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Cannes Panel: Studios Fight Piracy While Indies Embrace Digital Future

Cannes Panel: Studios Fight Piracy While Indies Embrace Digital Future

It was a friendly studios vs. the indies sparring match at the future of digital entertainment panel moderated by Deadline’s Pete Hammond at the American Pavilion at Cannes Saturday. Everyone wants to fight piracy. It’s just a question of how to go about it. Beat them, or join them?

Ruth Vitale, executive director of the film industry’s non-profit CreativeFuture initiative, sounded the anti-piracy gong, continuing to sing the plaint of content creators that piracy costs money for filmmakers. Elevated Sales’ Cassian Elwes (“Margin Call,” “Dallas Buyers Club”) agreed with her, as did Fox’s own anti-piracy czar, Elizabeth Valentina (VP of content protection litigation). But Tim League, CEO and cofounder of the Alamo Drafthouse theater chain, which just opened its 20th location and is distributing films as well, is willing to experiment with luring audiences in the digital realm, and Bill Bromiley president of Haim Saban’s week-old, well-funded Saban Films, is following a VOD model going forward. 

Vitale warned that if they can’t teach the younger generation to stop thinking they should get content for free and to understand “how much blood sweat and tears it takes, then we will end up with cat videos,” she said, inviting new members to sign up and add their voice to CreativeFuture’s 200 companies (indies and studios alike) and 2500 members. She countered the widely held belief that if people content is available when they want it at a reasonable price they will pay. She waved a chart showing that on the day a legal digital copy is available–there’s a massive 200% spike in piracy. “The idea that people don’t pirate when content is available is bullshit,” she said. 

Valentina added: Within the first 24 hours that “Arrested Development” went up on Netflix, pirates downloaded hundreds of thousands at a time, when it was available on Netflix for an $8 monthly subscription. “Being available digitally made them more likely to pirate,  because it’s a better copy and better version,” she said. “What happens even if we can stop pirates operating within the US is that they move to offshore servers where countries are not as receptive to fighting piracy, and it’s harder to find who’s behind it and make the case to take them down. It’s more challenging as it crosses borders.”

What can filmmakers do to protect their content? Hire someone to crawl the internet to find downloads and sending takedown notices, said Valentina: “If someone wants to find a copy and pirate it, frustrate the casual user by making it not easy to find it. We do work with indies to join us helping to create good law and bring lawsuits, to negotiate service providers to pirate sites. It’s staying on top of it, sending notices, and outreach, to get it down as quickly as possible.”

Vitale, warming to her subject, said that people who download illegally are putting money in the pockets of criminals, the Russian mafia, and felons. They arrested a guy with a server in Virginia who made $175 million in 6 years: $150 million in credit card subscription and $25 million in advertising dollars. She cited a $227 million figure for ad revenue generated by a sample of 600 pirate sites from ads placed by legitimate companies in 2013. That money “could have gone back into making more movies and TV shows,” she said. “They’re in drugs, child prostitution. Why are we giving them money, why are we not supporting the thing we love?”

League thinks the solution is to “make the experience of going to the movies compelling,” he said, “to engage with young people and get them excited about foreign language films. I admire edgy engaging films and market them to young people, which puts us in the digital space. We worked with Bittorrent to promote ‘The Act of Killing,’ which has new sophisticated product bundles next month with DV extras as a package with a link to where to download the movie in a legal fashion with a credit card. We have email addresses. We’re not sure if we’re promoting to people to pirate it. Sometimes if our films show up on Bittorrent we high five because it means it cares!”

Vitale: “When distributing a movie, you have to figure out how to make noise against studio pictures, who are spending $60-70 million to open, vs half a million for the indies. There are 170 million users on Bittorrent, but if you publicize there, how do you convert stealers into buyers?”

League: “Despite your objection, we’re going to test out the pay gate next month. If it doesn’t work, we’re going to drop it. I am aware that there is a different relationship between content and younger people. The argument–theft is wrong–doesn’t sink in. We’re looking for a mechanism to deliver content that will make them accept this.”

Bromiley: “It is the responsibility of an indie distributor to find a way to monetize a film, which is constantly changing. When I started it was theatrical in the Roger Corman days and drive-ins. Now that DVD is gone and piracy is online, how do we make money so we can make films? The Ultra-VOD model is a new revenue source that is continuing to grow. Filmmakers have the potential to help grow that business with us. Some are a bit uneducated about how to do it. We’re trying to educate them, that model will grow. As tech improves at the home it becomes an even better placer to watch. Theaters are always there –without theaters there is no business, you can’t bypass it. We have to be distribution agnostic and figure out where to make the money. Today that’s the way we do it.”

Elwes: “It’s very difficult to get movies made. Filmmaker are struggling, the environment is changing rapidly. Each turn around involves a different process with sales agent and distribution platforms. At Sundance three to four years ago with “Margin Call” we had on the same weekend John Wells-directed “Company Men,” so all the buyers thought that it was a disaster. Two companies IFC and Roadside, IFC wanted to go day and date in theaters and VOD same time, Roadside was the only one who wanted to go with traditional theatrical, which the actors wanted. They didn’t want day and date, it had been a dumping ground when it didn’t work. So we went with Roadside. There were so many financial stories, and another picture “Too Big to Fail” on HBO, Roadside said “we’re going to do day and date too.” They were all crushed, the actors were not going to support the movie, not promote it. Occupy Wall Street happened, the reviews were spectacular. It was a big hit $5 in America, 200 theaters played it on VOD at the same time, it did $15 million on VOD, we only spent $1 million to buy, $12 to promote. We got an Oscar nomination.”

Hammond: “You played a week in LA before VOD to qualify.”

Elwes: “The following year ‘Arbitrage’ was equally successful. A lot of people doing it this way speaks to Ruth and the nightmare in our business. VOD beats pirates by making it available, but some go download it and give it free to others. But you get in front of it, not six months after theatrical release, finding out a movie is pirated.

Valentina: “We’re starting to experiment with premium home theaters, making smaller titles available at a $30 price point, but it didn’t go over that well. It’s something even the major studios are experimenting with, ways to consume our studio content online, something the studios are investing in, like Ultraviolet, so that account users can access content anywhere. There are different ways to consume VOD transactionally, or long term, or through a subscription service. It’s important to the studios, who are looking to expand their business.”

Vitale: “The majority of American major theater chains will not allow a movie to go day and date, they demand a 70-90 day window or they won’t run product. The conversation is going to have to evolve, either at a higher price point for home viewing or revenue sharing with theaters and distributors.”

League: “I’m a member of the NATO lobby group– many of whom see me as a traitor. There is an active stance on VOD and Ultraviolet that it is not acceptable in the eyes of NATO, all the majors and Landmark. It’s down to 300 theaters willing to do day and date. Otherwise you have to buy theaters and do four-wall, pay $5000 per engagement or more and split the take, which is not how it normally works.”

Elwes: “It’s now not so much a problem explaining this to actors, art movies are not going to get big wide release anyway, and day-and-date is an acceptable way to go: IFC doesn’t go any other way. Each month, each year the number of VOD titles is growing. What will happen: it will mature so that people stay home and say let’s just watch ‘Frozen.'” 

Looking down the road, we’ll have day-and-date releases with Netflix, Amazon and Yahoo and hopefully Google. The whole business will change, but the theatrical experience won’t go away even as the cost of building a theater inside the home will go down. Indie films in the future will be seen at home.”

League admits that it’s tough to lose acquisitions to rivals like HBO which has deeper pockets and to filmmakers themselves who more and more are taking on self-distribution options with a boost from crowd-funders like Kickstarter, following the model of online sell-through artists like Louis CK–who did have the advantage of a built-in following enhanced by HBO. “It’s where you should be,” League admitted of one filmmaker who turned down his offer. “This is not the money you need to be profitable.”

Elwes complained that studios are not transparent about the number of downloads, just throwing out numbers at the end of the quarter. He’d like to get monetize-demand into his contract so that his clients can make a bonus based on the number of downloads, at different price points.

League warned filmmakers to sell their films with a sales agent: “Don’t try to sell a movie by yourself. The industry is full of evil people who will sense your ignorance and rip you to shreds. Put together proposal on how to release a movie, what to spend on ads how your film is positioned in the field. Odds are that you won’t get money except for a minimum guarantee [MG], so you want to lobby for that– you won’t get your first check for three years. That’s the harsh reality.”

Vitale asked filmmakers to protect and safeguard what they send out and how send it out. Vimeo is not protected, she said, advising them to use paid sites that charge by the download and are password protected.

Elwes reminded that people “have to be more careful about how they are handing movies to each other: “There will always be ‘Spider Mans’ for the rest of eternity, but indie film is getting killed.” ‘The Hurt Locker’ made $15 million at the box office, sold 6 million tickets, but got 10 million illegal downloads. None of those people bought legally –what if 5% did? That’s $2 million. You could make film for that. 

There’s new platforms. The most significant in the past two years is Netflix which is huge but precarious due to the relationship with the studios, that’s why it got into one content creating. In the indie space they’re not buying at the same price point as two years ago. That hurts distinctly. We relied on Netflix, Amazon is coming in, saw that weakness, and is now buying a lot of indie films. They’re a great partner, as the budget allocated at Netflix has shrunk. 

Netflix gets movies on a VOD basis, big hit pictures. The studios are thinking, ‘we’ll do it ourselves.’ Other competitive VOD platforms have enormous product to make available. The nature of our world is competitive. One hope is that competitive platforms appear to need more product and will buy indie films.

League: VHX is a new platform, a small company that sells direct to the consumer via their channel. Why they are hated here at this panel is that we provide DRM free digital copies. I don’t trust Ultraviolet, I don’t buy it, I don’t trust my content there. VHX is the preferred means, we like their content, VHX has a DRM free model. I find it difficult to fight piracy when young people can make a copy of anything, anything can become a .mov film. I believe in building a community who love and respect what we do.

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