The New Definition of Theatrical Release

Indie filmmaker John Reiss talks at DIY Days about changing the definition of “Theatrical Release”.  While Jon acknowledges alternative forms of distribution, he speaks candidly about the emotional importance of the theatrical release.

Reiss’ talking points include:

• Why theatrical is important
• Week long vs short runs
• Rethinking film festivals
• Alternative distribution models

Happy Turkey Day to all - I hope everyone ate 10 pounds and gained 20  !!

Is Smart Money Targeting Broadway?

During a difficult economy, the weak dollar and star talent has fueled a successful year on Broadway. Signs point to a bright year ahead.

Broadway:

• Contributes $5 billion a year to the New York economy
• Supports over 44,000 jobs
• Ticket sales for the first 6 months of this season are steady at $481 million
• Attendance is expected to surpass last year’s 12 million people

Disney Reports Earnings: Iger’s Crystal Ball

Disney reported earnings after the bell last Thursday, beating Wall Street’s expectations with Net income up 18% on 4% higher revenue.  Most interestingly on the Q3 conference call is that it was Disney’s media networks that drove growth.  While a secular ratings decline is occurring across all of the major networks, Disney was able to grow operating income for the media division by 26% during the third quarter of 2009.  Though Disney CEO Bob Iger is quick to point out that advertising revenues will continue to decline, Disney will still invest heavily in content creation.  Iger believes that the Company is on the right path toward developing alternative revenue streams.

Social Media Distilled for Business

I have been traveling over the past week and haven’t had much time to blog.  However, I come across a piece that I would like to quickly share.

Much has been written about social media – what it is, how to use it, etc.  Still, most businesses have a difficult time deciding how much time and resources to put in to social media.  This is because social media lacks a broadly accepted set of metrics to measure return on capital.  Though in my opinion the real reason has nothing to do with metrics, rather a lack of understanding about what social media is.  Social media is simply word of mouth – that’s it!  If more businesses understood this, they would be far less reticent to shift marketing dollars towards it.

The folks over at HubSpot published a great piece yesterday about why businesses should use social media.

The three main benefits businesses get from social media:

1. Listening

   Every company needs to listen.  Doesn’t matter if you sell solder paste, CRM software or fencing supplies.  You need to listen to your competitors, your customers, your prospects – your community.  Social media sites like Twitter, LinkedIn and Facebook make this easier.

2. Reach

   Reach is important to any marketer.  It’s the number of people you can communicate with directly via email, telephone, or any other channel.  You need this whether you’re selling to consumers or businesses.  Social media tools media it easier to build.

3. Nurturing

   Nurturing is another critical marketing task for all companies.  Regardless of what you sell, you need to build trust with potential customers and educate them about your company and your products.  Social media facilitates the development of personal relationships at scale.  This makes it an ideal tool for nurturing in any business.

Read the entire post on why businesses should use social media from HubSpot.

Filmmakers Should Keep An Eye On Netflix

Since its founding in 1997, Netflix has stayed on the leading edge of market trends.  Over the last 22 years, Reed Hastings has taken the concept of movies by mail from nothing to about 36% of the movie rental market.  Netflix has driven subscriber growth and changed distribution by providing customers the convenience of never having to leave their home.

In recent years, the Company has identified emerging distribution channels and partnered with brands including Vizio, LG Electronics, Samsung, Microsoft and Sony, making it easier for subscribers to access Netflix content.   This month Netflix streaming service comes to the PS3 and in early 2010 Netflix will bring streaming service to the upcoming Wii HD unit as well.

So, what does this mean for filmmakers?

This means that filmmakers should keep a close eye on Netflix as it becomes an increasingly powerful distributor.  Traditional movie rental stores are dead.  And unlike the kiosk market, Netflix has built an engaged community.  The Company has detailed personal information including user preferences and viewing patterns that will allow it to uncover new opportunities that its competition simply cannot.

Netflix currently has 11.1 million subscribers.  According to Wedbush Morgan analyst Michael Pachter,  the Xbox deal has contributed about one million new subscribers to Netflix.  That equates to 7% of the 15 million Xbox units sold.  Assuming the same 7% conversion rate on PS3′s 9 million household units, Netflix will grow its subscriber base by 630,000 (roughly 6%) from the deal.

Netflix’s move to leverage the broad adoption of next-gen gaming consoles and use them as a distribution channel furthers the Company’s competitive advantage.  Though many complain about the lack of content available for instant viewing, as Hastings points out in the New York Times, “Our ability to license more content is based on what checks we can write… If getting on the PS3 [and Wii HD] helps our subscriber base grow, that helps us write bigger checks.”

Because licensing makes up nearly the entire cost of streaming, Netflix has resisted newer and more expensive content.  To date, I believe most of the deals have been bulk licensing and unlimited use agreements.  Going forward, Netflix can accelerate the growth of its instant viewing library if it is better able to directly offset the licensing costs of streaming content.  Because of this, Netflix would be smart to tweak the current subscription model and introduce streaming-0nly plans.

One thing is certain, as grows Netflix’s reach, so grows its power within the film industry.

Filmmaker Ted Hope’s Keynote Speech

Ted Hope gave the keynote speech at the London Film Festival’s technology conference, Power to the Pixel.  I am a fan of Ted’s blog Truly Free Film, which focuses on “cross-media reinvention” – a fancy term referring to the diversification of a film property among various distribution channels and revenue generators.

Online Video Statistics 2009 and Beyond

Key Takeaways On The Future Of Online Video:

Online video vs. television viewership

As the stats below demonstrate, television still dominates online video in terms of the number of eyeballs, frequency and time viewed.  However, viewer engagement is another story.

• 2009′s online video viewership is estimated to be 144 million ~ 72% of Internet users.
• Television’s audience is almost 300 million.
• Weekly viewership for online video drops about 63% to 53 million viewers.
• Weekly viewership for television is 250 million.
• Average viewer consumption of TV is 4.7 hours per day.
• Average viewer consumption of online video is about 4 hours per month.
• Online video only accounts for 1% of total video viewing time in the US.
• However, research suggests that online video usage fuels TV viewership.

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What online video viewers are watching

One of the largest trends to keep an eye on is professionally created contents’ adoption in the online marketplace.  Long form professional content inherently presents more viable business models.  As viewer habits change with the increasing volume of professional content delivered over the Web, new opportunities for filmmakers will emerge… and Jeff Zucker will no longer be trading NBC Universal’s analog dollars for digital pennies (if he still has a job).

• 8 of the top 10 most popular online video genres are short form.
• Still, 28% of online video viewers watch full length TV shows and movies, and that figure is expected to grow dramatically over the next few years.
• Hulu’s audience is about 38 million viewers per month.
• Hulu runs 4 ads per hour.
• Television runs 32 ads per hour.

What really matters: MONEY

Actually, what REALLY matters is growth.  The Internet is consuming the entire media industry.  The newspaper business is walking the plank and an increasing number of magazines are closing their doors (R.I.P. Conde Nast Portfio). Meanwhile Google is still growing at 20% annually.  The Company reported earnings last week and beat analysts Q3 expectations by 8.67%.  Google also beat analysts expectations on top-line revenue growth by 3.3% for the quarter, with pay-per-click ads growing 14% over last year – all of these print ads need a place go!

• Total media spending (television, radio and print) will decline 14.5% in 2009.
• Yet, online video spending is expected to grow 44% in 2009.
• Online video ad spending amounted to $324 million in 2007.
• Online video ad spending will exceed $1 billion in 2009.
• However, that figure only makes up 4.3% of total Internet ad spending and only 1.6% of TV ad spending in 2009.
• By 2013 online video advertising will represent 5.5% of TV ad spending ~ 244% growth over 5 years (28% CAGR).
• eMarketer estimates that online video ad spending will continue grow at over 40% for the next 3 years.

Viewer engagement and the pulse of the market

Because online video is a lean-forward interactive experience, viewer engagement is far higher than television.  This will result in marketers continuing to shift ad dollars from television to online video.  In addition, Internet advertising provides more targeting and accountability than TV advertising.  In a tough economic climate, measuring return on investment (ROI) becomes even more critical.

• The average consumer recall rate of an online video ad is 50%.
• The average recall rate of a television advertisement is only 18%.
• Viewers are 28% more likely to pay attention to online video ads than TV ads.
• Currently, 50% of US marketers are using online video.
• 43% of US marketers expect to shift 20% or more of their TV ad budgets to online video by 2010.

Arguments against the proliferation of online video

Online video’s business model is in its infancy.  Google reported on their third quarter conference call that YouTube is getting “close” to becoming profitable… Close relative to what?  While the dominant online video business model is certainly some form of advertising, to date, not one company has provided a solution that renders television obsolete.

• Piper Jaffrey says 79% of consumers are not willing to pay for television online – Advertising.com puts this figure at 94%.
• 72.6% of US ad agencies will NOT run ads on user generated content.
• The average CPM (cost per thousand impressions) for online video is $11 – $35 (depending on weather the add is a pre-roll, mid-roll or post-roll).
• The average CPM for television is $10.25.
• 31% of US ad executives say that the Internet still lacks the targeting capabilities they are looking for, and 27% say that online video advertising is too expensive.
• US online video ad spending per hour viewed averages $.17, whereas television averages $.13.
• About 60% of adults are online and watching TV at the same time.

Conclusion

The Internet is clearly the way that we will consume television in the future – but – we are not there yet.  It will take time to refine a successful online video business model.  The good news is that more professionally created content is building audiences every day on the Web… And as the saying goes, money always follows eyeballs.

• In 2009 only 15% of digital video traffic will com through TV’s while 85% will come from computers.
• By 2013 61.5% of digital video traffic will come through TV’s while only 38.5% will come from computers.

Related Posts

• Film industry statistics for 2009: total spending, box office and home video numbers

Film Industry Articles You Should Read vol.2

Hollywood warming to Internet as DVDs begin to fade

Higher margins, the ability to collect and use information about customers, more revenue and greater willingness to share content with Internet operators is prompting Hollywood to join forces with the likes of YouTube or set up its own Internet portals.

Bill Mechanic On Moguls’ Bad Decisions

Bill Mechanic, former chairman/CEO of Fox Filmed Entertainment, shares  his thoughts on the present as well as the future of independent film production.  Mechanic spent 7 years at Fox, from 1994 – 2000, bringing it from a “doormat” to the #1 studio.

Film Fund-amentals: Across the Digital Divide

Despite the extra money that Paramount had to invest in preparing Paranormal Activity for commercial release, the film is such a low-rent item that it will make a profit after the first six customers finish paying for their tickets.  What is especially interesting about the release of Paranormal Activity is the film’s online strategy…

Comcast & NBC-U: ‘They’ve All Agreed to Agree’

What I am hearing from inside and around the deal is that indeed the Comcast deal to buy 51 percent of NBC-Universal is done in principle, but it will be several more weeks before anything official is announced.

Blockbuster Kiosks: Interview With NCR Corp.

Blockbuster announced Tuesday, September 15th in an SEC filing that it would be closing around 960 ( 22%) of its stores by the end of 2010.  That is double Blockbuster’s previous projection of 425 store closings.  Many of these locations will be replaced by Blockbuster Express movie rental kiosks manufactured and operated by NCR Corp.  As I stated in an earlier post, Blockbuster’s entrance in to the kiosk market seems to completely contradict their business model.  With Redbox projecting 22,000 units by year-end, it appears Blockbuster is operating under the business strategy of “if you can’t beat ‘em, join ‘em”.  Blockbuster, clearly a late entrant to the market, plans to open 10,000 kiosks by the middle of next year. I recently spoke to NCR Corp.’s Manager of PR Jeff Dudash to hear their side of the story.

Sceneclips Interviews NCR on Blockbuster Kiosks

 
About 15 minutes

Although I still have a hard time understanding how kiosks compliment Blockbuster’s retail stores, current opportunities in the market should not be blinded by the anticipation of future opportunities.  While streaming video on demand is certainly the distribution means of the future, the kiosk market is by far the fastest growing movie rental distribution channel.  Last year, kiosks grew from 2% of the movie rental market to 19% this year, and according to NPD Group the kiosk market will grow to 30% in 2010.  That being said, Blockbuster’s entrance is no doubt an act of desperation to maintain its dwindling market share.  The problem with the initiative and with Blockbuster as a whole is that they are:

• Late to the market – Redbox has already established itself as the dominant player and has nearly 10 times the number of kiosks that Blockbuster has.
  
• In a poor financial situation – They nearly went bankrupt before issuing $675 million in senior bonds.
• Still lacking a streaming media strategy – Netflix takes the crown here, just like they did in the DVD by mail market.

Please note: I am not a Netflix, Blockbuster nor NCR shareholder. My thoughts and analysis bear no interest of personal gain. I express them simply because I care about film distribution.

Paramount’s Breakthrough Distribution Bet

CNBC’s Julia Boorstin talks about Paramount’s “breakthrough” distribution approach with Paranormal Activity.  Through Paranormal Activity’s website, Paramount is putting the audience in control by letting them decide where the film is shown.  The film has already grossed over one million dollars on a $15,000 budget.

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