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The Long Tail will wag

Slate magazine reports research that questions whether Chris Anderson’s theory about the “long tail” in the digital world might actually be wrong…with the move to a “long tail”  being very slight – and the tail itself very flat.

However, I think differently. I believe that The Long Tail has created new paradigms, and the movie industry – in particular – is shifting quickly towards new business models to meet demand. Apple have changed their business model from being about making computers to being a Long Tail retail store and selling digital content – last year they had 77% of the digital movie sales market of the US! The article fails to acknowledge that delivery platforms (wide-spread, fast enough broadband) and reception devices (PVRs, Smartphones) with the right search and download technology on (eg. BBC iPlayer) have only really made it into homes (and not just the hands of early adopters) over the last year. So the findings – looking to the recent past – are hardly surprising.

But the landscape is changing. If the research started in 2008, what would it find?

Physical markets for the movie industry’s content (Cinema tickets, DVD sales)are still huge, but the markets are levelling off. In 2007 in the US, there was a growth in online sales of movie content (Download-to-own – DTO, and video-on-demand – VOD) of 462.5%. By 2011, US consumers are predicted to spend $560m per year on online digital movie content. last month Apple launched iTunes Film with 700 DTO  or rental movies, priced at £10 DTO and £3.49 rental for a new release. Yes they’re selling Hollywood movies, and I guess the only interesting point that the researcher makes is that people still like popular movies, but that is surely because Apple has done deals – just like it did in the early days with the major players of the music industry – with the major distributors. In 2007, Apple signed up Disney, MGM, Sony, Warner Brothers and 20th C Fox.

Smaller film makers and distributors – who will make up the long tail – are just beginning to make their work available digitally. However, they’re doing it in different ways – not the Hollywood/Apple way, and this may get that Long Tail wagging, like MySpace did for Sandi Thom and the Artic Monkeys. Business models range from cheaper rates for lower quality movies; some are offering the new movie for free, but its paid for by the “advert breaks” that the viewer has to sit through. Theres a fixed amount of cinema screens, and a greater amount of films released – there needs to be more channels.

Which is what Magnolia Pictures have recognised. They release VOD 3/2/ or 1 weeks before theatrical release – 2-3m downloads happen before the theatrical premiere, or a festival run. 2/3rds of revenue is generated by VOD, 1/3 via theatrical release (then on top of that there’s DVD, DTO, and rental sales).

And the indie film sector report that people still want to buy the DVD as well as having purchased the earlier released DTO, or having even watched a pirated copy. The extras (making of…, directors commentaries…) are still wanted.

B-Side Pictures is an alternative distribution company for indie films. Print on Demand DVDs (POD) – cost more per unit, but it means that a film-maker doesn’t have to purchase a big run.

The team behind Four Eyed Monsters had a different distribution model – they released the whole film for free via YouTube and MySpace – they gave it away, then got theatrical release through using Google Maps to show digital cinemas, and getting people to pledge $5/6 to see the film at those venues to cover the costs of the cinema. The team turned up in the cities to queues – they then stood on stage and asked each cinema theatre-full for a $1 donation (via their website) to cover the cost of the film and their own debts. They weren’t avaricious – the website was set-up to take just up to $100,000, which it took, and was full of new content – the film creators constantly blogged about their experience of distributing and promoting their film in this new way.

Of course this doesn’t even begin to address the pirated film market. Although the industry is trying to curb (with DRM systems) the playback and delivery of films, this doesn’t protect the format. It protects the revenue. I think piracy will impact pricing and we’ll see a move to non-exclusive distribution deals across platforms. Larger deals with fewer players? Inevitable growth in free films supported by advertising? Film distributors value will become their additionality: the marketing strength they can add to new film release.

So the research didn’t look at peer-to-peer (P2P) file sharing, where films grow uncountable audiences. Audiences who may be happy to watch a poor-quality version or n interrupted-with-adverts version; but also audiences who will still purchase – as well – DTO or DVD for the high quality experience and the added extras.

Finally, the talent unions are beginning to understand new business models, and new contracts for mainstream Hollywood movies and indies are in situ. this wouldn’t be the case if they did not believe in the Long Tail!

Film makers and producers at the Edinburgh International Film Festival in June reported writing clauses for “new media” revenue shares. There are models that the arts sector should consider with our talent unions. The Writers Guild of America (WGA) dropped their demand for increased DVD residual in return for new media revenues. The model is 0.36% of distributors’ gross receipts for the first 50,000 downloads and then rising to 0.7% thereafter. VOD and ad-supported streaming of events = 1.2% distibutors’ gross receipts. The Directors’ Guild of America (DGA) arrived at a similar arrangement: 0.36% of distributors’ gross receipts for the first 50,000 downloads and then rising to 0.65% thereafter; ad-supported streaming = 3% residual after a 17 day window. The American Federation of Television and Radio Artists (AFTRA) have proposed 5.4% of distributors’ gross receipts for the first 100,000 downloads, 10.4% thereafter. the Screen Actors guild (SAG) is holding out for a “better” deal. WGGB and Equity UK and US will probably follow suit – I’ll find out at their industry workshops at the Edinburgh Festival in August. (Thanks to Neil Gillard, Partner at ReedSmith’s Media Group, for agreeing to share this knowledge with the arts sector).