I'm Liesl Copland from William Morris Endeavor's Global Finance & Distribution Group, and am honored to be here at the inaugural Toronto Film Festival Documentary Conference. When Thom [Powers] asked me to come and talk to you about what I think about all day long - where, in this CHANGED world are the revenues going to come from for specialty feature films - I got a little nervous. When I get going on this subject I feel compelled to share a lot of statistics about changing viewing patterns in consumer behavior... and that can get a little book-wormy. And it has been a good year/year-and-a-half for keynotes, you know? "The Sky Fell", and indeed it did, Mark [Gill] was right and Ted [Hope] inspired us and we felt better - and yes, we still need Jim Stern's eggs. I agree with pretty much everything that all of them have said... But they're all so damned entertaining! It's intimidating.
EDITORS NOTE: William Morris Endeavor exec Liesl Copland gave the keynote speech at Sunday's Doc Conference at the Toronto International Film Festival. This is the entire speech that she delivered during the event Sunday before an audience.
So, I don't tap dance and am bad at jokes, but what I might be able to do is pull off getting each one of you, the filmmakers, the creators of all this intellectual property we talk about all the time, to take the broad view of this very moment... This moment, right now is an important one. We have been living in the new media world for a while now (so let's first agree to call it "not-so-new media") and brave companies have experimented. But now is the time to figure out what is working and what isn't working. Why? I think our product is slowly being devalued.
Why do we have to do this in THIS room? Because we have the most to gain.
The specialty film sector is extremely content rich, and its audience is very committed. But right now the distribution model has been disrupted and every man or company is trying to figure out new models for himself. This is as it should be. Our economy is built on opportunism. But the logic at large in the sector is not cohesive, not consistent, and certainly not consistent with the premises that have made the movie business profitable in the past. Yes, independent film is still fiscally independent because there are a large number of financial sources who believe in it. But the old distribution model, which never really fit them anyway, has largely forsaken them. So we need a new one, and we need to embrace the technological revolution for the specialty movie business.
In the not so distant future where every piece of content ever transferred to video is available on our remote controls, specialty film has a unique advantage, and Documentary is a large and vital part of that sector. All of that is to say, for the sake of us banding together with a bit of information at the ready, hopefully you'll forgive me a little bit of analysis.
So - content monetization - where will the revenue come from? I hope it is easy to understand why an agency who represents hundreds of content creators would be thinking about this, especially in the present economy. Everybody in the industry is thinking about it. Our business requires that we think of the consumer at the end of the day and the consumer and consumer habits have dramatically changed. What's worse, we are confusing them a bit. How have they changed, let's watch.
View the video here.
So, what is very obvious from this video, which can be found on YouTube and was created by the fine people at a website called Socialnomics.net, is that the one thing that is changing faster than anything at the moment is the rate of change itself... Adoption rates of new technologies are happening more quickly, we have unprecedented access to information and content, and each other, and the most connected generation moves on to the next new thing faster than the rate of film production. This does make life complicated, but it gives us (and by us, I mean the filmmakers in this room) real opportunities, because not only are we all out there marketing to each other, what was previously a top down supply chain in our business has become a vibrant two-way ecosystem. Internet companies have benefited from this tremendously, but the film business, and especially the specialty film business has been left behind.
Key note recap: Jim Stern said we need some new muscles and I think the first thing to do is to bulk up on is a little bit of data gathering, then we need to flex our pattern recognition skills. And then maybe, collectively, we can come together to devise a uniform distribution model that serves both our ability to continue to make specialty films and docs, and our ability to reach and retain our audience.
First, we as doc filmmakers and doc lovers need to read like never before - and not just the film trades and the MPAA yearly report. We need to look also at the news sources where the innovation is happening: Tech Crunch, and Ad Age. Information is power. Every crime thriller and cop show has that scene where investigators put pictures and pieces of a puzzle up on a bulletin board. Eventually the epiphany comes - the bolt of lightning... and then our hero runs out of the room.
Go to Staples and get a bulletin board. Because the power is truly yours. Get one thing straight - You are the new "they."
The Power Shift
I shouldn't have to tell anyone that traditionally all goods, including movies, have been purveyed to the world at large by a certain power structure that filters the content through a certain supply chain. The few - the people with money - pay for the works of intellectual property to be produced and then marketing happens and then down at the retail level, after consumers receive successful marketing messages, there is a point of purchase. The only talk back session ever to touch the supply chain logic in the movie industry was something called the focus group.
But now, much of the activity is happening in a new layer that the Internet has provided. And what is more exciting to me is that in the same place where we are reading and watching these messages about content we have immediate access to the content itself and can transact right there. Our TVs, our computers, and our phones are learning us.
And people are listening. In technology and the trade that follows it there is something called crowd sourcing. I heard Jason Kilar, the CEO of Hulu, speak on a panel addressing the monetization question the other day and he mentioned that he uses a part of Twitter called search.twitter.com and said he checks it hourly as Hulu introduces new functions. The audience talks to him immediately. The crowd is sourced as a resource - and it is all about the audience. All movie execs will hopefully one day be doing this, and the distribution platform will have to be as flexible.
And not only that, other people and platforms can pick up the torch and take it a step further. Netflix offered a million dollar prize and will soon be awarding it to a team of scientists who could improve their recommendation engine by 10%. To do this they "open sourced" a bunch of codes so scientists could help them achieve their goal - because - in the moment where all content is trying to find us, it has to know what we like. Filtration is everything. Targeting and personalization are gold.
So what of the traditional marketing methods? A client recently came to LA about two weeks before the release of "Inglorious Basterds." He remarked one day... "Where were all the ads? Where was the outdoor campaign?" A bunch of movie execs listening were playing a bit nervous. Was the Weinstein Company supporting the film enough? After all, it's a Quentin Tarantino movie with Brad Pitt for God's sake. I hopefully don't need to tell you that the film opened to exceptional numbers. Today, after about three weeks, it is probably crossing the $100M mark domestically and close to $200M worldwide, and a very savvy bunch of people thought they may not be marketing the movie strongly enough. What happened?
I went searching for the answer and I found the obligatory Twitter article. Stars were apparently twittering from the red carpet at Comic-Con all the way to the premiere. Not only that, while we might not have seen the ads in outdoor LA billboardland, I learned that The Weinstein Company did some very strategic TV buys by sponsoring presentations of two separate TV shows, one on an undercover cop drama on TNT, and one the "Ultimate Fighting Championships Live Vegas Event" on Pay Per View. Very targeted marketing was the answer, and smart use of the social web.
What this means is that the new way of marketing in the changed world is not just complementary to older, traditional marketing. "Basterds" shows us, as do a growing number of films, that it can be a replacement for the traditional, and likely a much more cost effective version.
Peter Dekom, the famed entertainment attorney, gave me an advance copy of a book he is working on and he calls the new world "Shredded" - what was there before you can still touch, in essence, but it doesn't really hold together in the same ways. He says there has been a "big media reset" and had this great quote from Harold Rosenberg - which I thank him for including in his book - says "Revolution in art lies not in the will to destroy but in the revelation of what has already been destroyed."
He postulates that use of the traditional and business as usual will likely only get you what's left of the demographic world (age and gender based targeting) where psychographic - in the Weinstein's case, people who like "Ultimate Fighting" might like a violent Tarantino movie about guys.
Peter boils down our choices in marketing. You either target your niche market, or be the loudest to rise above the din (and extremity is everywhere - in studio tent-pole marketing, as well as in politics). But lucky for us, we can use the advice to be super-relevant to our well defined niche enthusiasts.
Again, the AUDIENCE has the power - and the engines, platforms, websites, individuals who can aggregate audience, gather eyeballs, create a following, learn from them and tweak marketing messages based on consumer behavior.
Think about how this dynamic layer of information and interactivity has affected your life, and then understand that it has an impact first on our brains and then on how we make choices - how we choose political candidates, choose brands, choose movies. Can you go into your average video store and have the clerk know every movie you ever rented and what you think of it? No, but Netflix can. Do you look at a billboard the same way that you used to? Studies show that digital billboards have a greater impact than the static key art ones - they are dynamic and look a lot like that other screen you stare a lot at during the day. In that video we learned that students who take a class by podcast have higher retention than those who sit through the same lesson in a large college sized classroom. Suddenly having thousands of four year universities and asking students to get all their learning from one institution in one place seems strange, doesn't it?
And what is happening here in our business? And what should it look like? Once again, let's throw some tidbits up on the bulletin board and flex our data gathering muscle, and then let's cross train the second and more important muscle - the skill of pattern recognition.
In a world where you can have movies where you want and when you want, and the even better news is that you are all out there marketing to one another, what is happening to theatrical? Jim Stern said in his speech this past summer that people will watch movies in theaters and they will watch them at home and both are good for business. The numbers bear this out. Movie watching is robust. 71% of adults in this country say they watch one movie per week across all platforms. And we will look at all the platforms, but let's look at what is happening to theatrical first. We've all read that box office is up 7% year to date over last year, right?
Now this is a graph of MPAA data of theatrical, adding DVD and Pay TV revenues, the two big dogs in the business for a long time. What we might notice in the long run if we apply patterns we used in high school is that this curve will peak and come back down (and yes we know that Hollywood is in major detox weaning off the junk of these huge incremental revenues they have been receiving for years from Pay TV and DVD). But there are two bits of good news - something always replaces the "old" technology, and we will get to digital in a minute... but LOOK! People will always go to the theater! AHA! If you look at the theatrical bar it is not that vastly changed over the entire history of the movie business.
Now, each year you have more screens doing the work for the same audience, but if you compare admissions in years relevant to us, they are virtually flat for 10 years. MPAA statistics show that between 1999 and 2009 admissions wavered only between 1.4 and 1.6 billion in fits and starts, back and forth.
Dear theater owners, fear not... you are not going anywhere. And with digital conversion and the ability in the near future to program a multiplex like a cable channel - different films every matter of hours and days versus the rigid one week runs of heavy prints locked on platters - Tuesday night doc night, 10pm horror shows, mommy and me, mommy and anime! Anything is possible!
According to the National Association of Theatre Owners, Tuesday night represents only 22% of what Saturday represents to their weekly bottom line. That Tuesday night occupancy can only go up if together we can crack the code of how to work with the theater chains in the digital cinema near future to help them fill seats and sell concessions on their off-peak nights. Thom [Powers] and "Stranger than Fiction" do it in New York 30 plus Tuesdays a year. I am sure if I locked you all in this room you could figure out how to fill Doc Tuesday across the nation.
Now the flip side is that while 71 % of adults watch 1 movie per week, 75% of those prefer to watch movies at home. And while box office revenue overall is up, Indie box office, in comparison is down. I have seen numbers 20-50% depending on who and when you ask.
Let's look at docs to see if we can see a pattern of what might be happening in the specialty film space overall.
Documentaries and What I learned from Netflix
What I started to recognize when I worked at Netflix is that certain types of films, stories, subjects, are more "lean forward" or "lean back" in nature. Does everybody know what I mean when I say that? Lean forward was first referred to with interactive content and the nature of being on line... you lean in to your computer and get sucked in to the experience interact with it, get so stimulated by the story pickup your keyboard, talk at the water cooler, you do stuff. Take action. Lean back is - kickin' it at home with the lady friend on the couch, taking in a movie. Feet up... a more passive viewing experience.
So I started thinking of content in these two buckets. Do I have to tell someone about watching this film? Lean forward. Great entertaining two hours. Lean back. Different types of environments favor different types of content. What I saw there is that in some cases the Netflix buys would be 75% of the market share on a given title's total DVD revenue. The thought provoking indie, foreign language films, and documentaries over-performed on the service. And different types of titles perform better on Netflix's streaming service - comedies for one.
Maybe people like to have a few laughs while at the computer in the office. Hard to know exactly why, but the last I looked at the Streaming top 50 very young or very male titles were up there... "Spiderman," "Super High Me" and "Superbad." If you look at the 100 movies on Netflix on DVD, none of the 3 are on the list. Similarly, a New York Times article last week talked about the difference in customer and hit titles between the two largest DVD rental engines in the country - Netflix & Redbox. They are the same "technology" but a different customer, "Crash" was number one on Netflix, Paul Blart: "Mall Cop" on Redbox. So it is right to say know your audience and ask "who is your audience?" But I think it is equally if not more important to ask where is your audience and where are they watching movies?
So, what did I learn about docs? Let's take a look at the overall pattern in docs first:
Documentaries had a watershed moment in 2002 as you can see from this graph... and after that, every movie company got in the game. Overall Box office dollars went up dramatically and the number of screens docs reached at their widest grew considerably. Then in 2004 something happened. A big audience of folks got hooked on docs and the studios saw that they were making money for two years and they became mainstream. Numbers stayed healthy. But the box office numbers dipped. But the releases got wider and the title count held high.
Docs are still released, maybe fewer in numbers this year. But the audience is loyal, they just migrated the all you can eat model of Netflix and DVD rental.
Traditionally in the indie world a distributor has hoped that DVD revenue is about the same as theatrical revenue, and recently they are modeling at closer to 75%. But what these numbers tell us is that Docs are very STICKY in a movie rental environment, and huge compound percentages, 400 and 500% in some cases, come from documentary DVD compared to box office and largely significantly more than half comes from rental. And sure in many cases this is because the box office numbers are much smaller. But the marketing impact of a little event is big on the at home viewing numbers.
If I could break out Netflix from these wonderful Rentrak numbers I would likely show you that often 75% of the DVD market share comes from Netflix alone on a doc title. Now Hulu has done well with docs - one case I know of, "Crawford," had over 200,000 downloads on Hulu in two weeks and lord knows many have leaked onto YouTube. But those platforms don't earn money in the same way. They run on a CPM model - or "cost per thousand" - where a certain dollar amount is served per 1,000 views, and the revenue sadly doesn't yet compare to subscription and rental. I know of a doc that broke the top ten on iTunes but on miniscule numbers compared to these so that tells us the doc viewing on iTunes is not an over-performing category for them. Considering their younger audience, this would make sense.
Now no one single research engine has compared all of these platforms in a truly scientific way, but that is why I look at all of this... I have worked with a lot of documentaries so my knowledge is informed by real numbers on titles I have been involved with. I am looking for the patterns as part of my job and sharing what I have learned and the hunches I have developed as a result.
What are the tools we can learn from this exercise? Docs don't need as much of a theatrical release to have a relatively healthy afterlife. What follows is that if we can market them more cost effectively, which we learned we can because they are lean forward, they might return profit sooner in time relative to their overall cost.
The Numbers *
So what other patterns can we scare up today? Now, I might hurl a bunch of numbers at you so you can read them later and think about them some more, but let's get them out there and hope an "a-ha" comes now or maybe later.
Well we learned before that the digital age has upended the traditional model.
DVD sales are down 14% year over year and will continue. But rental is up 8%. Netflix rents about 10 million movies a week and Redbox 7.5 million. Combined they are a little more than half the rental business. Almost 20 million movies a week!
Screen Digest forecasts U.S. online movie consumption to quadruple between 2008 and 2012, after growing 135% in 2008
In July of this year, VOD hit a new record, 19% higher number of orders than VOD in July last year.
And again, 43% of the top titles in this space - TV on the couch - are comedies or romantic comedies... which could arguably be "lean back" titles.
Download to Own videos are up to $196 million in first 6 mos of 2009. And I can't even begin to tell you about what IPTV - basically Internet TV - could mean, but hear this: Major League Baseball has an IPTV platform that delivered 1.7 million streams on opening day 2008, that has tens of millions of unique users per month and charges $89.95 per year. Do the math, specialization, delivery of targeted out of market sports games to enthusiasts leads to dollars.
Overall in movies, while the number of theatrical release titles are projected to decrease 25% by 2011 - and we already have fewer movies in the system - revenue is expected to increase almost 20% (or increase 6.5 billion) due to growth driven by electronic sales and rentals. So if we can adapt to new technologies fast enough in the film sector, there should be more success in the offing.
What I Learned Secondhand from the Studios and the Music Business
So where are you watching movies, how many are you watching, and how much are you willing to pay for them? When will you pay more and when will you pay less? If you turn to the person next to you will realize that most of us would have different answers to these questions.
Now before I go through some of the other platforms and examples of the types of content that get lifted in each I thought I would throw up this glossary on the board.
Appointment viewing, On Demand, Sell through, Subscription, Rental. Now if I listed the price points for all of these it would get even more confusing. Except for the free. I think we got that. But basically, the price to watch a movie starts at the top with the most premium pricing and rolls on down to zero at free. And windows existed from the one that yielded the most revenue, pretty much, to the ones that yielded the least. A few years back, in the studio world, the TIME that it took for a movie to roll across these platforms moved linearly over time. Slowly. The same movie was more or less not offered in all of these ways at once - maybe two at a time (sell through and rental, and there were lawsuits about that). Subscription meant you didn't have to drive - you had a "home box office" - so you paid more for it. But then it used to take 3 - 5 years for "premium movies" to reach an ad supported free to consumer platform. They were premium priced in theaters for weeks and months, then premium prices at DVD. Then on demand, subscription at slightly less and each of these windows would last 6 months to 3 years.
Recognize here the pattern, and remember the video. Things are infinitely faster now so we have compressed everything to virtually the same moment. Across digital and on demand platforms, after a movie leaves a theater, you can often find movies free with ads in one place, part of your subscription in another, while it costs $14.99 to buy and $2.99 to rent both on the same platform. All while it costs a dollar in a vending machine... inside the big box store where it also costs $9.99. Ask yourself what happened to the DVD sales business and the fact that 22 thousand vending machines sell movies for a dollar a day in the very locations they also cost this higher sell through price - and release at the same time - and you have your answer.
So the audience has in effect scattered and dispersed across these platforms. Some people go to big box stores and love a value. Others put a premium on convenience and want stuff they know the will like without thinking to come in the mail. Some people like the last minute nature of perusing what's on the cable box's on demand menu and are willing to pay a bit more for the transaction. Others watch stuff on their computer and don't mind the ads. But each of these spaces essentially lifts different types of content.
So what should the model look like? And I mean for you, for specialty film, not the 1000 plus screen releases out there.
Someone told me yesterday a question their friend likes to ask, that if people were willing to dress up, leave the house, go down to the theater or video store in order to pay to watch a movie - wouldn't they be willing, if movies came to them at home, to pay more? If you hire a personal trainer to come to your house they are more expensive than at the gym.
And imagine if the music labels had banded together, before allowing songs to be 99 cents at the same time albums cost $9.99 and above, and insisted for 30 days after release, only complete albums could be sold.
I am not a big believer in movies being ten to fifteen dollars different in price at the same time, and I am a big believer in the 30 day window.
If we could apply some replica of the expertly tested "pricing window" to the new distribution paradigm, revenue would likely lift from each. Don't turn on cheap or free until you have milked a little stint at premium. In fact, the studios are fighting Redbox having movies at a dollar in the sell through window. Maybe we should learn a bit from them.
And as to the question would people pay more to watch at home, since that is what they say they prefer? Well MLB lovers do, and Sony announced it will experiment with delivering $40 on demand movies in a premium time frame to their Bravia TV owners.
But instead of constant experimentation, I think we know enough if we look at the patterns to sit down and make a truce... like the five families in a mafia movie, where everyone wants peace.
Galileo was born in 1564. When he hired his publicist... and announced that he thought the earth was not the centre of the universe (and here's a hint: he thought the planets revolved around the sun) he met with bitter opposition by his philosopher buddies, was denounced to the Inquisition, was forced to recant and eventually spent the rest of his life under house arrest (now I sure hope someone didn't mess with the Wikipedia entry). Point being... A ton of hardship and chastisement, but now he is thought of as the Father of Modern Science.
Traditionally it is always the independent thinker who leaves the flock, making statements and trying things that the establishment think are crazy who reap the rewards of the pioneer (though not always in their lifetime). We need this true entrepreneurship in the film space, focused on the film model. You saw Hulu's growth numbers in that video. And Netflix has 10 million plus people paying for all you can eat. But each of these platforms exist in competition more or less, and we need a little co-opetition.
If Galileo returned as a genie in a lamp and said, Liesl you can take all 300 plus of the specialty films and all of the docs released this year that don't make huge box office numbers and usher in a new Utopia, how would it work? It would be based on a descending cascade of pricing windows. Wherever films could be found when they premiered, even if everywhere, they would be the same premium price. Then subscription, then rental, then eventually free. And why not broaden your reach to the home viewer when you premiere? And think about the pricing. Right now day-and-date VOD is $6.99-$10.00 when movie tickets are largely ten bucks. Let's insure the ten bucks, or make it all the same price... and stop confusing the customer. And I am not saying Tentpole movies should follow this model, maybe they even cost a bit more? Especially if they tried premium home viewing earlier in the window.
And what about the theaters? We can't expect the smaller movies to go head to head with the big marketing giants. Maybe for us, for docs, we need to make sure the experience is differentiated, communal - let's do more for the audience in that space than show the film. More "extra content" at the theater, Q and A heaven. Curation. Maybe lower the ticket prices and let the theaters keep more... they might play us longer. And we've seen that the promotion affects where the real money is. On the glossary this is called Fremium. Give it away for a short stint, a la Radiohead, and let the content market itself.
People smarter than I in the theater business and the distribution business have proven this works. And with the power of the social web focused on this effort, we could have flashmobs Monday through Thursday.
We would need a lot of acceptance from the community, we would need to learn from Galileo and not chastise or banish him. We would need the theaters to understand we want their seats to be full and maybe we are open to new business models. Keep all of the box office, or share in our DVD and digital revenue. We need your screens. Let's all be friends.
And on the doc side specifically, we would need one small but important institution to hear how things are changing and want to keep docs alive.
"Dear Academy of Motion Picture Arts and Sciences, Documentary Section"
New Models of distribution are the saving grace of our category, and we need you, in the same year you increase the number of feature films capable of being nominated from five to ten, to look long and hard at how you are impeding the documentary's progress. We urge you to rescind your format restrictions and allow us to exhibit online and anywhere we can find eyeballs and make a buck for our hard work, after you have had your two weeks of theatrical."
I brought copies of this letter if you want to take one and send it in, the address is there, sign, seal and deliver.
And all the direct to fan learning that has happened in the music business, to help right the wrongs of the revenue collapse there... come to us with your ticket widgets and audience capture, and PayPal disbursements of earned revenues. All you web Galileos please turn your gaze our way.
We can do this together if we think of the common goals. I am crowd sourcing YOU to help do the work, and open sourcing the information so that you can pick it up and do more with it. And for this sector it is time to get down to business. It could be live or die, but it is certainly live DIY.
Spend less, know WHERE your audience is watching movies. The good news is that the studios, largely, have walked away from this content so we get to fix it. So get out there and follow the bouncing eyeballs and with them, the financial rewards. I hope somewhere I will see the results of your crowd-sourced work, all who are listening. We might get told "no" for a while, or "that's not how things work." But the pattern tells us things still might change in our direction. Even in the film business - especially in the film business, across recent history even, the independent spirit has been rewarded and copied. I hope I see that again in my lifetime.