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by Ted Leonsis
February 1, 2012 10:00 AM
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Ted Leonsis: Why Sundance Tells Us Digital Distribution is the Future

"Kinyarwanda," directed by Alrick Brown.
This is a first-person piece from Ted Leonsis, founder and chairman of SnagFilms (and parent company of Indiewire). He asked if he could have the floor to lay out why he believes digital distribution platforms define the future for indie films. And while as a principal of SnagFilms he clearly has a horse in this race, his perspective echoes points that others have made on our site (including this week's very popular piece written by Greenburg Traurig partner Steven Beer.) 

How does all of this square with your thoughts on indie distribution? Tell us in the comments. -- The Editors

Sunday marked the end of the Sundance Film Festival, the traditional launching point for a new year of independent films. I didn’t go to Park City this year, as I had when my films "Nanking" and "Kicking It" were in the festival, but I read the extensive coverage from Indiewire and others with interest. Since my first experience in 2007, Robert Redford’s vision of nurturing new voices and unexpected perspectives has remained constant. However, all the trends we saw six years ago have only accelerated since.

Although multiplatform distribution deals continue to be announced, it's clear that digital distribution isn’t just the best way for most films to reach audiences; it will be the only way. And despite all the talk about (and a few successes of) do-it-yourself distribution, it's not a real option for most filmmakers I know. They can't take a year to manage their film through release and lack the experience, staffing, relationships or the distribution footprint to reach audiences.

This is why we think digital distribution defines the future for indie films:

Profusion of new filmmakers. With better and cheaper cameras, and easier and far more versatile editing software, more and more storytellers are choosing film as their format. Nearly half (45 out of 117) of the features screened at this year’s Sundance came from directorial debuts, including some of the titles attracting the most buzz: "How to Survive a Plague," "Beasts of the Southern Wild," "I am Not a Hipster," "The Other Dream Team," "Robot & Frank," "Searching for Sugar Man," "For a Good Time Call," "Indie Game: The Movie" and many more. Championing new voices is a Sundance tradition, but here’s the big take-away: more good films are made each year than ever before.

Tightening of traditional distribution platforms. It is harder and harder to get independent titles into theaters. I used to say that it was easier for your kid to get into Harvard than for your film to get into Sundance, but gaining theatrical distribution is even tougher: it's the equivalent of your daughter getting into Harvard and starting on the gymnastics team her freshman year. Good luck with that. 

The best-managed of the indie theater chains has been on the sale block for a year; how can that bode well for the future of theatrical releases? And if you do secure a theatrical release, there is little chance of reaching a scale audience: Only seven of the indie films that screened at Sundance 2011 grossed over $1 million at the box office, and very few of them returned any money to their producers after exhibitors’ and distributors’ cuts and P&A expenses. Lest you consider Sundance’s selections to be an unrepresentative sample, only 28 indies grossed over $1 million domestically in 2011 (excluding studio-related and mini-major releases).

Explosion of digital platforms. More films were viewed digitally in the US last month than were seen in theaters in all of 2011. While this is very much a developing market, four approaches to digital distribution have been established: pay-on-demand (your cable, satellite or telco operator); download-to-own or -rent (iTunes, Vudu, Amazon and Xbox); subscription services (HuluPlus and Netflix); and ad-supported free streaming (Hulu, SnagFilms and others). 

At SnagFilms we've also put films on all of those platforms (including our own site), plus more than 110,000 other web allies. We also built applications for most smartphones and tablets, set-top boxes and connected TVs. In all, more than 100 devices and platforms, rivaling the biggest service’s reach. Here's what we see as the elements of success necessary for digital distribution companies:

    •    To satisfy the public and attract the attention of platform partners, you need lots of films (SnagFilms has 3,000 plus and announced 27 acquisitions while at or since Sundance, with more to come this week);

    •    To maximize the audience for filmmakers, you need to bring their films to every digital distribution platform, whether transactional or ad-supported;

    •    To acquire and market films and develop the necessary technology, you need strong capitalization (we announced a major round of funding this week for SnagFilms, from investors who are in it for the long haul -- vital for any new media venture, where bumps in the road are inevitable);

    •    To stay in a tough distribution business long enough to succeed, you need leadership at the board level equivalent to the big companies you’ll compete against, and management who have dealt with adversity and success in startups and large ventures;

    •    To attract filmmakers, you need transparent operations and regular payments – even first-time directors have heard horror tales about “studio accounting” and foreign sales agents who never providing an accounting, much less a check. That is why any reputable distributor provides statements every 90 days, with payments attached.  Those payments often start small – but keep in mind that the license to film the first NFL Championship went for $3,000. When you watch Sunday’s big game, remember that growing audiences always mean more money for content owners.

    •    For films to break through the crowded entertainment landscape, you need to turn your audience into evangelists, progressing from watching to reviewing and commenting, and ultimately to sharing.

    •    Beyond commercial objectives, every filmmaker I know believes their work can change the world for the better. Film is our most powerful communications mechanism and allying it with the web creates a virtuous circle, where story stimulates reflection and action, and plays the story forward. I’ve called it filmanthropy and you can see it in the work of the Sundance Institute, Participant Media and its TakePart, SnagFilms and others.

It will be another 12 months before the film world reconvenes in Park City. The shuttle lines again will be long, it will still be hard to get a dinner reservation – and the film offerings will continue to surprise, challenge and delight. That's a testament to the incredible motivation of inspired storytellers, a creative wellspring that was nurtured by Bingham Ray, whose untimely passing last week shocked and saddened his many friends. 

I was honored to know Bingham, to tap into his encyclopedic, idiosyncratic and passionate knowledge of the film business (always delivered with a twinkle in his eye). And I was happy to see him embrace the new future of film distribution. “I don’t know how in the hell this is going to turn out,” he told a colleague at SnagFilms, “but I don’t doubt for a minute that we have to be trying something new.” 

Trying something new is what every filmmaker at Sundance, and the tens of thousands who weren’t selected, do every day. That’s the essence of independent film, and the animating spirit of those who love it. 

Ted Leonsis is the founder and chairman of SnagFilms, which also owns Indiewire. He produced "Nanking," winner of a major award at Sundance in 2007 and subsequent Emmy and Peabody Awards; the film also was shortlisted for an Academy Award.  He also produced "Kicking It," which premiered at Sundance 2008, and "A Fighting Chance."

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12 Comments

  • Carol | January 25, 2013 2:52 PMReply

    There are alternatives for distribution like Yekra. Yekra allows filmmakers to set the prices for distribution and helps filmmakers make more money than with a traditional distribution deal so that the filmmaker can go on to do what he/she loves most, making great films! Check out Yekra you will love what you see! bit.ly/yekrahome

  • Quantel | February 3, 2012 11:27 AMReply

    "Although multiplatform distribution deals continue to be announced, it's clear that digital distribution isn’t just the best way for most films to reach audiences; it will be the only way."

    Agreed, the progression to digital cinema has been steadily growing over the past decade but 2010 saw a rapid succession of announcements by major multiplex operators; likely resulting from the 3D wave of the post-Avatar era.
    http://blog.quantel.eu/2012/02/the-rise-of-digital-in-motion-pictures-beyond-the-tipping-point-for-film-part-1-of-2/

  • brian fantana | February 2, 2012 3:38 PMReply

    agree with RJ - the "free" model doesn't work for anyone (except maybe the site owners who are offering the movies for free) - sure the asset value of your site presumably increases dramatically with the more content on offer, but that in no way translates to more revenue for a filmmaker if their film isn't being viewed (and if the site isn't curated and the navigation isn't great what hope does a filmmaker have?) - digital is the future - free isn't

  • Carol | January 25, 2013 2:53 PM

    I so agree with you!

  • Kevin Byrnes | February 2, 2012 2:25 PMReply

    I agree with everything in this article, although there is one additional reason that digital distribution will define the future of indie films (as well as studio films for that matter) - the astounding advances in-home viewing technology. There was a time when a trip to a theater was the only way to really “see” a film in all of its glory. It was a media experience well beyond what the average person could experience at home. This is no longer the case due to the rapid evolution of HD televisions and HD streaming/on-demand delivery channels. Theaters are noisy, expensive and inconvenient, and the picture isn't even that good if it is not IMAX. Barring a quantum leap in what theaters offer (you sit in some sort of immersive pod), the theater experience as we have come to know it is on its way out. People will say that theaters will always have a place in movies, and to some degree that is true, but as I watch my 5-year-old pause movies to run to the bathroom, I have a hard time picturing her in a theater when she gets older.

    As I alluded to above, I think the future of digital distribution for indie films is tied to the future of digital distribution for all films. As studios come to realize that their marketing dollars are better spent on concurrent theatrical and digital distribution releases, the digital distribution model will really take hold. This will only benefit indie films. The catch is that as the volume of content grows, better ways of targeting content to viewers are necessary for an efficient film market. This means that the purveyors of indie content in a digital distribution model need to do one of two things - mimic the current theatrical model, or create a better way to match content to viewers than simple reviews or tomato ratings. Mimicking the theatrical model will create the same problem we have lived with for years - a small number of people control what we watch and all we are guaranteed in exchange is some assurance of basic production value. Fortunately there is a lot of potential to remake the way we match viewers to content and I don’t think we need to go the route of the theatrical model. It all starts with a shift away from the current focus on the subtleties of opinions and a shift to a focus on the subtleties of who a person is matched against a simple thumbs up or thumbs down reaction to a film. The seeds of this already exist in current social networking models. This is a very exciting time in film distribution.

  • Ted Hope | February 2, 2012 12:09 PMReply

    Ted, I agree with all you are saying -- but I think you are not addressing some core issues. The irony of our times is that we have access to a super-abundance of films (and at a lower and lower price point) but are exposed & connected to an ever-slimming amoun of content as we all step back from mass media and in to hyper-focused echo chambers. With 45,000 films globally produced annually, how do we discover work that is not financially able to make a great deal of noise. How does the tidal wave of competition not dissolve into annoying static? Similarly, once indie film became corporatized, we began to allow our most important asset to rust & mold -- how do we once again transform "audience" back into "community"? The collaboration between "social" & "content" (tech & creative) is the most important innovation to come to our field. Snag & IW (and others) have the real potential to lead the way. I look forward to the days ahead of us.

  • Bret Bernhoft | February 1, 2012 6:15 PMReply

    This article certainly forecasts the near future for most film products, but the nature of online distribution will ultimately make it unlikely that any large scale operation is even possible, unless an audience is either fooled or convinced into paying for entertainment. The slightly farther down the road future of digital distribution is for large scale profit to become distasteful. We are staring the reality of barrier-less and nearly cost-less productions square in the eyes.

  • Ted Leonsis | February 2, 2012 4:52 PM

    It is getting cheaper to make some types of movies (obviously not blockbusters). I believe that consumers pay for good stories – and they don’t scale that payment based on checking out the production budget. They may watch plenty of user-generated videos, but they value professionalism. So it makes sense to offer consumers a range of ways to pay – by the view, by the subscription, or by the willingness to engage with advertising. Finally, we aren’t seeing a reduction in large-scale operations (look at the size of Google/YouTube and Facebook) – we are seeing that those who adapt fastest to changing consumer needs win, even if they start as David to someone else’s Goliath.

  • star jonestown | February 1, 2012 3:31 PMReply

    This article is beautifully-written and b/c it has hard data, it's really informative.

    I am no pollyanna when it comes to this stuff; glad to have spent the time reading it.

  • Ted Leonsis | February 2, 2012 4:53 PM

    I'm blushing. Thanks very much.

  • RJ | February 1, 2012 3:16 PMReply

    Interesting article. My question to Ted would be - what is the advantage of putting your movie out there for "free" on ad-supported digital sites, when he says to expect small payments? I'm an independent filmmaker who released a film two years ago - DVD sales continue to make us good revenue each month, Netflix streaming deals are a healthy annual license fee, pay-to-own or rent continue to come in steadily, and a Cable VOD window also generated some good revenue while it lasted. But once we put our movie out for "free" on Hulu or Snag, it seems as if it will cut into those other revenue streams without much financial benefit. I'm open to the idea, but why do it if the payments are small?

  • Ted Leonsis | February 2, 2012 4:48 PM

    You raise a good question and the answer has several parts. Let’s agree that any payment for content – whether it’s a share of ad revenues or a license fee – turns on audience demand. License payments work for established platforms where the audience size can be predicted based on past performance; revenue sharing offers greater reward and greater risk, and usually is used when audience demand is uncertain because the platform is newer. Television has a wealth of data to estimate likely ratings; DVDs have been sold for 20 years; subscription VOD is newer but has the advantage of collecting your money before you start to view. Ad supported streaming is new and it is harder to predict individual title performance, so operators want to let the consumer decide what to view, and reward the winners by sharing revenue.



    So some filmmakers are winning already: seeing 4- and 5-figure checks as their quarterly revenue share. That is not yet the norm. I am suggesting that we focus on the trend - and every metric shows an explosive growth in streamed film viewing. We believe that larger audiences mean more ad revenue and bigger partner checks. Let’s remember that free, ad-supported viewing isn’t a new concept: it has worked out pretty well in the television world. Filmmakers got small checks when TV was young, and do quite well now.



    So that leads to the second part of your question – basically, don’t you cannibalize your ability to sell a film to a consumer once it is offered for free, with ads? I don't believe that the question will arise for most filmmakers. Cable VOD usually requires a first window, but titles earn 90% of their lifetime revenue on that platform within the first 45 days, and usually are off of the system shortly afterwards. DVD sales have a similar life cycle. Netflix and iTunes don’t mind if a title is also offered on an ad-supported service, because their data indicates that consumers select the way they want to receive content, and a sufficient number will pay (by the view or by the month) to watch ad-free. All of that suggests that if you can get a film into cable/satellite VOD and/or the DVD market, you should do that first, and run your ad-supported window later.



    And if your film was made in 2010 or earlier, and isn’t already on a transactional platform, you are likely out of luck putting it up now. Ad-supported systems work for “long tail” titles, while the pay windows by and large live off of new releases.



    RJ, if you are realizing sufficient revenue and reaching the audience you want by doing DVD sales and a Netflix deal, you are in a very rare position. There’s no harm in waiting to see how those revenue streams play out over this year. But for filmmakers who want to reach the largest possible audience; who need to aggregate all possible revenue streams; and who believe in the appeal of their title to a broad audience, a sequencing of transactional digital release and ad-supported release will make sense.