In a business where accounting disclosures are often preceded by massive lawsuits, indie distributor The Orchard has gone the other way: Their filmmakers now receive detailed and interactive reports of all expenditures and revenue streams — current and future.
However, this isn’t an altruistic gesture. Paul Davidson, The Orchard’s executive VP film & TV, said the move reflects nothing more than good business. In the turbulent world of indie film distribution, it’s the only way to tap into one of the company’s most valuable marketing assets: The filmmakers themselves.
“I’d rather filmmakers know that $30,000 was the cost of the trailer and in general how much money we are actually spending on publicity and advertising,” he said. “Distribution is not an exact science. For example, I don’t know if releasing our highest-grossing film ever [“Hunt for the Wilderpeople”] exclusively on iTunes is the right move, but I’d rather the filmmakers feel part of those decisions so we fail or succeed together. If we can get past their skepticism, it allows us to have more strategic conversations.”
The transparency project centers on a real-time dashboard that allows filmmakers to see detailed accounts of the Orchard’s revenue and expenditures throughout their films’ lifecycles. It also has a user interface that projects future profitability — projections that most distributors make, but rarely share.
Filmmakers have an often-justified distrust of distributors’ accounting practices, but filmmakers also have a direct connection with their audiences. For The Orchard, that made it common sense to treat their artists as distribution partners.
“We were constantly getting questions: ‘What’s real versus contracted?’ ‘When will the film recoup?’ ‘What’s this $30,000 P&A expenditure?,’ ‘When does the money from the Netflix deal kick-in?,”’ said Davidson.
The Orchard has been down a similar path before. The company moved into film after nearly two decades as a music label; it’s one of the few that survived the Napster-to-iTunes-to-Spotify transition. The Orchard emerged as a digital distribution behemoth (it has more than 9 million tracks on iTunes), largely by giving independent labels the tools necessary to maximize their libraries’ online earning potential.
“The lesson from music is we can’t pretend we can dictate how the customer will consume something in the future,” said Davidson.
While Davidson believes this data access will encourage filmmakers to return with future projects, he also views filmmakers as tremendous distribution resources. If numbers show a film is struggling in specific regions, like “Southbound” did last February, the quickest fix is to dispatch filmmakers to do Q&As in those markets.
The Orchard also shares numbers from previous releases. Davidson said 12 theatrical titles is the company’s annual target and in 2015 that included Joe Swanberg’s big-name ensemble “Digging for Fire,” the Kristen Wiig-starrer “Nasty Baby,” and the swinger-comedy “The Overnight,” which the Orchard won in a $4 million Sundance bidding war.
“Each movie in 2015 represented a different genre with a different release pattern, so at the end of the year we were able to ingest all of that data, which put us in a better position for 2016,” Davidson said.
One lesson learned in 2015 was the success of Oscar-nominated “Cartel Land,” which helped Davidson plan “Life, Animated,” a documentary they believe is a strong Oscar play this year.
“Releasing ‘Cartel Land’ in July worked really well,” said Davidson.
By getting three months of theatrical revenue, followed by three months of VOD revenue, “Cartel Land” made money while gaining exposure as it headed into awards season. In early December, it was one of 15 films to be shortlisted for the Academy Award for Best Documentary, which brought a noticeable spike in revenue right before the film had a January broadcast release on A&E, followed by a February SVOD release on Netflix.
“When broadcast and Netflix came into play, we saw 25%-30% cannibalization impact [cutting into other VOD revenue] compared to what we would have probably done, but it was an exposure and awareness play,” said Davidson. “By January, there was a perception the film was everywhere and helped reach voters who didn’t have screener, or were too lazy to get off couch and put in the DVD.”
What really surprised Davidson was that 12% of the film’s total revenue came in the months after it left Netflix, proving the increased awareness outweighed the cannibalization.
Davidson discussed this strategy with the “Life, Animated” team including director Roger Ross Williams, producer Julie Goodman, A&E’s Molly Thompson, and the Suskind family (the subjects of the documentary). He wants them to be as well informed as he is when it comes to taking advantage of every opportunity.
For example, the Orchard had no way of knowing that “Cartel Land” would gain fresh relevance when notorious drug kingpin El Chapo was captured in January, nor that there would be increased news attention paid to bordertown violence while Donald Trump was promising to build a wall.
Suddenly, “Cartel Land” director Matthew Heineman became the film’s biggest publicity asset. Orchard quickly pitched him for interviews with Charlie Rose, NPR, and the morning shows, injecting the film into the discussion of current events.
“When I think of ‘Life, Animated,’ I think of how compelling of an interview Roger can be, the Suskinds’ incredible story, Julie and Molly’s roots in the doc community and their insights in positioning this film for awards,” said Davidson. “In every sense, like Matthew, they are our partners in releasing this film.”
Another lesson that comes from The Orchard’s music business is the long-term value. Davidson can’t predict how we’ll watch movies in five years, but he is confident that good content can continue to be monetized. One aspect of sharing profit projections is it signals to filmmakers the company wants to exploit all rights as long as possible.
Being a full-service, end-to-end distributor allows The Orchard to focus on maximizing profits over the entire seven-to-10 year life cycle of a film. For Davidson, this often means investing in the value of a theatrical release.
“There’s a 50-to-400 theater sweet spot for us,” said Davidson. “We’re not interested in a 10-12 theater release. We’ve seen that we can really increase awareness for title based on reviews we get from the top 30 to 35 markets.”
Yet spending the kind of publicity and advertising dollars necessary to achieve that type of awareness benefit, only makes sense if the Orchard can also financially benefit from the post theatrical dollars this type of awareness can bring. It’s all part of Davidson’s big pitch to filmmakers — a long-term partnership.