What I Have Never Understood
Why does the independent portion of the business let the studios and big theater chains set all the rules, set ticket prices, set these DVD prices, set release windows, in fact, set many of the conditions under which the indies and the indie outlets, including smaller theaters, find themselves and their work existing, nay, struggling. Indies SHOULD NOT try to mimic the studios, or be hemmed in by studio economics, or even studio deals, but should strike out and work, continually, to differentiate their product, to court their audiences and their audiences’ intelligence, and push to increase their profit margins through different types of deals.
I want to tackle my frustration with the fundamental imbalance in the Home Video (digital and DVD) equation. Consistent pricing between studio fare and indie fare is an ongoing threat to a healthy life for the indie film business.
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A Bit Of History:
When VHS movies were in their heyday (the ‘80’s and ‘90’s), there were two pricing schemes:
- Low priced films on VHS to buy and have at home, ET and the like, for $15 to $25 or so. Called “sell-through,” they were considered “volume” titles, priced low to move lots of units, and make more money for the studios. All films cannot be volume titles.
- “Margin” titles, which were much higher priced, with smaller target audiences, or anticipated to be targeted to rent primarily, priced at $60 to $110. Called Rental pricing.
Yes, that is accurate. Giant audience films sold for much lower prices, to boost collecting, and niche films with smaller followings had the opportunity to charge premium prices, targeting them to rental titles, and those who desired them heavily could buy them at a much higher margin.
The DVD Pricing Mistake
Enter DVD (late 90’s) and across the board “most-favored nations” pricing. This was not determined by small distributors, and certainly not by indie filmmakers. It was in the hands of the studios. All DVDs were priced at list between about $24 and $30. Wholesale price about half the list. At that time, all movies on DVD became volume products. [Price for volume, or price for margin, like low PC prices (volume) and high Apple prices (margin)].
Indies were forced into a deal with the devil, small margins, with only incrementally higher volume. Their consumer base is just not as big as the big guys; so small suppliers are hemmed in by pricing that favors the big suppliers.
Indie Films Should Be Priced Like Artisan Products
Go to your local chain supermarket, and go to the regular cereal aisle. You will see a volume product, each box identical, each brand completely controlled, some commonality in pricing, so everyone knows exactly what they are going to get. The same is generally true in the cheese aisle, and in the wine aisle.
But if you go to your artisan bakery, and they make granola there, you know their granola will have its own personality, and will not be like the cereal from the shelves of the big national chain. Their granola will be priced quite differently; not like a volume product because they cannot achieve volume in sales. It is an artisan’s offering. You as a consumer care about the granola the same way they care about it when they make it, so you are willing to go a little further to get it, pay more to eat it and enjoy the special product it is. Same with the farmer’s market cheese-maker, and the artisan winemaker. When a wine wins awards, they don’t mark it down, they mark it up! I think artisan films should pursue similar pricing strategies. You cannot achieve volume, so go for margin.
What Pricing Differentials Can Mean In Download Sales
For an independent film costing $1million or less, your film can achieve essentially double its sales in a single market with a properly targeted price. This is just to illustrate the opportunity in thoughtful pricing. Of course you could spend a bit more on marketing to support your title, but at a higher price point you can afford it, and it can quite possibly have a multiplier effect on your sales.
If your Download to Own (Electronic Sell-Through, EST) price point is $18.99 instead of $14.99, you have the opportunity to increase your sales margin on each download in a meaningful fashion.
Seize The Day
Again, indies should not mimic the deals the studios set for larger market films. Filmmakers can rightly say they have little control over the life of their film after they hand it to a distributor, and small distributors may express feeling powerless to change the world of retail. I have worked with distributors who felt helpless against Walmart with their aggressive tactics to lower prices. Hey! Walmart’s purpose is not your purpose. Walmart uses DVDs as “loss-leaders” to get people in, not to honor your product.
Everything around us today says that we are only powerless if we accept it and act that way. Strike off in a direction away from big market practices for small market products. At worst, when negotiating with a distributor, focus on the future prices of your product in different markets and enable this discussion. At best, do not do a deal in which a distributor will allow your product to be devalued in the marketplace by the studio deals. If your product is special, everyone has to agree to treat it as special, and make specific moves to protect that.
Everyone benefits from Film Independent, Sundance, Festivals, IFTA and the hard work they all do to get independent films up and made and get noticed. Art House Theaters have an organization that helps them understand their audience and best practices. I think that Independent Film, Specialty Film needs to have a core organization that pushes film consumption, information sharing and marketing expertise just like the MPAA does, and that will help with best practices, including positioning and lobbying for better pricing for these films, which, frankly, are part of the heart and a large part of the soul of film itself.
We face an existential question. Indie films, their producers, their financiers and their distributors must try to seize control over their futures, and stop letting the larger outfits set all the terms. Unique films must be treated like the artisan products that they are.
The New Yorker Magazine Found Success
The New Yorker delivers a quality product to a specific clientele at a higher than usual 3-digit annual price, and they are targeting subscriber growth. Sound crazy? “The lesson of the past five years has been not to undervalue ourselves.” Says the New Yorker deputy editor.
I think the independent film business undervalues itself and should change its approach.
Filmmakers, their champions, their business partners, and their fans need to determine that they want this special product to exist, to thrive. Higher margins will go a long way to helping ensure this. If you pay more for your cheese, wine and granola, I am sure you and your own clientele would be down to pay more for films that satisfy that special psycho-social itch you and they have, the one that Iron Man won’t scratch.
More To Come On This Topic:
I intend to pursue this topic further in the coming months, and illustrate the value of this strategy for making films more profitable for all.
Let Me Know Your Thinking, And Earn A Significant Discount
Tell me (in a comment to this article) why you believe “artisan” films should be higher-priced (like small-batch to box wine) and you instantly qualify for a 20% discount on our: Greenlight Analysis, Financial Models, Confidence and Probability Analysis or Audience Analysis. And the same to those of you who want to justify why I might be full of it.
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