DVD Distribution How To in Filmmaker Magazine

by | February 17, 2009 | Uncategorized

My second in my series of Hybrid Distribution How To’s has been come out in Filmmaker Magazine. Here it is:

Setting up DVD distribution: Yes, you can still make money doing this.

Following — or perhaps instead of — your independent film‘s theatrical release is its release on DVD. While sales of DVDs released by all content providers, studios included, are dropping at the moment, home video is still one of the most lucrative stages of a film‘s distribution. And while much has been written about filmmakers self-distributing their films to theaters (see, for example, part one of this series in the Fall 2008 edition of Filmmaker), filmmakers‘ options when self-distributing their work to the home market have been less well covered. Rest assured, however — the same grassroots marketing strategies and cost-saving economies can be brought into play.

I don‘t think it was clear in part one of this series, but I was offered quite a few theatrical/DVD offers for my graffiti doc Bomb It. Like most deals independents are faced with these days, these were very low-money offers in which the buyer wanted all rights for at least 10 if not 20 years. While these companies were offering a small theatrical release, my producer and I were savvy enough to realize that theatrical releasing expenses would be cross-collateralized with DVD and cable revenue. Translation: The likelihood that we would see any additional money beyond the tiny advance was small. Plus we would lose all control of the film and its revenue streams for many years.

When evaluating a distribution offer that‘s less than the amount needed to recoup your production budget, I recommend filmmakers ask themselves the same two simple questions I asked myself. First, is the film good enough to put all of my energies into releasing it? If you can answer “yes” to this question, then ask yourself, is the distributor offering to pay me what I think I could make from the film if I exploited it myself? If “no,” I highly recommend not taking the deal.

I realize that, exhausted from your film‘s production, you may want to take the deal. After all, you‘ll have a distributor! And you‘re sure they‘ll give your film the release you feel it deserves. But remember that having a distributor often doesn‘t obligate the distributor to actually distribute your film — or, at least, to do a good job of distributing it — unless guarantees are written into the contract with very clear guidelines, dates and penalties. And there is never any guarantee that you will see any money beyond your advance.

Regarding being exhausted — tough. Why did you make the film in the first place? For it to sit on a distributor‘s shelf? You are the best marketer and proponent for your film because ultimately you are the one who cared and bled the most for the movie. You made this film to be seen by an audience, and your belief in it is all that can guarantee that this will happen.

Filmmakers must understand that finishing the film is half the battle. Or, to put it another way, when you have finished your film, your job is half done. In order to take back your power as a filmmaker, you need to think about splitting the rights to your film and parceling those rights out to whomever you feel can best deliver in each particular platform or territory. When it comes to DVDs, there are still many companies who will take your DVD rights only. It is up to you to research whether or not these companies are reliable, trustworthy and financially solvent.

For Bomb It, we were lucky to garner a DVD rights-only deal from Docurama/New Video. We had heard good things about Docurama‘s support of filmmakers — that they push their films and pay on time — so we proceeded with them. We did so because video companies still have bigger clout with large retailers (Target, Wal-Mart, Best Buy, etc.) than filmmakers like I do.

But this does not mean that I handed over my video master, sat back and waited for the check. Any filmmaker who does that will be unpleasantly surprised when that check does arrive.

What I did was create a hybrid relationship with Docurama/New Video that allowed me to sell the DVD on my own from my Web site as well as to create the infrastructure and materials needed for me to sell my DVD worldwide myself.

In order to proceed with such a strategy yourself, the first thing you must do is think about a marketing strategy for your film. What is its best market? Who is its audience? How are you best going to reach them? Will you potentially sell to libraries and universities as much as or more than you will to individuals? Is there pressure to release your film in a timely way (will it be dated, is there another film you are racing to beat to market)? Answering these questions will help to fashion your DVD release strategy.

Here is some advice on maximizing the income from your DVD sales:

Sell your DVD as soon as possible (and on its festival run, if possible). Distribution consultant Peter Broderick is a big advocate of this and now so am I. (By the way, Broderick was invaluable in helping me fashion my own DVD release strategy — I still remember the day my producer-d.p. Tracy Wares came back from one of his seminars declaring, “We have to retain the rights to sell the DVD from our Web site — Peter Broderick said so!”)

Selling your DVD early on will help you in a number of ways. First, you will make money at festivals and screenings right away. Some festivals will not let you do this; others will. But festivals can‘t stop you from selling them at your parties or anywhere else. And as festivals start to realize that there is a new paradigm for an independent film‘s release — that they are actually the theatrical release for many films — I hope that they will realize their new place in the day-and-date window of DVD release. Selling your DVDs during the fest circuit for $20 each results in $18 to $19 in profit per sale. That will cover at least some of your daily expenses. If you sell just 20 per screening, that‘s $400. With three screenings at a fest that‘s $1,200 — not bad.

Depending on your film, it will gain the most exposure during its festival run. People will be going to your Web site, and how great to have something to sell them? (More on setting up sales from your Web site to come). Again, 25 DVD sales for a very conservative month in your festival release is still around $500 — again, not bad.

The fear of selling your DVDs in advance of any other sale is obvious. “My video company will already see that it‘s in release and won‘t distribute it.” I believe that is a false fear. First, any DVD company who is worried about your own personal sales is not worth making a deal with. Second, you can always fudge the truth and say the film is not in DVD release, and in a sense it isn‘t. Your distribution is not wide enough to be deemed a release in a distributor‘s eyes, so don‘t cop to it.

Alas, we did not do this before our festival run, and I have regretted it since. We retained the old-school idea that “we‘ll pick up a distributor — we don‘t want to scare them away.” Well, within a week of our Tribeca premiere, our film was on Canal Street as a bootleg anyway! And the video companies didn‘t seem to care about that.

The doc King Corn has been a pioneer with this strategy. They had a festival DVD out prior to their Docurama DVD release, and Docurama didn‘t care. They just required the filmmakers to stop selling it when the Docurama DVD (with extra features) came out.

The bigger point is this: Don‘t wait for distributors because they may or may not come. And chances are that your efforts in home-video marketing will, if anything, only boost their further sales. (Remember, once you sign a distribution deal in a particular territory, then you need to abide by it — but anything you do before is pretty much fair game.)

Even though it initially involves a bit more work and a bit of cost, I recommend that when taking this approach you use a mass replicator when creating your DVDs. They will look nicer and be less likely to fail. DVDs burned on your home computer are not as reliable as professionally duplicated versions. And even if you have an intern or the personal capacity to burn and label the hundreds of DVDs that you will need for festivals and press, at some point it will get to be a bit much and you will want to duplicate them professionally. DVD to DVD duplication can cost from $1.50 and up (not including case and cover). DVD duplication including case and cover from a mastering house ranges from $1.25 to $1.50. In the end you get more for your buck.

Negotiating with a DVD distribution dompany. If you decide that you will benefit from a more traditional DVD distributor and a trustworthy one is interested in your film without demanding all other rights (broadcast, download, etc.), here are some things to ask for. None of these are unreasonable, and distributors should agree to these requests.

• The right to sell your DVD from your own Web store. In general the company will require you to buy the DVDs from them, but I have heard of the rare case in which they will let you sell your own version from your Web site. (Generally this is very rare. Companies usually don‘t want competing products in the same market.)

• Retain the right to sell the DVD at your public appearances. (Hats off to Peter Broderick again for this tip.) Some theaters may have an issue with the DVD being available, but other theaters really won‘t care.

• Negotiate a reasonable fee for buying the DVD from your distributor. This should be no more than $5 and preferably less. And if you can, get them to kick in the “profit” from these sales into the general revenue pot. After all, you are selling the DVDs and they only cost the distributor at their bulk rates $1. (Chances of getting the distributor to agree to this currently are slim.)

• Retain access to the DVD authoring materials. This depends on your deal. A distributor is more likely to allow this if you have a “costs off the top” deal because, in essence, you are already paying for the materials. This is important when you create your own international, multilanguage, Region-Free PAL DVD. I didn‘t negotiate this with Bomb It and I have regretted it.

• Encourage your DVD company to create a region-free DVD. This will facilitate your foreign sales and might obviate the need for you to re-author your film for the international market. The old way of looking at this is the foreign-sales company and the territories they sell to will be upset if the U.S. product is region-free. However technology is making this issue moot. DVD players that can play region-encoded DVDs are becoming much more prevalent, and region coding is becoming more obsolete. You can restrict sales to certain territories through your fulfillment company and through your distribution agreements. (There will always be some market bleed in any case.) Explain to your home-video distributor that region encoding doesn‘t benefit them — it only benefits the foreign territories.

• Be cautious as to what digital rights you give to your DVD distributor. Some DVD companies like Docurama act as aggregators of content for iTunes and the like. Others do not but want the rights anyway. Do some research and find out if the company really is an aggregator or not. Many large Internet providers only buy from aggregators these days, so it can be helpful if your company is an aggregator. But if you let them have some digital rights here are some tips.

1. Digital rights need to be split just like all other ancillary rights. Download-to-own versus streaming versus rentals etc. (This will be the subject of another article.)

2. Even rights within download to own should be carved out. For example, if your distributor aggregates to iTunes but no one else, only let them have the iTunes download-to-own rights. Try as hard as possible to only license non-exclusive rights. Non-exclusive is the name of the game currently for digital rights anyway. No one can afford to or wants to pay for exclusive digital rights.

3. Argue for a different percentage for the digital rights than DVD revenues. DVD sales are a tough business and warrant a company taking 25 to 50 percent, depending on the deal. But when they aggregate digital rights all they do is sell off the rights (plus a bit of encoding). Argue that digital rights are a 15 percent deal.

4. Most importantly, and hats off again to Peter Broderick: Retain the right to sell download to own and streams off your own Web site. Someone‘s going to offer it for free on YouTube or bit torrent soon enough, so you might as well try to make a little money for it and offer a better-quality image.

• In general be prepared to wait for your money from DVD sales. Not only do you get paid up to three months after quarter‘s close, but you will discover the difference between “sales” and “monies collected.” (Even though you‘ve sold a lot the distributor will not have collected the money yet. It can take months. Plus, the distributors “hold back” some of your money for returns.) All in all it will be awhile before you see your cash from a home-video distributor.

Authoring Your DVD

This article is not a how-to on mastering your own disk, but here are some recommendations in case you don‘t have a DVD company who is selling you your product to resell.

• Get quotes for the authoring. There are a number of houses. Your fulfillment service might be able to provide you with someone.

• DIY. I found commercial authoring quotes pretty high. I then realized that two of my previous DVDs had been authored by former students and they turned out great (Better Living Through Circuitry and SRL 10 Years of Robotic Mayhem). Get an up-and-comer who knows DVD Studio Pro to do your authoring. If you have your HD master on a hard drive, it can be encoded straight from that.

• Again, make your DVDs region-free. This will facilitate the sale of your own DVDs internationally.

• Extra Features. I do see the argument for another of Peter Broderick‘s recommendations: Creating multiple DVDs by adding features to subsequent releases. However, you need to weigh this recommendation against your own ability to keep revisiting and working on your film. Certainly a “festival-film only” version makes sense. Work out an agreement with your authoring house so that you make one overall deal that allows you to come back to do more versions.

• Multiple Languages. You may want to save this for a later DVD, but if you are able to you may want to consider subtitling your film in its early DVD release. Subtitles can be expensive to create, but here are some tips.

1. Dialogue and Subtitling Lists. Provide foreign-film festivals with not just a dialogue list but with an English subtitle list. Hence festivals will be translating for you line by line with the time code you will need for the subtitling document you will later provide to your authoring house. The difference between a dialogue list and subtitle list is specificity. The latter has the time code for every time the image or line changes. The former is much more general and is hence less helpful. Doing this requires more work on the front end but will save you time and money on the back end.

2. Require as part of any foreign film festival deal that they will provide you with not only the translation of the subtitle list but also any files that they generate for the subtitling. You are looking specifically for .stl files or .son files. If these are not offered, try to get Final Cut Pro files.

3. Don‘t forget to create textless backgrounds of scenes in your film in which text appears on screen. You need this for foreign sales anyway. But you will probably want to create an intermediary second version of the film: one that has all of your on-screen titles that you can live with not being translated into a foreign language but excluding any language subtitles. This will allow you to create a multilanguage DVD without having to create such a hybrid version a year later (like I am hassling with for Bomb It now).

Manufacturing your DVDs. As stated, there are two ways to go: totally DIY (i.e., invest in a replicator or DVD printer), or hiring either a professional house or other third party. I recommend the latter.

If you are going to do a lot of sales in Europe, you will need DVDs playable on their PAL standard. A few companies can actually produce your PAL DVDs in Europe and fulfill them from there, thereby making the shipping for your customers substantially cheaper. But replication is more expensive in Europe. I have to face this decision soon myself. I may decide to go with producing my PAL DVD in Europe, but then charge Euros for it, which will make up the price difference. For example, I‘ll charge 10 Euros per DVD in quantities of 100 or more instead of 10 USD.

Setting up your own fulfillment. When you are selling DVDs from your Web site, rarely are you actually selling them from “your” Web site. Nor are you shipping them out of your garage with gramps putting the stamps on and walking them to the post office. You‘re doing enough already releasing your own film without having to then deal with customer service and returns.

The sane alternative is to find a fulfillment company to do this work for you. A fulfillment company takes a percentage, but it is worth it. If you look on the Web you will find a number of types of fulfillment houses. Most of them are set up for big volume customers. These houses don‘t set up your sales Web site (you still need to hire someone to do that). They often don‘t have customer service or credit-card billing integrated (or you pay extra for that). These large houses will usually have a monthly minimum and don‘t make financial sense from my calculation unless you plan to move tens of thousands of units (in which case you are doing porno).

There are however other filmmaker-friendly options. The most prominent one currently is Neoflix. They provide off-the-shelf Web stores, where you can customize the look and feel of your store and plug in your merchandise. They handle customer service, billing, fulfillment and provide an accounting and check every two weeks — all for the modest sum of 10 percent, which is the cheapest I have been able to find in my research of a number of similar sites.

I did explore Amazon, who seemed at first to have an amazing deal. However, as I was comparing services they had just nixed live customer support of their Web stores, which is a drag when you are starting up — you need people you can talk to. The kicker was when I went to enter my merchandise into my store, I was not allowed to enter any of my other DVDs or books that I wanted to sell, I guess because it would compete with these same products sold by others on Amazon. So I went with Neoflix.

Several other things you should look for in your fulfillment company:

• A low percentage per transaction with no hidden costs, such as “per pick.”

• Low monthly fee.

• Low start-up fee.

• Low storage costs. Fulfillment companies charge you to store your merchandise — make sure this is as low as possible.

• Customer service included — you need to keep your customers happy. Speaking of those customers, a fulfillment company should provide you with your customer lists. This is the way that you are able to build your fan base. It is essential that your fulfillment company provide this for you.

• Off-the-shelf Web store templates that are easy for you to set up, match the look and feel of your site, and modify so that you don‘t have to pay someone $1,000 to set this up for you.

• The ability to have multiple products and separate them by category. For instance, if you don‘t have a distributor you will want to have a variety of multipack DVD packages to sell wholesale in quantities of 10, 25, 50 and 100 preset on your store.

• Low shipping and handling fees. This is often a barrier to sales from your site, and when people can get free shipping from Amazon, it is an issue. Neoflix offers that you can charge extra for shipping and handling but I don‘t recommend it.

• Timely sales reports, payment and inventory, and a record of paying their clients. See what other filmmakers are using the fulfillment company and contact those filmmakers before you commit.

• The ability to sell your product on Amazon (let your fulfillment house deal with them). This is provided you don‘t have a DVD distributor who has an exclusive on Amazon.

• The ability and willingness to send merchandise for you without a sale. You can employ them to send DVDs and posters to theaters and festivals. They do charge for this.

• The ability to sell digital downloads of your film or stream your film.

• An affiliate program. This is an important way to build relationships throughout the Web and supporting organizations. Other Web sites can host a banner for your film that links to your store. The affiliate program tracks these clicks to your store and credits the affiliate Web site with money based on sales, clicks or a combination of both. Links can also be text links, allowing organizations with e-mail lists to send out an e-mail with embedded text links. To be honest, it doesn‘t result in a ton of sales, but it does allow a way to build partnerships and get people to promote and raise awareness for your film. I offer our affiliate program to every blog or Web magazine that writes a piece about us. It‘s a way to reward the people who support you.

• An ability to grow with you and handle your specific needs. I am making a big push for my DVD internationally and am selling decent quantities wholesale. Since shipping is different for every customer, this needs to be done manually for each order, not calculated automatically through the store.

A Note About Educational Sales

Many if not all educational sales companies (distributors that sell higher-priced versions of your film for use in classroom settings) will not take on your film if you have a DVD distributor already. Many will want to be your DVD distributor and may want up to a three-year window before you sell to home video. The reason for this is that many if not most educational institutions and libraries will buy your film from Amazon and put it into their collection if it is available there. Copyright law allows them to screen the film in an educational setting without paying royalties. The conventional way to block this practice is to not release the film on DVD until after the educational window has been served.

It is up to you to determine how long you want to wait to release your DVD to allow for educational sales. You need to decide how important the potentially lucrative educational market is to you.

Here are some other ways to circumvent this.

• Create an enhanced honor system. Declare on your Web store and on the DVD packaging that the DVD is for home-use only. Offer educational versions or licenses on your Web site. See my store for an example: neoflix.com/store/Hyb10

• Prevent the DVD from being played from the beginning without starting with a warning that the version is for home-use only and no public or educational screenings are permitted. I got this tip from Robert Bahar who did it on his film Made in L.A. (madeinla.com).

• Offer a special educational instructional disk when schools or institutions buy the film from you. Although this will not convince educational distributors to take you on after your home-video release, it may convince some to buy it from you instead of Amazon. (Again thanks to Peter Broderick for this tip and the following.)

• Self-distribute your film to the educational market. This is a very time-consuming process and requires you to buy lists of departments and university libraries to sell to. However doing so allows you to bypass the educational distributors (some of whom charge up to 70 percent) and keep all of the money for yourself.

Next issue: Marketing your Film Old School and New School