Methodology, Skills and Professional Benefits Participants Participants' Comments MEDICI Head of Training «The 12 Labours of Hercules» Report of the Reports – Workshops 1 to 4

Reports Previous Workshops

Third Workshop Report — 17 to 19 September, 2013 — Château de Limelette (Belgium)

Module 3 – How far do we need to adapt to new business models, and how far can we seek to protect traditional industrial structures?

Please also see Michael Gubbins' presentation “MEDICI-Module 3” (PDF)

Or, in other words:

Should they at once:

• Protect the existing value chain and the central role of movie theaters as a means of supporting both the industry and culture, and
• Explore the potential of new business models and platforms and, accordingly, extend their selection criteria?

1. Why new business models?

• Up to few years ago, people were passive customers depending on movie theater and TV programmers. Today, thanks to the Internet and new technology, people themselves can decide what they want to see and when. Film funds must find a proper way to turn these possibilities into a cultural or commercial value.
• New business models are necessary so that funds can deal with new parameters such as data, price point, connection speed, demographics, user behaviors, how good people are with technology, new ways of reaching the market, etc.
• It is necessary for film funds to experiment new approaches in order to better fulfill their goals regarding cultural diversity.
• New business models can set up new distribution windows that would better satisfy audience demand and turn them away from piracy. For example, Smart TV will replace Blu-ray and DVD because it provides access to the desired content any time and more conveniently.
• By experimenting new models, funds bring the audience and the producers together, providing more new distribution opportunities.

2. Types of new business models

• VoD channels: Some experiences have taken place within the context of European networking (i.e. Universciné).
• Crowdfunding:
  • Considered as a “donation” (grant), although in some countries, like Italy, it is considered as equity.
  • It finances only a small percentage of a film (i.e. Iron Sky was only 10% crowdfunded).
  • It requires mature technology
  • This option works well with certain types of films, like political documentaries where both crowdfunding and cross-media strategy allow people to involve themselves in specific action.
• Social media: These help track information on smaller groups of people who are merely spectators on the Internet. They also facilitate pinpointing who the social media-users are, and what they are ready to pay for and to engage with. Social media represent a marketing tool above all.
• Special events: The Cannes competition, for instance, can be shown live in local movie theaters across Europe: this would attract audiences and bring profit.
• “Day and date” film release (releasing a film the same day in movie theaters and on VoD channels): Some experiments have taken place, but no data exists to evaluate their impact and success. However, the advantage of this model is to stimulate people to go to movie theaters and to look at films.

Outcome of group discussions

1. Political aspect

• Some countries have strict rules about how films are to be released. Such rules may be political, requiring that a distributor be appointed, and that the film be released in a movie theater.
• Politicians may require justification of expenses. If the films supported by funds are part of so-called cultural branding, movie theater release is considered to be a must.
• A number of exhibitors are keen to get into the VoD market and start distributing on their own. This raises the following questions:
  1. What happens if an exhibitor has the power to decide instantly whether he wants to have a film on or off?
  2. What happens when an exhibitor has the power to decide the fate of a film on the spot?
  3. What does that do to the current distribution model, which is based on the idea that a distributor gives a print to an exhibitor for a limited number of days and at a certain fixed price?
  4. What would happen if an exhibitor would have a satellite distribution with a server, and could choose between a vast variety of films?
• Financing model also determines business model. As long as film funds take a certain percentage from movie theaters in the form of levies, and use it to finance projects, there can be no new ways of distribution. Therefore, the introduction of new business models should imply the introduction of levies on telecoms, iTunes, etc.
• If VoD gets a bigger distribution share, how can it be included in the legislation? We should start this process from the global platforms.
• Politicians quite often want to reach the young audience, recognizing the political value of such an agenda. Big corporations like Apple can offer such data (i.e. about the younger audiences using iTunes) to politicians, and trigger collaboration. This can give rise to a complex political debate on two counts:
  1. There is a risk that the ministers at national and European levels would be interested less in the cultural diversity of films than in keeping Apple and other big global players from ruining the exceptional position culture enjoys in Europe.
  2. Funds support stories and contents that safeguard the national cultural heritage. Switching over from old to new business models requires them to make adjustments to avoid having someone else take control of how national films must communicate with their audience.
• Funds tend to invest mostly in production; they seem more like financiers and less like strategic partners for the film sector. They do not take advantage of their public influence to introduce new business models and support new distribution strategies.
• Funds have the responsibility of encouraging directors to come to the fund with new distribution model ideas for their films.

2. Economic aspect

• The percentage of films that actually make money on the old business model is pretty small, and many of these are not released. The question is, can producers and distributors any longer base themselves exclusively on the traditional business model?
• Transmedia projects can complement traditional formats. They do not necessarily have to replace them. They can help a film become more visible and reach a greater audience (i.e. the new MEDIA scheme for the development of interactive projects).
• VoD platforms are no longer mere content providers: they can invest a significant amount (Netflix) in content (very small in arthouse films).

However

• There is still no economically sustainable new business model. New platforms (like iTunes) could be considered as a business model, but they cannot fill the financial gap created by the decrease in movie theater ticket sales.
• Even if a few producers make a significant profit from VoD channels, no data, understanding and/or knowledge exist showing how consistent and sustainable such revenues are.
• There are no rules and regulations on collecting data, such as exist for box-office sales.

3. Cultural (social) aspect

• Film funds strive for cultural value, but if their support goes to films that no one sees, what is the significance of “cultural value”?
• Funds do not deal with the audience-building work: that is the role of the producers or distributors. What funds can do is to encourage and support applicants showing innovative business models.
• Funds should find ways to encourage the young audience to go and see films through apps, mobile devices, social networks and other technological devices.

4. Technological aspect

• Can the new technology help us transform cultural diversity from a catch phrase into something that has a real meaning and can be demonstrated?
• Technology creates different levels of disruption of the traditional distribution model (VoD is replacing DVD, more and more films are crowdfunded, etc.).
• Technology influences the infrastructure of the industry (i.e. DCP greatly improved the delivery infrastructure).

However

• The technical issue is the self-evident fact that nothing can replace movie theaters—these alone boast huge screens and impeccable sound.
• New digital devices can provide very good quality, but the problem is that they stimulate an immersive and personal experience, not a social experience of the sort provided by the movie theater.
• Technology influences content and audience expectations. European films cannot compete with Hollywood blockbusters, and funds cannot afford to meet that demand on their current budgets.

Impact of Digital in Film Business and Production

• Introduction — The Perfect Storm/The Workshop Method — PEST analysis
• Module 1 — Should we support less films for an overcrowded market, or focus on ensuring that the films we select find audiences on new platforms?
• Module 2 — How does the dramatic increase in audience data and a demand-driven economy affect our decision-making processes?
• Module 3 — How far do we need to adapt to new business models, and how far can we seek to protect traditional industrial structures?
• Module 4 — Conclusions

Decision Making Processes

• Module 5 — Goals and selection processes/methods
• Module 6 — Selection criteria
• Module 7 — Profiles of experts, consultants, selection committee members
• Module 8 — Relations with higher authorities and producers

• List of Participants (PDF)
• MEDICI Third Workshop Full Report (PDF)

Illustrations by Jean-Philippe Legrand – called "Aster"

Schedules Previous Workshops Partners Contact