HOLLYWOOD FILM FEST GETS THE NET
by Susan Royal

This year's Hollywood Film Festival reflected the reality of the Internet's growing influence by adding The Hollywood Internet Awards and the Hollywood Internet Conference.

The Net Awards winners are:
mgm.com -- Best Major Movie Studio Site
iflm.com -- Best Independent Movie Site
mediatrip.com -- Best Netcaster Site
joecartoon.com -- Best Animation Site
Shockwave.com -- Best Game Site
msnbc.com -- Best TV Site

They may have to rethink some of the above categories in the future, as many of them cross over.

The Hollywood Internet Conference included panels discussing "The Craft of Digital Filmmaking," "Digital Filmmaking: Financing and Production" and "Marketing on the Internet."

Entertainment attorney Mark Litwak moderated a panel discussion entitled, "Digital Distribution and Exhibition." He spoke about a company is in involved with, called Reelplay, and asked the other panelists to describe their companies and comment on the state of the industry. Excerpts from that seminar follow:

MARK LITWAK (Reelplay): Reelplay is a virtual marketplace, like AFM [American Film Market] online. We've created free Web sites for all the sales companies and we have about 17% of them signed up. We also give them free Web sites for every one of their films. Buyers can go on the Internet, use our search engine and search for films in a much more efficient way. As of January we started giving away free Web sites to filmmakers, too.

BRUCE EISMAN (Executive VP, CinemaNow.com): At our Web site, CinemaNow.com, we show movies -- shorts and features. We're majority-owned by Trimark Pictures and we have several libraries of films. We believe that at some point when the Internet comes into the living rooms of America we'll have a combination of Blockbuster and HBO and you'll be able to pretty much watch whatever you want whenever you want without leaving the house. So that's what we're kind of positioning ourselves for.

ROBERT FAUST (President, MediaTrip.com): I'm co-founder of MediaTrip.com, an entertainment site with originally-produced content and acquired content -- feature-length films, short films, music and a community section where filmmakers or artists or musicians can push their own work and get the tools to build out their own site. We have focused on linear programming, but we're getting more interactive programming. We're partners with Revolution Studio, which is Joe Roth's production company, and have talent associations, such as with Adam Sandler to co-produce Adam's site, and we'll be sharing content with him.

BRUCE FORMAN (COO, Romp.com): Romp.com is a freewheeling, no-holds-barred, entertainment destination for those of us who are not politically correct. The site is chuckfull of interactive animation, videos and games. We're experts at developing Internet-specific programming. The genesis of the company was to use the Internet as an alternative distribution channel but also as a creative medium inside Hollywood and also outside Hollywood for up-and-coming talent. We work with artists from around the block as well as artists based in Canada and in Eastern and Western Europe. We're taking advantage of the up-and-coming talent that the Internet has suddenly liberated and cast a light on. The company was started a year ago. The site was launched in May. Within a few months we are up to a half million unique visitors, mostly from viral marketing and word-of-mouth, from people sharing our content and through file-sharing technology such as Scour Exchange. For the most part we've built our business on animation because, frankly, it makes the most sense right now due to bandwidth concerns and because it's also a great platform for interactivity...We develop shorter programming with a strong interactive bent which shows our sensibility. We believe the Internet is best for narrowcasting, rather than broadcasting. And that's Romp.com.

BUZZ HAYS (DotComix.com): I'm the head of an animation studio called DotComix. The company has been around for going on eight to ten years. The kind of animation we do is mostly based on performance animation, such as motion capture and real time animation. Something we're working on right now is Gary Trudeau's "Duke 2000 Campaign"....We also produce a ton of cartoons for syndication. DotComix is a portal of sorts, although we don't intend to be the next Excite or Yahoo!...The advantage to the process the way we do it, is that in an eight-hour day we can turn out 12 - 15 minutes of animation, which is pretty significant....Right now we have over 450 animated episodes online. We developed some things for offline, for MTV, including "Virtual Bill Clinton."

HARRIS E. TULCHIN (Tulchin Entertainment): I'm an entertainment lawyer and producers rep. I help filmmakers and animators and artists get their product out to market, get films financed and distributed. I work with Joe Cartoon, who also has his material on Shockwave and Atom Films in addition to his own site, and a new hip-hop animation studio called Imagination Studios and Spumco, which has an online network and recently has done a deal with Icebox to have some shows on Icebox.

QUESTION: What revenue models are working for you these days?

FAUST (MediaTrip): Right now it's a growing medium and so revenues are still exceeded by expenses. Our revenue model right now is advertising, streaming media advertising, we've done a deal with Microsoft, you go to any of our film sections and see Microsoft streaming media ads and that's based on cpm, which is the cost per thousand views, a certain dollar figure, banner ads as well and also in intellectual property which means that you create a show, have ownership of that property and you try to monetize that online and also offline, through taking it to television or film. We're about to announce one of our properties that will become a feature film. And then there's licensing thereafter, merchandising and that sort of thing.

FORMAN (Romp): We're syndicating our content to a network of different sites, that's one; and two, we're creating a library of characters and media properties that can then be leveraged across a number of different platforms -- not only online but offline. Offline is the big grand slam for everyone here, that's developing a character that's a breakout hit. We happen to do it in a very cost-effective manner. We get a number of "at bats" and we're shooting from the key rather than taking half-court shots at the buzzer to try to score. Right now, frankly, broadband is not yet a mainstream access. Controlling the file and being able to stream ads within the file is a much higher ROI vehicle for advertisers and I think we'll see a strong growth in advertising online when broadband does hit the mainstream, especially for content-owners, given the flexibility of advertising within the file and also in sharing and setting up files so people don't necessarily have to view the content on your site as long as they're viewing the file they're getting the impressions.

HAYS (DotComix): At DotComix we pretty much abandoned the notion that ad banners will ever make any money so we have bake sales every Saturday. [He gets the laugh.] We've done a lot of television advertising work as well and we work with the big agencies. Our first show for the broadband effort is a pretty huge scale show, in fact we actually perform before a live audience and that's going to be a sponsored model. And for the kid's effort [their site for kids, ages 9 - 13] we actually did this wacky thing called "a business plan." We sat down before going into production and lined up sponsors for certain shows before launching them.

EISMAN (CinemaNow): Banner ads, yes, as well as streaming video ads preceding shows and starting with the fourth quarter they'll be inserted in the films like NBC or ABC does. That's the basic revenue model -- that, and syndicating the content and also taking shows offline.

TULCHIN (reps Joe Cartoon): Joe Cartoon was discovered uniquely on the Internet and pretty much through, I wouldn't call it "viral marketing," I'd call it "love marketing" -- people sending it through e-mails got it up to 10 million page views a month and it's doing about $250,000 in ad revenue with banner ad sales and he's just a very small studio with one or two people, so that's not a huge business, but it is a business.

LITWAK (Reelplay) Speaking on behalf of Reelplay, we really never had expectations of making a lot of money in advertising, but we plan to introduce a bunch of premium services, we're a virtual marketplace and our clients are international salesmen and filmmakers looking for distribution and we're going to have a delivery service, for instance, to help them deliver materials to their buyer worldwide and that will save them money on FedEx and shipping charges. After we have hundreds of filmmakers' Web sites up, we'll go to Kodak and create a buyers club to get discounts on film because we can purchase stock at a much lower price than the individual filmmaker members. Those kinds of spin-offs will provide the bulk of our revenue. Most of our clients are having their first net business transactions through us. Once we get them transacting a lot of business over the Web, we hope to sell them services that will make us money.

Anyone having storage problems? How about Joe Cartoon, getting so much traffic?

TULCHIN: He has deals with syndication partners to help pay for bandwidth.

HAYS: Apple is the official sponsor of the "Duke 2000 Campaign" and they're providing all the bandwidth and streaming services for that. We did budget it out and looked at a variety of different models. We do a new 2¸ minute video a week. We have about an hour's worth now and the cost for a year-long project for us is about $2.5 million to stream and that's a lot of money.

How much is viewership limited by speed of modems and processors?

EISMAN (CinemaNow): For us, any computer purchased in the last couple of years with a 56K modem or broadband access is sufficient. Most of the people watching our films are using 56K modems. Personally I think you should be using DSL, cable modem, etc. That way you get full screen image. With dial-up it's small screen. But nevertheless, people are doing it.

HAYS (DotComix): At DotComix everything there is designed for 28.8. A pretty low bar is set these days. The way we get away with that is that we're using a technology called Pulse, which is a 3D player and we're streaming animation. The problem with players is, unless it's Flash or Shockwave, people have a weird resistance. People just have this weird resistance to plug-ins. In our case, there's a godsend in the wings, which was that Pulse just signed a deal with Real so that they can plug into Real.

How do you create a sense of community online?

FORMAN (Romp): At our site we have bulletin boards where people post comments and you can see trails of interaction and moving into chat where you can talk with a creator or a character. I think that's a rich form of community. People even suggest ideas for episodes.

Are you streaming or downloadable?

EISMAN (CinemNow): We stream. We are showing now virtually no advertisements. We do about 50,000 streams a week.

FAUST (MediaTrip): We are streaming only. We don't believe in downloading and giving away digital files and people's intellectual property.

What about doing reality-based shows?

EISMAN: There is a site doing that or about to do that, but I logged on to "Big Brother" last week and it was one of the most singularly boring experiences of my life.

FAUST (MediaTrip): The key for the Internet is to create a different experience. Why create something that's being done on television? Online programming, in our theory, should give the user something different -- interactive or a little edgier or just create a different environment for the user and a reason to come back.

How has the changed attitude of the investment community towards dot-coms affected you?

HAYS (DotComix): We're not an e-commerce site. We actually built content before we had a business plan for the company, so we kind of did it backwards. We haven't found much of a hitch at all because we create most of our content. If you're talking to investors about "Building market share" and expensive marketing campaigns it's getting harder and harder to get that kind of money. You can't spend a ton on intangibles, enormous salaries and ridiculous amounts of money on marketing, without building content. You can use content for marketing purposes.

EISMAN (CinemaNow): E-commerce is an expensive proposition. It's very expensive to fulfill. You should use a fulfillment service. With e-commerce you can spend a lot of money in search of brand loyalty that never comes.

FAUST (MediaTrip): Fulfillment is extraordinarily expensive. Job it out.

FORMAN (Romp) When capital is scarce the advertising budgets usually go first.

HAYS (DotComix): Of course for now the holy grail is the TV deal. Every day in the trades you read so-and-so is the "first" one to take a net show offline. Get in line, everybody is doing it. But chose the right project. We have a show called "Sister Randy," she's a ribald art critic. Our intention at one point was to take her to television, but right now she works the best in two minutes or a minute and a half. BBC called and said they wanted her and we said she's only two minutes and that was fine with them because they have programming that doesn't fit the standard half hour format so we just licensed 26 episodes to them as interstitial stuff.

TULCHIN: What did they pay?

HAYS: A little bit more than it cost us to produce it, which is a good thing. I must say in our case it's a little different because of the way we do our performance animation. It's broadcast-ready the day we do it. It's not like we have to go out and polish it and do extra stuff to it. Even with simple Flash, there is a bit of post-production you need to do.

FORMAN (Romp): In our case something along the line of eight to ten thousand dollars an episode will more than cover the production costs of most of our shows.

FAUST (MediaTrip): The key is to monetize things in as many streams as possible. We have a short film called George Lucas in Love on our site. It broke records online and then we took it out on Amazon, we sold over 15 thousand units and now we're rolling it out retail at Tower, Borders, The Wherehouse, Sam Goody's -- lots of units just as a test. We're talking about a nine-minute short. On Amazon it's been $7.99 and retail it will be $6.99.

Is it true that George Lucas in Love outsold Star Wars: Episode One?

FAUST: It continues to outsell Episode One. The amazing thing is you can see it for free on MediaTrip, but people are still buying it.

LITWAK: Getting back to the question of venture capital... now that the bubble has burst, we've come back to a level of normal reality. Right now I see a lot of people into infrastructure and wireless plays.

FAUST (MediaTrip) That's the reason we targeted Revolution to partner with. It serves two functions -- we're a promotional arm for Revolution's product and we do a lot of pre-promotion before the films are made, like we're casting roles online. We also serve as an incubator for talent, via projects developed on line that we forward to online projects through Revolution. We're creating those kind of synergies that are important in this environment.

HAYS (DotComix): On the "Duke 2000 Campaign" it was designed from the get-go for a life outside of the Web at least as much as on the Web.
We treat the show like news and our goal is to get at least one major magazine interview with the character per month. Keep promoting the name. Part of the reason we put those THX trailers in the movie theaters [he previously worked for George Lucas] was because it kept Lucas' name out there between the times he made pictures. Part of the effort was a marketing effort which a lot of people forget about. It can take a significant amount of money just to get heard on the Web. Companies that don't exist anymore spent all the money they had doing this badly. Those days are gone, investors will not give you money to market yourself that way. Figure out a way to get it into the public consciousness without having to pay a million dollars. Create something viral if you can.

How do you successfully viral market?

FORMAN (Romp): It's got to be good, it's got to be edgy and we encourage people to download it. We think at the end of the day that's good because we think it ultimately leads back to us. We give them a link and we put it on Scour.

HAYS (DotComix): I agree with Robert [Faust of MediaTrip] that the whole problem of letting people have your files is problematic. And as a practicality, we have to stream because mechanically it would take forever at 28.8.

Give us an example of one of your interactive shows.

FORMAN (Romp): We have "Open Mic," where the user can heckle or applaud the stand-up comics. We're looking to that sort of thing to use in conjunction with the television set.
Seventy percent of all people on the Internet are watching TV at the same time.