The Internet Saves The Indie Filmmaker – Or Does It

Much has been made about the democratization of filmmaking. The barriers to entry are gone. Now, with a webcam, 90 minutes of something to say and editing software, you – yes, YOU — can be a movie mogul!

Right.

True, the hard costs of media, cameras, editing picture and sound equipment have certainly plummeted, but the cost of actors and crew have not. Without volunteer labor, it still costs a lot of money to make a high-quality film, even for the guerrilla filmmaker.

The Hollywood business model may seem like it’s a dinosaur, now that the barriers to distribution have vanished. But Hollywood doesn’t just create and distribute content, it also funds it through a variety of investment sources.

Is it possible to bypass the Hollywood money machine? How are we as filmmakers going to make enough money from streaming web content to make it worthwhile for ourselves and an investor? Is the allure of rubbing shoulders with the stars enough to entice the nouveau riche into investing in a web-distributed film?

Before I answer those questions, I have a confession to make. I’m an LA-based guerrilla filmmaker currently developing a webisodic, future/fantasy, political satire/comedy called Nanny Boy. It’s about Dan, a twenty-something slacker who’s just trying to get by, get laid and party-on in a world gone mad with political correctness and intrusive ‘Big, Dumb Gov.’ It takes place 20 years in the future and Obama is still president. Every well-meaning but misguided Utopian idea has been tried resulting in hilarious intrusions into every facet of Dan’s mundane, government-controlled life.

While trying to raise funds for the project, I’ve learned that several next-gen business models are beginning to work for filmmakers. I thought the Big Hollywood insider crowd would like to take a peek into that world.

Content Supported by Advertising Revenue is Alive, Well and Growing

Filmmakers Sean Haines and Allen Murray founded oMoviesin 2007 to coincide with the release of their first project, “Paris in Jail: The Music Video,” a wildly successful parody of Paris Hilton’s “Stars Are Blind.” “Paris in Jail” reinvented the comedy duo as web-based content creators, was a YouTube nominated Best Comedy of 2007 and received over 26 million hits, becoming a viral sensation.

‘Viral.’ That’s when everyone sends a copy to two friends, those two friends send it to two more friends and pretty soon the whole world has seen it. In the world of web-based content, that’s the new mother lode, the Internet equivalent to a box office hit.

So what does being the #1-watched online video in the world in the month of June, 2007, really get you? A much-coveted YouTube Partnership which means advertising revenue sharing. That can translate into a decent amount of money if you’re getting over a million hits a month. But is it enough to fund production? Yes, but only if it’s a really cheap production, and only if you continue to produce new content for your ever-fickle web-surfing fans.

A key to attracting those fans back to your site again and again is the subscriber list. On the oMovies site, viewers are asked to leave their email addresses so they can be notified when new content is posted. oMovies’ second and third original music videos, “Harry Potter in the Hood” and “Lindsay Fully Loaded” enjoyed over 11 million YouTube and MySpaceTV views between them. This kept the fans and subscribers coming back for more and generated those all-important advertiser-loving ‘hits.’ The company’s new webisodic, The Blog Monkey Show, is off to a very respectable start with over 14 million views in its first six months online. The duos fourth and latest parody music video, “The Reproduction Rap,” recently debuted and pulled in nearly two million.

Motivated by the necessity to continually provide content and knowing they couldn’t provide it by themselves fast enough, Sean and Allen contacted filmmaker friends who had undistributed films in the can. The deal: let’s cross-promote one another and our audiences will see our work. No money changed hands. It’s working, but no one’s getting rich. Yet.

oMovies continues to seek finished films.

For filmmakers, this should be nirvana. All you have to do is make a film and post it simultaneously to YouTube and your own web-channel. If it’s good, you’ll make money. But don’t count on that house in the Hollywood Hills.

The Advertiser and Filmmaker: Still In Bed Together

To understand how shared advertising revenue works, let’s take a look at the way the money flows in this business model. Advertisers pay for eyeballs. Google, parent company of YouTube, provides them. Google shares this revenue with content creators. So far, we’ve got perfect symbiosis, except for the fact that they’re fighting over price.

Advertisers know and love the network TV model. They only pay an average of $11 per thousand views (aka CPMs or ‘cost per thousand’). Google, on the other hand, is charging $0.54 every time a sponsored website pops up in a search. That’s an equivalent CPM of $540. You can see why Google is not highly motivated to embrace the network rate structure.

Prices are in flux as the prime players try to figure out the value of those ‘banner blind’ eyeballs. According to Forbes Magazine, June 16, 2008, pricing for display advertising next to user-generated content has collapsed, despite Google’s best efforts. Rates on sites such as Facebook, MySpace and YouTube have fallen 45% since February, to 18 cents per thousand page views, according to digital analytics outfit PubMatic (click here to view the report).

Unfortunately, the ROI (Return on Investment) isn’t there yet for advertisers. As Don Reisinger posts in his Techland blog, most of the momentum now is for ads within full episodes run on the TV networks’ sites, such as NBC and Fox’s Hulu, ABC.com and CBS.com. It’s a format that advertisers understand. Plus, the production values are high, something that can’t be said for most web videos.

YouTube, which makes the bulk of its revenue from selling display ads that run on the right-hand side of the site’s homepage, has been trying to lure these advertisers to their site. An ad on the YouTube home page now costs $175,000 per day, plus a commitment to spend $50,000 more in ads on Google or YouTube. Despite this, it hasn’t been a moneymaker for Google, even though they own the biggest TV station on the planet. In March 2008, YouTube’s massive bandwidth costs were estimated at approximately $365 million per year. In June 2008, a Forbes magazine article projected YouTube’s 2008 revenue at $200 million. Apparently Google hasn’t figured out how to make a profit from YouTube yet.

Funding for Webcasting

With potential access to millions of viewers available to filmmakers, the challenge is no longer how to go around the Hollywood distribution model. We’ve solved that problem. The challenge is how to get investors or advertisers to see the value in the content we create. Many are trying to answer the question: Does web advertising work and what’s it worth? Yi-Wyn Yen wrote this in his Fortune/Techland blog:

“This is a challenge for advertisers,” said Chris Allen, the video innovation director for media agency Starcom. Roughly 10 to 20% of YouTube’s content is professionally produced. That really starts to diminish the opportunities for brand advertisers.” Not to be deterred, one media buyer stays optimistic. “We’re trying to figure out what is the value in brand association with content that’s not premium,” said Curt Hecht, chief digital officer for GM Planworks, which handles advertising for General Motors (GM). “The approach we take is, how can we package this in front of a ton of eyeballs.”

Advertisers will spend $1.35 billion on online video advertising in the U.S. this year, according to eMarketer, but that represents only 1.5% of television advertising spending and just 5% of all Internet advertising spending. The research firm forecasts that U.S. spending for web video ads will triple to $4.3 billion in 2011.

This bodes well for filmmakers.

Media planners, the ones in advertising agencies who choose where a product should be advertised, and those who track eyeballs, like comScore, Alexa and Quantcast, are trying to monetize these massive audiences. To do that, they need to figure out who is viewing what content and where. Using sophisticated techniques which track web traffic, they connect website visitation and search behavior with purchasing decisions. When the advertisers are convinced the web works for them, I suspect money will be available for quality content. The frightening fact that we lose all semblance of privacy in the process is left to another blog.

The Path to Advertiser Sponsored Websites



THE GUILD – One success story is The Guild which was created by writer/actress Felicia Day and producer Kim Evey. It’s a low-budget webisodic about six online game-addicted, dysfunctionals. They shot on weekends with friends in Felicia’s home using DV cameras. After posting three episodes and attracting a following, Felicia asked her fans to contribute PayPal money to complete Season One. 500 people from all over the world donated. They shot seven more webisodes to complete Season One, won several awards and attracted suitors, most of which wanted to acquire the IP (Intellectual Property). Just before going into production on Season Two, she signed with sponsor Xbox Live who, she said, “Really got our show.” In exchange for an exclusive distribution window, they agreed to fund Season Two production and allowed her to keep ownership of the IP. Sprint has also signed on as a sponsor now. Season Two just launched and they have an audience of 10 million. Hmmm. Isn’t that something like a $70 million Box Office? Not surprisingly, production values have increased significantly.

Ironically, she originally pitched The Guild as a TV episodic but Hollywood didn’t get it. They said it was “too niche.” Felicia owes her success to that very aspect of the show: it’s an Internet show about the ‘niche’ Internet gaming crowd. Either the Hollywood TV crowd doesn’t realize the gaming business is eating their lunch or they just haven’t figured out how to make money from it.

Despite their successes, they still need their day gigs as actors.

BARELY POLITICAL – Most of you political junkies have probably heard of Barely Political which grew out of the successes of Ben Relles’ YouTube hits “Box in a Box” and “I Got a Crush on Obama.”“Box” was shot for under $200 and generated huge numbers of hits. Ben set up parallel web pages on Facebook and MySpace, sold t-shirts, solicited donations and sold the tune on iTunes. Ben also interacted with the fans, which was crucial to his strategy of building an audience. He was rejected as a YouTube partner until “I Got a Crush on Obama” demonstrated he had an audience and could continue to generate popular content.

Although he now has 200 videos in his inventory and a team of six full-timers, he began with bare bones. On the morning of the Obama girl shoot, he decided he didn’t want to be the Director of Photography. He advertised on Grisliest and within six hours, had reviewed 50 reels and attached a new DP. Ya gotta love the Internet. In September of 2008, he was approached and finally acquired by NextNewNetworks who currently fund his productions and profit from his advertising inventory, the spaces on a web page allocated to advertising.

David Feingold, aka “The Fat Jewish Guy,” is the Internet guru on the Barely Political team. He calls himself a digital strategist who knows how to ‘monetize’ content. That’s what every next-gen filmmaker wants to know: how do we convince advertisers that an ad ‘impression’ is worth $0.11, the price they pay a TV station for that same recognition?

Is this one of those Field of Dreams“if you build it they will come” things? Feingold doesn’t think so. He says no one will pay for content up front. You can, however, make money off of the content you’ve created if you play it right. He believes content is still king, but cautions that great content will not necessarily find its audience. That’s where he comes in (www.Romadel.com).

Blended Distribution/Financing Models

Not everyone is going the all-digital route. Marc Rosenbush, the “Internet Marketing for Filmmakers” guy, still has one foot firmly placed in legacy distribution (the DVD) and one foot in next-gen distribution, viral marketing and direct sales via the Internet. He shot his mostly self-financed $100k feature, Zen Noir, hit the festival circuit and garnered a few notations and awards – but no distributor. He self-distributed to a dozen theaters and despite spending many times more money on marketing than he did on production, Zen Noir vanished amongst the Hollywood clutter.

In frustration, Marc applied his day-gig knowledge of Internet marketing towards selling his film. He was quite successful in that he recouped his investment. He now sells a course online teaching others how to do the same. To motivate people to sign up, he reveals many of his secrets for free. According to Marc: “Internet Marketing for Filmmakers will show you how I used this formula to release my film and make $40,000 in two days, and how YOU can apply the same technique to GET YOUR FILM SEEN and MAKE YOUR MONEY BACK…”

Marc’s next film is almost ready for the greenlight, and he hopes to start principal photography this summer. He’ll be using a hybrid distribution model combining traditional licensing deals with some of the techniques he’s perfected on Zen Noir. He knows before-hand who his audience is and knows how to reach out to them globally using the techniques he’s developed such as viral marketing, purchased mailing lists, joint venture partnerships and forum infiltration. Promotion will start beforeprincipal photography with behind-the-scenes footage and interviews packed onto his fan site. Rosenbush knows how to find his audience, feed them content, hook them in and sell them DVDs once the picture is finished.

While a one or two million dollar production might be supportable using this direct-sell method, Marc doesn’t think it would be viable for a $10M film. He adds, “My techniques can be used very effectively to build buzz and drive traffic as an adjunct to a traditional marketing campaign.”

Despite his successes, Marc continues to face many of the same brutal, financial challenges many independent filmmakers do. “In this economy,” Marc states, “more than ever, only those who really want it badly and who are prepared to evolve as entrepreneurs, not just as artistes, will survive.”

Summary

So far, I haven’t found anyone who’s getting rich creating web-based content. Yet. I keep saying ‘yet’ because the big money isn’t there now but conventional wisdom suggests it will be. Because of this, the only people who are making a splash are the guerrilla filmmakers who know how to beg, borrow and steal, to wrangle volunteers and donations and make a film on the cheap.

Filmmakers, advertisers and investors are all trying to figure out how to make the world of web-based content work and we at Crunch Entertainment are among them.

Anybody who wants to help us with Nanny Boy, give us a holler.