Ex-Groupon Exec Puts Indie Movies Online at Startup Prescreen
When Shawn Bercuson and his family went to Park City, UT, exactly one year ago, they may have been the only people not in town to attend the famous Sundance Film Festival, which is held there every January. “I do enjoy movies, but my family and I go skiing every year during Sundance,” he says. “If you go then, the mountains are empty. It’s unbelievable. And then at night, there are world-class concerts and movies. It’s a ton of fun.”
Still, it wasn’t to be a typical January for Bercuson. The former Chicagoan, who was one of the original employees at Groupon and a former principal with venture firm Lightbank, had just moved to San Francisco. He was thinking about his next career move. His friends knew that, and they were peppering him with ideas.
“I had some friends in the [film] industry who know me as their go-to tech entrepreneur, and everybody was talking about distribution and how DVD revenues are declining,” Bercuson recounts. “I started talking to producers and filmmakers and going to meetings my friends had set up. And it was amazing to me, number one, that this business was so antiquated, and number two, that it was such a huge opportunity. They really needed help.”
By “this business,” Bercuson means independent films—those where more than half the financing comes from sources outside the Hollywood studio system. For indie filmmakers, it’s a fiercely competitive world. Of the 4,000 films submitted to the Sundance festival in 2011, only 200 were accepted, and only 50 of those were acquired for theatrical distribution. “The good movies were getting financed,” says Bercuson. “The problem was distribution. And the more I looked into it, the more I realized how similar the problem was to Groupon.”
In a way, Bercuson suggests, indie movies are like coupons for local deals. There are a lot of coupons out there, but before Groupon they were harder to find, remember, share, and use. Similarly, “There were plenty of repositories for movies, like Amazon, iTunes, and Netflix, but they were still having a hard time finding an audience. The question is, how do you connect content to an audience that’s relevant when [the filmmakers] don’t have the money to market these titles?”
At Prescreen, the San Francisco startup Bercuson founded shortly after his Park City trip, the answer also looks a lot like Groupon’s. The company picks one independent movie per day to feature on its website and in its e-mail newsletter. People who rent a streaming version of the movie on that first day get 50 percent off the rental price ($4, as opposed to the usual $8).
As with Groupon, there’s a social and reputation-based element: if you’re among the first 5 percent of people to rent a movie, or if you can get at least three friends to rent on your recommendation, your next rental is free. And just like Groupon’s coupons, Prescreen’s offers are time-bound: once users start playing the movie, they have 48 hours to finish viewing, and most movies get booted off the site after 60 days to make room for new additions.
The only catch is that you have to watch Prescreen’s movies on your computer. The service doesn’t yet work with iPads, set-top boxes, or Internet-connected TVs. (That said, it’s not too hard to play streaming video from a laptop on a big-screen TV, if you have the right connectors. See my 2009 column Cutting the Cable: It’s Easier Than You Think.)
To tap into the excitement around this year’s Sundance Festival, which runs from January 19-29, Prescreen has gathered all of the publicly available trailers for Sundance-anointed films—so far that includes 86 of this year’s 112 features. You can’t stream the full version of these movies, but you might be able to after the festival. The whole point of Prescreen—and the reason Bercuson himself will be in Park City again this year—is to offer an outlet to the majority of filmmakers who, come January 30, won’t have distribution deals.
Also starting this week, Prescreen will spend three weeks promoting films from the previous three Sundance festivals that “didn’t get the love they deserved,” according to Bercuson. These hidden gems might even have turned up on Netflix or iTunes, but haven’t yet found their niche audiences. “We are going to show that there is a lot of great content out there that doesn’t have mass-market appeal but does appeal to me or you,” he says.
Bercuson launched Prescreen on September 14 with $1 million in Series A funding from a group of individual investors including former Facebooker Chamath Palihapitiya, CMEA Capital partner Saad Khan, Kauna Ventures chairman Ed Cluss, Rapleaf founder Auren Hoffman, and himself. The company’s nine employees work from a hip third-floor office in one of SoMa’s ubiquitous former warehouse buildings. Bercuson says Prescreen has signed up 65,000 newsletter subscribers. Trailers on the site are typically viewed 1,500 to 4,000 times, and Prescreen’s conversion rate—the fraction of trailer watchers who end up renting—is between 5 and 10 percent.
The startup’s best-performing film so far is The Electric Daisy Carnival Experience, a documentary about the house-music festival held each year in the southwestern U.S. The movie happened to go up on the site last Friday, the day I visited Prescreen’s office, and Bercuson’s colleagues watched excitedly as the metrics on their screens ticked upward. More than 50 people rented the film during the hour I was interviewing Bercuson. As of yesterday, the trailer had been viewed almost 19,000 times.
Still, all those numbers are small compared to the audiences for theatrically distributed feature films, and even compared to the viewership for films distributed via iTunes or Netflix. The point being that Prescreen and related startups like SnagFilms and Fandor, an indie rental site we profiled here last spring, are still in their infancy. The wave of digitization and fragmentation that has been roiling the publishing and music industries for more than a decade has yet to truly transform the movie business, though it’s clear from the headlines that the big studios are scared to death about losing their traditional revenue streams from theaters and DVDs— the decision by Warner Bros. last week to double the wait time before movies get to Netflix and Redbox is a case in point.
To Bercuson, the losers in today’s tussles over film distribution are audiences, who can only see new films in the manner, and at the time, prescribed by the studios. “You have the theatrical window, the premium video-on-demand window, the DVD window, the streaming window, and finally the Internet window—iTunes, Amazon, and so on,” he says. “So [the studios] are spending a whole lot of money to only allow one segment of the market to consume at any given time. Our whole thesis is that people who want to consume online are not going to go to a theater. If you give them access online today, they will buy it. And if they want it and you don’t give them access they will find a way to get it,” such as a pirated bittorrent version.
But Internet viewing and traditional theatrical release don’t have to be mutually exclusive. Bercuson points to Margin Call, a Roadside Attractions feature film released online last October on the same day it hit theaters, as an example of the way Internet marketing can actually boost box-office revenue. “What happened was, people online started talking about it and Facebooking it, and all of a sudden people knew about it, and it did much better, and it drove people to the theater.”
Now HDNet and Magnolia Pictures, Mark Cuban’s cable network and movie studio, are experimenting with so called “day-and-date” releasing in which movies appear simultaneously in theaters, on cable TV, and on DVD. “And this is all just in the last two months,” says Bercuson. “Theaters have always been afraid that this is going to hurt their exclusivity, but in reality it creates conversations and makes the marketing better for everybody.”
Filmmakers who sign up to put their movies on Prescreen don’t forego potential theatrical distribution deals, Bercuson says. In fact, Prescreen can provide analytic and demographic data that helps them figure out where to focus their efforts. “Every movie gets a ‘Prescreen Performance Report’ that says ‘Here was the open rate for the e-mail, the click-through rate, the trailer views, the total purchases, how many purchased on day one, how much money you have earned,'” he explains. (Prescreen gives filmmakers 50 percent of its rental revenue.)
But the really interesting thing for filmmakers, Bercuson says, is that “We can also understand who these people are. We can say, ‘The majority of people who rented your film live in the United States, specifically California and New Mexico, they are aged 18-24, and they like cooking, French films, and dancing, and we think that for this title your addressable market is 1.7 million people.’ If you want to go theatrical, we can tell you what are your top U.S. and international cities.” Prescreen obtains such details by correlating subscribers’ e-mail addresses with anonymized demographic data compiled by investor Auren Hoffman’s company, Rapleaf.
Bercuson says he’s aware that Prescreen’s PC-only streaming will present a hurdle for many potential viewers, but he says his small team wants to optimize that experience before building, say, an iPad version of the service. “We know that 7 percent of our daily users are opening their e-mails on their tablets, so we know that their preferred method of watching is probably going to be on their tablet,” he says. “But we are four months old and we are learning, just like the filmmakers and everybody else.”
I asked Bercuson if he feels there’s any danger that Prescreen might come to be seen as the reject site—a refuge for filmmakers who didn’t win distribution deals at Sundance, Toronto, or Cannes. He answered that there are plenty of worthwhile films to go around, and that Prescreen is all about economies of scale—except that in this case, the economics favor the small end. “We’d love to work with the blockbusters, but we don’t need to,” he says. “If a movie has an audience of 750,000, we are more than happy to find that audience, whereas distributors would not be. Look right now at some of the content on our site—each of these films has found an audience, whether it’s 15 people or 1,500. That’s what we are trying to enable.”