Vimeo has just launched its new VOD service that offers an exciting new potential for independent filmmakers to release their works online for pay. But how good is the deal really and where does it fit in the landscape of existing services? Let’s take a look.
Why VOD matters
Not long ago, VOD was a little throw-away right that got included in film sales but often didn’t even get exploited, let alone bring in any money—at least where independent films were concerned. So why the growing interest now? Because DVDs are dead.
Because DVDs are dead.
I had to say it twice. It’s kind of a big deal. DVDs—essentially the entire Home Video nut that spawned the independent film movement (back in the VHS/Betamax days) and has sustained it till now, is dead. People don’t really buy ‘em anymore. Wait a minute, you say, You are wrong! My cousin knows a guy who bought a DVD just a couple years ago…
Sure, a few DVDs still get sold. For blockbuster films. Or for very niche stuff that is more movement than entertainment. But if you have an independent film without stars then as far as mainstream distributors are concerned, DVDs are dead. You aren’t going to be making any money off them from distributors, but you’re welcome to make your own and sell them on your web site if you want. …And that brings us back to VOD.
VOD will be the new DVD
When was the last time you bought a DVD, then popped it into your player and watched it? I’m willing to bet that you’ve watched a video on your computer or mobile phone a lot more recently than that. VOD—whether it be via iTunes, online, or your cable system—is the future of home video. So why make DVDs of your independent film or series to sell through snail mail when you can sell a link to a downloadable file instead? You can save the postage, fulfillment costs, inventory, and time. And your customers can watch it right away and on whatever device they wish to.
VOD has two drawbacks for independent film and series creators—audiences are not habituated to paying for online video (yet), and there VOD services available are not tuned to independent films (yet). Both of these problems are rapidly sorting themselves out as more people get used to buying online and more services are launching to meet this growing market. So it’s worth looking at the VOD landscape for independent film and series creators.
VOD services for independents
VOD can take a lot of different forms. All of them give viewers nearly instant access to films for pay—but the specifics are very different from both the viewers’ and creators’ perspective. Here’s a rundown of the major players.
Netflix “Watch Instantly” streaming service enjoys the widest VOD viewership. Seriously, who doesn’t use Netflix—or at least borrow a friend’s password? And more than just the number of subscribers is the frequency of their use—people who use Netflix are very comfortable using it. It has become a cable TV alternative in many households. So from the viewer standpoint, it’s a no brainer. But as an independent creator, I have one word of advice about putting your film on Netflix:
A little background: When my first feature film, Entry Level, came out, you better believe I told everyone I knew about it and asked them to watch it. And people were excited for me. They promised they would not only watch it, they’d tell their friends to watch it too…on Netflix. I will never complain about someone watching my film, but the fact is, when they watch it on Netflix, you don’t get paid for it. Creators don’t always get that right away, and viewers generally don’t get it at all. I’ve had people say to me, “I’ve watched it ten times! How much do you get for each view?” On Netflix, nothing.
Netflix licenses films by paying a flat fee for two years of unlimited streaming. They used to have an output deal (now expired) with Showtime so that anything Showtime Networks licensed also went to Netflix. I don’t know what the fees are at the moment—last I heard they were a few thousand. If you are planning to release your film via a VOD service, my advice is do not release it to Netflix. That is where people will watch it, because they are already very comfortable using Netflix, and you will gut your VOD campaign for a very small Netflix license payment that will probably end up getting pocketed by some middleman, anyway. Don’t do it!
You may have noticed the comment about viewer’s comfort using Netflix. I think this is the key concept in getting viewers right now. The more comfortable the audience is in using a service, the more successful you can be in your VOD campaign. So after Netflix, what VOD service are people really comfortable using? The iTunes Store.
The iTunes Store seems to have it all—it’s well known, viewers are already comfortable spending money there for apps and music, so why not movies, too. And it feels prestigious, right? You’re on the iTunes Store? Solid! From the audience perspective, then, iTunes Store is a premium VOD destination. They may not be quite as comfortable with it as they are with Netflix, but it’s close. And they are willing to buy media there, so that’s an even bigger plus.
How is iTunes for creators, though? My short film, Full Disclosure has been on the iTunes Store since 2006—just a few months after they started taking short films. In fact, in September 2006, it was the #1 Short Film on the iTunes Store. A lot of people have asked me about how to get onto iTunes over the years, so I know this one well.
The iTunes Store can work well for creators. There’s a certain prestige to being there, viewers like it and will spend money there, piracy really isn’t a problem. Those are important strengths. So why isn’t iTunes flush with independent films? Well, there are some negatives here as well. For one, once your film is on the system, it can be hard to bubble up past the blockbuster films to have your audience discover you. But the biggest negative about iTunes is that it really is not set up for independent films. It’s hard to get into the system and iTunes seems just dandy with that.
To get onto iTunes you need an middleman. The fine folks at the iTunes Store are busy revolutionizing how Earthlings purchase media and are not interested in dealing with a bunch of independent filmmakers. (Can you blame them?) So to get onto the service, you need to work with an aggregator.
An aggregator is essentially a distributor. You make a deal with them. They have a relationship with the iTunes Store. People buy or rent your film, iTunes pays the aggregator. …And the aggregator pays you, right? Right? Well, you hope so.
Again, an aggregator is a distributor. Like distributors, some are better than others. The good ones pay you. The others make you fight with them over reports, payments, fees, their high percentages for simply acting as a pass-though billing entity. It’s important to know what kind of company your aggregator is—but often hard to find out up-front. Nobody tells you they’re out to screw you. And even the best aggregator is still one more set of pockets between you and your customers. And in the world of VOD, there’s no reason to have a lot of middlemen.
So that’s a concern, but not a reason to avoid iTunes altogether. Look for an aggregator with a good track record and low fees. The iTunes Store splits revenue 70/30 with creators. That means for every $9.99 sale, the aggregator is paid $7.00. Aggregators under the old model often split this with creators 50/50—so under that model you’d walk away with $3.50 for every sale—assuming the aggregator reported properly and decided to pay. Today, there are “new-model” aggregators who will return a much better percentage to the creators. Some even pay the creators 100% of what they get from iTunes in exchange for an initial setup fee.
New Model Aggregators
Distribber charges $1,200-$1,600 to encode a film in HD for iTunes and submit it to the service. After that, they say they will forward all monies collected directly to the filmmaker. I haven’t used the service so I don’t know if they do this, how long it takes or what the certainty is of getting listed on iTunes. But if you want to get your film set up, this is something worth looking into. Distribber and other new model aggregators can also encode and distribute to other VOD venues as well. Since discovery is still such a challenge for independent VOD, it can pay to be on a lot of services. Apple has a list of other approved movie aggregators, and I’ve heard whispers that there are a number of other services preparing to enter this space, so keep your eyes out.
The App end-run
There’s also a whole ‘nother way to get onto the iTunes Store—make your movie or series into an app. Content creators can encode their content as an app and sell it or give it away on the App Store part of iTunes. This is an end-run around the gatekeepers and expensive up-front costs of getting onto the iTunes Store. And apps can have more functionality than mere movies, so it has great potential for connecting to your audience in deeper ways. Plus there’s the option for additional in-app purchases. Companies like Veam will create the app for iOS or Android devices (so you can also show up in the Google Play store).
For viewers, the app route means a bit of a challenge, since few people currently think about going to the App Store to download a movie. However, once they’re there, all the trust, convenience, and installed base positives associated with the iTunes Store (or Google Play Store) are working for you. I’ve seen a few of these and they’re great for video quality—at least on the smartphone I’ve been using. Veam creates apps for some film festivals and to me, these are wonderful applications of art and technology. This is a route that we will be seeing much more in the future.
For content creators, dedicated apps have some pros and cons, but there’s a lot to like. Each service company will be different, so research this well before stepping in. It seems that the typical deals involve an up-front fee to create the app. This is generally a base fee, plus a per-minute of encoding cost for standard fare. Additional features are extra. But the additional features are what makes apps great so they shouldn’t be discounted. Once the apps are created, the content creators either collect all of the revenues from iTunes or some percentage based on the particular app-creator’s deal.
Discovery is the chief problem with this route. In the immediate future, content creators will have to push their audiences toward this route and educate them about the app because people are not just going to stumble across this on their own. However, it’s my opinion that content creators are going to have to drive their audience to their movies and series in any VOD scenario. Independent content just doesn’t bubble up to the top on services like iTunes. So you’re always going to have to drive and educate your audience. I think that apps make the most sense for content where it isn’t just an end-run—where the app is part of the experience. A lot of my TV 2.0-type ideas would do very well on an app and I’m paying a lot of attention to this for the future.
Amazon Instant Video
Amazon.com also has a streaming video service. And if there’s anywhere that people are used to spending money online, it’s Amazon. Amazon has put a lot of effort into getting people used to watching media through their service. They give Amazon Prime members free video streaming of a lot of content. They also incorporate it into their high end Kindles.
So customers trust Amazon with their money and Amazon is really working on getting the audience to be there. That’s a good combination. I know a few filmmakers who are selling their films via Amazon.com and seem happy with the experience. I don’t know if they’re getting great returns, but for a while, Amazon has been the most indie-friendly game in town. My understanding is that the revenue share is 50/50.
Hulu is a great destination for viewers. They have the free version which is ad-supported and the paid version with more premium content. In my experience, Hulu has a great player and seems to have a good-sized audience. My understanding is that they share ad revenue 50/50 with content creators.
Getting onto Hulu can be a challenge, though. They rightfully see value to their viewers in their curation and selecting great content. It can take a long time to hear back from them, especially with independent films and series. If you’re small, it can help to go through an intermediary like IndieFlix.
IndieFlix is also a subscription-based service like Netflix with some key differences. I’ve been following the company carefully since IndieFlix CEO Scilla Andreen and I served together on the Seattle International Film Festival short film jury in 2008 and hit it off. The service has grown and changed somewhat over the years, but I have always been struck by Scilla’s genuine interest in helping filmmakers find an audience. This is reflected in the transparency and freedom of their business dealings with filmmakers. I have just launched DIVERGENCE on the service, so I don’t know much yet as a content creator, however, their terms are quite filmmaker friendly compared to the majority of distributors I’ve worked with. For example, the contracts are non-exclusive and can be terminated by the content owner fairly easily. So you are free to work with IndieFlix and still control your rights in other venues.
As a subscription service, IndieFlix sells $69 annual memberships (or $49 through this discount link) to people who love independent films. These subscribers can then watch as many films as they like on IndieFlix. So in the broad strokes, it’s like Netflix. However, there are differences. First, rather than paying an up-front license fee, IndieFlix pools up part of each month’s subscription and divides it among the filmmakers pro rata based on how much people watched their content. So if your friends watch a lot of your films on IndieFlix, you do, in fact, get more money. At the moment, I have yet to receive statements, so I can’t say how much this comes to, but it’s something.
There’s another reason I think IndieFlix is very different than Netflix, where VOD campaigns are concerned. IndieFlix is a great service and they curate their content well, so they’ve grown a membership that is passionate about independent films—but that membership is still pretty small compared to Netflix. To me, it doesn’t have the same potential to gut your VOD campaign the way a Netflix deal does. Sure, you may lose some potential viewers since a lot of independent film lovers are already IndieFlix members, but what you lose in paid views, you’re just as likely to gain in word-of-mouth advertising from IndieFlix viewers who discover your content on the service and want to share it with their non-subscriber friends.
In addition to their subscription service, IndieFlix will act as an intermediary with larger organizations like Hulu and sometimes even networks—if you want them to.
By the way, if you haven’t already, do check out IndieFlix, every independent film and series creator should be a member.
Of course, YouTube is the giant in the video content delivery game. So, why so low on this list? Well, aside from special Pay-Per-View events like boxing matched, YouTube doesn’t really do VOD. For now.
As the 800,000-pound gorilla of the field, YouTube could decide to jump into this game at any time. They have a history of coming up with services and features similar to Vimeo, so with Vimeo’s launching of Vimeo On Demand, the Empire could strike back whenever they like.
Vimeo on Demand
So finally we get to the newly launched service from Vimeo that’s mentioned in the title. How’s that for a buried lead?
Vimeo just launched a new VOD service that lets content creators upload videos to their account and sell them online. Now, this is a new service and much may be altered as it develops. However, my initial reaction of excitement is somewhat tempered by the details of the deal.
From the viewer standpoint, there is good and bad. At this point, Vimeo is a trusted name in online video content viewing. The service is second only to YouTube in audience perception. There was a time when Vimeo meant better quality than YouTube. That time has passed—YouTube now has better HD content than Vimeo, for one thing—but the perception remains for many people. A part of this—beyond pure specs—is that people who host their videos on Vimeo tend to care more about video quality, and therefore the videos are more worth watching than YouTube. On YouTube, you get videos of people’s cats; on Vimeo, you get videos of people’s camera tests.
But unfortunately for viewers, to buy a Vimeo VOD video, they must sign up for a free Vimeo account. While that sounds—and is—pretty simple, it’s enough of a hassle to lose a lot of prospective buyers. And it seems unnecessary given that payment is via PayPal or credit card. I predict that this is the place where a lot of potential viewers will check out, even if they would have spent the money to watch the video. (Purchases are also US$ only at present which is a major turn off for most people outside the USA.) But for those who do sign up—or already have an account—Vimeo really is an excellent service in many ways. One great thing about Vimeo that sets it apart from the smaller VOD pretenders out there is that it hooks into so many devices right out of the box. That means a lot to viewers because, ultimately, VOD only works if people can watch it on their giant Man-cave television screens. Otherwise, what’s the point?
From a creator standpoint, the service is pretty sweet. (If you’re willing to write off international sales and overlook the fact that a huge portion of your potential viewership is going to bolt rather than sign up for a Vimeo account.) You buy a $199 annual membership to Vimeo Pro (sorry Plus members—time to upgrade) and you can create paid VOD albums with videos. These can be for one film or a season of a series. You can set your price, how long a viewer can watch, and whether they can download the file. You can also add new files like additional episodes, trailers, behind-the-scenes, and special messages. These features really elevate the service from much of the others available. And it’s cheap. A creator has to pony up the two bills a year for their account, but they can release any number of VOD movies for that. And the split is 90/10 (after credit card or PayPal fees). So you net the bulk of your revenue.
This price is one thing I think is undeniable amazing about Vimeo’s VOD service. I hope it makes it, I really do—they just have to iron a few viewer-side issues, which I expect they will soon. But whether or not Vimeo pulls this off, they have effectively set the price for VOD services in the future. This is what it should cost to release a film via VOD. The iTunes Store’s mandatory encoding may have made sense in 2006 when that stuff was hard, but today I can do the same thing on my laptop overnight. So take a cue from Vimeo and ditch the high encoding fees. Add some nominal account fee to cover overhead, and then take a tiny percentage of each sale to keep the servers humming—so that the rest goes back to the content creators. Reasonable fees and no one between you and your audience. That is the model for the future.
There are a number of other small services out there in the VOD space and Sooooo many waiting in the wings. One of these is VHX.tv. While you can’t quite get on it yet (and their deal points aren’t publicly available) it’s worth a shout out because it offers a slightly different model and is already enjoying some success.
VHX allows filmmakers to sell DRM-free downloads or streams of their videos. From a viewer’s experience, this is freaking fantastic. Viewers don’t like DRM, even if they have no idea of what it even is. It just sounds bad. So offering DRM-free content is a plus. And the VHX early adopters like comedian Aziz Ansari and Foo Fighter Dave Grohl have given the service a high profile. Well played, VHX. (Plus props for the cool name, yo!) VHX videos are also sold right on the content creator’s landing page and don’t require additional signup beyond inputting payment info and a credit card number.
As for creators, well, much remains to be seen. Apparently, there is no up-front fee for the service. Exactly how much of a cut they take will come out later this year when they open up the service beyond celebrity beta-testers. But it’s important to note that the company seems to be ideologically firmly on the side of DRM-free content. So if you like DRM and believe it’s important (or possible) to stomp out Internet piracy, then VHX probably isn’t for you, sir.
I’m going to round out this roundup with Distrify—the MLM of the VOD world. Distrify has me a bit mystified (yes, I’m mostly covering it for the wordplay opportunities), but my understanding is, content creators set up their video with the service and create embeddable VOD players for each video. These players can then be hosted on a variety of servers. You can put it on your own page, but you can also allow others to place it on their pages. When someone pays to watch the video, Distrify takes 30%, you get 70%—unless an affiliate hosts the video, in which case they get 10% (the split becomes 65/25/10). While this may initially seem like more hands in your pocket, it’s actually a great way to incentivize people to promote your content. This is the age of the curator, after all, and this strategy could really extend your sales.
The viewer experience here seems pretty solid, since Distrify players can be embedded on any web site, don’t require additional service sign up like Vimeo, can be purchased in multiple currencies (Vimeo is US dollars only at present) and offers lots of options like buying, renting, bonus features, and social media links. I’m not clear on the ability to stream videos to other devices, though. This seems to be lacking at the moment—but all of these services are developing rapidly. For content creators, the service also has lots of pluses. I think it has particular value for videos aimed at affinity groups and other niches that are passionate about a subject matter and exist in lots of pockets around the country or around the world. Distrify would be a great way to offer a decentralized VOD strategy where curators and other taste-makers have a real incentive to help spread the word. The folks at Distrify seem to be well aware of this approach as they’ve built in a lot of great international features like multiple languages and currencies, geo-blocking, and more.
If this isn’t my longest blog post yet, then it’s darn close. But I think it’s an important topic and this is the right time to discuss it. So, for both of you who made it this far, thanks for reading along. I’d like to hear your thoughts on this VOD revolution.
In response to reader questions, I looked into two other VOD services.
A service I hadn’t found in my original research is Reelhouse. It’s a VOD destination platform similar to Vimeo on Demand or VHX. It’s currently in “live Beta” so filmmakers can use the service now. Reelhouse seems to have a comprehensive suite of tools like paywall, download, blog, storefront, and crowd-funding that seems like a blend of Vimeo and Kickstarter. From a viewer’s standpoint, it all looks fine in the broad strokes. It’s a nice looking site with a good video player and some nice features. But it seems there’s still a lot of work to be done in finding the site—I was researching an article on the topic and I didn’t find it. Still, the service is new and may very well blossom into a trusted destination. Like any of these destination services where the viewer must go to the site (rather than the player being embeddable), how quickly viewers start thinking of it as a source for great content will depend on whether the content creators load and promote their videos.
From a content creator’s standpoint, Reelhouse offers a lot. Creators set their own price and Reelhouse takes just 6% after credit card or PayPal fees. Content creators will like that. There are also a lot of integrated social media, crowd-funding, and other features that seem to make Reelhouse similar to an online film festival experience.
Chill Direct is another direct VOD destination that claims it got the idea from the success of Louis C.K.’s self-distributed video release. And true to that inspiration (but not affiliation), a lot of the site’s first crop of films are comedian performance films and documentaries. It’s a nice looking site with a similar suite of tools as you’ll find on a number of the other VOD sites—plus an integrated storefront, which is pretty cool. That said, a lot of what’s been written about Chill claims that they’re seeking to remove the middleman from content creators and audiences, but with an old-model revenue split, it seems like they are a middleman.
Content creators will probably like the easy account set up and toolset. So far there doesn’t seem to be much more content available on Chill than on Reelhouse, so it’s doubtful that it has a lot of value in video discovery yet. Of course, that may may come as the service matures. Chill lets creators set their own price between $1.99 and $49.99 and splits these 70/30.
The emerging VOD price structure
As I said earlier, once Vimeo on Demand set the VOD hosting price at 10% (plus an annual fee), anyone asking for 30% suddenly has me asking, “For what?” If iTunes is taking 30%, I get it. It’s their store, they created a marketplace where people shop very freely, give each other gift cards, the whole shebang. If you want to be on that site, then you’re going to pay that price—and a lot of people will find it worthwhile. But for a direct VOD destination site—particularly one that no one’s heard of yet, I have news for you…you aren’t iTunes. Content creators still have to drive their viewers to your site if they hope to be successful. Once they do, I just don’t see many choosing to give a service like Chill 30% of their revenues when Vimeo or Roadhouse will take 10% or less. I see a new pricing structure in the future for VOD upstarts if they want to be competitive. And for content creators, that’s a great thing.
Douglas Horn is a feature film writer-director and a creator of independent series. Douglas and Dan Southworth founded the web media company Popular Uprising. The company’s action/sci-fi series DIVERGENCE will release its first season in 2012. More information at: DouglasHorn.com and WhatIsDivergence.com