I love short films—both making them and watching mind-blowing shorts from other filmmakers. Pound-for-pound, short films are my favorite format. I want to make more and see more. Unfortunately, the real world is getting in the way. Even though short films seem like the ideal format for today’s social-media attention spans, they just don’t get made or distributed in a way that lets them be an ongoing, viable art form. So—even though they create a lot of entertainment value for audiences—filmmakers aren’t capturing much meaningful return from that. As a result, filmmakers can only create new short films sporadically or as a brief stop along the way to some other career. If we could find a way to solve this problem, then filmmakers like myself who love the art form could continue making short films that audiences would love and benefit from. Everyone would win.
An open source business model for short films
I’ve spent a lot of time over the years thinking about how to address this short film paradox: people love great shorts when they get to see them, but rarely get to see them. High quality shorts tend to go to distributors, never to reach a broad audience. Or else the filmmakers put them on line for free as samples and never really recoup anything for their efforts. I’ve had films go through various distribution channels and haven’t seen any of them really address the problem. I’ve spoken about short films at film festival panels and other events, always getting roughly the same questions and giving the same responses: “You do it for the love of the medium.”
“It’s a calling card.” (it’s not, by the way.)
“no one’s really figured out a good distribution scheme for shorts, but they will someday…”
Tomorrow I’ll be speaking again at a panel about short films presented by the Seattle International Film Festival. It’ll be roughly the same panel I did last year. And while that is terrific, I really didn’t want to just give the same lame answers again. Because, after all these years thinking about this question, I think I finally have the solution. …Maybe 95% anyway.
There’s a famous saying, “It’s amazing how much can be accomplished if no one cares who gets the credit.” It’s attributed to Harry S Truman, but a have a sinking suspicion that someone else actually came up with it. Once I realized that I had put together a lot of the pieces for making short films more viable, my first impulse, of course, was to keep it to myself. Unfortunately, while that might help me keep making films, it doesn’t do anything to help me continue to discover amazing short films from other artists. So—entirely out of self-interest—I am opening up this business model to anyone. As a side benefit, I think this will let a lot of other smart folks weigh in about the remaining parts of the model so we can all improve it.
And just to be clear, the business model is open source. The films are not. (Though I keep toying with this idea as well.) Read it, try it, refine it, and please report back here so that we can all learn from each other.
A Business Model for Short Films
High quality artistic short films provide a high level of entertainment that audiences enjoy. However, these films rarely see distribution beyond film festivals. When they do receive paid distribution, it is often a frustrating experience for the filmmaker that ultimately does not provide any meaningful financial return that would offer an incentive to continue making them.
Since these types of short films are often characterized by writing, directing, acting, cinematography, music, and other production values on par with many feature films, it takes real resources to create them. The disconnect between what it costs and what is returned to the filmmakers means that these films tend to be personally financed, made infrequently, and dependent on favors from other artists. Rather than continue to develop within this format, filmmakers tend to leave it for others that are more financially viable.
Problem 1: Traditional paid distribution is not viable for short film creators
Paid distribution seems to work for other formats, like feature films and television series so why doesn’t it work for short films? Well, first there’s the question of how well traditional paid distribution really does work for independent film- and series-makers, but setting that aside for now, what makes short films so different?
Many traditional distributors have tested the market, with short films. I’ll mention two that I’ve done business with. The first is Official Best of Fest. This distributor licensed my film Full Disclosure and placed it on several DVD collections, then made a sale to television of a package of short films as a series. OBOF was one of the few distributors I’ve ever worked with that sent royalty reports regularly and usually with a check enclosed. While they never made amounts of money that would pay for the film’s production, OBOF paid on time, promoted the film, and were generally great business partners. They also closed their doors recently—a result of the death of DVD and the difficulty of getting people to pay for short films that they’ve never heard of before.
Another distributor I worked with is Shorts International. They continue to distribute Full Disclosure on the iTunes Store. My relationship with them has been very frustrating. They use their effectively exclusive access to iTunes (for short films) to foist a highly unfavorable contract on filmmakers, including retroactive amendments. Of course, no one is obliged to sign these—unless they want their short film to be available on iTunes. SI’s reporting is sporadic, unsubstantiated, and without audit rights, and over the term of my agreement with them payment has sporadic as well—and their cut is extremely high. SI is still in business and seems to be doing quite well.
A little math is instructive here: For every sale, iTunes Store takes 30%. Of the remaining 70%, SI takes a 25% programming fee, then direct expenses, and finally they take 50% of the remainder. So a $2.00 short film purchase through the iTunes Store is split up as follows:
iTunes Store: $0.60
SI programming fee $0.35
Direct expenses* $0.05
SI distribution fee $0.50
Filmmaker royalty $0.50
* Direct expenses will vary but include the cost of encoding, so this is a realistic amount for many short films.
So iTunes gets $0.60 for running the store, SI gets $0.85 for distributing the film, and the filmmakers get $0.50 or 25% of what the customer pays to watch the film they created. This is all assuming that SI is providing accurate reports to filmmakers about the revenues coming in—and we have to assume this because the filmmakers have no ability to audit them. Aside from the cold hard financial facts, a lot of filmmakers dislike making a film on favors from friends and their own savings, only to see the salesmen take 75% or more of everything that comes in. That’s a tough one to swallow.
So the problem with paid distribution of short films is that the distributors who are ideal partners for filmmakers are, sadly, not able to stay in business, while those that stay in business seem to do so by taking the lion’s share of the revenues. It seems likely that traditional paid distribution will always be like this. So, to formulate a viable business model, short film creators need to look to some model that does not include traditional paid distribution. QED.
Problem 2: Consumers will not pay for short films they haven’t watched.
It’s hard to get people to pay for entertainment in any format. Studio features have the marketing budgets to flood people in ads and promotional pieces that create a sensation that people must see the film, now. Short films can’t do this for obvious reasons. But in some ways they’re better off because following a media blitz like this—and after the release windows schedule that studios have ingrained in our collective consciousness—feature films have a tendency to seem dated very quickly, whereas short films can be evergreen.
That’s nice, but it doesn’t solve the problem. Even if a great short film doesn’t feel dated when the potential viewer first encounters it, the person is still highly unlikely to plunk down any money to view it. And really, why should they? There’s tons of video content available on the Internet for free. The artistic short film needs to prove its value to earn its shekel.
This is why short films are so often marketed with a trailer, a great synopsis, info on the stars or subject matter, photos from the shoot, reviews, word of mouth, festival laurels—all the stuff we see on any independent film trying to get our dollar. But none of it really works. Oh it works sometimes, but nowhere near the scale that would be necessary to make sales viable. And this is made even more difficult for short films because it is really hard to cut a trailer of a short film in a way that makes people want to pay to watch it without then destroying the experience of watching it. How are you going to pull two minutes—or even just one—out of an eight-minute film in a way that makes you want to watch it, but still leaves anything to watch?
It’s possible to apply some data to this axiom to check its validity. In my own experience, I’ve seen that my films start selling on DVD or iTunes mostly after they’ve run in a country on television. It’s very easy to track this—people see the short film on TV, Google it, and then figure out how to buy it or send me an email about it. It’s so reliable, in fact, that I actually found out that SI had sold Full Disclosure in a TV territory that they did not report on their statement (they later assured me it was just an oversight) from viewers in the region contacting me about how to buy their own copy of the film.
The principle, then, is that in an environment where there is boundless short video content of questionable quality, very few people are willing to pay to watch a short film that they haven’t already seen. You can’t show them enough to get them to buy without ruining the experience. But, once people have seen the film, they are often willing to purchase it—especially if they can get better quality or if they can no longer watch it otherwise. Aha! So now the knot begins to unravel…
So to recap:
- Traditional paid distribution won’t work for short films.
- Consumers will not pay for short films they haven’t watched.
- Consumers will pay for short films they’ve already seen and liked especially if they can’t watch them otherwise.
Why have we been unable to create a viable business model for short films so far? Well, in part because some of the structures of the model haven’t existed until recently, but more importantly, because most attempts at gleaning this cube have been based on some combination of making traditional paid distribution work for short films (which it doesn’t) or getting consumers to pay for short films before they watch them (which they won’t). That is the problem—working against not just one insurmountable obstacle, but two. Get close to wrapping your head around one of them, and the other will still bite you in the backside.
So then we must start with the idea that these approaches simply won’t work. I’ve droned on a bit on this partly to weed out people who are just skimming through for the easy answer, but mostly because the concept is so radical that unless you understand why the old, seemingly rational approaches don’t work, then the business model seems ridiculous.
Step one: Put your short films online to watch for free.
Congratulations—you’ve just destroyed your market! Or maybe not. With this step you bypass traditional paid distribution—which we know doesn’t really work. You’ve also created a way to get around people not being willing to pay for your film because they’ve never seen it before. They watch it for free. So, success, right? Now what?
But hold on, people have been putting their films online for free for a long time now. Many even put a little donation button next to it. Vimeo has the “Tip Jar” Centup.org is the new kid on the blog, and the “Buy Me A Beer” button has existed for a decade. None of these have gotten us there. Now we have a new problem…
Problem 3: People also won’t pay to watch a short film that they could watch for free
While very few people will pay to watch a short that they’ve never seen before, maybe even fewer will pay to watch something that they could watch for free. To do so, person has to either really love the short film, or be highly enlightened to realize that this is only way more short films get made. And that’s rare. I don’t know if it’s more or less rare than the mythical person who will pay to watch a short they’ve never seen before, but it’s in the same ballpark—the ballpark where we can’t really rely on it to make short films viable.
To make this work, you need to create scarcity.
Scarcity is what gives almost everything its value. Feature films create scarcity by only having the film in theaters for a short period of time. Disney has a policy of only releasing their classic animation films on home video for brief periods of time. This is entirely about creating scarcity. They could sell them all the time as an ongoing SKU as most distributors do, but they decided that by offering these films for very short release windows, that they would create scarcity and therefore demand among their customers. I’ve heard people who don’t even have kids yet plan to buy Cinderella on Blu-ray because they want their children—who aren’t even born yet—to be able to watch it—on a format that will likely be outmoded once these children exist and are Cinderella-watching age. Wow! That scarcity stuff works!
Similarly, why are these Italians and Czechs emailing me about buying Full Disclosure DVDs (not even available in Italian or Czech!)? Because they watched it, they want to watch it again, but they can’t because it only played on TV one time. They want it, but they can’t get it. So they will pay to get it if they can. Scarcity!
So the real question we must address is, how does a short filmmaker show his or her film so that people will like it, but also create scarcity so that they will purchase it? That’s the big question. And this is where the open-source contributions of so many other filmmakers is going to help refine this process. But I do have a pretty solid solution for us to jump off from.
Of course the optimal solution would be to let people watch the film once for free and then have to pay to watch it all future times. If anyone can develop this approach, let me know. It would likely be even better than what I’m proposing. However, I think that this would be something that people could easily circumvent, so I’m not advocating this. My current solution is not quite as good in theory but far better in practice. It’s called intermittent scarcity.
Step two: Create intermittent scarcity by occasionally making the free short film unavailable.
So you know that short film we put online for free in step one… Well, we didn’t just put it online any old way. We were a bit careful about it. First, it’s on a secure server like Vimeo or similar where people can view it, and even embed the player it into a site so that you get maximum exposure. This way lots of people watch it for free for that crucial first viewing. And you certainly don’t let people download it. Not for free, anyway.
Then you stop showing it from time to time. What “time to time” will ultimately mean is another great area for our experimentation, my short film entrepreneur bretheren. Here’s my plan for now, which I hope you’ll help me improve upon.
- Release the film online for free. Announce the release ahead of time if you can and make it a big to-do. Encourage people to view it and share it. Make sure everyone knows that the film will only be available for free for a limited time.
- Don’t necessarily tell people exactly when the film will stop being available for free.
- Then at some point—when you’ve reached a certain time frame or number of hits, or you just feel like it, make the film no longer be available for free.
- Let people know when it will be available for free again. Put a countdown clock on your site where you explain the whole availability issue. I expect you’ll want a broad period of time between free viewing periods. I’ll probably start with two months unavailable.
- Of course, include a link on the landing page to where viewers can watch the film immediately (purchase or rental) for a very reasonable fee. This is a standard paywall-type sales arrangement. Pick from one (or more) of the service providers I break down in the VOD Options for Independent Films and Series article.
What have you done here? You’ve created a real-world, workable way for people to be introduced to your short films and share them, but also to provide scarcity. A very common scenario is that someone finds out about the short film from social media, watches it and likes it—then wants to show it to a friend later…only to discover that the film is now unavailable for the next six weeks. Well to heck with that—they want to show their friend the short now and since they know how good it is, suddenly, $2.99 is no impediment—especially if they can then own the film and watch it any time they want. And even more especially-specially if they know that of that $2.99 something like $2.50 is going directly to the filmmakers who created the film they loved so much to help facilitate more great short films in the future. (Which the filmmaker will be sure to keep them in the loop about is a non-spammy kind of way, right?) And hey, they get an exclusive HD version of the film and some special features to boot—maybe a short “virtual Q&A” with the filmmaker like at a real film festival? Solid!
Now by telling people when they can watch it again, but not necessarily when the free period ends (only that it will end sooner or later) you create something more important than actual scarcity…you create the perception of scarcity—because scarcity doesn’t work so well unless people are aware of it. A funny thing happens to people when they perceive scarcity. They buy a bunch of stuff that they don’t really need to buy right then. Don’t believe me? Go to the supermarket the day before a snowstorm.
So once people watch and like your film, and then perceive the scarcity of possibly not being able to watch it again the next time they want to, they are very likely to buy it right then—even if they could still just watch it for free. And this is especially true if you can do two additional things in this afterglow of their having just watched your awesome short film: make a great value proposition about all the great stuff they get in exchange for their $3; and help them understand that paying for the film allows you to create more wonderful, entertaining, unexpected short films in a similar vein from you the filmmaker—and that this doesn’t happen without their support. In other words, make them part of your team.
This step is also crucial. American media consumers are familiar with the Studio System where a big financial entity selects from among artists who’ve spent years honing their various crafts and assembles these along with a lot of money to create a product that they can own and sell, where the artists are workers for hire divorced from their art. That is the Studio System and it is the same for movies, music, most books, television—essentially all the consumer-grade art we consume in this country and really the western world.
Before the Studio System was the Patronage System, where a powerful individual or family sponsored artists so that they could create art. This still exists to some extent. Even in the film world, many independent films have come to us courtesy of the mythical “high net worth individual” (aka dentists). In the future, however, we have the opportunity to advance short films through “micro-patronage.”
Micro-patronage is my fancy-pants way of saying crowd-sourcing. A lot of people use crowd-sourcing like Kickstarter to help fund short films one at a time. That’s fantastic, but I think that once the intermittent scarcity method starts making short films viable to the point where filmmakers can start releasing more and more great films and staying in touch with past viewers and purchasers, suddenly it’s possible to go to a group of people and propose micro-patronage of a “blind slate” of future short films.
Rather than saying to your audience, “Here’s one film I’m going to make which I am essentially going to ruin for you in the process of getting you to give me your money,” and then repeating this process over and over again with each film, the filmmaker seeking micro-patronage pitches this:
“Here’s a body of films you’ve watched from me—maybe you paid for them or maybe you didn’t, but hopefully you enjoyed them and were glad they existed. I want to make more films—and if you’ve watched these, then my hope is that you’d like to watch more like them. For that to happen, I need your patronage. That means you give me ten bucks—and encourage your friends to do likewise—and I make three or four films this year that will completely surprise and hopefully delight you. If enough people join in, maybe I can make eight or ten films over the next couple years. You’ll get to see them all for no extra cost any time you want to and before they’re available to anyone but patrons…and with some extra behind-the-scenes stuff if you’re into that. And you’ll know that the actors, writers, composers, and all the other artists involved made a little grocery money (maybe not the going rate, let’s not get crazy—but something meaningful) in the process so they could continue to pursue the arts that you are enjoying. With you on our team, we can keep creating short films that get better and better.”
Would this model work? I think it would—and the reason why I think it would is that I can right now think of several short film creators who I would give ten bucks to if it meant that they came out with more that one new film every few years. Yeah, I’m talking about you PES. And Martin Rosette. And guys like Phil & Olly. And I kind of think and hope that there might be a few Full Disclosure and Coffee & Pie and Trailer: The Movie! fans out there who would say the same about Douglas Horn.
One great thing about this model is, it doesn’t require any real secrecy to work. A filmmaker can be almost completely transparent and people will still buy in—maybe buy in even more. This business model also doesn’t require any exclusivity. I can do it, PES can do it, you can do it. If people like our films, it can work for all of us—again, maybe it even works better the more people do it because the fans of my short films might just be the fans of your short films, too. Maybe I show one of your films on my site and you return the favor. Because this was never a model just to get my short films made. I want to see yours as well. That’s why this is an open source business model for short films.
Where do we go from here?
Here’s how much I believe in the model. I’ve just released Full Disclosure for free online viewing. I’ve never done this before. Please watch it. Enjoy. Stop buying it at iTunes with their DRM that doesn’t let you move it from device to device. Share it with your friends! It’s free to view… for a while. I’ll be doing the same with my other films as well. There’s a good chance that this model will favor filmmakers who already have some good content to work with. That’s not a huge problem because there are plenty of great shorts filmmakers out there and it’s something that emerging filmmakers can work up towards. It’s not really designed to get first short films out there but to help support the continued creation of short films so that short films stop being a creative waystation and can grow into a viable format for the artists who want to keep creating great short films.
In a few weeks, I’m also going to release my newest short film comedy, Tape Recorder for free as above. And if the model proves out, well this is how I’m going to be making and releasing short films from now on. …Hopefully a lot more of them than I’ve been able to make the past few years.
To be continued…
Okay, this article has been long on background and “the vision thing” but a little shorter on specifics. But it’s getting pretty long here, so I’m going to hit a stopping point so I can set this loose on the world. There’s a lot to absorb here. I want to hear your thoughts about the idea. I will be coming back with a part two to this post that looks at the real numbers.
What does “viable” mean?
Who would get paid in this scenario and how much. (Spoiler alert, just about everyone and not a whole lot on an hourly basis, but not nothing, either.)
What kind of expenses will there likely be?
How much would you need to make to truly make this viable?
I’ll address all of these questions in part two with figures, budgets, whether SAG-AFTRA contracts fit into this plan (they do!), which services I’m planning to use and why. Again, all of this is subject to experimentation and refinement. That’s the whole freaking point, right?
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