How Much Is Your Movie Worth? - July 2022
(15 July 2022) - Distributors love a good independent movie just as much as the next guy. But who is the "next guy?" The next guy is the guy or girl next door, and they sometimes like a good independent movie -- not all the time; some times. What's more, considering numerous factors including streamers tightening their acquisition requirements, the glut of studio movies now being released after sitting on COVID shelves for more than a year, and the oversaturation of indie films entering the market, 2022 has proven to be a challenge for indies with high-hopes in small packages. For those of you making one or more movies per year, you probably already know this. For the rest of you, I wish I had better news.
Since S&R participates at every level of filmmaking (development, financing, packaging, sales, and as of November 2021, distribution), we're seeing different trends at different levels. And most importantly, we're seeing delayed reactions to market changes at these different levels. Let's first take a look at the pre-COVID and during-lockdown markets.
Prior to the pandemic, the film sales market was already in flux, and a long way from finding a new equilibrium. For a while Netflix was a bastion of independent film revenue. They were acquiring content hand-over-fist to build their library, attract new subscribers, and retain current customers. There came a time, however, where this minimally curated mode of operation led to an abundance of, frankly, bad movies. It wasn't that long ago that I remember logging into Netflix and, despite there being thousands of movies to watch, I couldn't find anything I was willing to watch. Netflix fixed that.
They essentially dropped all of their "put" contracts which previously allowed studios and distributors to dump their libraries (both good and bad) onto the platform. Simultaneously, Netflix launched their own in-house studio which allowed them to better control the content on their platform and the quality thereof. The results for Netflix were great, but the financial impact this tightening caused for traditional all-rights buyers quickly lowered acquisition prices across all genres for indies.
What's more, Netflix later launched not one, but two in-house unscripted departments (one for features, one for series). Previous to this, independent documentary filmmakers, and the distributors who worked with them, could rely on Netflix for a fairly substantial SVOD license which would offset distribution expenses and boost overall revenue (as much as 50%+ of North American revenue on some). When the aforementioned departments were launched, Netflix's documentary acquisitions went from being a "sure thing" to a "long shot" -- effectively destroying the indie doc sector. For context, regardless of who a documentary filmmaker's buyer was in 2015, if you had a good doc, you could count on $100K+ MGs for North American rights. That number (not including those with major name talent or built-in audiences) has now dropped to $10K. That's a 90% value drop in less than a decade. But Netflix wasn't the only 800-pound gorilla who threw their weight around.
Enter Amazon Prime Video. Amazon went from primarily a platform [with favorable splits to the distributors] to their own all-rights distributor. When Amazon Originals and exclusives came into the game, they also increased their distribution fees for the films simply being hosted on the VOD platform. On the surface, this might not seem like a big deal, but here's where it got hairy. Amazon started acquiring some titles for all-rights for really strong numbers (keeping good content away from other platforms via exclusivity). This is great for those who get those exclusive deals. But for everyone else, not so much. Because remember, Amazon is still a transactional VOD platform.
What this means is that for the titles Amazon wants to keep for themselves, they do, but for all the others, they know that those movies are still going to end up on their platform and available to their customers. In other words, if they really want your movie, they'll get it, and if they don't really want your movie, they'll get it anyway. With the increased fees they charge to distributors, those losses are not swallowed by buyers; they're passed onto the filmmakers.
As a side note to the previously discussed documentarians, there was another fatal hit during COVID. Thanks to all of the "fake news" unscripted titles being distributed through Amazon Direct, the fears of liability due to misinformation dissemination caused Amazon to entirely prohibit the placement of documentaries of all types on their platform. This is not a time where I would recommend shooting a doc without already having a buyer.
Platforms and streamers aside, without knowing it, indie filmmakers did their own part to damage the market this year. When all the major studios were very publicly shutting down productions, independent filmmakers en masse thought to themselves, "I'm going to go make a movie, and I'm going to be the only one doing it!" As it turns out, this was not an original idea, and thousands of low-budget films quietly went into production, and hundreds have and continue to enter the market.
So, with the aforementioned decrease in raw demand, and the subsequent increase in supply, acquisition prices plummeted.... but with one brief caveat.
For a short time during the pandemic, and while studio and larger indie productions were shut down, buyers were worried the flow of content might slow to a trickle -- not knowing that there were mobs of content creators making low budget films in the shadows. This was a good time to sell completed and post-production titles. Buyers were offering high prices for low and mid-tier films. It was the best of times. It was the worst of times.
We now sit in the eye of a perfect storm. There's an abundance of low-budget indies available in the market, the major streamers are at the heights of selectiveness, and the past 12 months of low-budget and small talent-package releases is now competing for the same eyeballs with the surplus of studio level big talent-package releases. The result: without a strong talent package, whatever you thought your movie was worth when you went into production, it's worth less.
Not all is lost however! Because the low to mid-tier talent packaging was being done in such abundance, movies that carry legitimate bankable talent are not only stand-outs in the market, but their numbers remain strong and their SVOD outlooks favorable. To anyone reading this, I urge you to keep your below-the-line budgets tight, and aim for the stars during packaging. Now is not the time to rely on story alone.