Why Capital Will Flood into Indie Productions by James Jaeger
How do you get somebody to choose your movie to stream/download, when tens of millions of advertising dollars are going to major studio releases? I have no doubt that somebody will occasionally stumble across an individual independent film, but does it still require a theatrical release to build recognition?
The kids don't want to recognize anything put out by "the man" or "the suits" if they have alternatives. And their alternatives are always presented most forcefully by word of mouth. Thus, word of mouth is the most powerful form of advertising for a young, savvy audience. It's a trust factor. A reality factor. Add to this the fact that the kids HATE commercialization. They hate everything about the commercial establishment that "studies them" like bugs and then "targets" advertisements and "high concepts" AT THEM so that it can "exploit" them for money and control. Just as we did when we were kids. Remember?
The kids also hate the studios even more because they are now suing them for downloading movies. Why do you think they do these downloads? It's not because they're thieves. Again, it's mostly because they hate the studios who represent the Establishment. The Man. The Suits. At least this is what kids tell me when I discuss these things with them at every opportunity I'm out in public (at such places as BlockBuster and private parties, concerts and hangouts, etc). The kids hate the movie industry just as they hate the music industry for charging so much for CDs when the money doesn't even go to the artists, as is the case in the movie industry where the money only goes to a handful of over-paid stars and their fiduciaries, while everyone else starves.
Thus, the old "brick and mortar," shelf space-dependant industry is dead. The body is in free-fall. When a feature comes along that is a must-see, word of it will electrify hundreds of millions of kids via email, cell phones, instant messaging, the NGs, chat forums, and other kid-comm channels instantly. Just as it did with BLAIR WITCH. Add to this the factor that eventually all the hackneyed, formulaic crap Hollywood has put out the past x years will be completely "SCREENED-OUT" within the next 2 years because places like BlockBuster are emptying their inventories for $19.95 per month -- an all you can watch deal with no late charges -- in competition with the NETFLIX deal which is forcing the issue. As soon as the MPAA studio inventories are SCREENED-OUT, the only place kids will be able to get new stuff will be over the BitTorrent-driven, Broadband Net. And the stuff, although less polished and slick, will be ORIGINAL and sell for less than 50 cents a download (a download that doesn't have to be returned or expire exactly as we predicted in the MID business plan in 1995. See http://www.mecfilms.com/mid/plan and Main Line Times article at http://www.mecfilms.com/mid/plan/graphics/mlt.gif). Thus, no one will risk stealing this product (thanks in part to Dan MPAA Glickman who is suing the kids, an act sure to encourage a mass exodus of customers from the over-commercialized, banal studio product. Gee, thanks Dan!). The long tail (and if you don't know what this is you need to read all about it in WIRED mag at http://www.wired.com/wired/archive/12.10/tail.html), will generate revenues equal to, AND EVENTUALLY GREATER THAN, hits -- even without that revenue stream having to be hit-driven (as admittedly it is now) and theatrical release-advertised (as it is admittedly now).
But remember, as new, must-see Indie product hits the Net in increasing amounts for cheap dollars, new portals will automatically be created each time it hits. Eventually these new portals will overwhelm and demolish the established distribution system emanating from Hollywood.
Plus the 9 factories that are currently being built in China will, by the end of 2006, flood so many cheap LCD-lit HDTVs into living rooms across America and the world, people will less often go to theaters and pay 6 to 8 dollars when a feature looks and sounds better in their living room. Thus Hollywood's theatrical advertising machine will dry up even more than its revenues already have because of the homevideo market (which Jack Valenti, former MPAA head, said would never amount to anything). In short, Hollywood is history because it no longer controls the distribution paradigm. This has NEVER BEFORE HAPPENED IN THE HISTORY OF HOLLYWOOD.
As the private capital markets get hip to the fact that an ORIGINAL feature can be produced by an Indie company, such as ours at http://www.mecfilms.com, for less than $1,000,000 and REGULARLY sell to AT LEAST 1 percent of a 500-million person Broadband audience for 50 cents per download (with no other costs of distribution) and generate a $2.5 million gross on a payback of $1 million production costs netting out a cool $1.5 million in EASY profit -- or a 66% return on investment over the 12 - 18 months -- money will FLOOD into the Indie production scene and the quality of pictures will rise to that of the studios. It will also rise because of the relentless availability of better and cheaper computerization for post and special fxs, the use of TAPE rather than outrageously expensive 35mm film stock (which will be indiscernible and cost-effective by December 2007), and the ultimate digitization of name talents whereby everybody will be able to afford a Tom Cruise in their picture if they want him (which they increasingly will not). Investors, as slow-minded as they can be when it comes to technology-driven paradigm shifts, will eventually realize they can't get anywhere NEAR a 66% return on investment in the stock market or the real estate market with a commensurate risk and capitalization entry requirement.
This is the best time possible to be an independent producer and a private investor of independent product. Just as the major networks have seen their market share dwindle, the MPAA studios that now dominate 85% of the market will also see their market share dwindle. Thus, over the next decades, hundreds of billions of dollars of revenue will be freed up for the independents and their investors. New acting, writing and directing talent will be employed as independent production companies increasingly have the money to hire.
The future also looks bright for the independent distributors that seize upon these opportunities and muster private capital to invest in productions. Since the costs of distribution will be almost nothing in the new paradigm, there will be more risk capital and more profit available for Internet-savvy distributors and their investors.
So bye-bye market-dominating studios with their features that cost $150 million to produce and distribute and hello new era where capital will flood into Indie productions and the talent that makes them possible.
For additional information see Why Invest in a Movie? at http://www.mecfilms.com/whyinves.htm as well as books by James Jaeger at MOVIE PUBS at http://www.moviepubs.net
06 January 2005
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