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Is VOD the Future of Independent Film? Yes -- and No.

Photo of Paula Bernstein By Paula Bernstein | Indiewire November 11, 2013 at 10:27AM

Is VOD the future for independent film? Well, yes and no.
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"About Cherry"

Netflix chief content officer Ted Sarandos riled the industry with a contentious Executive Keynote address at the 9th annual Film Independent Forum, in which he criticized theater owners for resisting the idea of day-and-date releasing of films on Netflix and claiming that theaters are going to "kill movies" if they continue to resist multi-platform distribution.

"I do wish more theaters would be open to supporting day and day releases for indie films."

John Fithian, president/CEO of the National Association of Theater Owners responded, telling Deadline that, in fact, Netflix was imperiling the future of movies. "Subscription movie services and cheap rentals killed the DVD business, and now Sarandos wants to kill the cinema as well," Fithian said.

After getting flak from theater owners about his bold statement, Sarandos backtracked, saying that he wasn't calling for day and date, but rather, "calling to move all the windows up to get closer to what the consumer wants."

Mainstream exhibitors refuse to carry films that premiere day-and-date, saying that there is a direct hit on theatrical exhibition when movies play day-and-date.

But some independently owned and operated theaters don't have a problem with the new distribution model. "I do wish more theaters would be open to supporting day and day releases for indie films," said Tim League, founder/chief executive officer of Alamo Drafthouse Cinema.

As he told Indiewire recently: "Alamo Drafthouse is one of the few exhibitors that supports the idea of day and date and even ultra-VOD windows. I am a open to this for small movies by small distributors who don't have the budget for a massive national P&A spend. We have proven that model can work for the right film."

It's clear that day-and-date continues to be a hot-button issue for the industry -- big-budget and indie movies alike. 

"Escape From Tomorrow."

Sarandos' comments come just as many independent films challenge the traditional theatrical model with multi-platform releases, including day-and-date VOD releases and ultra-VOD.

As these distribution methods lose their stigma, they're becoming standard for many small films. 

Depending on who you ask, VOD is either the salvation -- or the death -- of independent film.

Of course, the Netflix model, where consumers pay a flat rate upfront, is quite different than video on demand, or from renting or buying a film from a digital store such as iTunes, Amazon Instant Video, Hulu, or from sites such as Crackle and Indiewire's parent SnagFilms, where you can stream movies for free.

It's unlikely that Hollywood studios and theater owners will ever agree to having films stream day-and-date on Netflix or on VOD: By all appearances, it would destroy their business model.Independent films potentially have more to gain with day-and-date releases than blockbusters -- a larger potential audience and the ability to generate word-of-mouth -- but the risk remains.

If audiences can watch a new release at home, why go to the local theater?

Whatever Sarandos may want, it's clear that viewing habits are changing. The younger generation wants the convenience and flexibility of watching films whenever and wherever they want-- whether it's on their mobile device, tablet or streaming directly to their TV.

"Concussion"

VOD provides a potential audience of 100 million in North America alone, estimates Nolan Gallagher, CEO and founder of Gravitas Ventures.

"Not every great movie is going to necessarily get to Cleveland," said Gallagher, and "there are quite a few consumers who like to be the first ones to see movies fresh off their festival debut.

"Concussion," the Sundance hit from first-time feature director Stacey Passon, is only playing at select theaters, but it's available on iTunes and other VOD platforms.

"Some movies will find an audience on demand and some movies will find an audience in theaters."

The list of high-profile indies to be released day and date in the past few months alone is long and includes "Escape From Tomorrow," "Lovelace," "The Canyons," "A Teacher," "Adore," Drinking Buddies," "Don't Stop Believin'," "Touchy Feely," "Ain't Them Bodies Saints," "Blue Caprice," "Muscle Shoals," "Good Ol' Freda" and many other films that made the festival circuit.

Then there are films like James Franco's "As I Lay Dying," a prestige pic that (aside from a single Manhattan screening) bypassed its theatrical release and went straight to VOD, iTunes and DVD. With a recognizable title, Cannes credentials, built-in publicity and Franco's star power, the film should fare decently on digital platforms, whereas it would have been a tough title theatrically.

Radius-TWC distributed the low-budget, R-rated comedy and Sundance hit "The Bachelorette" via the "ultra" model a month before its theatrical release in September as a way to market the film and create buzz. The film, which starred Isla Fisher and Kristen Dunst, immediately climbed atop the iTunes "top movies" chart.

Recently, Magnet Releasing, a division of Magnolia Pictures, did the same for "The Last Days on Mars," the sci-fi thriller starring Liev Schrieber. The movie was available on VOD five weeks before its theatrical release in December and hit the top 10 in the list of iTunes Indies. Magnolia Pictures used the same strategy recently with "Mr. Nobody."

The specialty industry is clearly torn when it comes to the VOD future. Fear of cannibalization is strong, not only in terms of theatrical attendance but because VOD releases currently don't generate the same kind of PR and marketing push. The advent of digital projection hasn't made theatrical releasing any less expensive and it's harder to make back the money in ancillary rights.

Since the introduction of television, people have been declaring the death of cinema, but so far, nobody has been able to replicate the immersive, communal theater going experience at home.

"Whether you see day and date as half empty or half full -- as cannibalization or cross-promotion -- It's going to take a lot more than protectionism against ancillary overlap to keep folks going to the movies," said Richard Lorber, chairman and CEO of Kino Lorber.

"Not every great movie is going to necessarily get to Cleveland."

The fact is that despite fears that day-and-date will kill movie going, there's no data to prove that day-and-date is eating into theater grosses (although theater owners say they can see the evidence in box office receipts over the past eight years or so).

"There are separate audiences for theatrical and VOD and the cross over is slim as the experience of seeing a movie in theaters is so different than watching at home," said Matt Grady, founder of specialty distributor Factory 25. "There are people who go to movies and others who watch films on VOD and hopefully both audiences can grow with press generated from each."

There's also a sense that, to some degree, since viewing habits are changing, you have to give the people what they want. 

"I think VOD represents part of the future for indie film," said Oscilloscope Laboratories' David Laub. "Is it the entire future? I don't feel we have enough data yet to know that."

There is, however, enough data to know that more audiences are watching on VOD. 

Set-top boxes with on-demand viewing capabilities are now in about 60% of U.S. households, up from 37% in 2008, according to a recent report from Nielsen. Overall, about 102.7 million homes had pay-TV service from a cable, satellite or telephone company in the second quarter of 2013, according to Nielsen's Viewing on Demand report. 

The report also found that younger viewers are more likely to use VOD; about 31% of those ages 18-34 told Nielsen they used it, compared with 23% of those 35 and older.

What's also evident is that some films lend themselves to day and date more than others. Laub points to two recent Oscilloscope releases to prove this point. They decided not to do a day and date release for "Mother of George," because "it's not an automatic draw," said Laub. "We loved the movie when we saw it and the reviews exceeded our expectations, but it needs to be nurtured."

A film like "28 Hotel Rooms" was a natural for day and date release, said Laub, pointing out that its title was a big plus (films that start with numbers or letters early in the alphabet tend to do well on VOD). 

"About Cherry," starring James Franco, Heather Graham and Dev Patel, opened in only three theaters last year, but scored on VOD, where it made over $500,000 in the first week across all VOD platforms, according to the film's distributor IFC Films.

But a successful VOD run and a successful theatrical run don't have to be mutually exclusive; one benefit of a day-and date release is the publicity surrounding the theatrical release also benefits VOD platforms. 

"You can still be successful in both realms if you have the right marketing campaign, the right film and the right release strategy. They can feed each other," said Laub.

"Margin Call," the 2011 film directed by J.C. Chandor and starring Kevin Spacey, Stanley Tucci, Paul Bettany and Jeremy Irons, was a high-profile example of a film that had success in both theaters and on VOD. But even with that film, there's a question of whether it would have done better in the theater had it not been available on VOD. 

Unlike theatrical releases where box office receipts are publicly reported, in general, VOD numbers are not released, which makes it tricky to gauge success -- except when companies choose to trumpet their successes. 

That may change; John Sloss led the charge by releasing VOD figures for "Escape from Tomorrow" and urging other distributors to do the same. Radius-TWC followed suit by releasing the VOD figures for "Man of Tai Chi," which went the ultra-VOD route. 

"The Perfect Family"

Gallagher points to "The Perfect Family," starring Kathleen Turner, Emily Deschanel and Jason Ritter, which was released on VOD and in theaters in May 2012, as a day and date success story, saying it did "over six figures in the theater and very, very well on VOD." 

Releasing a film theatrically is expensive; historically, if the theatrical release wasn't a success, distributors would have to wait three months or longer to release the film on DVD or elsewhere. But now, distributors can coordinate all of the publicity efforts for the theatrical release to include the on-demand release.

"When you have big stars like Ryan Gosling in movies going on demand, people are starting to get it,"

"Most independent films aren't sitting on large marketing budgets, so to be able to market both a theatrical and VOD release at the same time is very efficient," said Gallagher.

Built-in name recognition or name stars also help VOD titles (as opposed to something like "Mother of George," where the title doesn't indicate exactly what it's about and there are no stars in the cast).

Berry Meyerowitz, president and CEO at Phase 4, points to the "ultra" release of films like "Only God Forgives" as leading the charge.

"When you have big stars like Ryan Gosling in movies going on demand, people are starting to get it," he said. "Movies that have done well on VOD have titles where you know exactly what it's about, like 'Assault on Wall Street.' "The more descriptive we can be, the better."

In the past, filmmakers might be reluctant to have a day and date release and some do still prefer theatrical windowing. But, as Laub points out, "A lot of filmmakers are increasingly open to these new models.

Terence Malick's last movie ("To The Wonder") was released day and date in April. There are legitimate success stories with films like 'Margin Call,' which went day and date. I've seen more openness to it over time." 

In the case of "Good Ol' Freda," director Ryan White had no problem with the film being released day and date, especially since music documentaries tend to do well in VOD.

Freda Kelly in 'Good ol' Freda'

"Our niche audience is Beatles fans who are throughout the country. It's a film for the fans. I didn't just want it to be available to people in the big cities. We wanted it to be democratic, with people being able to see it right away," White told Indiewire.

"More and more filmmakers understand," said Meyerowitz. "Exhibitors are starting to understand as well. If it's going to work, we need more exhibitors to buy into the notion that a bigger pie is better for everyone. Some movies will find an audience on demand and some movies will find an audience in theaters." 

Of course, the less of a stigma there is surrounding a VOD or day-and-date release, the more VOD releases we'll see -- especially as fewer small films have a shot at theatrical distribution -- which means there's already a glut of VOD releases vying for attention. 

So is VOD the future for indies? Only time will tell.

This article is related to: Filmmaker Toolkit: Distribution, Tech, VOD, Gravitas Ventures, Phase 4 Films, Good Ol’ Freda, Ryan White





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