$6.5 million in Net profit. Is that what the filmmaker gets? Nice.

Maybe, maybe not. It depends on the deal that was struck between the filmmaker and the distributor for the theatrical release, which usually includes the “home video” rights (DVD sales mostly nowadays) and any upfront money advanced to the filmmaker by the distributor.

If the filmmaker was able to retain DVD sales rights (or partial rights), then he/she could probably get a good percentage of the DVD revenue. But let’s say the filmmaker struck a lousy deal and ends up getting only $2.00 per unit of DVD’s sold at the wholesale price of $10.00 per unit.

If total DVD sales was $13 million (read previous blog entry) at $20 retail price per unit, that means about 650,000 units were sold. At $2.00 per unit x 650,000 units, the filmmaker receives $1.3 million. So now, the filmmaker is still short $3.7 million from the $5 million he/she spent on production. What next?

There are still other “ancillary” sales opportunities available to the filmmaker. These include digital downloads, pay-per-view, cable, broadcast, and foreign markets. Eventually, by adding up all of these other sales venues, the filmmaker will probably break even. Note that along the way, a whole lot of OTHER people have been making money off the movie the filmmaker made. All these distribution outlets, from theatrical to DVD to cable TV, entailed using a middleman who made money from fees and expenses charged back against the movie.

What about the poor filmmaker or production company who did all the work in the first place? How do they get a better share from the sale from “their” movie?

If you’ve been thinking ahead, you’re wondering... why doesn’t the filmmaker just sell directly to the audience, bypass the middlemen, and get most of the revenue?

Before the internet, that kind of targeting was extremely hard to do. Beyond your family, friends, and acquaintances, selling directly to others still meant that the filmmaker had to somehow reach every person who would be interested in their movie. That kind of effort involved expensive print, radio, and TV ads done on a high-frequency, scatter-shot campaign basis so that somehow an audience can be found for the movie. In other words, you (the audience) had to first know about the movie before you’d want to go see it and/or buy it. If the movie was good, then you became the “word-of-mouth” talking ad for the movie as you went around telling your friends about it.

The Internet marketplace available through email, blogs, instant messaging, and social networking changed all that. Traditional advertising hasn’t gone away. But for filmmakers, it’s no longer the only game in town.

For homeschoolers and filmmakers alike, the Internet was literally a God-send. Both communities thrive on it. For AFG, having made a movie about homeschoolers for homeschoolers and by homeschoolers, our marketing advantages gets tripled on the Internet.

(The Question Everyone Asks - Part 3 will explain how this works.)