How To Finance Movies With VOD Sales Projections

Do you know the most popular question filmmakers ask me?

I’ll give you a hint. It has to do with video on demand.

Ready. . .

Without too much variation, the most popular question is: “Can you provide some VOD sales projections?”

I understand the motive behind this question.

Believe me, I do.

You’re a filmmaker. You either made an awesome movie and you’re trying to use VOD sales projections to convince your partners that VOD is the way to go. Or you are in the process of making a movie and you need to convince your investors that VOD is awesome. In both scenarios, you’re trying to find proof that movies make money in VOD.

I get that. . . But. . .

Let’s make one thing clear. Asking for VOD sales projections is asking the wrong question!

If you dig around, examples of VOD Sales successes are out there. Check out what The Polish Brothers did. And if that’s not enough, Google the case study around Indie Game the movie.

But the truth is, one filmmaker’s past success does not guarantee that your movie will be successful.

Read that statement over and over again. And if you need a little more clarity, take a look at what the cat is saying here:

VOD Sales Projections

Realizing that VOD sales projections are BS is essential for your success. And I am going to explain how you can use your new found understanding for good, very soon…

But before I go there, let’s talk about why people invest in independent film.

Why Investors Invest In Indie Film

Independent movie investors invest because (aside from having an appetite for risk and an interest in the film business) most of these people want a return on their money. If you are doing things by the book, you probably created a marketing strategy as part of your business plan. This plan provides prospective investors an overview of how investment dollars will be budgeted, spent and hopefully recouped.

In the past, trying to convince investors movies were a good investment involved projecting returns based on speculative data. To guess how much money a movie may make, filmmakers would compare their project to other successful movies.

Creating indie movie comparables is complete BS.

The reason for this is simple.

Just because you make a low budget horror movie does not guarantee your movie will have the same success as Paranormal Activity.

In fact, Paranormal Activity is an outlier. It is not a fair comparison. And using breakout hits as examples, while ignoring the thousands of unsuccessful horror movies made each year, is short-sited at best and I dare say a little unethical.

Video On Demand Sales Projections

Given the birth of VOD distribution, as a filmmaker you now have the ability to access and enter into a non-discriminatory marketplace as soon as your movie is ready. And because many of these marketplaces exist online, much of your sales will come from internet traffic.

This is actually awesome news.

It means that you can boost your sales by using a very common marketing concept called…

[Seriously… Are you ready? You are about to receive the secret sauce of modern, indie movie marketing.]

More important than VOD Sales Projections is:

Conversion Rates

What is a conversion rate?

Conversion Rate Defined, According to Wikipedia:

Your conversion rate is the proportion of visits to a website who take action to go beyond a casual content view or website visit, as a result of subtle or direct requests from marketers, advertisers, and content creators.

Conversion_Rate

In other words, if you send one-hundred people to your movie website and two people buy your movie, your conversion rate is two percent. This is profound. This is life changing for indie filmmakers!

Question: Why should filmmakers be enthusiastic about the internet marketing, nerd concept of conversion rates?

Answer: If you know your conversion rates, you can model and potentially project more accurate movie sales projections from day one.

But before you start noodling around to find your conversion rates, it helps to answer the following questions:

Modern MovieMaking Model

  1. Who Is Your Target Audience?
  2. How Large Is Your Target Audience?
  3. How Will You Reach Your Audience?
  4. What Is Your Marketing Strategy?
  5. How Many VOD Sales To Break Even?

While I won’t get into the actual mechanics of marketing and selling your movie here (My Action Guide How To Sell Your Movie provides you with an actual step-by-step plan for getting your movie seen and sold), I will simply note that a marketing plan must now be included with your business plan.

The Secret VOD Sales Projection Formula

When you create (or refine) your marketing plan, you must now include some marketing math.

Truth be told, math is a weak subject for me and I dare say, most of the filmmakers I know. But luckily there are many spreadsheet templates that allow you to test several conversion rate scenarios. You can use these scenarios as a guideline to ballpark the potential ROI for your movie.

Here is a basic website conversion rate calculator you can utilize: http://bit.ly/17TSCrt

Before you get overly excited (like I am) calculating your movie website conversion rate is only one metric to determine your movie’s potential for profitability. You still need to figure out how to price your movie. And at the same time, you will need to determine how much targeted internet traffic will cost you.

Generating Internet traffic is the result of executing four strategies. You can either get free traffic online, free traffic offline, paid traffic offline or paid traffic online.

For the sake of this example, I am going to incorporate pay per visit advertising. With pay per visit advertising, you simply pay for someone to visit your movie website.

One example of Pay Per Visit traffic is StumbleUpon. It’s a social bookmarking site that also allows you to pay for semi-targeted traffic. This works well if you have a movie with a dose of controversy and a strong hook.

And again, if you’d like more info on specific traffic generating strategies, check out my indie guide to distribution.

Ok. Here is our first example…

Let’s assume only 1% of the targeted folks who actually visit your website, buy. Then how many visits will you need to sell 100 units?

100 units = Our goal for this ad campaign.
$.05 = Amount you may pay advertiser per visit.
X = Number of Visitors Needed to buy 100 units if only 1% buy.

(X).01 = 100 units
EQUATES TO: X= 10,000
THEN 10,000($.05) = $500 paid for targeted traffic.

So in other words, if you were lucky enough to get a 1% return, you just paid $500 dollars in pay per visit advertising to sell 100 units of your movie. But let’s go one step further. Let’s assume you’re like me – and you hate order fulfillment and shipping. So you decide to let a company like Amazon’s Create Space or iTunes (or some other popular marketplace) handle your order.

Video On Demand For Rent (Electronic Sell Through)
100 units ($3) = $300 – 50% paid to marketplace = $150
minus $500 paid for advertising = -$350 NEGATIVE

In this VOD rental scenario, the Pay Per Visit Ad numbers don’t work, unless you like losing money.

Video On Demand For Download (Electronic Sell Through)
100 units ($10) = $1000 – 50% paid to marketplace = $500
minus $500 paid for advertising = BREAK EVEN

In this VOD download to own scenario, the numbers work a little bit better. Assuming you’re lucky enough to get 1% of your money returned, at least the advertising pays for itself. But unless you can increase your conversion rates, pay per visit advertising is going to be very difficult method for returning money to your investors.

Physical DVD Sales
100 units ($20) = $2000 – 50% paid to marketplace = $1000
minus $500 paid for advertising = $500 in profit.

Ah ha! If you’re fortunate enough to get 1% return on your pay per visit advertising, you can see how physical DVD’s (or units) sold at $20 dollars may offer a slight profit margin. In other words, in this scenario, for every $.50 cents you spend, you get $1 dollar back.

So let’s tackle the bigger problem. Let’s try to get a return on our 1Million dollar movie, selling physical DVD sales and using pay per visit advertising alone:

Movie Budget = 1 Million dollars
Physical DVD Sales using Pay Per Visit Advertising

$1,000,000 divided by $20 per unit = 50,000 Units

Since we will give 50% to the marketplace for all sales, we will need to project for double our budget.

100,000 units = Our goal for this ad campaign.
$.05 = Amount you may pay advertiser per visit.
X = Number of Visitors Needed to buy 100,000 units if only 1% buy.

(X).01 = 100,000 units
EQUATES TO: X= 10,000,000 (Yes, TEN MILLION people.)
THEN 10,000,000($.05) = $500,000 paid for targeted traffic.

100,000 units ($20) = $2,000,000 – 50% paid to marketplace = $1,000,000
minus $500,000 paid for advertising = $500,000 in profit.

So to break even, you would need to sell 100,000 units and make $2,000,000.

Some Sales Conclusions

Based on this scenario, as a filmmaker you will (obviously) need to expand your promotion beyond pay-per-visit advertising!

But importantly and most AWESOMELY, you can treat your movie business like any other small business. With VOD Sales projections, you can find the marketing formula that works for your movie and crunch your numbers until you find a scenario that brings you profits.

Create a plan that included your marketing costs in your budget.

While there are no guarantees in any business, having a plan for marketing, sales and distribution sure beats the old days when your only plan for ROI involved crossing your fingers in the hopes someone will offer you a profitable, traditional deal.

While these may not be the VOD Sales Projections you were looking for, hopefully you now realize the power of knowing your conversion rates.

Treating your movie business like any small business simply means you don’t have to ask permission. You can make your movie NOW! And your prospective investors might take notice…

Also, can you do me a favor? If you liked this filmmaking article, could you kindly retweet or share this article with your friends?

How Do I Sell My Movie On Amazon?

If you ever asked yourself: How do I sell my movie on Amazon, you are not alone.

One of our Filmmaking Stuff readers wrote in, asking some very good questions about how to find a VOD platform and how to choose a website domain. Here is the question:

I have had one frustrating year of trying to launch my film for sale onto the internet and I am really interested in what you have to offer. After listening to your audio downloads and having read your blog, I have many questions running through my head. How do I sell my movie on Amazon? Aren’t they a middleman? So how much of a fee do they charge? Also, my film is 700 MB big and will I be able to upload onto whatever you are offering? And I have not bought a domain name for the film yet. I am thinking of using GoDaddy.com. How many years should I subscribe for the domain?

– – –

First of all, congratulations on finishing your film. This is a feat that very few filmmakers get to experience. And it is something that you should be proud of.

In response to your movie distribution questions, there are quite a few platforms that allow you to promote and sell your movie online. Since you mentioned Amazon, let’s start there.

If you live in the United States, it is fairly easy to get your movie seen and selling in the Amazon marketplace.

Before I go further – just know the companies I’m about to mention pay me to promote.

Sell Your Movie On Amazon

Sell Your Movie  On Amazon

Simply visit CreateSpace and send them a copy of your DVD.

In addition to Amazon, I recommend you research both iTunes and Hulu as two other options.

Hulu operates on a slightly different model than Amazon and iTunes. Unlike transactional video-on-demand platforms, Hulu operates in ways similar to traditional TV.

Their revenue is based on advertisements. After submitting your movie to Hulu, they will then pepper your movie with blocks of advertisements. Hulu then splits ad revenue with the filmmaker.

If you are based outside the United States, and you wish to enter the US Amazon marketplace,  you will have to go through a third party, US based aggregator. One such company is called Distribber.

Regarding your question related to website domains, GoDaddy.com is a pretty straightforward service.

sell your movieHowever,  if you are looking for a way to reserve both your domain and hosting, I also recommend researching bluehost.com – In full disclosure, while both of these companies are good, they do pay me to promote. So make sure you conduct your own due diligence.

In terms of length, I suggest that you reserve your website domain for at least two years, if not longer.

If you need additional help, check out the Indie Producers Guide on How To Sell Your Movie.

Market Your Movie

Image of the top layers of the earth's atmosph...
Market Your Independent Movie         Image via Wikipedia

OK. So you made a movie. Great. And so what if traditional distributors rejected you. Lets talk about how you’re going to market your movie, so you have the chance at recouping a little investment.

Assuming you’ve read my article prepping your film for selling – HERE

Then here are some steps you can take to start selling your movie:

1. Set up an account at CreateSpace. Feature your movie as a digital download, rental and physical sale. Unless you want to spend all your time shipping stuff around, consider letting those folks deal with the shipping and order fulfillment.Yeah, they will take a huge cut. But at the same time, all you gotta do is cash checks. Also, pick a price that ends in a 7. For some reason people like this number. $14.97 – maybe.

2. Rework your website. Up until this point, you’ve had a website that features a bunch of production photos and extra cute stuff from the movie. Get rid of all the extra stuff. Include a high resolution trailer, a low resolution trailer and a “BUY NOW” button. Also include one of those social networking buttons that allows you to tell your friends. Go ahead and click this one: Bookmark and Share

3. You’ll know if your trailer is no good. If people aren’t buying your movie, consider refining your trailer. The trailer should reflect the best aspects of your movie, without giving away everything. It should target your intended audience. If you’re missing the mark, re-cut. Also, make sure you include a trailer on YouTube with a back link to your website.

4. There are two ways people get traffic. Organic and paid advertising. When possible, go organic – but don’t spam. Do a Google Search for SEO. Read everything you can about this. It will help you. If you decide to pay for traffic, you can do it online and offline. Offline would be in things like magazines, etc. Online – well, here, online. Again, make sure you’re targeting your intended audience.

5. Test, test and retest. Install Google Analitics into your website. This will tell you where your visitors are coming from, how long they stay on the site and how many people are converting to sales.

Finally, if you like this sort of stuff – Filmmaking Stuff that isn’t talked about as often as it should be. Sign up for the official FilmmakingStuff newsletter. It’s only $197.97 per year. Go here: Http://www.filmmakingstuff.com