Illustration Courtesy of Mark Hammermeister. Mark Hammermeister is an illustrator and designer from the Detroit Metro area. Specializing in caricatures and humorous illustration, Mark has done design and illustration work for a diverse group of clients, including Playboy, The New York Observer, CitiGroup, ABN AMRO, The Nashville City Paper, Paramount Pictures, Hanna Barbera Animation Studios and HOW Design. View more of his work at www.markdraws.com
Introduction
There has been much debate about the entertainment distribution model. And it would appear the general public has the desire for easily accessible content at a modest price. And have the release of the content, coincide with any theatrical release. The price level and accessibility depend on the budget level of the project. But, in this case let's put our initial budget at $500,000.

From modest estimations, total labor on a production comes in around $250,000. Actor salaries and star power will make this number grow. This leaves a couple thousand left over for advertising and promotion.

Rather than looking for the traditional route, of expensive TV spots and billboard advertising, spend a modest budget on online advertising. Specifically Facebook. Using Facebook users selected interests. Example Films, Movies, Action. Kung Fu. Along with movies they have liked, that are similar in nature to the project. Coinciding with campaigns on genre specific blogs and websites catering to those genres.

The goal should be to provide the project in as many ways as possible. Netflix, CinemaNow, Amazon, DirectTV onDemand and iTunes. At an inflated rate. Along with providing a more cost effective alternative on your website. There is an effective way of monetizing a distribution process, eliminating the middle men in the process almost completely. Focusing all traffic towards your own website, taking payments via Pay Pal. Realistically, with a good advertising campaign, you wouldn't need a 3rd party distribution outlet at all.
Site
The site will be constructed with html5, insuring compatibility with all smart phone, tablets and desktop devices. Entertainment sites will normally have an about, cast, crew, video, gallery, blog and downloads sections.
Content Management System (CMS)
Utilizing Expression Engine, a php based admin tool will be installed to a web server. This provides a web based interface that can be maintained by someone with very little web skills. Tech notes will be provided to assist in administration.
Monetizing Content
The CMS has integration modules with Pay Pal. It allows you to create product and membership related items, take payment, report back to the web site and confirm payment. Providing rapid access to the content they purchased.
Streaming
Ideally you would want to use a streaming server for all content. This won't stop people from recording their screen, but won't give instant access to the main video file. Reducing piracy efforts. There are streaming services out there, but they look to be a little expensive. Budget would determine this option. You can also utilize a progressive download file, from a standard web server. This is more cost effective and easiest to set up. But, it reveals the video file which could be downloaded, and distributed to the online piracy outlets.
The New Model
Under the theory of accessibility and cost effectiveness, revealing a downloadable file shouldn't be of concern. Because the system provides a better delivery service than a file sharing system, at an affordable price. Forever, theoretically.
Paid Once
There are many who will argue that they paid for a pirated item already, seeing it in the theater or buying a VHS copy back in 1994. Fair enough. During the theatrical run, when you buy a ticket, you get an activation code for the streaming version. Leading to a future $5 sale for the HD version and extra content. And more importantly, actively including a user into the universe of your project. With newsletter and blog options for continued communication with them. Ripe for cross promotion for other vehicles. And going back to the theater, the user already spent $10 to see it. With potential for future sales.
Downloads
This is a comfort level issue. You can set a higher price for the HD version of the file, that users can keep. But, this increases the likelihood of online piracy. On the flip side, you could charge a higher price and look for returns on initial purchase. Rather than be concerned with the effect of a long term file sharing issue, reducing 1st purchase sales from other users.
Videos
Utilizing m4v and mp4 file formatting, Quicktime for iTunes will result in the broadest device compat- ibility. iPhones, Androids, iPads, any Tablets or Desktops.
Members
A Member Admin is built into the CMS, and the levels of content accessibility will be based on their member level. See Pricing. This could also grant them access to behind the scenes content. Including games and apps as part of membership features. Items users cannot purchase or view on other media networks. Value added content contained in the productions realm of influence. I.e. No Middle Men. Driving traffic to your site, a centralized location for the project. Along with instant options, globally through the site, pointing to the project on the other media networks.
Blog
The CMS also provides a blog. Interacting with your audience is very important. Providing a blog to all members, to collect feedback and communicate with your audience about film festivals, releases, updates, etc. Membership features will allow Members to comment on blogs, videos, and photos. With a large array of share options for social networks.
Heavy Traffic
If the project takes off, and is garnering millions of users simultaneously, it may require an upgrade in service. Especially for the streaming video files. Having a streaming service selected prior to launch would be a good back up plan. Potential CDN options: CloudFlare MaxCDN
Release Date?
Partner with Festivals, under the concept of "Come see the movie at the Festival. Receive an activation code for an online membership." This will be a lure to the festival showcase, provide word of mouth advertising, along with a potential future sale in an HD file purchase of $5. A win, win for both parties. Additional revenue will also assist in future promotion and marketing. During the festival run, maybe keep membership closed to give festivals exclusivity. But, this may deter potential sales from word of mouth referrals.
Pricing
$10 iTunes Download

$2 iTunes Rental

$5 onDemand

$2 Amazon, CinemaNow Streaming

$1 Website Streaming

$5 All Access - Website Download, Streaming and Special Content
Expenses
Website
$300 Expression Engine License

$100 Expression Engine Plugins

$200 Web Hosting 2 Years

$50 Domain Name Registration

$650 Up front Expenses
Design and Promotion
Web Site, Poster and Banner Ads.

$2000 Design

$2000 Production

$1000 Admin

$1000 QA

$6000 Design and Production*

$6650 Total Production Cost
Advertising
$18,000 Facebook
$2,000 Blogs and Websites

$26,650 Estimated Self Distribution Model Initial Expenses

*Pricing is based on median freelance rates. Agency rates have been estimated at around $50,000 for full service design and development.
Post Launch
Initial returns on online purchases will be paid to Total Production Cost. There after to the production company alone, with the potential of a maintenance and update fees for continued work on the site through out the life cycle of the project. Re-investment for initial returns into continued online advertising, for 6-12 months, is advisable. Depending on budget needs, revenue distribution could be negotiated in the statement of work. Covering initial production costs on the campaign, in good faith for a percentage of earning over the first 2 years of the project. Up front money for design and production, and no percentage. Terms could be negotiable.
Advertising
Check out the following links for information on Facebook advertising Facebook Marketing and Facebook for Business. Basically, it's pay per click. Along with bidding for the price per click. Productions can have a daily cap on expenditures, allowing you to assess performance without a large up front investment.
Affiliate Programs
Partnership advertising is an option also. Link Share shows promise. These type of systems can place ads on sites that have something in common with your project. Profit sharing for online sales generated from traffic coming from Affiliate sites. This has interesting potential. Will post more as information comes in.
Internet Rights
Maintaining internet rights for a project is key to long term returns. This shouldn't stop any other distribution efforts in foreign, theatrical or TV. Which from most accounts, doesn't really garner enough of a pay out to cover the initial costs of production. This isn't always the case, but it's becoming much easier to reach a mass audience without binding yourself to traditional contractual agreements. Over time, maximizing your long term returns and control of the project.
Digital Rights Management (DRM)
Crap. Lots of Crap. Double Crap. Tons of Crap....In my best Jonah Jameson impression. Bought a HD copy of Dragonslayer (1981) from iTunes. My experience was less than smooth, and pretty irritating. You have to have your Apple account up to date and working. Forever tying you to Apple services, when I know I may want to use it on another device further down the road. Price: $18. That's a ridiculous price for a 30 year old B sci-fi movie, and I have this DRM crap making it difficult to view it on different monitors. I found a lot of blocks. It's dumb, and I can get around it for $40 worth of software. Made me want a Pirate version. This system should be completely erased and never revisited.
Netflix Deals
Talked to a distributor who reports that Netflix pays between $4,000 to $8,000 for movies similar to the one in this model. Not even coming close to covering initial expenses. This deal may benefit Netflix with long term revenues, but does nothing for the filmmakers. Sound like a take it or leave it scenario. I'm leaning more towards leaving it. If you can't earn returns over the long term, based on performance, than this deal is bad for your porjects long term revenue. At that price level, you are practically giving it away for free. It would be more beneficial to use Amazon over Netflix. It's making me wonder if this was the reason most of the major studios rejected Netflix Streaming Partnerships.
onDemand and Theatrical
Theater owners rejected the plan for Tower Heist to release in both Theatrical and onDemand. Many users do not desire, or cannot go to the theater, but still want to see a new release. Tower Heist's $50 price point is way to high. $20 would work better for the public. Normally, it's you and your girlfriend. 2 people, $10 a person. Looking for a reason to make out. Not a group of 100, just seeing it for free. Or it's a married couple with a baby, who can't go to the theater. Who normally pirate movies? A normal business dude, because he can't leave the house for a movie. Sammy's sick again. Those are missed sales, that would justify an inflated rate of $20. Movies in the budget of this model would do well to keep onDemand around $3-$5.
Conclusion
This model would grant studios greater control of their titles, over the long term. Making them essentially their own Netflix or iTunes. With huge advertising benefits from collecting user data, integrated with social networks.

As for overall revenue performance in the context of a big studio. Out of billions of internet users, Lets say everyone wanted a copy. 1 billion people pay $1. That's $1 billion dollars. Made your money back, and some. Granted, the US market is only 300 million. For larger productions, that average $1 goes up to probably $5 or $10. $10 x 1 billion users... You can argue the numbers and age groups, etc. But still the math adds up. A lot of money. It's making a switch of mind set. Not the initial value, but what a mass consumption can really do to the bottom line. Where you can get everyone to pay a little, not just small groups of users to pay more.

With current technology, there is a cost effective way to monetize an entertainment project, outside of traditional distribution channels, reduce costs, reduce piracy, make it's money back and continue to have long term revenue. Louis C.K. and Kevin Smith have both successfully used this model.
Questions
Cost effective streaming service?

Cost effective hosting service?

Pitfalls of Expression Engine in regards to mass daily traffic?

CDN options for site hosting?

Potential solution for encrypting or hiding the url for a progressive download file?

Is it necessary to stream the video?

Performance data for streaming on Netflix? Traffic and revenue return.

Best Hosting performance for Expression Engine CMS?
Written By:
Matthew has been working in the web development community for over 10 years. Has produced 2 feature length films and over 20 short films. Earing degrees in Advertising from Michigan State University and, Film and Video from Columbia College, Chicago.
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Louis C.K.
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