Recently, there was a list by filmmaker Mynette Louie that has made the rounds of the film web called "Why Microbudget Filmmaking Sucks" . The list is one where Louie recounts all of the disadvantages and advantages of microbudget filmmaking. Many of those disadvantages are also listed as advantages in the list so really it's a matter of attitude and approach that seems to make the difference...
And that seems to be a problem for some people. They can't redefine 'film' to fit their own needs and wants or the needs and wants of the audience. In many filmmakers' heads, film exists only at the local theater where someone has to pay 8-10 dollars or more to see and experience it. If media history has taught us anything it's that film is far more flexible than we give it credit. If film were as inflexible as many would make it seem then we would never have had the TV movie, the Direct-2-Video or the DVD Premiere.
Film is fluid. It fits into the glass you place it in... and just like beer or soda you can sell a lot of it.
But again, short-sighted filmmakers are putting up a huge cover charge at the door when they seek theatrical only. I call "ego at work." It's not good business sense. It's not good marketing. It's outdated - especially for microbudget filmmaking.
True story: When we launched SCARECROW it was with the idea that we were going to make most of the money back because it was A) made inexpensively ($100K +/-); B) we were staying as far away from theatrical as possible, and C) we were going to sell it internationally prior to its having any sort of domestic DVD release.
No festivals. No reviews. No retailer support. We had a great concept, a great poster, a good trailer and a movie that was still in post-production. Our goal was to get half the production budget back at AFM, and then the rest at Cannes...
On Day Two of AFM, I got a call at my office telling me to start work on a sequel idea. We were 3/4 financed and had more people interested for other territories. By the end of the market, we were in the black and had many people interested in a sequel.
Then we used the response to promote the film stateside. We made these great folders with screener discs in them and sent them to the retail buyers. There was discussion of trying a screening but in looking at the expenses we nixed it. Too expensive.
Then we got a deal at Wal-Mart. It was a tight squeeze on the profitability (they strike a hard bargain) but the order was huge. We shipped a ton of discs to Walmarts around the country, and the discs were placed on the shelf at a price of $8.99. Fangoria ran an article on the movie, surely the fans would rush the shelves.
But the DVDs? They sat there. Some went off the shelf to be sure, but overall we were looking at some big returns.
Then WalMart had a bright idea. They placed Scarecrow in the bargain bin at $4.99.
And people picked it up... a lot.
WalMart was happy - they were making a profit on their purchase. We were happy - we were making a profit on their order. Fans were happy - they got their film and took it home where they could enjoy it (with a six-pack)...
They were so happy that WalMart renewed their order and asked about the sequel which by this time we were promoting domestically and internationally. We also discussed making it a trilogy (which I didn't contribute to except for some artwork direction)
By the time it was all over with the distributor had made over $1,000,000 on a $300k investment that never went theatrical. These movies were also shown on the SciFi Channel as a double feature which inspired us to release them again as a 'Double Creature' (though I was overruled on that bit of title business and they were released as a 'Double Feature') which made some more money for the company.
Bottom line to all of this is: Don't think that there's only one way to write, produce, distribute and screen your film. Rules were made to be broken and if you're insightful and entrepreneurial about it - the opportunities are endless. If I were to make a microbudget movie tomorrow, I would never think of a theatrical release until way after the film has been released elsewhere - like torrents, IPad, IPhone, Playstation Network, VOD, Netflix, Amazon, MSN, Hulu or elsewhere (or all at once).
That's where the audience is growing, evolving, and business-wise it makes cents... which is more than you'd make if you did it the old way because at internet speed those pennies add up quickly.