In a world of FAIR distribution, the very people responsible
for creating and financing
independent motion pictures from sources OUTSIDE the film industry, would be held in higher regard.
Unfortunately, as Lee Garmes and the
ISPA pointed out EARLY, and as countless other victims
(through their law suits) and researchers with the courage to speak out
(such as John
Cones) have pointed out RECENTLY -- this is not the way it is in Hollywood at all with today's distribution paradigm.
When you buy a movie ticket at a box office, for let's say
$8 (to use a round number),
the movie theater (the Exhibitor) immediately takes about
60% of this $8 (known as the
"Box Office Gross") and turns over $3.20 to the
studio/distributor who released the
movie. Many times the movie theater is fully or partially,
directly or indirectly, owned by
the studio/distributor.
Then the studio/distributor charges its "distribution fee"
of about 30% - 40% against this
$3.20. We'll use the conservative figure of 33% which leaves $2.14 from the original $8 ticket sale.
The studio/distributor THEN reimburses itself out of this
$2.14 for anything it spent on prints and advertising (P&A), and all other expenses relating to distribution, for the movie. This is an area
where distributors have
traditionally inflated their costs and is usually where any
cash flow back to the producers
and production financiers stops dead as expenses can be anywhere between 20% and 50% or more.
Using a mean figure of 37.5% for expenses such results in the sum of $.80 charged against this
$2.14, leaving a puny $1.34. This means that from the $8 ticket sale, only $1.34 is available to turn over to the
Production Company, provided the studio/distributor does not
ALSO have participation rights in this sum as well, reducing such cash flow to zero.
This $0.00 to $1.34 is what is
known as "Points" or, in certain circumstances, known as "Producer's Net" (or, as Eddie Murphy
called it in connection with
the Buchwald v. Paramount suit, "Monkey Points").
The Production Company, thankful that it has received its
Monkey Points, now has to
split them (that $1.34) with its film production Investors,
usually 50-50. So, wow, that
leaves a whole $.67 for all you
Producers/Writers/Director/Talent/Development Investors AND
$.67 for all you Production Investors, from that original
$8.00 ticket!
The Investors, who BELIEVED in the Production Company (and
who may have believed in promoting culture as well) enough to
finance the movie (and who may have
millions invested), go away praying that these little puny
chunks of $.67-here and
$.67-there will someday add up to (recoup) their total
multi-million dollar investment
(plus a reasonable return on investment) at the very
least.
As mentioned above, The Production Company, now gets to pay
its producers from this
$.67 for the years of hard work they put in (as many as 10);
and they get to pay back
any sums deferred by the Cast or Crew and lastly; they get
to pay back the
Development Investors, those gutsy people that put up THE
VERY EARLIEST
MONEY (probably to put a few sandwiches in the refrigerators
of a starving writer and
producer) -- yet don't get paid back until NOW, if at
all.
No wonder investors believe the myth that "movies are risky." To be more accurate, one should say "studio/distributors are risky." You don't hear the studio/distributors complaining about how "risky" the business is unless they are trying to avoid taxes or "creatively account" someone out of their profit participation.
The above scenario is EXTREMELY optimistic and, pursuant to
John Cones' research
(explicated in vast detail in his book,
The Feature Film Distribution Deal) "The truth is
that only about 5% of the major studio/distribution deals
actually result in the payment of
net profits to anyone, regardless of how much money the film
makes (that's the best
estimate of a profit participation auditor who is out there
on the front lines every day
auditing the studio books)."
Thus my estimate of $.67 per ticket is exactly $.67 too high
in 95% of the cases, and
significantly high in most of the other 5% of the cases.
THIS is Today's basic Distribution Paradigm. This is the
"PLAN" the current
studio/distributor-driven movie industry has waiting for YOU
(as an independent
producer, writer, director, actor or investor).
Whether or not, the advent of digital delivery requires less
energy be
expended, i.e., money, to move matter around on the planet's
surface (i.e., truck cans of 2,000-ft
reels of 35mm motion picture film: that action of a
studio/distributor) - is not the reason
why a new paradigm is needed.
In Today's Distribution Paradigm above each level of the
marketing chain,
from exhibitor to distributor to producer to development
financiers has the opportunity to
"divert" or "siphon-off" money before turning it over to the
next group. I don't like to use the word "steal" because we
usually reserve this word for people who DON'T have the money to
afford $250 per hour accountants and lawyers.
Today's system of studio-type distribution is based on the
unwritten word: YE WHO
GETS THE GOLD FIRST, GETS TO POCKET THE GOLD FIRST.
Thus, those who created and financed the works of filmic art
get the gold LAST, if at all,
because all the people who truck and futz and display the
films are in the equation FIRST
and hence in a position to levy charges for THEIR
"invaluable services" against the
newborn cash flow, a cash flow generated by the filmmakers'
ability to thrill audiences.
Of course the bloated industry of studio/distributor
executives, truckers, exhibitors,
boxers, popcorn sellers, postal service delivery boys,
building maintenance crews for
marketing strategy teams and the thousands of screen credits
you DON'T see on the tail
of a movie (thank god), will NOT agree with any paradigm
other than the current one.
Their view is, it takes MUCH more "skill" to market a movie
than it does to "produce"
one... AND this is unfortunately TRUE, probably, because
today's movies are so POOR
and UNORIGINAL - it DOES take marketing GENIUS to RAM all
this "lousy" (i.e.,
remake, sequel, violence-oriented, exploitation) product
down the public's throat.
Under a FAIR system of distribution, one where more of the
creators were supported
and validated, (not just 100 over-paid stars and executives
in Hollywood) something
unheard of might happen: more original, better-made, more
creative pictures might be
produced and they would SELL THEMSELVES through
word-of-mouth (the most
natural, hence powerful, advertising "technique" known to
Humankind).
In other words, if starving filmmakers the world over, were
not being robbed by Today's
Distribution Paradigm, they might be able to spend more time
making movies of higher,
more original, quality - than having to pump out more of the
same SAFE stuff to please
their slave-master, studio executives' thinking, thinking
based in the rationale that they (the
executives) GENERALLY can't afford to take chances on
"unproven" concepts or
talents, because the costs of distribution are SO high.
Their justifier. ;- ) Hence all the
people in the above line up, "must" be in place, hence all
these people preempt the
cash flow as they get their hands on the GOLD first.
This is part of the rationale behind Today's Distribution
Paradigm: Everybody is
A New Distribution Paradigm is based on the change of two major
factors in Today's
Distribution Paradigm (as explicated in two previous posts):
A) WHEN everyone gets paid; and,
WHEN:
Since it is clear that everyone connected with exhibition or
distribution or production of a
movie feels that THEIR contribution to the "thrill of an
audience" is most important, all
will feel their justifications for getting their hands on
the newborn cash flow from first
dollar are valid.
So, rather than argue forever about this, why not PAY
everyone from first dollar. This
would never have been possible in Lee Garmes' day, but now
with computers,
credit/debit cards, electronic banking and the internet, it
is quite possible.
Just think, Writers, Producers, Talents and Development
Investors, no one (having the
opportunity to siphon) would get THEIR hands on the GOLD
before YOU. Just think
Distributors and Exhibitors and Truckers, you STILL will get
paid your fair share, only
sooner and without ANY temptations connected with touching
the cash flow. :-)
Once all parties in the production/distribution/exhibition
chain agree on WHAT everyone
should get, modern electronics can make it instantaneous to
wire-transfer these sums
directly, AND SIMULTANEOUSLY, into bank accounts of the TWO
camps in the
movie industry: the Creative Camp and the Business Camp.
First dollar, from a ticket
sale or the click of a button on the Internet, can be
transferred to a "film revenue collecting and allocations agent"
who is a type of escrow agent we'll refer to as a "Parsing
Agent." This phrase has been coined from the word "parsing" as
such is used in CGI/Perl scripts which control/direct the flow of
data (such as inputs, emails and credit card numbers) on the
world wide web. This Parsing Agent will
immediately divide the sum of money authorized on a credit
card authorization for the purchase of a movie in accordance with
the new distribution paradigm and transfer each agreed-on sum to
all parties, in both camps, who built and marketed the movie.
Thus all will be effectively paid out of first dollar
gross.
This is the first, and most important, part of the New Distribution
Paradigm.
Forgetting some of the mechanics for now, if one can agree
with the basic philosophy
that the distribution and display of a product is NOT more
important than the
CREATION of that product, but actually less important . . .
then part two of a proposed New
Distribution Paradigm may make sense.
As we saw in previous posts, Today's Distribution Paradigm
provides that from an $8
ticket sale, the people who create a movie end up with about
$1.34 (if they are the lucky 5%)
and the people who distribute/exhibit that same movie end up
with about $6.66. About a 17/83 split.
Thus Today's Paradigm is a reversal of the above philosophy
and a reversal of what
reality could BE, especially in a digital and electronic
Era.
From the first dollar of an electronically parsed "ticket"
sale, and especially from an
electronically delivered movie with Automaticly
Parsed Royalties
certainly no more than 50% of the ENERGY (money)
earned should be allocated, directly or indirectly, to the
distribution/exhibition of that
product. In fact it should be no more than about half of
even this, or 25%, a little less
that the 30%-distribution fee generally levied by Today's
Distribution Paradigm. This
would leave 75% for the production-side of the equation and
25% for the distribution/exhibition-side.
In other words, in a digital Era, the people who distribute
and exhibit a movie should
ultimately receive 25% of the ticket price. The people who
develop and produce that
movie should receive 75% because these people are the source
point and creators of
the product; they are more important than the distributors
and exhibitors of that product
because without them, there would be no movie distributors or
exhibitors, and no jobs for all the
other service industries (film, processing/printing labs,
camera and light rentals, post houses, completion guarantors,
film offices, etc.).
The creators of a movie also create the jobs for the
distributors and the exhibitors as
well. In other words, NO MOVIECREATORS = NO DISTRIBUTORS,
TRUCKERS OR EXHIBITORS because there is NO movie in
existence.
Thus, the New Distribution
Paradigm calls for, after all the dust and futzing settles,
the
people who develop, package and produce movies to have 75%
of the cash flow
generated from audience excitement and the people who
distribute and exhibit movies to
have 25% of the cash flow generated from audience excitement.
A 75/25 split, not a 17/83 (or more probably, a 00/100) split as in Today's Distribution
Paradigm.
Also, 25% rather than a 33% distribution fee because movies
can now be "simply" highly-ordered
arrangements of bits, rather than 2,000-foot reels of silver
halide ions and hence can be
"distributed" with a flow of electrons rather than a flow of
trucks.
And, forgetting some more of the mechanics for now, if
one can agree with the basic
philosophy that the ENERGY to build a product prototype
(each feature is a prototype
because it is a unique creation, a debatable statement with
all the remakes these days)
equal to the KNOW-HOW in creating that product . . . then
part two of a proposed New
Distribution Paradigm may make more continued sense.
In other words, the people that provide the ENERGY to build
a movie: the money, the
finances, the funds, the guarantees, the budget,
the-what-ever-you-want-to-call-it, as
opposed to the people that KNOW HOW to build it, the
producers, the writers, the
directors the actors, the production managers and First
Assistant Directors are equally
important. A pile of dead energy, (i.e., dollar bills
sitting around) will simply evaporate into
the hands of frauds and flakes unless it is spent into
KNOW-HOW and managed
efficiently.
Therefore the New Paradigm posits that the investors
connected collectively with the
development, production, distribution or exhibition of a
movie, are JUST as important as
the people who bring it all off, those KNOW-HOW people from
BOTH Camps,
creative and business.
Thus 25% - 50% from every dollar collected from a newborn cash flow
should go to Investors,
especially those Investors who believed in the creation of
the movie the earliest when
there was the least TANGIBLE evidence of a possible success.
Thus the New Distribution Paradigm's WHAT-aspect is that
100% of the cash flow
generated from first dollars is AUTOMATICALLY,
SIMULTANEOUSLY and
IMMEDIATELY parsed as follows:
Once the Financiers have received 200% return on their
investment (or x% return on investment), the creators and distributors of the movie have paid
everyone back substantially for
use of their ENERGY and now should NOT have to continue to
pay more.
This is the proposed New Distribution
Paradigm: Everyone gets automatically paid at the
same time, from first dollar gross such sums that are more
in line with each element's
overall contribution to the "excitement of the audience."
What Filmmakers, Talent or Investors would want to continue
to support Today's
Distribution Paradigm if a New Distribution
Paradigm such as the one postulated (not only
by MEC, and others, but by Lee Garmes and the former-ISPA) is possible?
I would like to hear
from you if you are out there.
fighting for first dollar, because THEY "deserve it
more."
B) WHAT everyone gets paid.
WHAT:
The theory here is that the four large groups responsible for the picture's existence and marketing share equally.
These four parts are the people who manage the picture, the people who finance the picture, the people who
create the picture and the people who market the picture. All get 25% out of gross, simultaneously as
automatically parsed.
AND EVERYBODY PAYS FOR EXPENSES CONNECTED WITH THEIR
SERVICES, THEIR SIDE OF THE PARADIGM I.e.,
expenses are not endlessly "slipped in" or "charged to" everyone
else's segment in the manufacturing/marketing process, as is done Today. Why should the producers have to pay for all of the
marketing people's prints, advertisements and transportation
expenses, especially when they are the ones that have
jurisdiction over those expenses and may even over-order or pad
their budgets thus killing the cash flow completely just to keep
"their people" paid first?
(1) Examples of studio distributors are Paramount Pictures,
MGM, Universal, Disney, Fox, Warner Bros., Columbia Pictures.
and this NOTE is not removed.
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The terms and phrases "Home Video Network," "Pay-per-view.com," "Movies-on-Demand,"
"Automatically Parced Royalties," "Email Parsed Royalties," "The World's First Internet Distribution Company for Video-on-Demand™ as well as this "Distribution Agreement" and the business process described and used herewith, are trademarks of MEC, a Delaware corporation. This business process and Distribution Agreement may not be copied, in full or in part, or used without express written permission from the copyright owner.
MID was founded on February 15, 1996.