It should be no surprise that the direct-to-DVD market is taking a hit itself since there's been an overall decline in DVD sales and rentals as more viewers continue to make the shift to VOD. But I felt this needed to be said publicly since there've been many posts on Shadow And Act since I started following the site that have announced films going direct-to-DVD, most prominently, almost all of 50 Cent's recent movies.
We tend to look down on direct-to-DVD film releases but it has been a lucrative business for both the sutdios and indies. That is until the decline began a few years back.
And you know that when the studios are struggling in one area, the indies feel it even worse.
There's an article on Variety magazine's website this morning about this decline in demand for direct-to-DVD films which I recommend you read, especially filmmakers/producers/distributors/exhibitors.
A summary of it is:
- While studios are still making money with direct-to-DVD releases, there is still an overall decline in demand for those films, as there is a general decline in DVD demand, a change that's really affecting the indie film market.
- Direct-to-DVD films that tend to be profitable are those that are already parts of a franchise, like maybe sequels to films that were released in theaters, but subsequent films like sequels or prequels, were released straight to DVD. Like the BRING IT ON franchise.
- And no surprise that budgets for direct-to-DVD films have fallen. They were as high as $10 million to $15 million a few years ago, but have dropped down to $5 million to $10 million today. It did surprise me to learn that studios are spending as much as $15 million on average for films that they already know are heading straight to DVD. That should indicate just how profitable some of these films have been for them if they are willingly dropping that much money to produce them. I mean many films are released in theaters with those kinds of budgets. And that doesn't include marketing, which the Variety piece says can be substantial, especially if it's a franchise release. I should probably say that these figures are significantly less than the industry average budget which I think is around $50 million to $60 million right now and maybe higher.
- And of course this also hurts the indies in that funding for indies either drops or is just no longer there.
- But the light at the end of the tunnel is that direct-to-DVD is gradually becoming direct-to-VOD, or at least distributors of direct-to-DVD are using the VOD market to test their releases before spending the money to print them and ship DVDs. Because VOD is significantly cheaper which means profit margins are higher. So it only makes sense that direct-to DVD is being replaced by direct-to-VOD, which I think is the future.
Times are changing and filmmakers/producers/distributors/exhibitors have to take note and probably before a filmmaker even thinks about shooting one frame these days he/she will have to have already mapped out their distribution strategy. At least have more than 1 or 2 options in case neither works out in your favor. The days when theatrical and DVD were the only real distribution solutions are behind us. It's like you now have to start thinking ahead of time, where your film best fits, based on things like budget, actors and audiences, and what your target audience's viewing habits are.
All that said I wonder how this is affecting all those straight-to-DVD release companies or people like 50 Cent who's releasing most of his movies on DVD. I suppose they are all aware of this shift and are doubling up to release their films on both DVD and VOD. I guess the term will soon change from "direct-to-DVD" to "direct-to-VOD."
It makes sense then when companies like Netflix announce that they are splitting up their DVD and VOD service. I think they made the right move but maybe just a little too early and people who were not ready and willing to make the jump got mad and you all saw what came of that. But the company is still thriving. They were just a little bit ahead of everybody else and I don't blame them. VOD is far cheaper and can mean increases in profit so it makes sense for business. And that's the direction we seem to be going in anyway.
You can read the Variety magazine article at this link: http://bit.ly/wxeqXG