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Where Would the Money Come From? On Film Festivals, Distribution and the Economies of Change

Indiewire By Tom Hall | Indiewire February 13, 2013 at 8:57AM

"Fair Trade for Filmmakers," an article by Sean Farnel that we published last week, attracted a lot of attention from filmmakers, festival programmers and other industry members, who carried on an intense debate in the comments about the feasibility of Sean's suggestion that festivals pay filmmakers a percentage of their event's earned revenues. We invited Tom Hall, the Director of the Sarasota Film Festival, to write a response to the piece and offer a perspective from someone currently involved in running a major regional festival.
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"Fair Trade for Filmmakers," an article by Sean Farnel that we published last week, attracted a lot of attention from filmmakers, festival programmers and other industry members, who carried on an intense debate in the comments about the feasibility of Sean's suggestion that festivals pay filmmakers a percentage of their event's earned revenues. We invited Tom Hall, the Director of the Sarasota Film Festival, to write a response to the piece and offer a perspective from someone currently involved in running a major regional festival.

Last week, Indiewire ran a piece by Sean Farnel, a friend and colleague, asking a vital question about the future of film festivals: with the proliferation of film festivals and the decline in the viability of theatrical distribution for many independent films, what role can festivals play in creating a sustainable economic platform for filmmakers? Sean's conclusion, which argued in favor of film festivals offering cash payments to filmmakers on par with percentages found in traditional distribution models (roughly 35% of gross ticket sales), set off a great deal of debate among festival organizers and in the comments of the article, with opinions deeply divided. Indiewire invited me to respond to Sean's piece, and I am honored to be asked, but I write with some trepidation as the Internet is not a place known for reasonable, measured conversation.

As I said, Sean is a friend and colleague, so I want to be clear that the thoughts presented here are not in any way seen to be a judgement on Sean or his experience, but I do think and honest assessment of his ideas, and some of the assumptions behind them, is in order. Instead of responding directly to Sean's argument, I thought it important to instead describe the current reality of film festival organizing in this country and to present a case for transparency and clarity in this environment. I want to use my own experience as Director of the Sarasota Film Festival as a framework for this discussion if only because it allows me to address what I know to be true and because Sarasota is a relatively large, non-profit regional festival of the type that makes up the vast majority of festivals in this country.

In the autumn of 2008, following what seemed to be a very successful festival in April of that year, our festival was forced to undergo a radical transformation in its economic structure. Sarasota, which was at the epicenter of the real estate market collapse, was confronted with significant cuts in sponsorship dollars (which collapsed along with the real estate business), individual giving (which was tied to the stock market crash and real estate values) and state and local funding (while Florida has no state income tax, property taxes are vital to government funding, so that when property values declined, so did revenues). 

Working with our management team, our Board of Directors responded to this crisis by making deep cuts across the organization to create both a sustainable economic model for our festival and offset existing expenses we had taken on during better economic times. Like most, our organization was forced to reassess its position and viability in the face of lost revenues and new deficits and we responded by becoming leaner, more efficient and by tightening the margins around the key areas of our festival:  staff costs and size, film presentation (projection), guest services (filmmaker travel and hospitality), marketing, 

That same year, in addition to my duties with Sarasota, I was hired by The Newport International Film Festival in Newport, RI to program the festival. The organization was carrying a deficit into 2009 and despite the best efforts of management, with Rhode Island having some of the worst unemployment numbers in the country, the festival only broke even on the year. Unable to raise enough money to host the festival and simultaneously pay down previous deficits, the Board of the festival shuttered the organization. And while a group of excellent and dedicated locals have kept film alive in this amazing community by starting newportFILM, a year-round organization that hosts a screening series at various venues around the city, Newport is left without a festival. 

Across both of these festivals, every stone was turned to find ways to keep them solvent; nothing was spared and the impacts of the economic downturn remain in place to this day. So does the economic environment for fundraising. As non-profits around the country work harder than ever to secure limited numbers of grants, sponsors and donors, the costs of operating a film festival continue to creep upward; travel costs, new technologies (including the transition to Digital Cinema) and a general decline in sponsor dollars have created a new set of challenges. Thankfully, surviving festivals are working hard to deliver great events to their communities and industry constituencies (filmmakers, distributors, the press), but as these changes require diligent management, an entirely new set of economic pressures are being shifted on to festivals, those of traditional film distribution. 

As the economy continues to struggle, the film industry has also felt the effect across the board, from film investment and production to the dramatic cost shift from traditional theatrical distribution (and the marketing dollars required for success) to a diversified approach that has seen a dramatic rise in video on demand (VOD) utilization across a number of platformed distribution strategies. And so, filmmakers and many distributors, facing a new environment where theatrical distribution grows more costly (and therefore unlikely for many) while the marketplace for VOD grows more crowded, are looking for new revenue streams to replace the diminishing likelihood of wider distribution and revenue

So, why not film festivals? They are, in many cases, the only opportunity for a film to screen in a movie theater in many communities. They appear to be spending money on things that, when seen by a filmmaker struggling to make investors whole, appear relatively superfluous-- parties, hotels and plane tickets, etc. The new thinking is that since the decline of the theatrical market for most independents, film festivals have become a "de facto" distribution strategy unto themselves. So, why not apply the old distribution model to festivals to replace what was lost in the ongoing theatrical decline and transition?

Why should we be applying a failing and uncertain economic model to any organization at this point?

First and foremost, the reason the traditional distribution economy is failing and changing is because it didn't make economic sense for distributors and exhibitors themselves. Why should we be applying a failing and uncertain economic model to any organization at this point?  The recent example of Indomina shuttering its theatrical distribution arm in the wake of releasing two of the most acclaimed films of the year is only a small example of how difficult distribution and exhibition of independent, non-fiction and foreign films are today. The theatrical film experience is competing against a dizzying array of choices for the consumer, from home VOD to other forms of entertainment, while consumer dollars remain relatively flat or in, many cases, decline.

And of all the structures in place to generate revenue for films, the least profitable and viable is the film festival. At each screening of a film, my festival loses money. The cost of theater rentals, projection rentals and technical staffing, building and implementing a stand alone ticketing system online and on site, marketing our films and promoting them to the press, staffing the theaters and often traveling filmmakers to the festival means that ticket sales do not cover the cost of any screening.  Yes, festivals raise money outside of ticket sales, but they do so in order to not only supplement film exhibition costs, but to create the kind of environment and event that actually drives an audience into the theaters to see films.

Which is to say that yes, you can have a film festival without filmmakers, press and community events that create an environment outside of theatrical norms, but I am not sure how that helps anyone. Without building the event itself, there is no audience. Just take a look at a weekend’s per-screen average for some of the most interesting work that has played the festival circuit.  Even with five screenings a day in cities full of millions of people, there are films losing money against the cost of exhibition and P&A.  Film festivals are not simply exhibitors, generating revenue on concession stands and throwing a print on a screen, they are there to create a living environment where the experience of seeing a film matters. Where there is dialogue and engagement, where word of mouth can be a powerful force for a film’s future. Film festivals are marketing partners and audience builders, platforms from which filmmakers can and should be launching an integrated campaign for their VOD and ancillary distribution strategy. We live in world where, aside from the biggest studio films, theatrical exhibition is a loss leader for the long tail of VOD and home video revenues.

Many of us, my own festival included, are going to need to constantly re-examine what that value truly is and can be.

This gets to the real heart of one of Sean’s arguments-- that festivals believe they are “force multipliers” and have a misperception of their role and the real value that they exchange for the “gift” of exhibiting a film. By and large, this is less and less true (although certainly there are those among us with delusions of grandeur). Just look at the situation with premiere status.

When I started programming the Nantucket Film Festival in 2002, we would fight battles to ensure an East Coast Premiere or some other meaningless status, not because it mattered to the film, per se, but because it mattered in the perception of press and sponsors that the festival was seen as a place to premiere work. Today, that argument is pretty much dead; aside from the largest festivals, premiere status is irrelevant for most if not all festivals. 99% of festivals must concentrate on delivering value in a hyper-local world while establishing and maintaining a national presence in other ways.

But Sean is certainly right that the value proposition of film festivals has already shifted and many of us, my own festival included, are going to need to constantly re-examine what that value truly is and can be. This is an area where festivals can and must become better-- by offering support and audience building for filmmakers throughout a film's entire lifecycle. Integrating long tail awareness for films is a big part of the future, and festivals whose organizations can capitalize on social media, local partnerships and integrated support for driving revenue opportunities to VOD and other platforms can play a major role in supporting artists over the long term.

READ MORE: Why the Hell is One of the Most Well-Respected Doc Fests in Columbia, Missouri?

Film festivals, and again I include myself here, have done a lousy job of making this case for value in the face of our economic realities. Assumptions about the submission process and the idea that programmers hold “hoity-toity notions of curatorial independence and prestige” are really just an expression of justifiable frustration that festivals have not been transparent about their processes and their economic realities. I would also suggest that, in a competitive non-profit fundraising environment, projecting uncertainty and economic frailty is a certain way to make your situation worse.

Confidence breeds investment, and negative perceptions have as much to do with the seasonal and regional nature of the organizations as it does with a lack of a national voice that can gather data and create a landscape analysis of the domestic festival world. I, and many colleagues from across the country, have recently begun meeting under the guidance of the IFP in the hopes of creating a national organization of festivals that can help us all get our arms around these new challenges confronting our organizations, information that we hope will create far greater transparency for filmmakers, distributors and festival partners.

And so, instead of questioning the motivations of film festivals, the overwhelming majority of which are run by very good people looking to help connect films with audiences, a reality check seems in order; in almost all cases, there is no profit to share and the loss of revenue from ticketing would create another economic disadvantage in an already difficult environment. That said, festivals must work with filmmakers to help create real value for their films, value that capitalizes on the rapidly changing marketplace without repeating the failed models of the past.

This article is related to: Filmmaker Toolkit: Festivals, Filmmaker Toolkit: Distribution, Sarasota Film Festival