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?

Independent Movie Distributors are Aggregators

Independent Movie Distributors are great if they offer you a deal. The problem is, many filmmakers do not get a great deal. Instead, many filmmakers end up with a lot of empty promises.

Now, thanks in part to a shrinking DVD market, many traditional distributors have shifted focus to partner with, or become a  movie aggregator. For those of you new to the concept, a movie aggregator exists to source a whole bunch of movies, and then serves as a middle-man between YOU and the marketplace.

The result of this DVD to VOD distribution transition has created a new sales pitch for filmmakers:

“Give us your VOD rights for a gazillion years and we’ll get your title onto iTunes.”

If you’re like a lot of filmmakers, this pitch is all you need to hand over your VOD rights for many years. The result of which allows you to tell all your friends: “Our movie was picked up by [insert bottom feeding aggregator here] and now we are on iTunes.”

Any time I hear this, I want to PUKE.

Why? Because treating VOD distribution like DVD distribution is the difference between lighting and lighting bug (I think that is a quote from Mark Twain.) But you get my point. It can’t be treated the same.

WHY DO I SAY THIS?

I say this because many traditional DVD distributors will add NO VALUE to your VOD strategy.

They will simply get your movie into the marketplace and suck your profits for the extent of your contract. And since most traditional distributors can not monopolize the VOD marketplace (like retail DVD), they will grab any title they can and hope for the best.

Think about it. It doesn’t cost them anything. All they gotta do is get your movie encoded and uploaded into the market – and if it makes money, they make money. If it doesn’t make money – OH WELL!

Like I said. That makes me PUKE.

You see. The problem isn’t your ability to access a VOD marketplace. Your problem is SOURCING an audience. In retail DVD distribution, it was different. Retail DVD was a predictable sales channel. In the old days, you licensed your retail DVD rights to a distributor. Then your distributor made a few phone calls and got your movie into video stores. People drove to video stores and walked around the store. So if your DVD was on the shelf, your odds of making money increased.

But with VOD? We are talking about people sitting in front of their computers. The marketplace changes at the click of a mouse.

So far, we know that iTunes, NetFlix and Amazon are popular. You should get your movie into those marketplaces. But that doesn’t mean you should give up your VOD rights to get there.

The secret that traditional DVD distributors don’t want you to know is this: Getting into the marketplace is easy.

The TOUGH part is getting people to watch (and buy) your movie. For that I recommend The Indie Producer’s Guide To Digitial Distribution or at the very least, read some of my other articles on movie marketing and distribution.

And if you’re just getting to know me, make sure you grab a FREE copy of my filmmaking book. Click Here   >>

In a future article, I’m going to show you how to leverage VOD distribution for your business plans. Stay tuned.

Sell Your Movie For Maximum Profit

If you’re already a seasoned feature filmmaker, take a moment and think back: Do you remember when the idea of making movies seemed like a far away dream?

Do you remember when you first got the idea for your movie? Do you remember Your first day of production? Do you remember your first screening and how well everyone loved your work?

That happened to me with my first feature. Like you, I thought our movie would get into Sundance, play well, build buzz and if we were really lucky, we had hoped the movie would garner us a 3 picture deal. But that didn’t happen.

Sure, we got some offers, but they were not “deals.” (A deal actually pays money!)

So instead of exchanging our movie for an empty promise, we decided to try selling our movie on the internet. Little did I know, this one decision has changed the course of my movie making life. That was five years ago…

And since that time, the internet as evolved. If you’re a filmmaker with a movie, you need to get it selling in all the popular internet marketplaces, including Amazon and iTunes.

You don’t need a middle-man to make this profitable. I am going to show you my internet marketing secrets…

You can check out my “How To Sell Your Movie” system by visiting the website here.

Increase Web Traffic | Sell Your Movie PT 6

Life Stats for a zombie movie websiteAs a filmmakers, getting your movie seen and selling  has become incredibly challenging. If you’ve been following filmmaking stuff over the last year, you know that one of the major issues we are trying to solve is this question: In a world where DVD sales are non-existent (because there are no more DVD sales outlets), then how can filmmakers make enough VOD sales to justify a budget?

In an effort to solve this filmmaking problem, today we will cover step 6 of this 7 part series on how to sell your movie on iTunes, Amazon and Netflix for Maximum Profit.

Increase Targeted Web Traffic

To increase your website traffic, you might decide to work out Search Engine Optimization tactics with your web marketer, pay for online or off-line advertising, or incorporate a bit of everything. Unpaid traffic is called organic. Organic traffic is the best kind because whenever you pay for a customer, you diminish your profit margin from the outset. So obviously, the goal for all movie marketers is to acquire a customer for the very lowest price possible.

One secret I utilize is frequent press release submissions. Years ago, it was advised that you only wrote and submitted press releases when you had something newsworthy to say. But these days, in addition to targeting traditional news outlets, most press releases are included in search engine results. Without getting overly technical, this means for a very small amount of money, submitting one press release complete with links to your website can increase your web footprint.

Over time these releases are picked up by blogs and other websites hungry for related content. And the resulting benefit is more awareness of your movie, for a minimal cost.

If both your traffic and your budget are low, search out other filmmakers who have successfully sold their movies to a similar market and find out if they would be interested in promoting your movie to their mailing list. Assuming your movie is congruent with what their audience enjoys, these other filmmakers may gladly help you out for a cut of the profits. I have found that giving affiliates a good return for effective marketing creates long term win-win business relationships. These other filmmakers are able to create a stream of revenue between their movie projects. And you benefit by expanding your movie’s reach quickly.

This is also a good time to revisit those sites from your initial research. Compile a list of one-hundred target websites, then reach out to site owners and kindly ask if they would be interested in reviewing your movie. Regardless of whether or not these folks like your movie, what is secondarily valuable to you are links back to your website. Over time, these back-links, combined with your trailer and social networking profiles will serve to funnel more and more prospective viewers back to your website. And the cycle continues…

For more information on how to market and sell your movie, visit www.HowToSellYourMovie.com

Filmmaker Jason Brubaker Gets Punched Out By LA Producers Over Video On Demand Sales Projections

When I published my article on leveraging VOD sales to finance your movie, I had no idea that a simple internet marketing formula for filmmakers would be such a polarizing issue. I can’t tell you how many Los Angeles based movie producers responded negatively through email.

One guy even told me my grammar sucked.

So to clarify, I was not trying to ruffle any feathers. I was simply applying a standard internet marketing ROI formula to a product available through video on demand. Nothing more.

All of this was based on the premise that selling movies on the internet is no different than selling any other downloadable product (where you are lucky if you convert 1%)

This is based on experience. I learned how to market and sell movies on the internet when our first feature did not garner a traditional distribution deal and we ended up selling on Amazon. Back then I personally knew a bunch of filmmakers in a similar situation – all had titles but no deal. Since that time, even more filmmakers have flooded the market with titles. Couple this with the decline of various DVD sales channels, and suddenly a crappy $25 backyard indie can now share virtual self space with $25M movies.

For those of us who produce features without any sort of pre-sales, instead of telling prospective investors “If we are lucky, we might get into festivals and garner a distribution deal.” We can finally reach our audience without asking permission. And to me, this makes the indie movie business like any other small business… Produce a product and then market, sell and distribute your product.

This said, I totally agree with one of the readers who said my equation for returning a 1M dollar budget was preposterous. He was right. Anybody who thinks you can magically generate the mass amount of sales needed to recoup even a 1M dollar investment without a substantial outlay of cash towards advertising is mis-guided. Which is what those formulas reveal.

I wasn’t trying to present an indie movie panacea. We are all trying to find profit in business competing with (what I think is the indie movie equivalent) of sweat shop labor produced goods. So in terms of the person who said I’m trying to seduce “starry eyed producers,” I would say that finally having non-discriminatory VOD sales channels like Amazon, and especially iTunes finally gives us producers something to get excited about.

Whether or not we can find the marketing formula to justify our budgets remains the ongoing challenge. I for one am working my butt off to find the balance between budget and the amount of marketing needed to recoup the money – and hopefully create an ongoing stream of revenue.

My model of moviemaking isn’t for everyone. In fact, many of you have great relationships with distributors and are still making money in DVD and theatrical. Awesome! But if you are a filmmaker still relying on the “Sundance Dream” to recoup your budget – or if you are a filmmaker with a title collecting dust in your bedroom closet, I hope my article offered a little optimism.

At the same time, feel free to share your own thoughts on VOD distribution.

And spelling an grammatical tips are welcome from filmmakers too.