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Filmmakers: Why 1% is the Most Important Number
By Ted Hope
By Scott McMahon
Filmmakers, what comes to mind when you think of 1%?
The “Occupy Wall Street” movement perhaps?
Hmm … maybe …
1% RULE OF THE INTERNET
In Internet culture, the 1% rule is a rule of thumb pertaining to participation in an internet community, stating that only 1% of the users of a website actively create new content, while the other 99% of the participants only lurk.
This is a tremendous community, as Sheri constantly provides value after value to the community.
However, I notice over the months that there are only about 16 other active participants in the community.
These are members who post articles, further conversations with comments, and generally have a regular presence in the community.
16 ÷ 1,666 = .01%
1% of the community members are actively participating, so we can assume the remaining members are indeed lurkers?
Or, perhaps they sit back in awe of how much content Sheri submits on a regular basis and maybe don’t feel the need to contribute, or don’t feel like they can match the contribution?
Speaking of Sheri Candler, she was recently interviewed by Craft Truck’s Business of Film Podcast for episode #21.
In the interview, Sheri points out that there were 12,218 films submitted to Sundance 2014, and only 121 films were selected.
121 ÷ 12,218 = .009%
That’s almost 1%!
So, it should be expected that you, as a filmmaker, have a 1% chance of getting into Sundance, or any other major film festival.
I recommend you checking out the entire podcast, as Sheri unloads some extremely valuable information.
Here’s the link to that podcast episode: Business of Film Podcast, Episode #21
THE ORGINAL 1%
In 1947, in response to reports of boozed-up bikers, the American Motorcyclists Association (AMA) assured worried citizens that 99% of its members were law-abiding citizens, thereby marginalizing the remaining “1%” as outlaws.
These original One-Percenters relished the branding of “outlaw” and could be identified by the infamous diamond tattoo or patch with the 1%er in the center.
You’ve heard the saying?
“It only takes a few bad apples to ruin it for the rest of us.”
Well, in this case it only took 1%.
THE NUMBER ONE IN NUMEROLOGY
The 1 is a doer, a powerful force that produces results and does not allow anything or anyone to limit its potential. The 1 is aggressive, a necessary energy for creating and producing. The 1 is always in the forefront: a spearpoint directing and leading others.
This could be true, in that if only 1% actively participate in any community, then they would be considered the “doers”.
I’m sure the wealthy 1% would love to rally around this concept from Numerologists.
99% PRACTICE, 1% THEORY
Yoga is 99% practice, 1% theory was a favorite saying of Ashtanga Guru Pattabhi Jois. Jois was saying that it’s not that useful to sit around having philosophical discussions about how to become enlightened and the meaning of life. Instead, students should spend the majority of their time on doing the yoga asanas proscribed by the Ashtanga method.
This is almost in direct opposition to what Numerologist believe that the power of “1” represents.
For anyone who has tried Yoga can attest, there is no room for theory when you’re trying to pull your head through your crotch.
1% CONVERSION RATES
The conversion rate is the proportion of visits to a website who take action to go beyond a casual content view or website visit, as a result of subtle or direct requests from marketers, advertisers, and content creators.
As it pertains to sales, a conversion rate means you take the number of units you sell and divide that by the number of views from your ad, or the number of visitors that came to your website.
100 people saw your ad, or visited your site and only 1 person purchased the product, then …
1 ÷ 100 = .01% Conversion Rate
Believe it or not, getting a 1% conversion rate is quite common in any direct or email marketing campaign.
1% … Holy cow, that sounds miserable.
CROWDFUNDING CASE STUDY
I recently witnessed a crowd funding campaign where the producers were pre-selling their movie for about $10. They had a list of about 100,000 subscribers.
Wouldn’t it be amazing if you had all those 100,000 subscribers forked over $10? Or at least have 50,000 subscribers give you $10 a piece?
Interestingly enough, these producers only secured $2,500 in pre-sales.
$2,500 ÷ $10 = 250 subscribers
250 ÷ 100,000 = .0025% Conversion Rate
I believe the producers were aware of this conversion rate, as they did make their crowdfunding goal.
They didn’t allow themselves to get caught up in their large subscriber base and planned accordingly.
WHY IS THIS IMPORTANT?
If you send one-hundred people to your movie website and two people buy your movie, your conversion rate is two percent. This is profound. This is life changing for indie filmmakers!
Question: Why should filmmakers be enthusiastic about the internet marketing, nerd concept of conversion rates?
Answer: If you know your conversion rates, you can model and potentially project more accurate movie sales projections from day one.
I’m currently selling my uber-micro-budget film, THE CUBE, on Vimeo On Demand.
In sales terms, my unique selling proposition (USP) is that this feature film was made for $500 with no crew.
I was brilliant enough not to apply anything that the experts like Jason Brubaker and Sheri Candler have been evangelizing … which is to build your audience first!
I didn’t do that
When you’re making a feature film made for so little … and doing so with no crew … well, you don’t think about building an audience for something that might blow. Haha.
So, I must sleep in the bed I made.
I’m building an audience from scratch, at the same time trying to see how many sales I can make with direct (self) distribution.
And guess what?
The 1% is real.
The first month my movie had a fairly good conversion rate of nearly 18%. But that has since dropped down to a more realistic 1% conversion rate.
At the time of writing this my trailer has been viewed 1,478 times. It’s only been available for sale for about a month and half now, so although 1,478 is not YouTube viral numbers, it’s not terrible for a $500 feature film.
Anyway, out of the 1,478 views, I made 32 sales.
32 ÷ 1,478 = .02% conversion rate
Wait! I did better than the 1% rate. Haha.
VOD SALES PROJECTIONS (This is the stuff you’ve been waiting for)
The future of independent film distribution is no doubt Video On Demand (VOD), or Electronic Sell Through, or Streaming VOD, or whatever you want to refer to it as …
Bottom Line: How do you project your Return On Investment (ROI) with VOD?
I’m only taking the mantle from what Jason Brubaker has been evangelizing since 2010.
2010! That’s 4 years ago!
If you have a large subscriber base, or better yet, a large email list … you can plan on at least 1% of those subscribers to actually pay to watch your film.
Offering your film up as a $5 rental, you’re going to need a HUGE list in order to ensure that your 1% is worth anything.
Let’s see …
You hope to make $1 million profit with VOD sales?
You should account for the following as well:
30%-50% to pay to the platform (i.e. iTunes, Cable VOD, Hulu)
Any percentage that would go to a sales agent, or digital distribution company
Let’s say we need to double our number in order to hit the $1 million mark …
You’ll need to make at least $2 million to make your goal.
Applying the 1% conversion rate rule:
$2,000,000 ÷ $5 = 400,000 customers
400,000 is 1% of 40 million. You would need to connect with 40 million customers!
40,000,000 … forty-millionnnnnn!
So, it should be your responsibility to tell investors that in order to make $1 million, you would have to show proof that you have connections with 40 million fans.
I’m not sure what kind of garage indie filmmakers can attain this kind of reach?
40 million is nearly twice as many subscribers that the top YouTube channel has garnered to date.
Speaking of YouTube …
There are about 600 channels with over a 1 million subscribers. (According to statsheep.com)
There are roughly 600 million channels on YouTube.
600 ÷ 600,000,000 = .000001%
Dang! I wonder if the lottery odds are better?
PERHAPS THE 1% IS A COSMIC CONSTANT
If 1% is a conservative expectation on any ROI with VOD, then indie producers will need to manage their expectations.
Film budgets will have to plummet even further …
I made a feature film for $500 … so we’re talking about budgets in that range.
And to clarify … this is the concept that a filmmaker can make a film and throw it up onto any one of the various VOD platforms and start selling it to audiences.
I’m not referring to all the various outlets that you can profit from your film license … but rather just a simple deduction.
If you are selling a film online for $5 per view, then how many sales do you need to make, say, a $1 million?
So, is 1% a cosmic constant?
I wonder if the fight against the 1% who control 42% of the nation’s wealth is a losing battle?
Look at the wealth distribution from the Screen Actors Guild (SAG) …
About 95 percent of SAG members makes less than $100,000, and all but 1% make less than $250,000.
There seems to be a cosmic law of wealth that abides by the power of the 1%.
But I digress … Let’s move on!
FILMS RELEASED EVERY YEAR?
Chris Hyams, the founder of indie film distributor and film festival submission company, B-Side Entertainment, estimated that based on individual entries from the thousands of festivals that used B-Side’s Festival Genius software to manage their websites that as many as 50,000 films were produced in 2009 – a number that terrifies Hollywood big-wigs.
So, an estimated 50,000 films were made in 2009.
We have to assume that the number has increased significantly now it’s 2014.
In 2013, roughly about 684 films were released theatrically.
If we do a conservative estimate and add another 10,000 to the 50,000 number.
684 ÷ 60,000 = .01%
Round it up and you get 1%.
And of those 684 films, only 35 films cracked the $100 million mark.
35 ÷ 684 = .05%
Your chances are slightly higher of cracking the $100 million mark, if you have theatrical release, and are backed by a major studio, and have a plethora of marketing dollars behind you. Haha.
1,000 TRUE FANS
A creator, such as an artist, musician, photographer, craftsperson, performer, animator, designer, videomaker, or author – in other words, anyone producing works of art – needs to acquire only 1,000 True Fans to make a living.
If we independents are to sustain and thrive in this new world of filmmaking, then we may have no choice but to earn our 1,000 True Fans.
1,000 True Fans who are willing to pay us $100 every year until we die …
That’s pretty good money for the starving artist.
But in order to earn those 1,000 True Fans, we must garner at least 100,000 on our list.
1,000 ÷ 100,000 = .01%
In the end, you will have to offer such tremendous value to your 1,000 True Fans on an annual basis to warrant them to spend $100 on you … that I’m not sure peddling a $5 movie rental is going to be enough?
Remember, the producers with a 100,000 subscriber base?
They garnered the correct base number, but it’s obvious there is much more work to be done in order to earn the loyalty of the 1,000 True Fans who are willing to spend more than $5 on our work.
Remember, we are emotionally irrational human beings …
But all you need is that sliver of hope …
That you will be the one …
To overcome all odds to become part of the 1%.
Scott McMahon is the Director of Content Marketing for Film Trooper, a website for helping filmmakers become entrepreneurs. Scott recently made the feature film The Cube that was made for $500 with no crew. For more info on the equipment Scott used to make this feature film with no crew, then head on over to www.FREEGEARGUIDE.com