May 27, 2018
In a marketplace dominated by major studio blockbusters and digital goliaths, indie home entertainment suppliers are holding their own. These scrappy companies are showing resourcefulness and cunning, embracing technology and industry consolidation, while staying true to their packaged-media roots.
A dominant player in the indie world is Cinedigm. When Cinedigm acquired Gaiam Vivendi Entertainment in 2013, it declared itself the largest indie home entertainment distributor, with projected annual sales exceeding $300 million from physical and digital distribution of more than 10,000 and 30,000 titles, respectively. (Two years later, Cinedigm and Gaiam were in litigation, citing fraud allegations in the $51.5 million GVE acquisition following claims the home entertainment unit had “grossly inflated” the value of third-party content license agreements, among other issues, but the companies settled in 2016.)
Fast-forward to 2018 and Cinedigm is embracing OTT video through proprietary SVOD platforms Dove Channel (faith-based), CONtv (multi-genre) and Docurama (documentaries), among others, with expansion plans in the Far East.
In 2017, CEO Chris McGurk sold a majority stake sale in Cinedigm to China’s Bison Capital. He also created a strategic partnership with China-based Starrise Media Holdings aimed at distributing hundreds of U.S. titles in China and Asian content in the United States. Last month, McGurk delivered the keynote address at the 8th Annual Beijing International Film Festival, where Cinedigm inked a license deal with six Chinese content partners.
McGurk tells Media Play News consummation of the Bison financing deal was considered a long shot by everyone he knew in Hollywood.
“But we were fairly confident we were going to ultimately close because our investor (Bison) is very close with the Chinese government and regulatory authorities over there,” McGurk says. “And from the beginning, we knew this deal would be positive for China.”
Indeed, Cinedigm has staked a standalone foothold in China, where SVOD behemoths Netflix and Amazon Prime Video haven’t. While Netflix has entered the world’s most populous country through a content license deal with video platform IQiYi, which is owned by China’s Internet search giant Baidu, its attempt to establish a branded SVOD service in China failed. At the same time, Cinedigm’s acceptance by government authorities required more than just a Chinese makeover. The company was vetted by the country’s cyberspace division, which, according to McGurk, is chaired by President Xi Jinping, and is responsible for the flow of data into the country, particularly over the Internet.
“They came and saw us in Los Angeles,” McGurk says. “We had a direct meeting to talk about our capabilities. Then, they invited me and Bill Sondheim (president of Cinedigm’s entertainment group) to go over there to their global Internet conference. And that’s one of the reasons the Starrise deal came to fruition.”
McGurk says Cinedigm’s distribution plans in China “synced up really well” with what the regulatory authorities wanted, which, according to the CEO, was a company that had OTT expertise in indie content and was majority-owned by a Chinese firm.
“[They wanted a company that] could be a two-way pipeline for content in-and-out of China,” says McGurk, who is traveling to the Shanghai Film Festival in June.
Formats: Mixing It Up
Bulking up and global concerns aren’t the only challenges facing independent suppliers. DVD, Blu-ray Disc, 4K Ultra HD, SVOD, AVOD, transactional digital release — the formats available to indie suppliers are more diverse than ever.
Andrea Downing, co-president at PBS Distribution, describes her company as “an omni-channel distributor across both physical goods and digital.”
“We have developed and continue to adjust our go-to-market strategies to ensure we’re maximizing all channels as the media environment continues to evolve,” she says. “In order to thrive, not just survive, we’re intent on remaining nimble and flexible in this fluid environment.”
Despite continued declines in disc sales, indies still find it an important part of the business.
“Packaged media are not dirty words around here,” says David McIntosh, SVP of content licensing and strategy at Shout! Factory.
Well-known for its award-winning disc sets, and attention to detail on bonus material and artwork, Shout! Factory has expanded into digital distribution while still generating upwards of 70% of its revenue from discs. Indeed, major studios are increasingly offloading movies and TV shows to Shout! and other distributors while keeping the digital rights.
“Majors have their own digital strategies. They have their own teams doing that,” McIntosh says.
Shout!’s recent disc deals from Paramount Pictures and MGM Studios include such titles as Poltergeist III, Road House, Halloween 2, “The Bob Newhart Show,” “Hill Street Blues,” “T.J. Hooker” and “One Day at a Time.” Shout! scored a pop-culture coup earlier this year when it (along with China’s Ace Film HK) acquired the film catalog of Roger Corman, patron saint of American ‘B’-movies.
“Our physical goods business is still growing because as more players realize how hard it is in that space, they think it’s a better idea to license those rights to us,” McIntosh says.
RLJ Entertainment, which includes Image Entertainment, Agatha Christie Ltd., Urban Movie Channel and Acorn TV, got a shot in the arm after AMC Networks became a majority stakeholder (on paper) in the company. RLJ’s focus may appear to be on British-centric streaming service Acorn TV and Urban Movie Channel, which have more than 750,000 combined subscribers, but packaged media hasn’t been forgotten.
“RLJ Entertainment still views home entertainment distribution as a core component of [its] content acquisition and release strategy,” says Mike Pears, president of U.S. distribution at RLJE. “We continue to release nearly all of our titles on both digital and DVD, Blu-ray or 4K UHD.”
Ditto for Cinedigm, which generates about 30% of revenue from packaged media, and considers itself a “selective last consolidator” in packaged media.
“It’s still is a [viable] business,” says McGurk. “And we think we’re well-suited to pick selective opportunities in that space.”
Still, indies often have to navigate digital and physical rights and plan format distribution for smaller titles on a case by case basis.
While most everything Random Media acquires is intended for digital platforms, up until the release of Trouble Is My Business — its first Blu-ray — the company had preferred to release its titles physically only on DVD.
“I just think narrative films that aren’t heavily influenced by special effects or have a lot of action are better suited to DVD,” says Eric Doctorow, Random Media CEO and founder. “DVD presents a terrific viewing experience.”
Trouble Is My Business, which came out in April, is a 1940s noir story. “The look of the film” was what prompted Doctorow to release it on Blu-ray.
“It’s beautifully shot. It’s got a lot of action,” he says. “Noir films as a genre have a very loyal audience. They are film lovers.”
Likewise, Doctorow is waiting for the right film to bow on the newest format, 4K Ultra HD.
“Films that rely heavily on special effects and high digital material are going to be a lot more successful on UHD than traditional narratives,” he says. “Films where the visual and audio experience are really important are going to be better candidates than story-driven narratives.”
The majority of titles at Well Go USA Entertainment have both a physical and digital release, with most titles coming out on Blu-ray to satisfy the retail pipeline, says Tony Vandeveerdonk, EVP of sales and marketing.
“In the case of Best Buy, there’s almost no DVD,” he notes.
Also an advocate of Blu-ray, Dennis Doros is co-owner of the two-person company Milestone Film & Video, which goes through another indie, Oscilloscope, for domestic disc releases. Because Milestone’s titles are mostly restored collectable classics from around the world, the company is even getting ready for 4K.
“We are restoring up to 4K,” Doros says. “We can see that in the future.”
When acquiring films, Eric Wilkinson, director of home video sales and acquisitions at MVD Entertainment Group, says the company looks for all rights, but says on some titles, “It doesn’t bother me as much if we don’t get digital.”
“Our physical business is very important, especially with catalog,” he says. “The collector’s market is super strong.”
For those collectors, Wilkinson has created a nostalgic “MVD Rewind Collection” that he calls “classics and more from the video store.” Box art harkens back to the heyday of video stores, with faux “be kind rewind” stickers and tattered art.
“I miss video stores terribly and I refuse to let go of physical media,” he says, adding “there are a group of collectors out there that I am convinced are trying to build a video store in their basement.”
MVD is an aggregator, distributing titles in the United States and North America from such companies as Arrow Video, VCI Entertainment, Full Moon Entertainment, AGFA, Wild Eye Entertainment, FilmRise, Cleopatra Entertainment, Lightyear Entertainment, Ocean Avenue Entertainment and Dreamscape Entertainment.
It makes sense for a company such as Lightyear, says its president and CEO Arnie Holland, who has signed MVD to handle physical distribution and The Orchard to handle the digital side. Lightyear releases about two theatrical titles a year, but it has a big catalog that includes some of the titles that started the video business, Jane Fonda’s workouts. Lightyear May 15 bowed its first big project with MVD, a high-def transfer of The Return of Swamp Thing (1989), starring Heather Locklear, on Blu-ray and DVD as part of the “Rewind” collection and loaded with extras — some new — for collectors.
MODifying Physical Distribution
Still, as consumer demand for discs wanes, so too does the need for large-capacity production runs that often result in costly returns from retailers. Thus, manufacturing discs on-demand (MOD) has increased in popularity among some suppliers.
“MOD is a terrific solution to a problem,” says Random’s Doctorow.
But MOD doesn’t work for every title.
RLJ’s Pears says subscribers of Acorn TV enjoy collecting and gifting DVDs and premium boxed sets — content, he says, that often requires the quality of a traditional production run.
“We have a typical unit production run for every new release and the bulk of our catalog and take advantage of [manufacturing on-demand] on a selective basis where necessary,” Pears says. “Artwork has always been very important to us and is now more important than ever.”
Shout!’s McIntosh agrees MOD makes sense economically on some titles, but he contends traditional production runs result in a superior product for the consumer. Indeed, Shout! boxed sets put a premium on bonus features that include blooper reels, updated interviews with cast members, producers and creators discussing a show’s designs.
“We try to be the Criterion [Collection] of pop culture,” McIntosh says. They’ve got arthouse covered. We go for more of the fanboy/girl, popcorn films. A lot what attracts customers is the packaging and how it looks on the shelf. It is definitional about who you are.”
Leaning Into Digital
On the other end of the spectrum, Mitch Mallon, founder and CEO of Stadium Media, has only released one title on physical media (DVD), the romantic comedy The Matchbreaker.
“It’s kind of like a timeless film,” he said, adding the filmmakers’ social media presence was a big factor in his deciding on a physical release.
“When you pick a film in an indie space, cast involvement, social media is very important,” he says.
It stars YouTuber Christina Grimmie, known also for her singing on “The Voice.” Grimmie tragically was shot and killed while signing autographs following a concert performance in Orlando, Fla., in 2016.
On the digital side, Mallon is all in — SVOD, AVOD, transactional.
“If I speak to any platform, I should have something for everyone,” he said. “I completely believe in the long tail.”
That applies to international markets as well, which he says are ripe for explosive expansion.
“I’ve just signed my first Mongolian film,” he says.
All indies are mining the digital marketplace, though they note that Netflix and Amazon are becoming increasingly more selective as they pursue and promote their own original content.
Digital changes are “affecting independents tremendously,” says Scott Mansfield, founder of Monterey Media.
“We are competing with our customer, which we had never done,” he notes.
Monterey is looking to place its arthouse films, which often have film festival cachet, on niche platforms that offer “focus to the consumer and focus to the marketing.”
Still, some are yet to prove a very profitable endeavor.
“Sometimes your check is for $28.75,” jokes Mansfield.
“There are more and more viable retailers on the digital side,” adds Mitch Budin, co-founder of Vertical Entertainment. “We try to understand what kinds of content and what kind of space they want to be in.”
Niche-mining isn’t just on the digital side.
“We took a big initiative to really try to penetrate non-traditional accounts,” says Barrett Evans, VP of marketing and product development at Mill Creek Entertainment.
They’ve placed appropriate disc titles in direct-mail catalogs and at truck stops, home improvement stores and other unusual retail outlets, putting “more nontraditional titles in nontraditional spaces,” Evans notes.
Shout! Factory has mined a niche outside the home, releasing upwards of 12 theatricals a year, including The House of Tomorrow, which debuted April 20, and the upcoming edgy romance Izzy Gets the F**k Across Town, due June 22, and partnering in “live event” theatricals with Fathom Events. The concept is a way for exhibitors to put people in seats during the week, in the afternoon, without committing to multiple screenings a day. Fathom digitally simulcasts a movie, opera, musical, etc., to participating theaters. Shout! screened The Boxcar Children — Surprise Island May 8 in select theaters — targeting children after school.
“It’s actually a really good business,” says McIntosh. “We’re dipping our toes in it.”
Some indies — as does Cinedigm with Dove Channel, CONtv and Docurama, and RLJ with Acorn TV and Urban Movie Channel — manage their own, targeted digital streaming services.
“Today, we are managing two successful premium services through Amazon’s Prime Video Channels — PBS Masterpiece and PBS KIDS,” notes PBS’s Downing. “For the PBS Masterpiece channel, we launched original series ‘Jamestown’ in March and it has been a huge success for us.”
In the case of its OTT streaming channel launched in 2016, Jason Pfardrescher, SVP of digital at Well Go USA, notes, “A big part of our catalog is martial arts and Asian action driven, so it made sense for us to create to Hi-Yah.”
The Asian/martial arts streaming channel is on Amazon Channels and Playstation Vue and is in the process of getting onto Roku’s lineup, he says.
Many indie suppliers fondly recall the days when video stores and other retail outlets gave them ready-made marketing for their titles, with box art and posters prominently displayed.
Monterey’s Mansfield notes marketing titles has gotten a lot more complicated than in years past “when your main job was to get Blockbuster and Hollywood Video to put it on the shelf.”
To get noticed, especially in the digital world, social media exposure is key. If the filmmakers or actors have a strong social media presence, it can tip the balance in the acquisition decision.
“It’s part of the marketing plan,” says Mansfield, who notes Kaley Cuoco and Sasha Pieterse, stars of Burning Bodhi, debuted the poster on their Instagram accounts, offering exposure to millions of followers.
Conversely, he says, “I could also give you examples of stars who couldn’t write 40 characters.”
“The moment you start shooting your film you need to be active on social media,” MVD’s Wilkinson advises filmmakers.
Art that appeals to the digital consumer is also key.
“We have to remind ourselves that the consumer is going to see our key art in a much smaller space,” says Random’s Doctorow. “Subtle, nuanced key art is not as compelling as strong art features. The more direct and compelling it is the more likely the consumer is going to focus on it.”
“You have a brief second to get their attention,” adds MVD’s Wilkinson.
‘Just Keep Swimming’
Despite the challenges of home entertainment distribution, indie suppliers are optimistic.
“The physical business is still very healthy,” notes Wilkinson. “People are still collecting movies.”
“We’re coming off a record year last year,” says Well Go’s Vandeveerdonk, noting theatrical successes including domestic distribution of the Asian blockbuster Wolf Warrior 2 (China’s highest grossing film of all time).
Milestone’s Doros notes sales have doubled in the last three years as they have perfected distribution and marketing.
In their optimistic perseverance, indies aren’t so different from their larger studio counterparts.
As Disney home entertainment chief Janice Marinelli noted at the last year’s Variety Video Hall of Fame ceremony in Beverly Hills, content owners have to “just keep swimming.” The line, from the hit Disney film Finding Nemo, seems to apply to suppliers of all sizes.