The Economics

A sign of the increasing proliferation and dominance of DVD is that they have supplanted videotapes on weekly rental charts. Sales of DVDs jumped from 5.5 million copies in 1997 to 685 million in 2004. The steadily dropping price of DVD players (from more than $500 to around $100) and of DVDs themselves account for much of this proliferation. DVDs are big business, hence the exponential growth in those interested in serving this burgeoning market, including companies and divisions of larger companies such as Amazon and CustomFlix. This section will look at the marketplace for independent media and at the economics driving the DVD market: Is the market for independent media on DVD shifting as rapidly as that of commercial media on DVD? What does all of this mean for the bottom line of independent media distributors? Are there viable options for distribution beyond the more traditional methods of institutional sales, television broadcast, etc.? To answer some of these questions, it will be useful to look at an overview of the market for independent media in terms of who is buying, what they’re willing to pay, how they buy and the impact of auxiliary markets (such as television) on acquisitions.

If the future is DVD, then what happens to the past of VHS? No discussion of the economics of DVD technology would be complete without a look at the costs of transferring to DVD for those who acquire and those who distribute independent media.

The Market for Independent Media

A large portion of independent media is sold to the educational/institutional market — universities, libraries, museums and other institutions. Libraries have long had a strong connection to independent media culture. Independent media makers and librarians often share a common passion for useful information and public engagement intending to take wider audiences on interesting journeys. Librarians, especially institutional librarians, have also been a financial mainstay for independent media producers and distributors for decades, from the days of 16mm films to VHS and now DVD. There is still a lot of strength in this relationship, but there are also new pressures with any new transitional technologies and this is certainly true for the transition to DVD. As will be explored below, the transition to DVD not only affects future purchases for institutional consumers but the existing holdings of (and thus access to) videotapes.

One of the strengths of the relationship with libraries is the librarians themselves. Gary Handman, Head of Media Resources at UC-Berkeley and the convener of the VideoLib listserve and discussion group, spoke to the importance of having a sharp, committed media librarian. Someone in each library needs to be the trusted guide to the available media materials, as well as being the hub for acquisitions work. If not, media falls off the library’s radar. Unfortunately, it has become harder for libraries, particularly public libraries, to create or even maintain staffing levels for media librarians. Milos Stehlik, Executive Director of Facets Multimedia, said: “The more than 13,000 public libraries are the great hope and frustrating tragedy of American independent film. Libraries get popular titles that drive circulation. There are some great librarians, but not enough of them.” Jonathan Miller, President of First Run/Icarus noted with fewer centralized gatekeepers, it can be harder to make sales in some ways. The upside, however, is that there are more people to sell to: media librarians, subject area specialists, bibliographies collection development staff, general faculty and centralized media buyers, with the latter going down in numbers and authority.

Price Points

Independent media distribution is a volatile business, with many organizations unable to stay in business. Debbie Zimmerman, Executive Director of Women Make Movies, pointed out that part of the problem is that, despite the “independent media” hype, there really isn’t a market for “independent film” per se. Rather, consumers (institutional and otherwise) are interested in subjects, many of which are only addressed by independent media makers. Therefore, only occasionally does an independent program hit a high enough level of sales to be classified as commercially successful.

The discussions of DVD culture bring back histories and memory of old struggles fought over the deployment of VHS technologies. At that time, the educational/institutional market was very wary of what was then the major transitional technology. Originally, videocassettes held the promise of lower prices stimulating an exponential increase in sales to new users equipped with an increasing numbers of VCRs. Unfortunately, this promise didn’t bear fruit, with many independent distributors unable to remain profitable once institutions stopped purchasing or renting film (16mm or 35mm) and moved to video.

The deployment of DVD, even more so than VHS, raises comparable questions on the gap between the price points for the educational/institutional market and the home video market. Many distributors and the independent makers they serve depend upon the higher prices institutions are willing and able to pay for crucial revenue. However, the cheaper cost of producing DVDs puts additional pressure on distributors to reconsider their higher prices for institutions. Seymour Wishman, the President of First Run Features, said that they receive pressure from librarians paying a $400 institutional price, but then seeing something available for home video for $19.95. Gary Handman also noted the downward movement of price points in public libraries, saying: “If a distributor or maker can find a public library willing to pay more than $150 for a program, then they’re doing well.”

Despite pressures on distributors to lower price points for the institutional/educational market, no major changes will occur right away. No matter how inevitable changes in price may be, institutional buyers understand that the higher prices help keep independent media culture going, and thereby ensures a flow of quality programming into the future.

Many nonprofit distributors adjust their release pattern accordingly to allow for a solid window for the higher prices of the institutional market to take hold before doing a home video release. As long as demand continues, the key players in the institutional market indicate that prices will stay comparatively high. Jonathan Miller of First Run/Icarus and Larry Daressa of distributor California Newsreel each indicated that lowering prices wouldn’t boost sales, and media buyer Gary Handman concurred. Miller reported that their institutional sales were increasing, most likely due to the quality and relevance of their titles and successful marketing efforts. However, Eddie Wong, Executive Director of the National Asian American Telecommunications Association (NAATA), said that sales revenue decreased 35 percent in 2004, which he attributed to diminished demand from the institutional market, and cuts in media funds.

An interesting detail: Peter Wintonick, the Montreal-based documentary producer (Manufacturing Consent and others), noted that price points are not as high in Canada as in United States. Institutional pricing, not as prevalent in Canada, is generally less expensive. For example, a title costing $500 in the American institutional market might cost only $79 in Canada. Kim Tomczak, Co-Director of Toronto-based distributor V-tape, had a different stance. V-tape still differentiates between institutional sales and educational and individual. To add to this tiered approach, many artists want them to offer limited edition DVDs at even higher rates. That said, the market for V-tape programs overlaps some with the art video holdings of American distributors like Electronic Arts Intermix, which can still charge a lot because of the arts context and demand from buyer/collectors.

The area of enhanced DVDs or DVDs with additional materials is a major area of interest with the independent media community of filmmakers, distributors, libraries and audiences. There was a wide range of opinions on the real value of enhanced DVDs and whether or not they met a cost/benefits analysis. A discussion of the pros and cons can be found in Sidebar #3: DVD Enhancements and Add-Ons: Are They Worth It? Additionally, readers may find it instructive to look at the case studies of two filmmakers — Arthur Dong and Mark Moscowitz —who have produced enhanced DVDs of their documentaries.

Most distributors don’t voice alarm at an impending bottom falling out of the higher institutional pricing — the educational/institutional market is holding on, but perhaps only just. Despite sympathetic institutional media buyers, distributors and independent media makers will be hard-pressed to maintain the higher price points for the institutional market. For every First Run/Icarus, whose sales to the institutional market have gone up despite maintaining higher price points, there will be several other distributors whose sales go down. This means some changes are needed for the independent media arts field to survive, much less thrive. Time may well not be on the side of institutional pricing systems — particularly when those customers who understand the need for such pricing structures cycle out of their positions of influence.