VHX and Why Filmmakers Should Embrace Fragmentation

Independent filmmaking is crippled by a broken financial model. It's not broken because the films don't often generate more gross revenues than their cost - many actually do - it's broken because current and legacy distribution deals take too much off the top for what the "distributor" provides.

Then you have things like inflated expenses and expenses allocated to other companies (marketing service companies, etc.) that are actually shell companies owned by the distributor or studio. Then you have false reporting - aka: cooking the books aka: Hollywood Accounting. That is assuming you even get the statement that the distributor is contractually obligated to send. Isn't strange that so many times they can't manage to send the statement until the lawyer requests it? Isn't strange that when the film is very successful, and makes even more than the distributor anticipated that there is a massive delay in reporting and providing the statement?

When there's more on the books to cook - you need to spend more time in the kitchen.

It is, by definition, white-collar crime. But is continues, year after year. Everybody does it. Nobody goes to jail. There's no motivation for the distributors to change. In fact, there's motivation for the distributors to steal even more since they are worried about fragmentation in online distribution / VOD.

Independent filmmakers don't have a lobbyist in Washington, DC trying to get politicians to take legal actions against distributors and studios stealing from artists. So it comes down to ... "if you think we are stealing then audit us." And auditing a studio or distributor is a long and painful process designed to get you to give up - and you need $35,000 - $50,000 to hire a firm to do it and most filmmakers getting screwed don't have an extra $35,000 to $50,000 in their accounts to initiate an audit - because .... they are always getting screwed.

Thankfully - we do have Ted Hope - who's is single hand-idly trying to promote a change. And thankfully we have Steven Soderbergh - who explains why the Hollywood studio system is so broken that it no longer embraces and facilitates the creation of artistic cinema.

First of all, as a filmmaker or producer, how do you know how many times someone clicked on the pay-per-view button? How do you really know the gross of the online VOD? It's all being run by software - it's all realtime - so why do you have to wait for a quarterly statement from the distributor that is sent of day 29 of the 30 day window after each quarter?

Recently, John Sloss released VOD Numbers for 'Escape From Tomorrow' and urged other distributors to "Show Us the Numbers". 

I decided to release the numbers for the same reason we created PDA and Film Buff. Transparency is a good thing. Where better than to start with ourselves? If we can’t do it ourselves, how can we expect others to do it? It’s not revolutionary, in my opinion.
— John Sloss - Indiewire

Read this article - Digital On Demand: Show Us The Numbers

Sooner or later the truth comes out. And the truth is - people are paying for content. And people have more access to more content to buy. And people have more FREE tools (blogs, social media, review websites, etc.) to help them find content they might enjoy - and promote content that they enjoyed. Which also means, the filmmaker has free tools to find and build an audience and drive them to the place where you can buy his/her film.

I believe that right now, the distributors (and filmmakers) are so afraid of the fragmentation - that they feel like nobody will find their film unless it is on a major platform - iTunes, Xbox, Amazon, etc. - which follows a highly flawed assumption that we are watching movies like we watched TV in the old days. Eyeballs on a few major networks.

But the internet is - in fact - a TV with UNLIMITED CHANNELS. The internet is the very definition of fragmented content.

So here's the 64 bazillion dollar question - But how will anyone find my film ....? (if it's not on a major content delivery platform)

One answer: a link

Focus for a moment on the question: But how will anyone get the link to my film?  Then think about Kickstarter and the countless successful stories of a fan base directly supporting the creation of content or a product and INCREASING THAT FAN BASE by telling others that they have supported that specific Kickstarter campaign. How do they spread the word?? a link

Millions of dollars collected without any traditional advertising. 

So ... why is every filmmaker and even some movie stars considering or using Kickstarter? Because they need to get the money to make the content. And private investors are harder to get because the current distribution models rarely flow the right amount of money, or any money, back to the filmmakers and investors.

Now imagine is self distribution starts to have the success stories that Kickstarter has? Imagine if the money starts rolling back faster - with a lot less taken off the top. That will make it much easier for filmmakers to raise money from investors.

Millions of Americans don't come how from work and watch Kickstarter, right? But somehow, someway ... these projects find their fan base (audience) and that fan base (audience) pushed out via their social media circles and expands the fan base (audience) for free. 

Here's the facts that will define and dictate the future of distribution:

The audience will seek out and go where the good content is. Look at HBO - look at Netflix making new, original content to expand their audience. Look at AMC before Mad Men and look at AMC now.

The good content will be where the good filmmakers actually get paid. Look at HBO - look at Netflix making new, original content to expand their audience. Look at AMC before Mad Men and look at AMC now.

New online platforms facilitate streaming and download for self distribution. The technology is here today. NOW. It's only a matter of time. Sooner or later ... the talent is going to figure out ... the best way to get paid - is to cut out the distributor ENTIRELY.

Do not fear fragmentation. Don't get seduced into the flawed theory that if your film is not on a major platform nobody will find it and pay for it.

There are a few technology solutions/platforms for self distribution - I have looked at almost every single one.

The one that I would personally bet on - the most impressive one today IMO - is VHX.

It's only a matter of time before independent film has a high profile example of self distribution - an example with a bit of star power would help get exposure and get folks to seriously consider the viability. That's what happened with film financing on Kickstarter. We need a good film, made by a known filmmaker or with known actors - to JUST SAY NO to the current online delivery platforms - and just self distribute. We need our Luis CK success story for a dramatic narrative feature or quality web series. It's going to happen. It's only a matter of time.

Embrace fragmentation - otherwise know as ... the world wide web.