Cannes 2014: VOD, piracy and the future of digital distribution

Today, at the American Pavilion, a panel including representatives of Creative Future, Elevated Film Sales, Saban Films and Alamo Drafthouse discussed the state of digital piracy on the independent film sector, and how new models of hybrid digital distribution can respond.

First up was Ruth Vitale, Executive Director of Creative Future: an organisation which seeks to respond to the economic threat of piracy, with a particularly focus on educating younger film viewers who have grown up expecting content on the web to be free.  According to Creative Future, the illegal downloading and streaming of most films ranges from 25-100% of their legitimate sales worldwide. For library titles, online piracy can reach as much as two to three times legal sales. Nearly 30% of internet users in North America – and 40% in Europe – use pirate sites.

The Pirate Bay alone receives nearly 60 million unique visitors a month – 14 million more than Netflix, and more than the websites of ABC, CBS, NBC and Fox combined. And it is a lucrative business: MegaUpload.com was reported to have made $150m in credit card sales, and $25m in ad dollars, over just six years. Avatar is the most pirated film, with 16.5 million illegal downloads (note: that film also grossed a record-breaking $2.7 billion at the worldwide box office). Vitale comments that the effect of piracy is particularly acute for indie films in terms of lost revenue. She gave the example of The Hurt Locker which she reported sold six million legal tickets, against 10 million illegal downloads.

Tim League, CEO and co-founder of Alamo Drafthouse, talked about the need to better engage younger people with foreign language, arthouse and independent films, and to use digital spaces for this engagement to deliver content on their terms. He gave the example of BitTorrent’s recent offer to download a content bundle of the film plus DVD extras, which led to 3.5 million international downloads of The Act of Killingamong many other successes. League commented that this functionality is soon to be behind a paywall and this is a model he’s keen to test. [Interestingly, this is a similar model to our’s at We Are Colony].

Bill Bromiley, President of recently launched Saban Films, talked passionately about independent distributors’ responsibility to find audiences for their films. He is championing the ultra-VOD model as a revenue source with huge potential to grow, particularly as technology in the home continues to diversify. He commented: “we’ve got to be distribution agnostic…we’ve just got to find out where we can make money from films, to make the next crop of films”.

AP Distribution

Cassian Elwes, CEO of Elevated Film Sales, championed day-and-date releasing, but made clear the challenges of getting actors to lend their support to innovative models, with VOD formerly seen as a dumping ground for films which could not get distribution elsewhere. In his view, new VOD models are a way to monetise films by making them directly available to fans, and getting in front of piracy rather than waiting six months to go digital. He hopes that Google will get into premium film distribution, to truly understand the value of content and to lead a crack-down on piracy sites.

Elizabeth Valentina, Vice President of Content Protection Litigation at Fox Entertainment Group, was challenged as to whether the bigger studios, and larger cinema chains, were truly embracing new VOD models such as day-and-date. She argued that the studios are innovating – from ultra-violet, to varied transaction VOD models, to subscription platforms. But Vitale commented that the major cinema chains will not give distribution to films doing ultra-VOD or day-and-date, leaving producers restricted to some 300 screens across the US (unless they “four wall”, where the producer pays the cinema a minimum per week to screen their film, often costing $2-10k per week). She suggested the potential solutions were either higher at-home VOD price-tags, or revenue sharing between VOD and theatrical.

Elwes voiced frustration that studios are not revealing VOD numbers; but with smaller platforms now doing so, he suggested future deal terms might be structured around success, with bonuses on early digital engagement and download/streaming numbers. Elwes also suggested that the studios will start investing in competing platforms to Netflix, to monetise new films and archive pictures, and that as those platforms grow they will need new content, giving an opportunity to indie films.

We Are Colony launches in private beta this month, sign up now for early access. Independent filmmakers can submit their in-production or in-distribution films for consideration here. More are @wearecolony and @colonymakers.

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