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Netflix and the afterlife of indies

For a documentary, Deadline (2004) was, by all accounts, a big success. The film, which profiled Illinois Governor George Ryan and his decision to condemn the death penalty in Illinois, toured the festival circuit to rave reviews and was nominated for a Grand Jury Prize at Sundance in 2004. Producers for NBC’s Dateline made the unprecedented decision to show the film as a one-hour, prime-time special, the first time the network had aired an independently produced documentary in such a timeslot. Filmmakers Katy Chevigny and Kirsten Johnson tirelessly promoted the film through a special website and at viewing parties. It even made it into a few theaters. For a film about an issue as thorny as the death penalty, it was a pretty good run.

Then Netflix purchased a number of copies of the DVD, and Chevigny and Johnson found that all their work to get the film seen at festivals, on television, and through outreach programs was merely a prelude to the afterlife their film would find in countless Netflix queues. It is now doing brisk business on the website, with a new audience who might never have had the chance to see the film a few years ago.

“Prior to Netflix, you were dependent on this perfect storm of circumstances for anyone to see your film,” Chevigny says. “They had to know about it, be free to go see it on the night it was playing, to have the cash, to not flake out. Now, all we need is someone who says ‘I want to see that movie.’”

DVD-by-mail services—dominated by industry pioneer Netflix—may be fundamentally changing the landscape for independent filmmakers. Netflix currently has about 3 million members in the United States. That’s a small fraction of the 70 million US homes with DVD players, but it’s a number that the company says is growing rapidly. They currently mail a million titles every day from 35 shipping centers. Of the over 45,000 titles in stock, almost 35,000 are in circulation at any given time. Indies make up a good portion of that active inventory, meaning Netflix has the power to make a big difference to a little film.

In the past, most independent films were on their way to obscurity almost from the time that they wrapped. Many found their largest audience at film festivals. A small number got theatrical distribution, and an even tinier number made it onto the shelves of Blockbuster or Best Buy where people who missed them in theaters could maybe discover them. But if movie-goers didn’t live in a major market, where arthouse theaters booked something other than studio fare, they missed most independents.

“That’s been a critical, unsolvable problem for 30 years,” says Chevigny. “What DVDs generally—and Netflix specifically—are able to do is capitalize on that buzz and word of mouth for people who are interested in independent films and documentary. You have to be able to feed that interest with ready access, and Netflix can do that.”

Netflix didn’t bring Chevigny and Johnson profitability, but it did reassure them that their film was more than a pet project. “I don’t know whether [online DVD rentals] will affect our financial survival,” says Chevigny. “But it’s critical to our mission and to our justification that we’re making an impact. If people can’t see our films, it’s almost like they’re not movies anymore.”

For Netflix’s Chief Content Officer, Ted Sarandos, that’s welcome news. “It is so frustrating that films are made and then shown only once,” he says. “You never know when a topic may come up and a documentary will suddenly be relevant all over again. These films exist in theater and on television, but they live on DVD.”

Sarandos cites the success of Capturing the Friedmans (2003), Andrew Jarecki’s film about a family of accused pedophiles, as one of Netflix’s biggest successes. According to Sarandos, Netflix accounted for about 70 percent of the revenue that HBO Home Video pulled in for Capturing the Friedmans. “[The film] was hard to market because of the topic, but it was a high quality film and there was a high level of awareness, and that created a place for it online.”

The popularity of independents and documentaries on Netflix can be credited to the company’s internet-based business model, which is fundamentally different than that of traditional video rental outlets. In order for Blockbuster to make a profit on a film, it has to move several copies of one title. Hence, stores filled with Harry Potter and Phantom Menace. The heavy promotional budget and resulting ubiquity of such films virtually ensures that renters will seek them out. Netflix stocks these titles, but it also stocks thousands of more obscure films—mostly classics, and independent and foreign titles—and these account for a good deal of its business. “The American movie-going public has an appetite for a broad, diverse range of movies and our model has always been to provide something for everyone,” says Steve Swasey, Netflix’s director of corporate communications.

Call it the “long-tail effect.” Last year, Wired magazine’s Chris Anderson wrote an influential piece about something that online retailers have known about for years: the power of near infinite choice to drive business away from mainstream media and towards a far broader spectrum of movies, books, and music. The “long tail” describes a graph that spikes early and then tapers out into a long, flat appendage. The spike represents best sellers: Spiderman (2002) or The Da Vinci Code or Britney Spears albums. These sell many, many copies and would justify real estate on the bookshelves and movie screens of any city or town. They do big business for Netflix and Amazon too, but they make up only a portion of online sales. The long, flat tail represents everything else: obscure short-story collections, Vera Drake (2004), Sigur Ros albums. No one item does that much business, but taken all together, these titles sell many more copies than Ms. Spears ever could.

“Niche content finding a niche audience has been the internet’s promise since the beginning,” says Bo Peabody, a venture capitalist who is funding a DVD-by-mail site that launches this fall. (He declined to give details, citing the ease with which competitors might adapt his idea for their own purposes.)

Netflix can afford to stock its warehouses with titles that might appeal to only a few thousand or even a hundred viewers. It can use its website to make recommendations, a feature which has reportedly been wildly popular, driving users to good movies that didn’t make it to theaters in Phoenix or Cincinnati. Titles that did not have the time to find an audience can build a word of mouth buzz or satisfy the interests of a few fanatics who represent Netflix’s core business. Instead of just choosing the stuff in the biggest display case, it turns out customers are willing to be far more eclectic and experimental than retailers had previously assumed.

“There hasn’t been a film culture in the country since the 60s,” says Ryan Krivoshey, director of feature distribution for The Cinema Guild, an indie distributor. “The DVD boon has almost created a new film culture. People are following directors through Netflix, watching an entire career’s worth of work. It’s very exciting.”

That interest can even drive an audience to theaters to see new releases. “People who’ve rented something from Netflix because of a recommendation will then look for the next theatrical release from a director,” says Krivoshey.

Many credit Netflix with doing more than merely stocking indies. “They position independent films on an even playing field,” says Kathleen McInnis, film festival specialist at Loyola Marymount University, and director of programming at Palm Springs Short Film Festival. “They don’t ghetto-ize them.”

Recently, Netflix has expanded into DVD distribution, striking deals to package more than 90 independent films. Born Into Brothels won the Audience Award at Sundance in 2004 and then went on to beat Fahrenheit 911 (2004) for Best Documentary at the Oscars, but the film did not have a home video deal. Netflix swooped in and packaged the DVD in return for an exclusive. The film will eventually be available everywhere, but for the first few months, Netflix will be the only place to get the DVD.

Sarandos and his team visit all the major festivals every year in search of new titles, as well as workshops and labs like this month’s IFP Marketplace in New York City. Netflix also has exclusive agreements with PBS, BBC, and the Canadian Film Board. They’ll happily release films that never hit theaters, certain that they’ll find an audience. Netflix and its ilk may eventually remove the stigma of straight-to-video.

“There’s this notion right now that if you didn’t have a theatrical release, you weren’t really a success,” says McInnis. “And that’s got to change. It’s just as valuable for the majority of indies to get out there and be seen.”

Netflix is also experimenting with soup-to-nuts production. Sarandos says that in this respect Netflix is modeling itself after HBO, which began its original programming juggernaut by acquiring films that couldn’t get theatrical distribution and eventually by producing original comedy specials. Last year, Netflix funded The Comedians of Comedy, a low-budget documentary about the alternative comedy circuit. It is making its way around the festivals now, and Sarandos is taking a wait-and-see approach to the future of Netflix-branded films. (HBO, for the record, is the largest producer of original, independent films.)

To be sure, Netflix isn’t the only game in town. Bay Area-based GreenCine is marketing itself as the online community for independent film lovers. “Netflix is very good at helping people find what they want,” says Jonathan Marlow, GreenCine’s director of content acquisition. “We’re good at helping people find things they didn’t know existed.”

The company’s approach is far more low-key. GreenCine seems to be counting on a backlash against Netflix’s aggressive marketing strategy. Netflix, according to Swasey, is currently the largest internet advertiser. By contrast, GreenCine’s site reads almost like a blog, with subtle graphics and lots of articles about up-and-coming filmmakers.

“We want to push films that we like and indie filmmakers,” says Craig Phillips, one of GreenCine’s two editors. “We have a real content and editorial background, and we use that to push things, rather than marketing. We want to promote films, not ourselves.”

GreenCine has not invested in multiple distribution centers, so its subscribers must wait for their next DVD to arrive from San Francisco. But they believe that their subscribers will pay high premiums and put up with longer waits in order to be part of a community of independent film lovers who will offer informed recommendations.

Netflix believes its ease of use will counteract any upstarts. “The real value [to subscribers] is having a useful interface and customer reliability,” says Sarandos. “The way you differentiate yourself in the space is to be good at it. We invented it, and we perfected it.” Defensive swagger aside, Sarandos has a point. GreenCine can bill itself as a home for indies, but it will be hard for any website to offer a unique inventory unless they capture exclusives. Barring near unlimited warehouse space, it’s almost impossible for any service to offer a demonstrably different selection.

It remains to be seen, of course, whether Netflix is the future of film distribution or merely a crucial bridge to something new. People may tire of Netflix as they have of over-lit, understaffed rental chains. And the web has enabled an active do-it-yourself movement. An Irish organization called Death to Hollywood (deathtohollywood.com) offers free downloadable movies and plenty of anti-Hollywood propaganda on their website, while low-cost DVD duplication services like CustomFlix make it possible for people to sell their own films from their own websites. The problem of promotion has not yet been cracked. Though Netflix recommendations, like Amazon ratings, are incredibly valuable free advertising.

Then there’s the promise of video-on-demand (VOD). For years, people have forecast a not-too-distant future where people will download movies directly to their TV sets. That would theoretically enable independent filmmakers to make their films available directly to consumers, without having to find distributors or even put up the cash for packaging. But again, promotion is the biggest hurdle any filmmaker faces. “The question is, how am I going to make a movie that you’ve never heard of relevant to you? It’s a marketing challenge,” says Peabody. “How do you connect consumers to content in a cost effective way?”

Sarandos and the rest of the Netflix crew are betting that independent operators will never find a satisfactory way around the problem. Filmmakers will still need a middleman. They’re building their subscriber base now, so that whatever the future holds technologically, they’ll be the gatekeepers for content.

“Netflix has conditioned people to be willing and happy to pay a subscription to access for video content,” says Peabody. “DVDs are a way to capture subscribers so that, when VOD is a reality, you’ve got their credit card information, and you’re already communicating with them by email.”

In other words, true independence isn’t a reality quite yet. It may never be. But online rentals have opened up a new audience for filmmakers and ensured that indies aren’t relegated to increasing obscurity. “Just focus on the storytelling,” say Sarandos. “And it’ll find its way out there.”

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