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Potential for Revenue

Sep 1, 2002 12:00 PM, By Bob Turner

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"Comparing CustomFlix with Traditional Video Publishing"

Terran Interactive's founders have started new e-store company called CustomFlix, and it offers services you should know about.

With the economic woes our industry is experiencing, new services may be the way to survive in this unhealthy climate. CustomFlix says it wants to partner with you in this effort. The company recently announced a new, low-risk e-store solution it claims will allow you to turn content into cash.

CustomFlix Labs in Los Gatos, Calif., (www.customflix.com) is a low-risk video-publishing service. If you have content you think you may want to market (or have postproduction clients who do), I strongly urge you to take the web-based tour of this company. The bottom line is that streaming media has yet to fulfill video publishers' expectations, and marketing DVDs and VHS tapes can have huge upfront costs — especially with traditional duplication and fulfillment expenses. CustomFlix may be the first to successfully create a new video publishing service, removing the barriers to entry that prevent many video content creators from profiting by selling programs to niche markets.

This programming could be anything from an independent feature film to a training program. It might be “sports highlights” captured by a local TV station. It could be music videos of a local band or “the making of” a film or video program. Maybe you have decided to write a book and want to offer a DVD supplement — either an interactive DVD of repurposed programming or your personal creative vision-statement. It could be anything that might sell.

“Traditional video publishing is a great solution when you've got 10,000-plus copies of a blockbuster movie to sell,” says Darren Giles, CustomFlix co-founder. “But if you expect to sell somewhere between 10 and maybe a thousand copies, then CustomFlix offers a far better, more profitable solution.”

CustomFlix CTO Giles, President Dana LoPiccolo-Giles, and Vice President of Marketing John Geyer founded Terran Interactive. Along with Sean Sanders, former Media 100 director of sales, and Clinton Staley, former engineering manager for Terran/Media 100, they decided to start CustomFlix.

The Costs and the Services

Here's how CustomFlix works. If you have already created a DVD title for sale, CustomFlix will charge you a $49.95 setup fee, plus the first $9.95 plus 5% after that for each sale. You set the price of the tape or DVD. The purchaser is also charged a low shipping and handling fee (for a DVD it is $2.99 base fee plus $1 per disk). There is also an annual renewal fee of $9.95 per title per year. If you want a master tape turned into a DVD with a customized DVD menu and chapter names, there is an additional $249.95 charge for a program of up to 70 minutes. This fee ramps up to $499 for a three-hour program.

There is no advance payment for DVD or VHS duplication runs with the guesswork of run numbers. There are no inventory concerns or re-order hassles, and CustomFlix takes care of all sales support, shipping, and technical support. CustomFlix does this without huge upfront costs, yet the quality of its products is exceptional. The company uses the same encoders as Hollywood DVD creators and records on Mitsui media.

CustomFlix features a well-designed program that lets you create a customizable banner for your e-store webpage featuring a streaming QuickTime trailer and order buttons. The program allows you to create DVD and VHS case designs and labels. CustomFlix also provides an online accounting title report that details your sales progress and the number of visitors to your e-store.

Referrals Program

Even if you do not want to market content but rather focus on serving your editing clients, you should be aware of this company. Why? Because it has a referral program where you can earn cash by letting your clients know about CustomFlix. Access the site's referrals program page at www.customflix.com/Producer/ReferralProgram.jsp. Clients can benefit from this service, and you may be able to earn cash for providing the referral.

In an unsettled economy, here is a company that can help you increase your revenue without significant investment — whether you are repurposing content, creating work of your own, or profiting from its referral program.

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Sidebar

Comparing CustomFlix with Traditional Video Publishing

LET'S EXAMINE A TYPICAL SALES example and see how CustomFlix services compare to traditional methods. Let's say you sold DVDs and VHS tapes at a price of $29.95.

Using Traditional Duplication

First, you need to pay upfront to have a DVD produced, packaging printed, and copies duplicated. Your next challenge would be to determine how many units you are going to sell. You guess (because you have to) and order 500 units, 250 VHS and 250 DVD. Once you get the units, you'll have to pay monthly e-commerce and fulfillment fees or ship the product to customers yourself. Over the next few months, sales are good, and you sell the entire inventory.

That's great, but now you have to decide whether to reorder, and again decide how many units to have duped. Not reordering means turning customers away, so you order another 250 DVDs and 250 VHS tapes. But sales slow, and at the end of a year you've only sold half of your second order. Still paying monthly fees, you stop sales at the end of 12 months. Using this approach, you'll need to pay $5,510 upfront. Also, you'd pay about $75 per month in e-commerce, fulfillment, and other charges. Add it all up and you have to invest $6,410 to make a profit of $11,376.

Using CustomFlix

Compare this to CustomFlix, where you pay the $50 setup and $249 transfer fees. With an investment of $300, you would earn $13,612 profit. And note that this comparison does not include any sales support, customer support, shipping and handling expenses, web service charges, or other overhead you may experience with the traditional method.

More importantly, let's say you were not very good at predicting sales and only sold 50 DVDs and 50 tapes. With CustomFlix, you have still earned a profit of $1,555. And if you pay $10 to renew your e-store lease, you can have revenues trickle in for another 12 months.

The CustomFlix Business Plan

How did CustomFlix come up with the $6,410 investment? I asked John Geyer, CustomFlix vice president of marketing.

“For the traditional methods example, I compared us to what we call ‘low-end’ outsourcing. This won't produce a disc that is of the high quality CustomFlix produces, but we still beat the competition,” Geyer says.

The costs used in the previous example for the traditional method were:

• DVD authoring: $199 for encoding and authoring

• DVD art: $150 for preparing artwork for a printer, printing proofs, film, etc.

• 250 DVD dupe: $1,675 = about $5.95 per disc, plus 75 cents per Amaray case

• DVD misc.: $137.50 for insertion of printed covers and $30 for mailing

• 250 VHS dupe: $660 = about $1.99 per tape, plus 61 cents for plastic covers

• VHS misc.: $107.50 for insertion of printed covers, plus $30 for mailing

• E-commerce: $1.86 per sale via PayPal and about $40 month for the e-store

• fulfillment: $3.75 per unit shipped, plus $35 per month

Taking the above prices, you can derive the upfront costs for traditional duplication:

$199 authoring

+$150 for DVD artwork

+$1,675 for DVD duplication (per run)

+$137.50 for misc. DVD (per run)

+$660 for 250 VHS duplication (per run)

+$107.50 for VHS misc. (per run)

× 2 (and double per-run costs for two orders). Then add e-commerce costs for 12 months — ($40 + $35) × 12 — and the grand total equals $6,410 invested over 12 months. You will also experience traditional per-unit fees of $1.86 for PayPal + $3.75 for shipping, or a total of $5.61 per unit shipped.

Compare this with the CustomFlix fee structure: $250 for DVD authoring + $50 for setup fee equals a total upfront investment of $300. Per-unit expenses would be $9.95 + 5% with no monthly fee. This results in a $300 investment and per-unit expense of $11.50.

“I'm sure one can find other vendors to dispute the above numbers,” Geyer says. “To this I will say a few things. First, I spent a considerable amount of time tracking down the best deals I could, so producers are welcome to do the same. But what's their time worth? The comparison is conservative, as we don't take into account any charge for the producer having to spend time dealing with any of the headaches.

“Lastly, even if I'm off by a couple of hundred bucks on duplication, etc., the producer still has a sizeable upfront investment that they can't escape, which means the risk of losing it if sales don't materialize. Who needs the stress?”
— BT

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