Heavenly jukebox: cloud distribution and the future of film
By Chris Foresman
Cloud services have been heralded as a way to give smaller voices the same access to a global audience as bigger voices. Anyone can start a blog that everyone in the world can read. Anyone can post a video to YouTube and generate millions of views in a matter of days. This same power is helping small film distributers that specialize in independent and foreign-language films reach wider audiences by way of streaming, on-demand video. We spoke with one such distributor, Music Box Films, about the recent deal it struck with Netflix to make its movies available via the Watch Instantly streaming service.
Music Box history
The Music Box Theatre is a mainstay of Chicago cinema. Originally built in 1929, the theatre became an “art house” in 1983. Bill Schopf bought the theatre in 1986 and has worked hard to maintain a reputation for bringing the best of foreign and independent film to its audience.
Schopf knew he had a good thing going with the Music Box, one of only a few dozen art house cinemas in the country. To increase the job security of his loyal staff and the theatre’s business, he knew he had to expand either horizontally or vertically. While the company is still considering expanding to additional locations in Chicago and elsewhere, an opportunity to branch out into film distribution opened in late 2006.
In 2007, Music Box Films acquired the rights to its first film, Tuya’s Marriage. The Chinese language film had earned a Golden Bear award at the Berlin International Film Festival, and later earned two Silver Hugo Awards at the 2007 Chicago International Film Festival. Yu Nan was named Best Actress for her “delicate, natural performance as a woman in crisis which is the soul of the film.” The film also garnered a Special Jury Prize for its ts “strong portrait of a woman struggling to survive a remote landscape.”
The success with Tuya’s Marriage led Music Box to strike a deal with MPI Media Group to distribute its films on DVD for the home video market. Then, in 2008, it struck gold by acquiring the rights to the 2007 French thriller Tell No One. The film won numerous film festival awards and became the top grossing foreign language film in the US for 2008. The film was also considered one of the top ten films of 2008 by several critics, including Roger Ebert of At The Movies fame and Stephen Holden of The New York Times.
MPI worked out the deal to distribute Tell No One on Netflix via DVD and its Watch Instantly streaming service. Music Box Films began acquiring distribution rights to more films, and later decided to develop its own in-house home entertainment division to handle DVD and Blu-ray production and distribution. Netflix then approached Music Box to strike a deal for Watch Instantly. That deal was finalized earlier this year, along with deals with Gravitas Ventures, Kino Lorber, Oscilloscope Laboratories, Regent Releasing, and the highly respected Criterion Collection. All told, the deals with those distributors added about 300 independent and foreign language films to the already impressive streaming service.
The deal means a lot to a small distributor like Music Box Films. “Our core business is releasing films for theatrical release,” Schopf told Ars. The theaters that typically show independent or foreign language films, or “art house” cinemas, are few and far between. Most also tend to be located in larger urban areas, such as New York, Los Angeles, and of course, Chicago.
“With video on demand, however, we get to reach more of our potential audience out there, that may not live anywhere near an art house theatre, or simply may not care to go to a theatre,” Schopf said.
Movies in the cloud
There are several reasons Music Box wanted to include video on demand options. Reaching viewers that don’t live near an art house is just one of them, though. “The traditional art house audience is over 40,” Schopf told Ars. “We don’t know for sure, but we have an idea that people in their 20s and 30s watch more films in their homes, so we want to make our films available for them there—we want to make sure we’re reaching a younger audience as well.”
Also, said Schopf, the more people that see the films, the greater chance Music Box has to generate revenue from DVD sales. “We don’t have millions of dollars to market the way Hollywood does,” he told Ars. “So video on demand can feed word of mouth, and we like to take advantage of that because it’s a very powerful marketing tool.”
As visceral an experience as it is to go to a small art house theatre and watch a nice 35mm print, Schopf told Ars that he doesn’t much care about the format that people see the film in—35mm, DVD, streaming video—as long as they actually see it. “I’ve heard that as little as five percent of the films made in the world get distributed in the US,” he said.
Traditional film distribution is expensive, especially in a country as large as the US. “One of out biggest costs is making and shipping 35mm prints,” Schopf explained. The UK, in contrast, has almost all of its art houses in London—“that’s the equivalent of only releasing in New York,” he said.
“The big picture of it is this: we find the best films around the world to bring to the US,” Schopf told Ars. “We’re just a middleman between the films and the people that seem them. So we want to get them to as many people as possible and figure out how to bring down the transactional costs to doing so.”
Putting movies in the cloud is one way to do that. Netflix, for instance, gives Music Box Films access to 13 million subscribers. Because Netflix works on a subscription model, it negotiates a flat fee to distribute a particular film for a limited time frame via Watch Instantly. (This is also why many titles come and go periodically—some are re-negotiated, others are not.) But while video on demand is still new for Music Box, so far the strategy is working. “Netflix does a great job with its recommendation system,” said Schopf, which gives the films the attention that he feels they deserve. “It’s one hell of a bargain.”
Music Box Films also has a deal with Amazon On Demand, which offers pay-per-view rentals, as well as higher-priced digital downloads. The benefit of this model is that Music Box has a better understanding of exactly how many times someone watches one of their films, and it gets a cut of every view. The company is also looking to get its films onto iTunes, but according to Schopf, iTunes prefers to work with much larger distributors or aggregators. “We release 10 films a year, whereas they want to deal with someone who’s releasing 100 films a year, for instance,” Schopf told Ars.
Getting deals for on-demand services with cable providers is another avenue that Music Box wants to explore as well. Schopf explained that current technology effectively limits the number of films that most cable operators can offer, meaning foreign language or art films tend to get passed over for more mainstream offerings. “We think they are going to have more room for us soon, but we’re not there yet,” he said.
The bottom line
“At least right now, the way we do business is that we start out with a theatrical release for at least four months,” Schopf told Ars. “Then we release it for home entertainment for both DVD and video on demand.” He said that his company might experiment with releasing video on demand sooner, but there are still a lot of people going out to movie theatres. “It’s an experience to watch a film,” he added.
But the cloud offers much larger distribution for much lower incremental costs. “My observation, with respect to the Internet, is that there is almost unlimited capacity to put content on these various platforms,” Schopf told Ars. “It’s in their interest to put as much content on there. They are splitting revenue with you. There doesn’t seem to be much risk to the service or the content provider.”
And after the costs of making and shipping 35mm prints, marketing still remains one of Music Box’s biggest expenses. As digital projection technology advances, Schopf said he’ll be ready to eliminate the costs of using 35mm prints. And even if he were to eliminate physical DVDs, and distribute through video on demand with its increased potential audience, there’s still a concern of how to get the films in the minds of potential viewers. “If no one’s ever heard of it, how are they going to see it?” he said.
That’s why Music Box Films is still sticking with its current four-month theatrical release window. Marketing for the film can be recouped with ticket sales, and it also generates interest for DVD and VOD. And so far, Netflix’s and Amazon’s recommendation systems are helping put titles in viewers’ queues.
However, said Schopf, he sees a future where all films live in the cloud for anyone to access. “We’ll have to get some revenue on video on demand to make up for lost DVD sales. But, everyone is dealing with this.” In the meantime, he said, “we are still watching, figuring out where it’s going.”
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