September 1, 1995

Across the Great Divide: Independent Video Distribution

The distribution of audiovisual works to educational and individual users, unlike that of printed materials (books), has a relatively short history. Video buying by schools, libraries, and individuals is only about a 20-year-old business. Prior to the marketing of video, these buyers purchased 16mm prints. This market began its rapid growth as 16mm projectors declared surplus by the U.S. Armed Services at the end of World War II found their way or were sold to schools, libraries, churches, and other users for entertainment and education. Film became a great medium for teaching.

To understand the difficulty in distributing independent video work, it is important to know that the market for these works grew from an educationally based one, in which a few hundred copies of a work (to a few thousand, at best) could be sold in 16mm versions, to a market today in which Hollywood studios can sell millions of works in a 90-day period.  Building a publishing business (such as a university press) to sell works one at a time made sense when the market was willing to pay $15 or more a minute for these works and high prices for limited runs of academic books and there was little or no competition for these dollars.

The advent of home video changed this model. Suddenly it was possible to manufacture copies of audiovisual works for less than $0.03 a minute (in the case of a 90-minute work), while 16mm film manufacturing prices continued to climb. Today a 16mm color release print can cost $10 (or more) per minute when one is amortizing the cost of printing elements into runs of less than 20 or so copies, while a six-hour EP video can be made in large lots for as little as $0.006 per minute ($0.35 an hour!).

The writing was on the wall in the mid-1980s for those who could see it. The market was receiving a flood of recycled television product from producers all over the globe, and people working with Hollywood movies and works published by entities such as public television got the message. As an example, the education version of The Civil War cost less than $35 an hour to buy in 1990, while works by independent film- and videomakers being distributed by mainline companies were still selling for ten times that amount. As customers moved into the 1990s with downsized budgets, universal ownership of VHS players (the industry models show 85 million units in America), and a video store every few blocks, the fate of 16mm and high­ priced video became clear-the traditional markets would not support it. Despite clear copyright protection, the public and the educational markets are uninterested in paying a premium for public-performance and/or educational works. If educational users can purchase the home-use copy for less, they will. This is made easy because of the proliferation of catalogs from companies that take advantage of this gray area of copyright relying on first-sale provision, the unenforceable nature of public-performance use restrictions, and home video publishers who do not care to differentiate between markets with tiered pricing.

 

The Numbers

Independent filmmakers and video artists are now faced with the daunting problem of getting their works out to a world that is not that interested in it or at least is not willing to pay the price that would support small sales levels. Filmmakers must reinvent themselves and try to find ways of getting their works into these markets at price points that can support future work and the cost of distribution. Going back to our model from the late 1960s, one might see the following:

30-Minute 16mm Sales, 1969

200 units of a 30-minute work
at $400 a unit                             $80,000

Cost of making 225 units
(for preview and sale)                   20,000

Cost of distribution/marketing
30% of sales                                24,000

Profit (loss)                                 $36,000

This model does not show possible additional income from rentals or television and other sales. This model also assumes "self-distribution" rather than using a distributor paying a 25 percent (plus or minus 5 percent) royalty. Life was simple then.  

If we examine the same model today with lower price points-say, $95 instead of $400-taking into account the higher cost of distribution spread over a lower gross income for the same work, the picture might look like this:

30-Minute Video Sales, 1995

200 units of a 30-minute work
at $95 a unit                               $19,000

Cost of making 225 units
(for preview and sale)                   1,500

Cost of distribution/marketing|
50% of sales                                9,500

Profit (loss)                                 $8,000

The problem, of course, is evident:  $8,000 in profit over a few years of sales is not a lot of income. It is also unclear (or perhaps optimistic on my part) that a work would sell 200 units. It could sell more, or it could sell less­ it all depends on whom the customer is for the work. Unfortunately for the video or film artist, the primary educational customers for this kind of work have had major budget cutbacks, and competition for their remaining purchasing dollars has become more intense. Does a library buy a work by the video Antonia: Portrait of the Woman, about conductor Antonia Brico, for $95, or does it buy six works from the nonprofit Facets Media catalog filling in its collection of children's and foreign language films for less than $20 a video?

 

Boosting Sales

Since the paradigm has shifted to a market in which 5,000 to 10,000 units need to be sold, what can the film or video artist do to make these sales either directly (self-distribution) or through a distributor? Also, what can the film or video artist do to insure more sales? Finally, how do you sell thousands of copies of a video work?

First, when working with cable television, public television, and other buyers, it is imperative that the work be shown with an 800 tag, because 800 tags sell video works. It is also

possible to get a tag when a work is shown on public television if one conforms to the public television rules or if one is willing to sell finished tapes to a public television video distributor (KCET, WNET, KCTS, WGBH, et cetera). Independents must demand that tags be used when their works are shown on public television. Avoid public television distributors such as APS that do not "believe in" tags. Also try to avoid selling to stations who want to offer your program on their 800 number and buy copies from you at deep discounts of 65 percent or more. Insist on doing the marketing yourself or having your distributor do it. This is also true of for-profit cable and television.

Second, create consumer packaging and find retail outlets that will sell your work. Bookstores are our friends, and, for the most part, video stores are not. Blockbuster and other large chains do not effectively sell non-Hollywood videos unless they fall into mass market categories like fitness, wear, children's, and so forth. Generally, alternative bookstores, record stores, and specialized video outlets like Learningsmith are supportive of work if it fits into their market niche. Using cardboard sleeves for consumer packaging saves money because these cost less than plastic cases (and four color inserts) and are cheaper to ship.  They also help sell your video when it is on the shelf with other products such as books, audio CDs, and the like.

 

Choosing a Distributor

If You choose to work with a distributor, consider using the following guidelines around which to model your deal:

  1. Does the distributor service both educational and home video users? (Of course, if your work is in only one or the other market area, then see how the distributor markets works that are similar to yours.)
  2. Does the distributor have tiered pricing-that is, higher prices for educational versus lower prices for home use?
  3. How does the distributor service home markets? Do they attend trade shows? Do they have titles in other companies' catalogs? Do they subdistribute using both educational and specialized home video catalogs? How does their consumer and educational packaging look?
  4. How involved are they with the educational markets? What trade shows do they attend? What markets are they really in within the hundreds of possible educational markets? Remember to hold on to your digital rights!
  5. Can they service a hit video? Selling thousands of copies of a work to individuals is a different business than selling a few hundred copies to schools and libraries. Do they have the ability to process credit card sales? Do they manufacture copies economically? What about using copy protection systems such as Macrovision?
  6. What about working with PBS and cable outlets? Do they have in­bound 800 operator service bureaus to handle a few hundred calls in a short period of time when the work is on PBS or cable? (Direct Cinema has had as many as 10,000 calls in 24-hour period, so we are not talking about just having a few people standing by.)
  7. Watch out for public television and cable buyers who try to get "all" rights when you only want to license broadcast or cable rights. Public television does not have a good track record handling independent work. Their success mostly is limited to specialized series and more mass market items. If possible, try to use television and cable as a marketing tool rather than as a distributor. The cable networks for the most part are not set up to do educational distribution, only home video.  Conversely, PBS Video is not set up to do home video or 16mm distribution-they only deal with educational distribution.
  8. What kind of deal is being offered? There are companies that can sell tens of thousands of videos using ads, infomercials, and so on, but these companies will pay only 5 to 15 percent royalties or buy tapes for 65 percent or more off the list price. These could be great deals if a lot of tapes are sold. How does the distributor deal with returns or copies that are sold off if the market does not buy the copies that are manufactured?
  9. How much sense do their pricing policies make? It is not written that home videos should be priced at $19.95 or less or that educational pricing should start at $49.95. Have the distributor explain the thinking behind their pricing.
  10. Are they set up to do film and video distribution if your work can be shown in theaters, museums, and similar venues?
  11. Are they set up to handle international distribution directly, or do they use sub distributors?
  12. How does the distributor deal with the press, reviewers, and others interested in your program? Does the company provide free previews to educational users? What about preview copies, stills, press kits, and other support materials? How does your distributor work with festivals?
  13. Finally, is the distributor the right home for your work? Do they have other titles that share similar markets and uses? If the answer is no, marketing can be a problem, since videos do not sell themselves­-they need a lot of "hand selling”, as they say in the publishing business. How long do they promote titles? How often do they promote works they distribute?

In selecting a distributor, it is important to find a solid fit between your program and the programs the distributor is currently marketing. The markets are changing dramatically, and the markets for personal video works are becoming smaller on the institutional level, but larger on the personal level, if one can find economical ways of marketing to the people (800 tags after television or cable runs, sales to museums and other specialized retailers, and so on).

 

The Market Today

Regrettably, the public library market that was created in the 1960s and 1970s for independent work has changed. Despite the fact that there are over 10,000 public library buildings with video collections and 4,000 colleges with film and now mostly video collections, buyers at both public libraries and college libraries are not trained to evaluate new media (let

alone old media). The public librarian is far more comfortable buying several general interest and Hollywood home video works from a catalog company such as Baker and Taylor for $100 then buying a single high-end specialized video for the same dollar amount.  Furthermore, the librarian does not have the time or the budget to purchase and evaluate the thousands of specialized titles being offered. It is far safer to buy a Disney children's work or a Hollywood feature than an independent work that might be have challenging or controversial content. The public librarian for the most part sees media as "nonprint," which means a detour for promotions within the library system. As the world switches from analog to digital, libraries and schools are faced with fewer resources to buy into the change.

Since the educational field is not making the collecting of media an important job, collections are being built by many untrained buyers or curators who are overwhelmed by the technology, their jobs, and the lack of resources they have. With untrained and overworked professionals controlling these budgets, works that reflect cultural or other diversity or are avant-garde are hard to purchase because there is a high perceived risk that they will not circulate or will cause controversy. Also, the buyers do not recognize the small publishers (or self­ publishers) of video and other works and are concerned about whom they are buying their products from.

Other problems come from the decentralization of purchasing. There are fewer large customers and hundreds of thousands of new small customers . How does one find them and market works economically to them? How does one price for these customers, who may not have a media budget? A number of the niche­ market video distributors mail millions of catalogs each year to these building-level buyers. Of course, this is not a market that is interested in new work, but rather it is one interested in very curricular work or general Hollywood­ type product. (This can include work by National Geographic, Sesme Street, and the like.)

The digital future of full-motion, full­ screen video on CD formats represents a possible bright spot for the independent film- and videomakers, once the technology sorts itself out.

Work with artistic integrity should always have a market, but getting to that market at a price point that will support the industry will remain the challenge.

 

IDA Treasurer Mitchell W. Block is president of Direct Cinema Limited, a Santa Monica, California, based distributor of nonfiction and fiction films, videos, and interactive media.  He is also an artist-in-residence at the USC School of Cinema-Television and an Emmy Award-winning filmmaker:

This article was first published in the April/May 1995 issue of Video Networks.

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