All right, a huge post on a business model for digital filmmaking forwarded to me by an actress in one of my student films. Good potential here. For students, I see no reason wasting money on film when digital is available....then again, I'm shooting on film this upcoming semester. Go figure.


I rarely do this. ok, well sometimes we stumble upon
a good cause, a good charity, but rarely something
that can benefit our filmmaking careers.

I've attached a long document. print it, read it over
the weekend. Also, please sign up at
movie-producer.net. Send him an email and tell him
Andrew at Jewels Filmworks sent you his info. He's
got some revolutionary ideas on distribution and
financing, and some great tools to help us all follow
our dreams.

I bought his budgeting software and it is fantastic!!
for $150 it kicks ass compared to Movie Magic. And
for that price you can't beat it. You don't have to
buy the software to be a part of this team, but you
should read his "thesis" if you are interested in
finding a new way to make films AND get distribution.
ENough said.
All the best,
-Andy

******************************************
Read Below
******************************************************

The Final Phase of the DV Revolution;
A Market Analysis and Economic Model for the
Development of new Distribution
and Financing Pathways for Independent Films

By Shiron Bell for Movie-Producer.net
For further information contact: Shiron Bell at
sbell@movie-producer.net or
323-449-3378

I've been involved in digital video technology since
the good old days of
1998. I've seen the hope and promise of a brand new
way of making movies
evolve into a sea of questions about how to make DV
entertainment viable from
an economic standpoint. Digital Video (and HD)
filmmakers are focused upon
ways to infiltrate the existing entertainment
distribution system with digital
content. In my opinion this is inappropriate means of
developing new consumer
demand. There is absolutely no way for the current
motion picture economic
model to absorb the vast supply of content that has
become available over the
past 5-7 years.

I am proposing a new economic model that will increase
the supply of digital
content to consumers and help to build new financing
pathways for the
independent filmmaker. This system, called the
Movie-Producer.net Independent
Producer/Distributor Network (IPDN), will launch in
Spring, 2004. The system
will include a series of virtual and live seminars,
group buying and cross
marketing systems, filmmaker content exchanges and
support systems to help
filmmakers to establish demand for their films through
innovative marketing
and sales programs. The cost to the filmmaker to join
this system if $0. It
is a free service to all users of the
Movie-Producer.net software product
called Cinetools. The system is described in depth
later in this document,
but to understand this new model you must first
understand the realities of
the motion picture industry from an economic
standpoint.

IMPERFECT COMPETITION

Today's motion picture industry is in an economic
state called "imperfect
competition." If an industry is in perfect
competition prices adjust as
consumer tastes change for that product. So if
consumers were to start
purchasing more DVDs, in a perfect market the price of
movie tickets would
fall, giving consumers more incentive to continue to
come to the movies. This
kind of price adjustments is impossible within the
current entertainment
industry, making it a text book "imperfectly
competitive" industry. The only
way for companies in imperfectly competitive
industries to compete is to vary
the supply of their products (for example make, fewer
movies as in the motion
picture industry) or use what is called "nonprice
competition." With
nonprice competition firms use options other than
adjusting prices in order to
influence consumers, such as spending enormous amounts
of money on
advertising. From an economic standpoint adjusting
price is a much more
effective tool to influence consumers than extraneous
advertising.

OLIGOPOLY

Add to the general state of imperfect competition the
fact that the movie
industry is characterized as an economic Oligopoly.
An Oligopoly is an
economic state where an industry is controlled by a
small group of companies
that are responsible for the majority of all sales
within the industry. In
the motion picture industry the major Hollywood
studios control nearly all of
the theatrical and retail windows that give consumers
access to motion picture
content, thus the industry is an Oligopoly. One of
the key components of an
Oligopoly is that it contains significant "barriers to
entry" for small
firms. In the motion picture industry a filmmaker or
small distributor who
attempts to access consumers through theatrical
distribution or retail
distribution (DVD and Home Video releases) is left
without many promotional
options. As stated above it is very difficult to vary
the price for products
within today's movie industry, thus a consumer pays
the same price of a small
independent film as they do for a Hollywood film.
Since small firms can't
vary price their only alternative is to try to use
nonprice competition such
as advertising spending. However there is no way for
a filmmaker or small
distributor to compete with Hollywood's huge
advertising budgets so there is
really no way for small firms to compete aggressively
in the current motion
picture industry. Thus consumers are only presented
with a small selection of
films to choose from. The enormous amount of content
produced each year that
can not gain access to traditional distribution is
left untouched and
consumers are never made aware of these options.

CONSUMER CHOICES

To be clear it is not that audiences do not want more
choices. If you are a
skateboarder you would be very interested in any film
about skateboarders but
the choices available to you are extremely limited
unless you attend every
film festival in the country seeking out such films.
The same thing is true
for people who are interested in Gay and Lesbian
films, or African American
films, or Asian films. There are films that have been
produced that can meet
the needs of these consumers, but these films have no
way to access the
consumer within the current motion picture
distribution model. Hence everyone
loses: consumers lack choices and filmmakers lack
opportunity while the
Hollywood industry as a whole continues to operate the
same way that is has
since the very earliest days of the movie industry.

CASE STUDY: HIPHOP MUSIC

Hiphop music is a world wide phenomenon that began in
the same way that the
digital video revolution has begun; With the
availability of inexpensive
turntables and mixers in the early 80s, artists found
that they had the
ability to create their own music very inexpensively.
In the early days the
music was raw and gritty and the production quality
was nothing like that of
major record labels. However rap music had an
advantage: the music was
influenced heavily by consumer tastes. In order to
build an urban music genre
the music needed to reflect the urban environment.
With founders such as Def
Jam Record Co-Founder Russell Simmons and breakthrough
artists such as Run
DMC, hip-hop gave consumers what they wanted. It gave
them new sounds that
both reflected the environment that the consumer
currently lived in and gave
them a vision of better life that they could aspire
to. But record labels had
no interest in hip-hop in those early days. Rap music
was written off as a
passing fad and everyone seemed to agree that
consumers would prefer more high
quality product delivered by record companies to the
lower quality hop-hop
music. Consumers thought otherwise. The rap pioneers
started to infiltrate
the industry by going directly to consumers and hence
the Mix Tape Phenomenon
began.

"I'd go on this block and make $100, go on that block
and make $100."
- Brucie B
(HIP-HOP DJ ON SELLING HIPHOP MIXTAPES TO
MAKE PROFITS)

What exactly are mixtapes? In the early days of
hip-hop (the 1970s) mixtapes
were Cassette tapes with a mix of music from different
artists put together by
a DJ. Before rap records were even made these DJs
would record their
performances and sell the cassettes in the streets for
$20 each. These days,
mixtapes come primarily as CDs, cost $5 to $10 and
feature unreleased songs
from major artists and new songs from up and coming
artists. As the industry
developed, the songs or artists from the best selling
tapes eventually landed
on radio stations and retail shelves. The same system
continues today.
Mixtapes serve as a way for hiphop artists to gauge
consumer demand and
influence consumer tastes for music at the street
level. No such system
exists within the film industry. The "B" movies of
old Hollywood are gone
replaced by softcore films for Skin-e-Max (Cinemax).
There is no way for
consumers to sample inexpensive films from new
filmmakers or to get films from
big name filmmaker that they can't get anywhere else.
The internet tried this
model but it is still too early for this kind of
system to work on the
internet. DVD has penetrated the consumer market much
faster than broadband
and it is with DVDs that this kind of filmmaking
mixtape revolution must
begin. Furthmore, as it did with hiphop, the
revolution must begin with the
artists themselves stepping in to create demand for
their products at the
local level.

The Movie-Producer.net IPDN system will assist
filmmakers in creating small
independent distribution systems for their films. The
goal is to create super
low budget DV films and create small profits from each
film release. As
consumers get used to this new, less expensive, more
disposable source of
entertainment, filmmakers will begin to break out of
the low budget realm into
Hollywood films, just as hiphop artists break out of
mixtapes and onto the
charts. With this system, a mixtape phenomenon
similar to hiphop could occur
with short films. Most consumers don't really even
know what a short film is,
so why would they spend $15.00 at the store to buy
one. They have to be
introduced to shorts at the local level. The movie
mixtapes have to make the
consumer feel like they're having an experience that
is different from a
traditional film experience, much like some of the
most cutting-edge films
from the top festivals of today.

This is where teenagers become very helpful. Teenagers
will try anything
once. So building mixtapes as a cheap underground
source of entertainment can
develop with teenagers. To get the teenagers
interested you might partner
with a local school and restaurant to have teenaged
"dinner and a movie"
nights. It would work much like school dances where
the teenagers could come
alone or with a date, they'd view some cutting edge
short films (approved by
the school) get dinner and dancing to follow for a
single ticket price (maybe
$20). The DVDs of the shorts in the screening would
be available for sale at
a very low price (maybe $6.50). That's cheap enough
that the kids should have
money to pay for them. Since shorts would be "new"
and "cool" to them in this
environment (particularly if you chose films that
really clicked with the
audience) they would probably want to buy one. If one
of the "cool" kids
bought one the whole lot would want one.

The individual filmmaker/distributor wouldn't make
much off of this promotion,
maybe $500-$1000. Now imagine if the filmmaker did
the same promotion at 20
different schools surrounding his home. The
$500-$1,000 he made from one event
now gets multiplied by 20. Plus he would introduce an
entire consumer
population to DVD shorts in a way that will probably
make them interested in
future series of shorts. He would have begun to build
consumer demand. Imagine
if 1000 filmmakers each do this at 20 schools. Now
you're talking about $10-
20,000,000 in revenue off of short films. On average
this type of system
wouldn't see returns anywhere near this level. The
actual sales would
probably be closer to $1,000,000 based on most of the
filmmakers failing to
hit sales goals. However, this system would create
$1,000,000 in revenue for
a collection of short films and would prime the market
for additional short
film releases to come. Eventually, the
filmmaker/distributors who succeed in
generating interest in DVDs with their own small
distribution companies will
be acquisition targets for Hollywood. Furthermore
this system would create
some breakout stars: filmmakers whose films would take
off at the street
level. These filmmakers would graduate quickly to big
Hollywood films.

"How do you jump start an industry with growing costs
and decreasing profits
at portions of the sales cycle? You remove barriers
to entry which act like a
sleave cover the industry. Then you give the industry
a shot of smart
entrepreneurs right in its arm..Nothing changes an
industry faster than good
old fashioned competition"
- Shiron Bell
Founder/CEO Movie-Producer.net

A SYSTEM OF MOVIE LABELS

The movie business is different from the music
business in that studios still
continue to finance productions themselves. The music
industry is primarily
composed of two types of companies: Music Labels and
Music Distributors.
Within the music industry it is the labels that pay
the artist, pay for videos
and do all of the other day to day processes of
producing music. The
distributors simply market and distribute music once
it is complete. The
concept being proposed in this document is to begin to
switch the motion
picture industry into a similar system.

The system would start with small independent
filmmaker distributors. As the
system conglomerates, these distributors will build
cash reserves and a
network of small private investors. As they return
profits to investors on
small films they will eventually earn the opportunity
to risk a larger amount
on a more expensive theatrical release through a
Hollywood distribution
system. Eventually Hollywood studios can acquire the
companies that succeed
in building significant revenue with direct to
consumer businesses. Overall
this system could have an extremely positive impact on
Hollywood. The current
Hollywood infrastructure is far too large to deal with
the approaching changes
in consumer demand such as the advent of DVD burners
and the approach of
downloadable films from the internet. To absorb new
innovation entrepreneurs
[independent business people] need to be released at
the street level to help
gauge consumer demand and shift consumer tastes. By
allowing small companies
to build new pathways, then acquiring these companies
later, Hollywood can
begin to absorb the changes in demand that are quickly
approaching for the
movie business. Without such a system Hollywood will
be in a position similar
to that of the music industry today, with downloadable
music eroding corporate
profits. Economically it is competition among
companies that produces
positive change. For Hollywood to ride past the issue
of piracy they need a
level of controlled competition outside of their
current retail pathways.
That is what our system will provide. Stopping Academy
screeners from being
released will not save Hollywood, competition will.

The previous example with High School short film
mixtapes is just a small
example of what can occur within the IPDN model.
While some
filmmaker/distributors might create a business plan
that allows them to focus
on the high school market, others might choose to
focus on the college market.

For instance, a company could choose to put together a
small catalog of cheap
DV films and market it to local fraternity houses at
college campuses around
his home. If the prices for such a catalog of movies
were reasonable
(typically $5.99-$11.99 for a DVD feature) an
industrious
filmmaker/distributor could build quite a business
simply off of marketing to
those fraternities. This is because the fraternity is
full of college
students, the segment of consumers with some of the
highest disposable income
and the consumers who are early adopters of new types
of products. Now
imagine if the filmmaker distributed catalogs to every
fraternity at 20
different college and universities. Now imagine if
1000 filmmakers did the
same thing.

ECONOMIC IMPERATIVE

The final component of the Movie-Producer.net IPDN
model is film commissions.
We plan to partner with film commissions to offer
training and incentives to
help foster new production/distribution entities in
all 50 states. The US
Film Production industry is in crisis due to the
decreasing production and
loss of productions to Canada. Most people would
argue that US states need to
increase subsidies to film productions in order to
decrease film production
costs in order to keep productions in the US. The
people who say this are
wrong! The US can't put a band aid on runaway
productions by simply providing
additional subsidies. The theatrical opportunities for
films are getting
smaller and smaller. This decreases the chance that a
film will ever get to
theaters in order to return profits to investors. But
US states are trying to
solve this problem by increasing productions in the
face of narrowing
distribution options. US States need to restructure
the entire financing and
distribution landscape to allow for production costs
to fall by themselves.
Let the economy fix price changes, not the government.

How does this work? Well the logic goes like this:

1.) States incentivize people to begin to form their
own small distribution
businesses to distribute inexpensive DV productions in
conjunction with IPDN.
The incentives can come in the form of free or
subsidized classes and
workshops, grants, rebates or tax leniency for
start-up companies that are
successful in producing revenue. To begin with,
filmmakers can distribute the
enormous amount of content from film festivals that
has never been acquired by
distributors. This will allow them to begin to
produce cash flow immediately.

2.) These firms would eventually reinvest the money
from distribution into
production, increasing the level of production within
a state. Since these
productions will probably be ultra low budget, the
economics of traveling to
Canada or even out of state just don't make sense.
Hence the revenue would
stay in the state.

3.) The overall increase in production volume will
decrease production costs
overall. Vendors can decrease prices if equipment is
rented more often, crew
can decrease their prices if they are working more
often, businesses can
afford to provide more economic incentives to continue
to attract production
business and overall it becomes cheaper to produce
films within a given state.

Using this model a state could succeed in building a
sustainable production,
self-financing and distribution model for filmmakers.
This will allow that
state to capture tax revenue from the individuals
working on films as well as
all the new small distribution companies that are
housed within their state.

THE IPDN MODEL DESCRIBED

The work of building a small business isn't so much
difficult as it is time
consuming. You need to clearly identify your target
market and use low costs
methods to try to sell products to that market.
Filmmakers wishing to
distribute their films could come up with any
marketing/distribution plan for
their film that they want. Some people might
distribute films through local
churches and community organizations, some people
might create events where
people can view the films in a microcinema screening
environment, then
purchase the films on DVD after the event at a low
cost, other filmmakers
might setup displays at local truck stops, allowing
visitors to buy extremely
low cost DVDs (in the same way that many truck stops
sell cassette tapes),
finally other filmmaker/distributors might create
fundraiser promotions that
allow students or local organizations to raise money
by selling their low cost
DVD films. The only limit to the number of ways that
movies can be marketed
and sold is the imagination of the
filmmaker/distributors who take part in the
system.

The IPDN process works like this:

1.) Filmmakers join the system by purchasing the
Cinetools software
product from Movie-Producer.net

2.) Filmmaker/distributors build their knowledge base
by communicating
with other distributors online in the IPDN forms and
at Movie-Producer.net
networking events. They can also increase their
knowledge by taking part in
low cost online and live courses held throughout the
US or by purchasing
inexpensive ebooks on various subjects related to
building their new
distribution business.

3.) Movie-Producer.net will help filmmakers to create
business plans for
their new companies and will provide advice and
support on implementing these
new business plans. The network is not exclusively
for people who plan to
self-distribute their films. Movie-Producer.net will
also provide business
plan and financing support for larger budget films
seeking traditional
Hollywood distribution. However our entire model is
build upon a foundation
of solid business plans. Thus it is the filmmakers
who can design the most
innovative business and marketing plans that will see
the greatest success
from the IPDN system. To kick start this process we
will be launching a Movie
Business plan contest in 2004. The contest will
provide cash and prizes to
the filmmaker who designs the most innovative business
and marketing plan for
their company.

4.) When filmmakers are ready to begin distribution
they have two options:
they can distribute existing films from other
filmmakers within the IPDN
system by sharing sales revenue with the producer of
each film. Alternatively
they can produce their own low budget films and market
them directly to
consumers. Movie-Producer.net will provide legal
advice and support in
conjunction with a network of support organizations.

5.) The process begins to take root through the IPDN
movie exchange (much
like the early motion picture film exchanges). Here
filmmakers can take
advantage of the distribution pathways created by
other filmmakers within the
system. Movie-Producer.net will facilitate the
process of filmmakers renting
or exchanging films with other filmmaker/distributors
in order to expand the
revenue possibilities of each film.

6.) As the system grows Movie-Producer.net will serve
as an umbrella
organization, negotiating group deals for DVD
replication, marketing
materials, retail distribution deals and other vendor
services to help to
minimize the cost of all filmmaker/distributors. We
will also provide a clear
knowledge base that allows filmmakers to learn from
the mistakes and successes
of other filmmakers within the system.

7.) Overall the goal is to nurture thousands of new
direct to consumer
filmmaker/distributors in order to create extremely
fast market penetration
and growth for DV and eventually HD content.

As stated earlier, this is a new operating system for
the low budget DV
filmmaker. By creating an environment where
filmmakers can begin to generate
cash flows from screenings, DVD sales and
merchandising such as t-shirts we
will begin to create economic certainty for ultra-low
budget independent
films. We will accomplish this without name talent or
any of the other
marketing elements used for major Hollywood films. If
investors can evaluate
film investments based on a filmmaker's previous cash
flows and the
filmmaker's business plans, much of the guess work of
modern day film
financing would be removed. Furthermore, with new
direct to consumer
marketing systems in place, more of the movies that
are produced each year can
return sufficient profits to producers to attract
additional investment. By
releasing thousands of filmmaker/ distributors at the
street level an economy
forms that will eventually create new pathways for
film financing at ultra low
budget levels. Overall this will result in the
creation of a new "revenue
floor" for the entire film industry. Obviously not
everyone will succeed
within this system, but the filmmakers who do succeed
will be pioneers who
generate a new kind of "B" movie using inexpensive
digital video technology.

Within the next 12-18 months Movie-Producer.net will
enter the financing realm
by matching investors to business plans from within
the IPDN system. In order
to create a level of security for our investors, only
filmmakers who generate
sufficient cash flows and whose business plans are
approved by the IPDN board
of review are eligible to receive financing from IPDN
investors. However,
that's where the requirements end. Whether a
filmmaker made money on a $500
movie or a $500,000 movie, positive cash flows and
membership in the IPDN
network is all that is required for them to
participate in financing system.
(Obviously those with the highest cash flow will have
a much higher chance of
receiving financing). Additionally distributors
within IPDN will have the
option to reinvest all or a portion of their
distribution revenue in films
that have passed the IPDN cash flow and business plan
review process. This
will allow filmmakers to generate cash flows directly
from consumers and then
use those cash flows to create larger budget films
within the first 12-24
months of the system. By year 3, if our growth
estimates are correct,
filmmakers would have created a clear pathway for 5-10
low budget theatrically
released films per year simply by starting to sell
ultra-low budget DV
content. By year 5 they would clear the way for as
many as 20 or more new
theatrically released films. Rather than waiting for
investors to make money
in the real estate market or the stock market so that
they can invest in
films, filmmakers can generate distribution revenue
right now that can be
reinvested in their own films or films from other
filmmakers. Hence the
digital revolution will have fully begun

Movie-Producer.net's primary business is the
development of production
management software products and infrastructure
systems for independent
filmmakers and distributors. Therefore we will not
ask for any additional
fees or commissions to provide Cinetools users with
access to basuc
Independent Producer and Distributor Network (IPDN)
services. Access to the
network forums, chats, articles and business plan
development support is free
to anyone who purchases the Cinetools product.
Moreover Cinetools is sold
with a lifetime license so you will never need to pay
any additional upgrade
fees to use Cinetools as it continues to grow and
develop. If
filmmaker/distributors need services beyond the basic
IPDN support system such
as courses or consulting we will have extremely
affordable prices that work
within your budget and your business plan. Our goal
is to help this system
grow, not to rob filmmakers of large amounts of money
in the front end.

COMPANY GOALS

1,000 Active filmmaker/distributors by 2005 -
PROJECTED TOTAL DISTRIBUTION REVENUE $500,000
(Average of $500 in distribution revenue per
filmmaker/distributor)

3,000 Active filmmaker/distributors in 2006 -
PROJECTED TOTAL DISTRIBUTION REVENUE $3,000,000
(Average of $1,000 in distribution revenue per
filmmaker/distributor)

6,000 Active filmmaker/distributors in 2007 -
PROJECTED TOTAL DISTRIBUTION REVENUE $18,000,000
(Average of $3,000 in distribution revenue per
filmmaker/distributor)

9,000 Active filmmaker/distributors in 2008 -
PROJECTED TOTAL DISTRIBUTION REVENUE $54,000,000
(Average of $6,000 in distribution revenue per
filmmaker/distributor)

12,000 Active filmmaker/distributors in 2009 -
PROJECTED TOTAL DISTRIBUTION REVENUE $144,000,000
(Average of $12,000 in distribution revenue per
filmmaker/distributor)

There is much more to be told about how this system
will operate. This paper
was only designed to introduce the reader to the
reasoning behind the IPDN
system and give them a general understanding of how it
will work. Additional
information about the IPDN system and
Movie-Producer.net corporate
partnerships will begin to be released on
Movie-Producer.net on December 19,
2003. All people who purchase the Cinetools product
will receive the most up
to date information on the development of the IPDN
model and will have a part
in the design and implementation of some of the IPDN
programs.

To get started visit: http://www.movie-producer.net or
email ipdn@movie-
producer.net

Free Software Trials
Free trials of Cinetools are available at:
http://www.movie-
producer.net/cinetools.php

About Shiron Bell
Shiron Bell is an African-American entrepreneur and a
graduate of the Wharton
School of Business at the University of Pennsylvania.
Shiron has worked as an
analyst for the investment bank as well as serving as
a producer, film
festival director and self-distribution consultant for
numerous independent
films. As a Marketing Executive Shiron has worked
with Fortune 500 companies
such as Anheuser-Busch and various other companies.
Most recently he was the
Director of Marketing for the Los Angeles Film School
in Hollywood. Shiron
developed an innovative business planning, financial
projection, budgeting,
scheduling and production software application called
Cinetools that makes
high end film financing and production software tools
available to filmmakers
at less than 20% of the cost of most of the budgeting
and scheduling software
currently available on the market. With Cinetools he
founded Movie-
Producer.net in 2002 and continues to work to develop
innovative ways for
filmmakers to compete aggressively in the areas of
motion picture commerce.

About Movie-Producer.net
Movie-Producer.net (MPdn) provides education and
software technology that
empowers filmmakers to think in practical terms and
incorporate sound business
and marketing praxis. With MPdn's knowledge base and
technology, filmmakers
plan their films and business based on audience tastes
and the use historical
precedents and relevant marketing metrics. MPdn
instills objectivity into and
streamlines the filmmaking process while creating
filmmakers who think and act
entrepreneurially. Movie-Producer.net's goal is to
facilitate a community of
educated, savvy and resourceful filmmakers who support
and share resources
beyond the technical production aspects, such as
marketing, distribution and
financing.




=====
www.JewelsFilmworks.com
--Jewels Filmworks is a collaboration of artists and filmmakers who enjoy working together and supporting one another through all stages of production. Partnership information available online.

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