Two years ago, I set out to re-educate myself in the film distribution business, aiming to find solutions to the profitability challenges faced by independent filmmakers. During this journey, I questioned prevailing assumptions and moved away from traditional Hollywood business models. In this blog post, I will highlight the issues filmmakers face in getting paid and the inherent flaws within the VOD (video-on-demand) platforms' business models.
Why Do Filmmakers Struggle to Get Paid?
To understand the issue, I interviewed several independent filmmakers with films on various VOD platforms. One filmmaker, Janet, shared a revealing story. In the first month of her film's release, she notified her fans and received a substantial commission payment as they watched her film. However, by the second month, her fans had shifted their attention to other new releases on the platform, leading to a significant drop in her income.
The VOD platform tracked her film's performance and paid her commissions based on viewing duration. Unfortunately, after the initial viewership surge, activity around her film plummeted, resulting in drastically reduced commissions. Despite her efforts to encourage her fans to subscribe to the VOD platform, she saw no additional financial benefit from their continued participation as subscribers. Janet's commission check dropped by 99% each subsequent month.
The Shortcomings of VOD Platforms for Filmmakers
Interviews with other independent filmmakers and various VOD platforms (including our competitors at OPPRIME.tv) revealed surprising insights and a shared critical flaw:
Identical Business Models: Most VOD platforms in the independent film streaming industry operate with virtually identical business models.
Inadequate Revenue Generation: These companies suffer from the same flaw, preventing profitability and hindering filmmakers from earning substantial revenue.
Understanding VOD Economics
The VOD business model relies on the population of fans who subscribe to the platform based on filmmakers' referrals. However, VODs fail to compensate filmmakers for these referrals. Instead, commissions are determined solely by a film's performance, measured by its viewing time on the platform. This misalignment in the incentive structure of all VOD platforms is financially disastrous.
The Pitfall of Existing VOD Business Models
The major flaw lies in the standard point-of-sale (POS) payment system used by VOD platforms, commonly known as the "buy button." When a filmmaker's fan visits the website to sign up, no financial connection is established between the paying subscriber and the filmmaker at the point of sale. These POS systems merely process credit card payments without recognizing the referral source.
As a result, VOD platforms remain unaware of which filmmaker referred the fan, making it impossible to financially reward the filmmaker for their fan's subscription. Without the ability to incentivize filmmakers to refer their fans, VOD platforms fail to provide sufficient income for filmmakers to continue their artistic pursuits. Consequently, the POS systems create no incentive for filmmakers to refer their fans, leading to decreased income for both the filmmakers and the VOD platforms.
The Need for Change
The struggle for independent filmmakers to earn a viable income from their films persists due to flawed VOD business models. The lack of financial connections between paying subscribers and filmmakers, along with the absence of referral incentives, significantly hampers revenue generation. It is crucial for the industry to address these shortcomings and explore alternative models that empower filmmakers and create a sustainable ecosystem for independent film distribution. By doing so, we can foster an environment where filmmakers can thrive, and audiences can discover remarkable independent films.
For more insights into improving independent film distribution and supporting filmmakers, visit our blog at OPPRIME.tv. Let's work together to build a better future for independent cinema.
