Sneak Peek #2: Under the Milky Way

Last month, we gave you the first sneak peak at the next edition of our EU-focused Case Study Book, set to launch in the spring.

Our second teaser looks at digital aggregator UNDER THE MILKY WAY, which specializes in digital aggregation to some of the largest TVOD (transactional video on demand) platforms such as iTunes, GooglePlay/YouTube, Amazon, Sony Entertainment Network and VUDU. Unlike New Video and Gravitas in the U.S., they do not really deal with telecoms, pay TV or the cable sector in Europe. Advertising Video on Demand (AVOD) and Subscription Video on Demand (SVOD) in Europe will be addressed in a forthcoming preview blog and in the next version of the book.

While UTMW does not exclusively work with EU territories, our interview with co-Founder Pierre-Alexandre Labelle concentrated on some of the ways filmmakers (and other rights-holders) are getting their films onto digital platforms in the EU.

1) What are the services you provide?

Under The Milky Way is a company providing VOD distribution services on a global basis.

With offices in 13 countries, including the US, we provide services to rights-holders of audiovisual content to get their films distributed on the most prominent VOD Platforms in the world. We provide a legal, commercial, editorial and financial interface between rights-holders and platforms.

2) Do you work directly with filmmakers? Or just sales agents and distributors? Or just distributors?

Most of our clients are distributors who choose to use our services to get their films out in VOD. Our commission-based model allows them to outsource part of the work necessary to take full advantage of VOD distribution for a limited investment. Through our ongoing agreements, we currently distribute more than 1600 films. We also sometimes work directly with sales agents who have not sold rights to a film in a particular country, and sometimes with producers looking to release their films internationally directly to VOD.

3) What are the key digital distribution platforms in Europe?

As you know, Europe is very broad and each country has its own set of “local players.” Normally, only one or two of these local players have an important VOD market share in their respective country (and the rest is very marginal). However, none of them operate on a European level. They are also mostly IPTV operators (comparable to cable operators in the US), and usually propose a limited selection of films (limited to films theatrically released in their country).

The main opportunities on a European level lie with the “global platforms,” i.e. iTunes, Google, Sony, etc., who also have a long tail approach and are willing to host a wide variety of films. Given their wide geographical coverage, one delivery/process can lead to wide exposure, ensuring much needed economies of scale.

4) To what other continents, if any, do you distribute?

In addition to the whole of Europe, and North America, we have offices in Japan, and Australia. We also handle Latin America from our New York office.

5) Which kinds of films perform best?

Huge blockbuster hits that are locally released in theatres… such as The Hunger Games, Twilight, Intouchables, etc, which we distribute in some territories. But I presume that’s not the kind of answer you are looking for…

Filmmakers who want to release their films globally on VOD first need to understand the implications of doing so. We will share this information with whoever contacts us in order to manage expectations to the best of our abilities. We can guarantee for all films a regular flow of information and data, which can then be useful for future releases. From a financial point of view, royalties are paid in a regular and transparent manner. We normally calculate a 2€ average revenue share for rights holders per unit sold (mix VOD/EST) meaning that 350 to 400 units are required to pay for their initial encoding expenses. No other costs are opposed, and any sale above that is direct revenue for the rights-holder.

6) What does performing well mean in Europe? In terms of money, prestige, placement on platforms, etc.?

Again, putting aside theatrically-released films in Europe, direct to VOD numbers can in theory vary from a few units sold to a few thousand. But we should look beyond the monetary aspect. UNDER THE MILKY WAY developed communication tools and workflows to ensure that all films are properly presented to the programming teams at the platforms. We do this on a per-territory basis, thanks to our local teams in all major markets. We always make sure to provide the best pitch possible for the film, but placement is still the decision of the merchandising teams at the platforms. They have the final say, but we feel that they value our recommendations and the work we put in to make their job easier. This is of course true for the release of the film, but also to ensure that the film is properly presented in promotional opportunities (which also proves to be a determining factor in the financial performance of a film on a particular platform).

7) Which kinds if films are the hardest to get platforms to take? And the hardest to get consumers to watch or buy?

Most global platforms will take any film that has had at least one theatrical release in their home country.

This being said, we sometimes still have a hard time understanding why a particular documentary does really well, while another does not. There are probably many reasons (Subject, Artwork, Trailer, Placement, and a myriad of other reasons). But I find this to be tremendously exciting. Distribution and marketing of cultural content has always been a very interesting subject, and quite a challenge. For the first time, the “Distribution” aspect is less of a problem; we now need to concentrate on the “Marketing.” How do you convince people to watch your film? Trade Marketing (placement on platforms) is currently a very important factor of monetization, but we are constantly working on experiments to find the right marketing levers to pull to maximize returns for our rights-holders.

We believe Digital Marketing will be key, and that a customized strategy could be applied to each film. We still experiment in that sense and are very careful to do so in a way that we can learn from our experimentations without wasting anyone’s resources. I wish we could be more efficient in terms of marketing at this point in time, but I believe that the market has not reached that point yet. I have yet to meet anyone who has found the proper mechanisms of VoD marketing (although a lot of people claim that they have —the good old “fake it till you make it” approach!).

8) Do filmmakers in Europe do DIY distribution? If so, to what extent?

The European Film industry is very complex and structured. I won’t go into all of the details, but most films in Europe are pre-financed through the involvement of distributors/sales agents/TV’s etc. at an early stage in the project. Even though truly independent filmmakers in the American sense exist, they tend to be marginalized by the fact that many films fall within the “system. ”

This being said, we are seeing an increasing amount of independent producers seeking the route of DIY for reaching international markets (especially the US). Indeed, international distribution in the traditional sense is still very limited. In any given year, only about 10% of European productions find their way to the US “traditionally.”

As a result, producers are starting to prefer an international VOD release of their film to 1) ensure commercial distribution (not always the case through a sales agent); 2) have shorter financial cycles (royalties flow rapidly in VOD and no recoupable expenses; and, finally, 3) directly connect with their audience (having access to data—actual number of units sold, etc.).

Of course Sales Agents provide many services that VoD distributors are not in a position to offer (festival selection, potential all-rights deals, etc.), and often do a great job at adding commercial value for a film, which will not be the same for a straight to VoD deal. Then again, not all films are fit for sales agents…It all boils down to having a very lucid picture of the film, its potential, and its best route to audiences.

9) Do you know about or know of filmmakers in EU using Distrify or VHX?

We recently initiated a partnership with Distrify within the TIDE Experiment (TIDE stands for Transversal Independent Distribution in Europe). It is a project made possible through the support of the European Commission. The goal of the action is to experiment with international Day and Date releases (Theatres/VOD). Distrify is taking part in the experiment on the third film entitled For Those in Peril. We’ll let you know how it goes, but I’m sure results will be very interesting.

10) What role do Film Festivals play in the success of a film digitally (in EU)? Which festivals matter? Do prizes matter (other than presumably winning at Cannes).

It is obvious that festivals play a very important role in the “professional” life of a film. A lot of initiatives were recently started in order to bridge the gap between the B2B marketing surrounding a film’s presence in a festival, and the general public.

Of course, no festival in the world actually has more of an impact on the success of a film digitally than Cannes, but more can definitely be done, which is why we partnered with the Rotterdam Film Festival last year and launched an initiative called IFFR in the Cloud. It provides filmmakers a way to show a film on iTunes Benelux within the itunes.com/iffr collection. [Note: the previous link will only work on computers with iTunes installed and logged in to one of the iTunes stores in the Benelux territories.]

11) What advice can you give to American filmmakers with regard to digital distribution in EU of their films. For American films, do only the bigger films with cast work, or is there a market for small indies? What about documentaries?

There are no set of pre-defined rules at this stage. I would suggest starting slowly and experimenting. The process is fairly straightforward. We sign agreements for a two-year term, and fees are payable directly to encoding houses (so there are no hidden costs of any sort), and you start getting your reports, and payments soon thereafter. Again, it is always valuable to have a discussion beforehand in order to manage expectations.

12) How are LANGUAGES handled in digital distribution in the EU?

You need to have localized versions of your films for each territory. Some platforms produce multilingual assets, meaning that with only one encoding you can add many subtitle tracks, thus making it cost effective to distribute a film over many territories. English is still accepted in many territories (I believe that, to this date, with an English version of a film, we can distribute it on 47 territories…)

[Note: By “multilingual asset,” he is referring to a textless version of your feature. If your film, for example, has a few non-English lines of dialogue, instead of burning-in English subtitles to your film, you would create an external English-language subtitle file in .itt format [Note: in the U.S., we are often asked for a different format: .srt or .stl] and submit with your master. This is the most flexible way to submit films, as many (but not all) platforms, such as Apple, will not allow external subtitles on any films that already have burn-ins. They will ask you for a new master, and you will have to once again pay encoding fees.]

Clearly, there are a few takeaways here that we have heard before:

• that every film is different, and there is no one thing that determines films perform well and which do not. The best way to manage expectations is to understand how your film fits into today’s market. Having said that, it’s encouraging that a company such as UNDER MILKY WAY is taking steps toward transparency in terms of the process and reporting of earnings.
• that IPTV operators in EU, like cable operators in the U.S., are quite localized and normally take only films that have been release theatrically in their country. Having said that, perhaps there was a slightly higher emphasis here on the curatorial aspects of getting one’s film onto platforms— perhaps they are stricter than those in the U.S.?
• that the importance of proper presentation to programming teams at the platforms. Moreover, proper placement/positioning on those platforms was repeatedly brought up as an important provided service.
• that for global platforms with wide geographical reach, UMW’s “one delivery” process simplifies the process and reduces costs.
• that there is quite a bit of experimentation going on, such as their day and date partnership with Distrify and their film festival partnership with Rotterdam.
• that marketing still is the missing piece of the puzzle here. As it gets easier and easier to get onto platforms, so too does it get more difficult for audiences to find the films that are perfectly suited to their interests. This is especially true when talking about marketing one’s film outside one’s home territory.
• and lastly, we should remind our readers that one of the major obstacles to releasing a film in another territory can be the cost of translating and producing a subtitle file— it’s a tough hurdle to overcome on one’s own. One piece of advice for filmmakers, no matter how they are handling their global strategy is this: if your film is showing at an international film festival, ask if they are producing subtitles, and negotiate that produced file as part of your festival fee. It may need to be proofed again or adjusted at a subtitling and transcription lab later on, but as a first pass it could prove very valuable down the road.

Orly Ravid March 14th, 2014

Posted In: Digital Distribution, Distribution, DIY