Tuesday, March 21, 2006

The LA Times

Had a great article today on the impact of Netflix on the Home Entertainment industry. This is an important company to know as you move toward making your first movie. They will be far more important than Blockbuster in the next five years...

Then they will become the dinosaur as VOD (Video-On-Demand) takes over...

17 comments:

Aric Blue said...

Competition is typically good, but the fact that they've hurt Blockbuster financially--doesn't that translate into hurt for indy filmmakers?

BB isn't paying the big money they used to for units(typically around $50/unit so they would get rental rights, correct?)

So you think Netflix is a good thing or a bad thing(as far as indy filmmakers go)?

Bill Cunningham said...

Back in the 80's they would pay $50 / vhs cassette. Those are the "Dark Ages". No one pays that anymore. BB pays the wholesale price for a DVD. For a $14.99 disc that means $5.99 ea. For the big studio titles they won't go any higher than $6.99 because they buy so many of them.


Netflix does a great service to indy filmmakers. Read the Times article - Netflix services a lot of niches. Niches that wouldn't and couldn't be serviced by BB.

Don't ever think that BB is the friend or champion of indies. They are a business. If they can't sell your flick, they won't buy it. They will keep it on the shelf until it outlives its usefulness and has hit its required TPC. Then goodbye.

Dave Fogerson said...

Have you heard from any of the winners you picked from last year's logline contest, as to whether they've sold or optioned their scripts since the contest?

Bill Cunningham said...

No I haven't. I should do that before launching this year's contest...

RogerRmjet said...

Read that article this morning. Really enjoyed it. It was a great addition to the conversation/article I started with you last week. Makes me feel much better about the impending demise of Blockbuster, and gave me a much better understanding of how NetFlix operates. As you said, anyone who wants to make a movie better understand the business first!

Glad to hear there's going to be another contest this year!

Aric Blue said...

I'm not championing BB at all--but I don't think they can buy RENTAL copies at wholesale. That would be like me buying a dvd and renting it to my friends--it's illegal.

Purchasing a dvd only gets you viewing rights, which as far as I know is why they used to pay so much money. Or am I missing something?

'Cause believe me, the distribution model is something I'd like to learn more about; it's clearly where the money's at(it's not with the people who, you know, actually MAKE the movies) :)

Bill Cunningham said...

And I'm telling you that they used to buy discs from York for $5.99-$6.99 apiece.

Aric Blue said...

And York was giving them RENTAL rights, or were those dvds for resale?

I can't believe the studios would sell a dvd to BB for wholesale and say "Yeah, rent the heck out of that and then sell it used."--they have to get more money.

I dunno--you know anyone who could tell us definitively? I'd love to know for sure just how it works.

Bill Cunningham said...

It was rental rights.

DVD has always been a SALES model. There is no window between the rental and the sale the way there used to be with VHS. It used to be you had to wait months while the VHS movies were rented, before you would see them for sale at a retail store.

This is what turned the whole home entertainment world upside down when DVD came in. You could buy it or you could rent it all at the same day when it came out.

Now if a disc is SRP'd at $26.99 then the studios are getting $11.99 per disc times millions of discs. They are also getting a slight rental fee to them from BB, etc... BUT it is NOTHING like it was in VHS times.

They are NOT charging anything close to a $50 fee for a disc. This is what I think you were going for, right?

Some rental stores buy discs from the indies and give a larger percentage of rental fees back to the distributor...BUT AGAIN, they are buying discs at COST and in the end, the indie distributor gets about $6.00 bucks per disc...BUT it takes A YEAR to get that money.

Also, if there are any returns, the rental outfits get a credit for them. Sometimes they hold onto stock in their warehouses for years, then turn it all back in for credit at once.

And because the way the system works - they can do this.

Aric Blue said...

>>They are NOT charging anything close to a $50 fee for a disc. This is what I think you were going for, right?>>

No, I know they don't pay THAT much anymore, but there has to be some fee for rental rights. I just wonder how that works.

Is it a percentage of the rentals? Or a slight increase per unit? Or, I've heard about Rentrak and have a vague idea of what they do--are THEY the ones buying and then selling to BB and the others, and collecting percentages on rentals?

I'm saying it would be nice to have better than a vague idea of how it works--for low budget guys like me.

For instance--I've seen the rental figures on FOC. I have a percentage deal in SALES though of FOC--and I have little idea how to find out the total SALES figure on it. I can audit the company, but where do I get proof that they're not lying?

The whole distribution game seems WAAAAY mysterious.

Bill Cunningham said...

I just spoke with a colleague and we used to sell DVDs flat out to BB for $8 bucks - that includes everything. No rev share. They buy all rights for that price. Period.

Rentrak is its own system. They don't sell to BB. They buy the discs at less than wholesale and give the distributor a portion of the rentals back.

Based on what you've told me ...

You'll get a percentage based on all the discs SOLD. No rental fee share.

I'll have to do a longer post about how this works...

Aric Blue said...

Yes, I know I'm only being paid on sales figures. My point there is--I have no idea how to get sales figures, so no way to prove whether or not I'm being stiffed when they send me a check.

As far as Rentrak--let me ask the question that occurs to me: In just about every chart/graph/statistic I ever see on rentals they quote their source as Rentrak.

If Rentrak isn't supplying BB(and everybody for that matter) how are they providing information on ALL rentals?

Bill Cunningham said...

Rentrak takes info from stores, they don't provide the discs.

They are like Billboard, which tracks record sales in the same way.

But it is an estimate, a fairly accurate one, but not 'hit the nail on the head'.

The distributor knows how many units they sold to a particular buyer. They also get statements from Hollywood video and whatnot on the rev share...they have to take that info on faith as well.

Your take is going to be based upon the amount of discs sold less returns.

Its a system that is ripe for corruption unless you have the right to audit in your contract.

Now let's add some more confusion: did they buy all rights for the world or just US?

Aric Blue said...

>>Its a system that is ripe for corruption unless you have the right to audit in your contract.
>>
Yes, that right has been in both contracts(my first film and this one). Of course, you have to hire a CPA to audit, and it's gonna cost you a fortune to do...

>>Now let's add some more confusion: did they buy all rights for the world or just US?

Just US(and some Canada--I'd have to look to see the exacts)--we just sold the Italian rights separately for a surprisingly decent amount.

I haven't really taken the time to send screeners/press kits to any other territories.

Aric Blue said...

And re: Rentrak--isn't this them also?
http://www.rentrakonline.com/

This is the one I was talking about when I mentioned hearing something about them also doing a form of distribution.

Bill Cunningham said...

You don't have a distributor for foreign?! You're servicing territories overseas yourself?

email me.

Anonymous said...

Hi,

After reviewing some of the articles left on my consumer reviews
website, I still cannot understand: Who is winning in online DVD Rental business?


Blockbuster Service Reviews


Here are some of the Blockbuster specific examples:
Blockbuster Books, Records, Videos and DVD rentals
Blockbuster Video Stores and Online service
Blockbuster Late fees


Netflix Service reviews

Here are some of the Netflix specific articles:
Netflix Complaints - 3 Movie at a time rental
Netflix Quality of Service
Netflix speed of service


Can someone help me understand, who will come out on top here?

Regards,