A New Business Model for Film Festivals

It’s not a typo. I really mean “business model”

Most film festivals today are losing money.
Most of them don’t even have a business model, at least not in the general sense.
It’s not something that film festival directors like to speak about much, but during one on one honest meetings they will justify it in one of the following ways:

We’re here for the sake of art.
We’re subsidised (a derivative of the previous bullet).
We’re not expected to make a profit. We’re a not-for-profit org by definition.
We do it in order to promote other things, like tourism in the city, our production company, our organization, a cause etc.

While all the above are totally correct, there’s actually no contradiction between the promotion of the above (art, tourism, cause) and being profitable or at least — self sustainable.

In this post I will outline a new possible method for film festivals, that can allow them to be self-sustainable or profitable.
But for that, I have to describe how film festivals work today.

How Film Festivals Work

To start with, film festivals are showing selected films to their community, which is often called “festivalgoers” — a group of people who like non communicative films (sarc on!), lengthy long shots and preferably in strange languages, always in their original version, never dubbed. Another group is of school kids, who are forced to watch those films by their teachers. A third group exists only in large film festivals: The film professionals. They come to buy, sell, gossip and maintain or extend their network. They are not really interested in (or have time to) watching films for fun, but only to make a purchase decision.
That’s basically it, either for the old huge festivals who already run 80 years or those who started this year in your neighborhood.
And then there are the themed film festivals, like ethnic film festivals or festivals for specific topics (mountains, disabled etc.). They run with the same principles, only for narrower target audiences.

The Current Model of Film Festivals

The right-holders pay the film festival an entry fee.
The film festival pays the right-holder a screening fee.

At first glance, it seems confusing: Have you ever gone to a grocey store that pays you? Or went to buy a car and found out that you’re paid to drive it?
Yet, the two models exist in the world of film festivals quite harmonically and sometimes even within the same film festival itself.

The Logic Behind the Current Model

A filmmaker might pay a $50 entry fee but win a $5000 prize. That’s a calculated risk or a fair gamble for the filmmaker. In addition, the festival might provide a springboard for the filmmaker’s career, because distributors, sales agents and journalists are also attending the festival. In those cases, one can consider the fee as an exhibitor fee in a conference, market or convention.

A festival paying for a film to participate would be in one of the two cases:

The film director is a celebrity and her or his presence will attract viewers, journalists and industry professionals. It’s practically like companies sponsoring influencers.
The film festival is small or themed. There’s no prestige in participating in the festival and there are no industry events like film market or a pitching event . In those cases, the only motivation for the right-holder to participate would be the screening fee.

Why Film festivas Lose money

First, there are the operational costs. Personnel, accomodation of guests, opening ceremonies with catering, PR, insurance and all the other expenses that exist when organizing a conference (since a film festival is practically a conference).
It’s true that many film festivals have sponsorships in the form of free venues from the local cinematheque, catering from the nearby restaurants, corporations which are sponsoring art in exchange for advertising (or green/black or whatever washing) and more.
All those expenses and the balance between them and sponsorship is not part of that post.

This post is about the way the screening fee model can be improved.

Revenue share

It all started when on Movies Everywhere, we developed a revenue share feature. For me, as an active digital distributor, it was obvious. Reveneue sharing is a prevalent model in many film deals, especially in the VOD industy: A small to no upfront fee (MG) is paid and in return, the right-holders receives a share of the revenue as long as the film is sold.
There’s nothing new in this mode, yet I was surprised that not one film festival from our client base chose to use it!

Festivals, especially, the small ones, pay thousands of dollars as screening fees. In other cases, they have to compromise on their programming, because they don’t have enough budget for the screening fee.

A Viable Model

The festival can substitute the budget dedicated to screening fees in order to promote the film screenings. That way, both the festival and the right-holders will gain revenue.
Of course, not all right-hlders will agree to it. Psychlogically, people prefer “sure money” than “potential revenue”, as proved by behavioral economists again and again.
And yet, there would be always those who will agree. Later, the success of the rev share model will do the persuation job and the rest will follow.
The film festival itself will enjoy a higher popularity and will be able to offer a larger program and that way, benefit all sides. A true win-win situation.

Revenue share on Movies Everywhere is straightforward: For every film added to the system, there’s an option to enter the right-holder’s email and a percentage of the rev share. The right-holder has then access to a dedicated revenue dashboard and can ask for a payout at any time.
Would you like to try it out? Simply open a free account on Movies Everywhere or contact us for instructions on how to use it.