How is your revenue calculated in a traditional DVD distribution deal? Distribution expert Stacey Parks explains the math so you know what you will make.
I’d like to share a little tip with you, as it’s something that came up recently that I think is important you all know. It has to do with traditional DVD distribution deals and how revenue is calculated, and how you get paid.
To keep it simple, here’s the deal: When you see a DVD for sale at Target for $20, that price is called the retail price. When the DVD distributor sold the title to Target, Target paid a wholesale price, probably of $10 in this case. So what does that difference in price account for?
Retailers buy wholesale from distributors, and then mark things up usually double to arrive at their retail price. That difference in price is how Target stays in business – it covers overhead costs and hopefully some profit.
How does all this affect you? When you get a quarterly accounting statement from your DVD distributor, you will notice that your royalty income is calculated as a percentage of the wholesale price of the DVD, not the retail price.
Many filmmakers start counting their chickens, and plan on receiving a certain amount of money in royalties, and then the big surprise comes when they see it’s half of what they expected. Why? Because many filmmakers project their DVD revenue based on retail price instead of wholesale price. So do yourself a favor – if you’re projecting revenue from traditional DVD distribution, remember to use a wholesale price (like $5-$10 per unit), rather than retail price. You’ll have a lot less surprises later on!
This information is especially critical if you’re doing a business plan for your film. You will quickly see that retail distribution is not a big profit center for the filmmaker at all. Your big profit centers for DVD distribution will be doing direct sales off your website, since you can sell your DVD for $20 if you want, and you get that full amount in your pocket.
Keep learning filmmaking
Want more lessons like this? Join StudentFilmmakers free for live webinars with working pros, and stream on-demand filmmaking classes in cinematography, directing, screenwriting, sound and post.
