The New Independent Film Distributors’ Business Model

September 30, 2010
posted by sheric

I want to focus on how to rehabilitate the film distribution entities so that they may continue to exist. I know what you are thinking “What’s she on about? We’re fine. We survived the latest shake out and are all the stronger for having less competition.” I am here to tell you that is fallacy. The old ways of bringing films to market are fading fast and it is time to reinvent your business. I want to acknowledge my gurus Gerd Leonhard, Seth Godin and Clay Shirky (though he is more my go to guy on all things having to do with immersive storytelling and audience collaboration) for being a constant source of inspiration for me in looking toward the future of media.

When Ted announced on his Facebook page that he would take part in a panel discussion at the upcoming Woodstock Film Festival concerning the new distribution paradigms, I had to look at who would be involved in this discussion. What people and companies would be taking part who are practicing radically changed business models for film distribution? It was as I thought; none. I posted a link on his page (http://www.techdirt.com/articles/20100326/1452138737.shtml) asking all involved in the discussion to read it and then talk about how they see the new paradigms. I don’t know if anyone did, but I did get a response from Dylan Marchetti from Variance Films explaining to me how his company functions to actively engage audiences for films they’ve booked in the theater. It was a lengthy exchange that resulted in my writing this post. I don’t think he read the article before he spoke because the point of that piece was to inform on how businesses need to form ecosystems around their companies, not continue only to sell copies of the content they distribute. Distribution companies should not be focused on selling copies, either for viewing or for owning. They should be selling access, creating networks of devoted fans around their brand and developing customized experiences instead. In other words, selling things that cannot be copied. This means they must first gather and cultivate a community of engaged followers and then develop, acquire, produce, and source material with only these people in mind.

Of the companies taking part in the Woodstock panel, I would say only Cinetic with their Film Buff organization has started with the potential to do this, but rather than building an engagement platform, they have merely built another online distribution portal (like so many others in existence that consumers have never heard of) to put copies out on the internet. Actually you can’t see any of the films on the site, it just directs you to their existence on VOD channels. Their “community” engagement is only a call for an email address so that they may send marketing messages. What is communal about that? What connection would a consumer have to the company itself besides advertising? None. Cinetic has no idea who these people are, what drives them, motivates them, interests them. It is not fair to pick only on Cinetic, I can’t think of a single distributor currently connecting directly with audience who can answer those questions. Troma comes to mind as a distributor with a very clear brand identity but even they are not directly in dialog with their audience. All current distributors are far too dependent on push marketing, usually hired from outside the company, and sourcing films purely on guesses based on audience reactions at festivals , favorable press or from hottest trends in market research. Every investment prospectus will tell you future earnings are not indicative of past performance, so why is that how decisions are continually being made?

What would I suggest for these companies? First, a total rethink of what business they’re in. Distribution of goods is no longer needed from you. You should not think of yourselves in the film distribution business because distribution has become easy to access by anyone online. (I know Dylan, you’re not online, but art house theater days are numbered too). Attention getting is now your main role. But from whom? If you don’t have a following as a company, a deep relationship with a community, how will you get attention and keep it? By building a tribe around the people in your company and, in turn, the company brand itself. This starts by identifying what kind of group you appeal to or want to appeal to, actively seeking them out and forging those deep connections. At first, this will mean attracting people through outside means, appealing through media and various outside groups to introduce yourself. Eventually the effort to enlarge the circle will be done by the community members, but until you have one, you must do that work.

Often, in a rush to monetize, companies jump right over the relationship building. The dismal failure of paywalls in newspaper circles only serves to prove my point. They did not build up an engaged community first, and then ask for payment. They falsely thought that their paper subscribers would be willing to continue the previous paid relationship even after it was possible to get most of the news stories from aggregators for free online. There is a great video from Jeff Jarvis explaining the new business models for newpapers here (http://www.youtube.com/watch?v=Jsb9NfJmqPY&) and lots can be gleaned from it for all corporate endeavors.

The reinvention

“The future leaders in business will be connectors, not directors”-Gerd Leonhard
The new model will be to build and foster a community around the brand as a company and to be in the entertainment fulfillment business. This community will have interests that the company can fulfill and that is the company’s ONLY function. To try and serve a well balanced diet of wide ranging content is to spread too thin and attract no one. Mass is not your target.
You will be a resource to your community not only in entertainment but in anything that interests them. This means you MUST know what “that” is. Is it books, is it music, events, clothes, games, causes, other similar tribes? These will be your other revenue sources as you create a network of interconnection with other companies who have their own niches, their own tribes. Also, consider enabling community members to profit in what you have sourced, to be affiliates and to create networks of their own. The network will feed each other spreading the brand even further.

A key part of your site will be to connect your community to each other. Some companies have sites where they connect to the user, but they don’t allow for intraconnection and some networking platforms are merely housed on a company website but members are never engaged by the company, merely left to use the tools as they see fit. Listening and collaboration will be cornerstones for this model to work. This isn’t work to be left to interns, by the way, but by those in power within the company.

You will also partner with other tribes of like minded individuals. Through these interactions, you tribe influence grows. There is no need for shouting out messages, gaining favorable PR placement, buying media for attention or forcing members to spread the word. If you are fulfilling their needs admirably, they will do it. You will however, generously reward those members in your community who do enlarge your circle. Instead of paying large amounts of money to outside companies to get “buzz” and “traffic,” you will invest that money in building experiences tailor made for your community. Development of experiences can only be done from active participation in the community and collaboration with them.

This model is far simpler to run as you won’t be going for masses, you will only cultivate your community. It will be labor intensive work, but not prohibitively expensive. You will need to develop tools so that the tribe members can speak to each other and so that they can spread the word to their friends easily. You should be facilitating sharability at all times, not closing it off and being insular.

The filmmaker/artist whose content you will source (not acquire as creators will have an equal partnership in your tribe) will be encouraged to participate with the community. In fact, if they will not, then their work is not very attractive to your community. Engagement at all times is key, this is no place for egos.

How To Make Money?

It may be that while you are in audience building mode, you will be spending more than making to develop a truly exceptional experience for your community. If you start this now before your entire business collapses, you will fare better.

-Create an online experience that makes the lives of your community better, easier, richer and be the number 1 site they visit for news, information, resources and community tailored to what interests them.

-Fill the vacuum of the lack of curation. People are confused by where to find things they like and overwhelmed by the choice. In a sea of content, be their favored destination. In this way, you can take on the likes of Netflix, a company that offers a huge range that makes finding content specific to personal interests nearly impossible because they don’t intimately know who their customers are. You will know this.

-Lock in the community by maintaining a dialog that will turn their initial attention into a revenue stream for your brand. A subscription model is what you should aspire to, but you cannot rush to that without first showing what you have to offer and reeling them in. First offer the ability to sample, share and then buy.

-Innovate in the online experiences you build to keep the community engaged and interested in making the circle bigger for you and for them. Incentivize those who are the most active at enlarging the community. Take the money you would have spent on outside marketers and use it to think of interesting incentives for your tribe.

I fear the problem for all of you will be waiting to see if another business model becomes successful before you decide to reinvent your own. This is extremely detrimental because waiting only results in being that much further behind. The first ones to embrace a new model win. It is why Netflix beat out Blockbuster. By the time Blockbuster conceded the model Netflix forged was legitimate, they could never catch up. Entrenched companies usually misjudge the speed with which change happens. Now is the time.

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