Actor Hector Jiminez

Actor Stacy Keach

Actor Kevin Farley

Number of iVOD users reached 7 million in 2011

The video-on-demand market for paid rentals is currently ruled by pay TV services, but the Internet-on-demand market is growing in strength, according to the NPD Group.

Pay TV VOD services hit $1.3 billion in revenue for 2011, according to the market research company, while the iVOD market reached $204 million. The report found that 4 million fewer pay TV users paid additional fees to watch movies in August 2011 vs. a year earlier.

Studio product still makes money; indies struggle

 

The decline of the DVD business, which began in 2009, has split the producers of direct-to-DVD content into haves and have-nots — and sent the major distributors to look for sweeteners for their product, including offering exclusive windows to retailers, adding bonus material and instituting loyalty programs. 

Predictably, the majors are hurting the least. About a dozen large distributors continue to churn out titles like Disney’s animated “Tinker Bell,” Fox’s “Wrong Turn” franchise and Universal’s “Bring It On” video sequels, which skip the theatrical window and rake in tidy profits. The independents are having a rougher time (although they still have a sweet spot in foreign films and the horror/suspense genre).

The majors are releasing fewer direct-to-DVD titles, but the average revenue per title is relatively steady, indicating that individual releases remain good financial performers. Despite the downturn in the DVD biz, such releases have brought in a steady $4 million -$5 million apiece in recent years, according to IHS Screen Digest.

“The most lucrative direct-to-video movies are major-studio sequels to theatrical films, and most of those are franchises that generate a new film every couple of years,” said Jan Saxton, IHS Screen Digest senior analyst for filmed entertainment. “The top 10 titles consistently claim more than half the total revenue for the whole category from year to year. The sector’s revenue is volatile because it is heavily dependent on the performance of just the very top titles.”

Some productions are designed from day one to premiere on DVD (in this story DVD is used to encompass both traditional DVD and Blu-ray). For other titles — so-called “busted theatricals” — direct-to-video is a fallback when they fail to secure theatrical release.

The very top titles — typically movies designed by major studio distributors as video premieres — can still sell 2 millions units of physical DVDs, but that’s down by about half from the heyday of 2004-08.

Production budgets of movies conceived as video premieres by the majors have undergone commensurate declines. They peaked at $10 million to $15 million at the high end a few years ago and have dropped to the $5 million-$10 million range today. The studios have managed to maintain production values by shooting the titles in lower-cost facilities outside Hollywood — in places such as South Africa, Bulgaria and Michigan — and relying on film financing incentives offered by local governments.

Leaders in direct-to-video include Walt Disney with its animated “Tinker Bell” and live-action dog adventure “Buddies” properties, 20th Century Fox with the “Wrong Turn” franchise, and Universal with its “American Pie” and “Bring It On” video sequels.

Glenn Ross, executive VP and general manager of Universal 1440 Entertainment, the unit of Universal Studios Home Entertainment that generates lower-budget films distributed in all media, plucks properties from the Universal film library in what he calls “brand development.” Teen drama “Bring It On,” which began with the 2000 theatrical starring Kirsten Dunst, recently spawned a live stage national touring musical comedy after four direct-to-video sequels. “Very rarely are we looking at this as just making one-offs,” Ross said. “We are careful about the properties we pick and (make sure) we have the resources to market them properly.”

With its family brand, Disney takes an even a broader multimedia tack. For example its “Tinker Bell” direct-to-videos mesh with its huge-selling Disney Fairies consumer products property, which together “helped to drive a really healthy toy business,” says Lori MacPherson, exec VP of global product management at Walt Disney Studios.

Also financially healthy, per MacPherson, is Disney’s “Buddies” merchandise business, which launched in 1997 with the theatrical “Air Bud” and has since morphed into about a dozen “Air Bud” and “Air Buddies” DVD sequels, along with books and other ancillary merchandise — all populated by cuddly golden retriever puppies.

Some direct-to-DVD properties have pumped up their marketing muscle via exclusive deals with big retailers. 20th Century Fox’s “Marley & Me: The Puppy Years” was exclusive to Wal-Mart, and Samuel Goldwyn Films/ATO Pictures’ “Mao’s Last Dancer” launched only in Target stores.

“Sometimes a retailer gets passionate about a title and will put a lot of marketing resources behind it in terms of advertising, in-store promotion and product placement” on store shelves, says David Bixler, senior VP of acquisitions and production at 20th Century Fox Home Entertainment. After a limited-time exclusive window with a single retailer, the same title is distributed widely.

Direct-to-video focuses on selling DVD’s rather than renting them. For its part, Disney works to buttress such sales through a loyalty program and generous bonus material. Eventually Disney intends to offer interoperability of its titles across multiple platforms via the Disney Studio All Access program — a cloud-based storage system that a Disney spokesperson says will launch “in the next several months.”

Independents — with fewer cross-merchandising resources and less clout with retailers — have had less success. “Starting in 2007, independent distributors sold more foreign direct-to-video films than the studios, and this trend continued until 2011 when the studios eclipsed the indies once again,” said David Paiko, VP of home entertainment at research provider Rentrak. (The data comes from tracking DVD sales in brick-and-mortar stores, and not online sales of DVDs.)

Perhaps one of the biggest downsides for indies: Shrinking DVD sales have put negative pressure on financing, with titles now typically generating hundreds of thousands of dollars — and some as little as tens of thousands of dollars.

“The decline in the U.S. of DVD values has increased the difficulty of funding indie productions today,” says Peter Elson, of Global Cinema Group, an international sales agent and producer’s rep. “As the gross revenue becomes smaller, the advances or minimum guarantees offered by indie distributor-buyers shrinks commensurately.”

Even as it adjusts to the realities of a declining physical DVD market, direct-to-video is morphing toward a digital distribution model. Fast-growing VOD now shares the same release window and slice of consumer dollars as traditional home entertainment and provides a big chunk of revenue,but it still doesn’t make up for the money lost on DVD sales, says Breaking Glass Pictures CEO Richard Wolff.

The downside of VOD is that it tends toward lower-priced rentals. On the other hand, it can support higher profit margins because there are no costs for disc manufacturing and no returns of unsold DVDs.

“What was the direct-to-video business is now migrating entirely to VOD,” says David Molner, managing director of Screen Capital Intl., the outfit that financed “Love and Other Impossible Pursuits” with Natalie Portman, which went direct to video in the U.S. “How long it takes to fully port over is the subject of fair speculation, but industry sentiment is certainly in favor of the trend. Consumer acceptance is finally reaching meaningful levels.”

Plus, new wrinkles are emerging in the relationship between VOD and DVD. “Distributors like the idea of taking a film out first on VOD to see how it performs,” says Nolan Gallagher, CEO of Gravitas Ventures, which operates a VOD platform offering hundreds of indie films. “If it does well on Comcast and iTunes, then they have ammo for the DVD release and can say, ‘Here’s why you should take this title for your store.’ If it doesn’t do well, then they recalibrate their commitment. VOD is a great test bed.”

Contact the Variety newsroom at news@variety.com

1. How did you get into filmmaking?
I attended NYU for film. After spending many years in the fashion magazine business, I began directing live theater productions in NYC Off-Broadway (at The Lucielle Lortel) and at the theater in Cherry Grove (Fire Island). I loved directing the live theater productions, but realized that there would be more creative options as a filmmaker.

2. What were some of the biggest challenges/rewards you encountered while shooting this film?
Biggest challenge – endurance! We had to run a marathon race with the fashion industry over the past 2 & 1/2 years to get this film done. Biggest reward – having so many different players from the fashion industry involved & having the film turn out so well.

3. What inspired you to make a film about the iconic fashion tents in New York?
When I realized that NY fashion week would be moving from the tents in Bryant Park after 18 years to Lincoln Center, I knew that this chapter in fashion history needed to be captured & recorded. Very few people outside of the fashion industry really know what fashion week was like before it became an organized event in the early to mid 1990′s. We also wanted to explain more about how the fashion industry works to the general consumer, so they can learn what happens during fashion week & what goes on inside the tents. It was a great story that really needed to be told, so we were thrilled to have the opportunity to be the ones making this documentary.

4. You have a number of interviews with some of the most revered names in the fashion industry. How did you get so many high-profile people involved in your film?
Key word to accomplish this: Persistence! Also had some great relationships after having worked for so many different magazines and attended the shows in the tents for so many years. Our first big supporter was Marie Griffin, who handles PR for many key designers. She arranged interviews for us with Betsey Johnson & Carolina Herrera – they were among the first big designers we interviewed, so the rest of the big names came right along.

5. How do you think “The Tents” have become such a cultural symbol in New York?
As the story goes, there are limited places to stage a unique fashion week experience in NYC – the tents were created to meet the growing needs of the fashion industry to present shows for a wider audience. As a result, they have become an actual symbol & the tents are synonymous with fashion week itself.

6. What do you think is the attraction to high fashion?
High fashion taps into the aspirations that we all have to feel sexy & glamorous. When you put on some wonderful, top-quality clothes – something that fits you well that is the latest design, well, the clothes can actually transport you to a special place. A place where you look & feel just fabulous.

7. Throughout the film, it is mentioned that having these tents creates an accessibility to fashion that is not present in other fashion shows in other cities. Yet at the same time, we see people pressing to get in to the shows, to have the best seats, to get closer to the action. Do you ultimately feel that The Tents flourish because they provide accessibility or exclusivity?
This is a complicated question to answer. For starters, we do address the fact that the fashion show is really a trade show – for all the designer to present their collections to the apparel buyers & the press. As with any business, there are the individual decision makers that have to be influenced to buy the products and cover the line editorially. So in the case of the fashion industry, this starts with the formal process of presenting the collection in the context of the fashion show. For the retail buyers, there are then numerous follow-up meetings in the designer showrooms after fashion week where the retail orders will be written. The editors will pick from runway shots to showcase the looks that they believe will be successful trends, then subsequently ask for the merchandise to be used for their individual fashion features & cover shoots. With the development of new technology and the expansion of media in having direct to consumer applications, the insider experience that the shows used to have just to the fashion industry (the trade) – that exclusivity – has been expanded to include a much wider group of people – the consumers. But, ultimately, the business decision revolving around the fashion shows still fall on that small group of people in the fashion trade. So, the tents flourish because they do both – they cater to the fashion insider, first & foremost, the core audience, but also, the tents do allow more accessibility to the fashion show experience to consumer than ever before.

8. Shooting in such a small space with people running around preparing for shows must have posed a difficulty. Can you discuss the process of actually shooting your footage in the tents?
You really have to know many of the “rules” regarding the way things work in the show venues and backstage at each of the fashion shows – and – there are no rule books to refer to. You have to have a very good instincts and know your place – the “back of house” PR team will help explain things as each show/designer has their own style & process for doing things. Then also, you have to know how things work in the venue itself – the “front of house” PR team handles different roles – the seating areas/assignments, the celebs, the runway access for the camera crews prior to the show, plus the camera crews in “the pit” – so all of these different aspects of the filming the show experience is just something that you learn by doing it over a period of time. It also helps to be nice & respectful to everyone – that is always appreciated. There are times when you can’t shoot or do something you’d like to do, so instead of argue with a PR person or venue manager, you are better off accepting it – sometimes, that’s just the way it has to be.

9. What message about the fashion industry would you like people to take away from this film?
That this is a great business with a lot of interesting, passionate & creative people involved in many different aspects of the work. That the business of designing & making the clothes, then showing the latest fashions during fashion week every season is a celebration of all that creativity, passion & talent in the fashion business,

10. What can we expect to see from you in the near future?
The documentary – COMING OF AGE IN CHERRY GROVE – is done & ready to shop around. Currently filming & preparing for release during fashion week in September 2012 is MAKE IT IN MANHATTAN – a documentary about encouraging the reinvigoration of the NYC Garment Center & the return of domestic apparel manufacturing to the US.

1. How did you get into filmmaking?
I grew up watching movies and was fascinated by the process from a very young age. In High School I made my first short films. They were all terrible, but I immediately fell in love with the process. While in undergrad, my friends and I decided to attempt to make a feature. We had no idea what we were doing and while we made almost every mistake in the book, I learned a great deal and decided to try again. So, I directed another feature in undergrad where I made every other mistake in the book. By the end of the second feature, I was hooked and knew that this was what I wanted to do with my life, even if I didn’t yet know exactly what I was doing.

2. What were some of the biggest challenges/rewards you encountered while shooting this film?
There’s that saying about Murphy’s Law being in effect whenever you shoot a film, so not unexpectedly, there were many unexpected challenges that arose, such as losing the main house we were going to shoot in the day before we were scheduled to shoot there. If I were to single out the biggest challenge, it would have to be, like with any indie film, making the days while not compromising the vision. The biggest reward is getting to work with a group of amazingly talented individuals, crew and cast, who all come together to support and guide a singular vision. I’m always in awe of the process and all of the dedication it takes to create a film.

3. The decision to set a story about emotionally disconnected people within a storage locker facility is a particularly resonant narrative decision. How did you get involved with this story?
The script was discovered by producers, Guy Pham and Brian Oliver. I was brought in a little later in the process. It was clear from the start that there was a strong, dedicated team behind this project. They really understood the other side of Hollywood that you don’t often see in film and the concept that living in a large, heavily populated city can often cause individuals to feel disconnected and alone. I was honored to be selected to bring this vision to life and greatly enjoyed the creative collaborative process with the production team.

4. You have an extremely talented cast, with one of the new up and comers, Sarah Jones, star of the new Fox show, “Alcatraz.” Can you discuss the casting process?
We had an amazing casting director in Barbara Fiorentino who found us incredible actors. When Sarah auditioned, we were all blown away and felt she really embodied the character. Barbara was also great about finding actors that went a little against type and added extra dimensions to the characters.

5. There are several references to the film, CASABLANCA in the movie. How do you think they shape and influence the story?
In the scripting process, we tried to take a number of elements from CASABLANCA and work them into the story, almost as a tribute. For example, CASABLANCA starts with a spinning globe, so we paralleled that by having our opening shot be of a spinning globe on the sign for the storage facility. The main way that CASABLANCA shaped the film was with the love story and the theme of sacrifice.

6. What other films have influenced your approach to filmmaking?
I was heavily influenced by David Lynch, as I think many young filmmakers are, so I tried to make my first films disturbing or upsetting to the viewer. I’ve since toned that way down, but did try to flush out a few of the disturbing elements in 2ND TAKE in order to add a darker undertone to the seemingly playful surface.

7. The film takes a very unexpected turn at the ending with the fates of the two main characters. Without giving too much away, did you have concerns about steering the story down this unconventional path?
There was a lot of discussion about the ending and it went through a few different incarnations before we found the proper balance. Ultimately, the goal was to leave it with some ambiguity and defy expectations in a way that continued the themes but was still emotionally satisfying.

8. You were fortunate enough to work with Tom Everett Scott, an actor renowned for his charm and affability, yet this is a very different role for him. How did you get such a raw yet restrained performance out of him?
I really enjoyed working with Tom as he is an incredibly gifted actor. We discussed the character before the shoot to come up with a way into the understated approach. One of the concepts we came up with was to have each motion be specific and controlled. We did this so that each of his motions (or emotions) would be greatly amplified when juxtaposed with the characters typically restrained demeanor.

9. Since the theme of emotional isolation is particularly resonant throughout the film, did you have distinct visual ideas as to how you wanted the film to look in order to make this more thematically relevant?
Yes, this was a concept brainstormed with the DP, Mark Putnam. We shot the film using Primo Anamorphic lenses that have a shorter depth of field which creates a feeling of isolation. Another motif we used was shooting characters alone in large spaces and watching their actions when unguarded. We also never had the camera be handheld in the film to add to the feeling of stasis when paired with the lingering cuts in the edit.

10. What can we expect to see from you in the near future?
Since 2ND TAKE, I produced a Sci-Fi thriller, EXTRACTED, starring Sasha Roiz and Dominic Bogart. I’ve also produced a 3-D Thriller, STATIC, starring Milo Ventimiglia, Sarah Shahi, and Sara Paxton and produced an indie dramedy that just wrapped principal photography, 3 NIGHTS IN THE DESERT, starring Amber Tamblyn, Wes Bentley, and Vincent Piazza. Currently, I’m gearing up to direct my next film in March.

Lives intersect at a storage facility in a seedy industrial neighborhood.  Peter is a a grieving screenwriter who has given up his craft, Charlie is a desperate wanna-be actress who can’t act, Bobby an agent who doesn’t have any clients.  Together, they play out a classic Hollywood fantasy set against a bleak reality that seems a million miles from Tinseltown.

Leroy Lowe, grand dragon of the Texas Ku Klux Klan confronts everything he’s been taught to hate when he’s sentenced to three years of hard labor on a prison work farm, where Warden Merville, dead set on rehabilitating Leroy, chooses Emilio, a Hispanic field worker imprisoned for fighting for labor rights, to be his cell-mate. Leroy, confined in a small cell with the enemy, far from the KKK comrades who deserted him, finds the chatty Emilio slowly chipping away at his anger and prejudice. His weekly rehabilitation meetings with the warden, barely tolerable as the man drones on about farm labor and field crops, take on a different meaning when Madalena, a beautiful Mexican maid is hired to clean the warden’s office. An unconventional love story develops that opens Leroy’s eyes to the possibility of a different life. And a man who was a born and bred racist finds himself heading down a completely different path to salvation.