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NetFlix is not your savior…yet

April 18, 2007

Lets shift, for a moment, to long form content – specifically to independent feature length film. Not the “faux indie” stuff put out by Mirimax or Fox Searchlight, but truly independent films funded and distributed outside the Hollywood machinery. (Let’s call them non-institutional, for lack of a better term.)

The typical non-institutional film probably has a budget of $750K or less. That normally includes the cost of production, distribution and marketing. Not having the benefits of huge marketing dollars and established distribution channels that the Hollywood institution affords, these films have a few options in life. They can toil away on the festival circuit, hoping to gain some audience traction and institutional interest (e.g. “Napoleon Dynamite”). They can try to book theaters themselves, hoping to generate enough foot traffic to attract a distributor who will take their movie to the next level or put it on TV or DVD (e.g. “I am a Sex Addict”). Or, if both these options fail, they can join the hundreds of other titles that are sent straight to DVD or into foreign markets through various film markets. Basically, as you move from option to option, your chances of profitability become less and less.

There is a common perception out there that salvation is close, and rides on a broadband horse. The search and recommend, community, long tail culture of the web will bring these titles to those who want to watch them, opening the floodgates to starved independent film makers. A recent Variety article which can be found here seems to concur with that view. Many also point to their experiences with places like NetFlix: the recommendation engine on NetFlix has an uncanny ability to introduce people to countless titles that were previously never on their radar.

This line of reason make a lot of sense. After all, a lot of what has held true in digital music, has held true in digital video thus far. And digital distribution has, most certainly, helped independent music. (Although not to the extent many believe.) However, in my mind, salvation is further away than people think.

The good news is, there are services emerging that are helping non-institutional film makers through various steps of the value chain. In addition to storefronts like NetFlix and Amazon’s Unbox, digital rights marketplaces are starting to pop up like inDplay. In addition to making it easier for buyers to find previously unknown properties, these solutions track rights and facilitate negotiations and payments. Services like Without A Box have, been around for awhile, helping film makers manage the festival submissions process. However, along with solutions like MySpace and even YouTube, they are making it easier for those film makers to develop and maintain relationships with potential audiences, helping to alleviate marketing pressures.

That said, there are three core issues that are preventing non-institutional films from blossoming online the way independent music has.

  1. Bandwidth. A feature length movie file is much larger than a music file. Not only does that mean longer download times, it also means more bandwidth costs. This is at least part of the reason feature length download volumes have not blossomed (there is a pricing issue as well, but that is another post). The additional cost also vastly changes the finances of potential film distribution sites, and is probably one of the key reasons you don’t see more smaller, vertically oriented storefronts blossoming and staying in business longer.
  2. Recommendations. For all of the collaborative filtering goodness Amazon’s and NetFix’ recommendation engines provide, it still doesn’t solve the critical issue of how you make recommendations for movies nobody has ever seen. Most recommendation engines run on transaction histories and prior viewing behavior. For a title and for a potential viewer. But what happens when nobody has actually rented the title? When there is no transaction history? The answer, for music has been to associate metadata that you know about a specific song, with other songs that have transaction history. Pandora, for example, looks at things like tempo and tone and beats per minute, assuming these attributes can lend some predictability to what people like to listen to. Similarly, movies need a system that can take metadata that we know about every title, and associate it with metadata that we know about commonly watched titles. In other words, by associating films through things we definitely know about them, like plot development, or dialog and editing style, we can start making richer recommendations of movies people have truly never heard of. Until then recommendation systems will continue to only benefit titles that have already had some distribution success.
  3. Advertising. In the offline world, the core marketing problem for a non-institutional film is how to compete for share of mind against the massive marketing budgets brought to bear by institutional releases. Despite the Myspaces and CPA driven campaigns, this problem is no different online. Media is one of the largest online advertising categories, and it is difficult and expensive to break through the sheer volume of exposures the media industry pumps out on a daily basis. Better recommendation, and more niche, vertically oriented storefronts will certainly help in this regard. But CPA driven campaigns are difficult to implement in this vertical. Often, movie makers can only afford to pay on a cost per acquisition basis. And the dollar amount you need to pay a publisher, to convince it to carry your ad, versus the Hollywood movie willing to pay on a CPM basis, is often prohibitively high.

Ultimately, I think digital distribution will provide some form of salvation to the non-institutional film maker. But there are many hurdles we need to overcome before we get there.

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