DVD Self-Distribution, Part 1

I linked yesterday to a story Peter Broderick wrote for DGA Magazine on distribution options back in January -- it's a great primer on many of the issues related to decisions facing independent filmmakers on the business end. It also makes the argument that "filmmakers may be better off making other types of video deals [than typical industry deals]." As prep for a discussion I'm having with the guerilla film marketing class at the UCF Film School tommorrow, I wanted to start outlining some of those issues on self-distribution of DVDs as a filmmaker.

The attractiveness of self-distribution is control and margins, the flip side of those are risk and volume. A traditional home video deal, if you could get it (meaning the distributor thinks they can make money off the deal too), is typically 15% of the wholesale price -- so, on a $25 retail price with a $12.50 wholesale price, a filmmaker might make $1.87 per DVD sold. Conversely, though, none of the expenses of marketing and duplication or distribution are things they have to worry about ... and if they do worry about it, they won't have much control over it.

Self-distributing DVDs means thinking about margins and containing those costs, and there's such a variety of options open to filmmakers that it becomes difficult to catalog:

  • You could go with a just-in-time DVD duplication service that either dealt with the costs and paid you straight percentage (like GreenCine) or just charged you a manufacturing cost and let you sell yourself (like CustomFlix). While these might "cost you more" (or give you a lower return), you'll be looking at about double the per-sale copy with GreenCine or a $7.95 manufacturing cost with CustomFlix.

  • You could go with a short-run duplication run from a major DVD duplicator like Disk Makers and get 1,000 DVDs in one packaging type or another for between $1.30 and $1.80 per unit. Of course, now you need to find a sales mechanism such as iFulfill.com (which might take $2.40 in fulfillment fees and 9% for credit card processing.) This means your costs to sell that same $25 retail disk direct to a customer might be as high as $2.25 + $2.40 + $1.80 = $6.45.

  • You could go with a more traditional DVD duplication service (there are hundreds) and increase the order size more -- by the time you get close to 5,000 copies you should be under $1.00 per unit.

    To provide you a real-world example, I could point to "Nothing So Strange". We went with a variation of Option #3, pressing 5,000 DVDs ready for retail at a total expense of around $6,500, or a manufacturing cost of $1.20 per unit. We're using iFulfill not just as a point of sale for consumers (where our $14.99 retail price is well below the high end of DVDs) but also as a central warehouse to make consignment placement deals with other retailers (at about 60% of the retail price). For us, the net gross per DVD sold is about $10.04 per disk when we're retailing and $4.89 per disk when we're wholesaling.

    That means (if we spend no money on promotion, which isn't the case) selling 650 DVDs pays for the pressing of 5,000. Figure with other expenses we need to do double that before we're "in the black". Our traditional dealmaker, after selling 1300 copies, might be due $2,400 in royalties where we just broke even. But if you crunch similar numbers for 3000 copies, we might stand to clear as much as $23,000 ... let's say other expenses eat up 20% of that and we make $18,890. Our traditional dealmaker is now owed $5,610 in royalties under our "good deal" example.

    This means many of my independent peers with films that might be lost would be well served to look at even modest self-released DVDs -- even taking 300 DVDs in efficient packaging from Disc Makers for $1,200 in total costs (at a massive $4/unit manufacturing cost) and selling them from your own website with iFulfill could produce a net margin of $7.24 on a $14.99 item. That means your 300 DVDs yield you more than $2000 in profit, which is more than enough to re-order another run and put half the proceeds into the production as profit.

    posted to Independence on March 24, 2004
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