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CEO William Mainguy: "We're bridging two very interesting worlds. We are very much about that open marketplace where great things can happen that are under the control of both viewers and filmmakers." Vancouver digital film distributor Reelhouse has just unveiled a suite of new features for its platform, including flexible payment systems, improved product bundling, greater content control, and discount offers to special audience groups. In conversation with Cantech Letter, Reelhouse founder and CEO William Mainguy said, “We’re building our features to appeal to the majority of filmmakers and content creators out there, rather than just a place to upload a film with ad revenues. We give them different monetization tools, different marketing tools, different ways to showcase their film, and different purchasing or monetization options.” It doesn’t take much knowledge of the film industry to appreciate how potentially game-changing Reelhouse’s approach is. The screenwriter William Goldman once famously quipped “Nobody knows anything,” referring to the futility of predicting which films would go on to success while others failed at the box office. He may also have been making a comment on the general cluelessness of the people charged with engineering those hits on behalf of the studio system, via marketing campaigns. For several decades, those responsible for marketing films have prized the audience more for their butts, for their ability to fill seats, than for their brains. In other words, while a lot of attention is paid to attracting warm bodies (now charmingly referred to as “eyeballs” by a new generation of marketers), a lot less attention is paid to why a viewer might want to watch any given film to begin with, or whether the audience might want to continue a meaningful relationship with that film or TV show over time. In the past decade, new platforms have risen up and offered the viewer a different dynamic when it comes to watching films, such as Netflix and on-demand video, not to mention YouTube and Vimeo. Whether any of those models are sustainable over the long haul is debatable. But they certainly have affected the conversation. And although formats and viewing platforms are becoming more flexible, the basic dynamic between filmmakers, marketers, distributors and viewers remains roughly the same. The audience, prized mainly for their butts and eyeballs, eventually feels a little cheap and taken for granted. Things could be so different if anyone paid attention to what the audience actually wants. Since 2012, Reelhouse has been attempting to change that dynamic, in an industry notoriously resistant to change and outside interference, by betting on film as “experience” through audience engagement, more so than as “commodity”. Reelhouse has enjoyed rapid success, partnering with the Sundance film festival and then with Warner Bros. for a trial involving five of its feature titles. In April, Gener8 Media Corp., also based in Vancouver and specializing in 3D conversion of feature films, increased its stake in Reelhouse to a total of 70%. Part of the problem that Reelhouse is trying to solve, for both independent and studio filmmakers, is allowing each film to find its right audience, and vice versa. The film industry operates on the widespread belief that a film is not even worth making, much less distributing if it is not all things to all people. Niche subject matter need not apply. When William Goldman said, “Nobody knows anything,” he was referring to the film industry’s middlemen, marketers and distributors and producers, all of them desperately trying to anticipate what makes a hit, based mainly on gut feeling and little to no audience insight. Looking at the experience of recent platforms in other verticals, like Wattpad in publishing, for example, has proved that content can be successful in every meaningful sense by allowing for work that appeals to a highly specific audience, or by simply letting the work find its right audience, rather than being shoved through a marketing grinder that measures each book for its mass market potential and not much else. Similarly, while Reelhouse acts as a central platform for filmmakers, it also maintains a very hands-off approach in allowing a natural dynamic to develop between filmmaker and audience. Cantech Letter spoke to Reelhouse CEO William Mainguy by phone recently. William, was there an a-ha moment that got the idea for Reelhouse going? Yeah, there was a couple things. In general, we looked at a lot of the different industries that were entertainment and interactive industries, and we saw the same trend was occurring elsewhere, in the sense that things were going direct to consumers, yet film was still left to be disrupted. You can call it many different things. You can call it “direct to consumer”, you can call it the democratization of that type of content, but that was happening all around us. Who knows whether it was the chicken or the egg? But this was happening all around us, so we looked at film and noticed there was still a very evident chokepoint, where the supply side was growing. Thanks to the genre of YouTube type videos, people were producing more and more interesting content. Viewers were loving it, and yet in the theatrical world, and we’re talking about long-form content, it was still controlled by festivals and a select few people who deemed whether a film would ever see the light of day or not. And that’s how the model was set up. And we did our math, and we said, “There’s less than half a percent of films that are getting into these festivals that are actually getting distribution deals.” And even when that does happen, the person who created the film is completely removed from the process. They literally get a cheque and a royalty back. It didn’t seem to make any sense. And so that’s what really prompted us to dive into it. We often say at Reelhouse, “We’re changing the way that films are being distributed, as well as the experience.” So those are the two touch-points. And what I mean by that is, we’re just at the beginning of it right now, but to date movies have been, whether it’s on your Shaw set-top box or your Netflix, it doesn’t really matter, a sea of movie posters and you click one of them and you watch your film. It delivers the commodity, and you watch your film and then it’s over, and that’s about the extent of your experience. Whereas movies, for us, was one of the most compelling and immersive entertainment mediums out there, even more so than games arguably. Yet the way they were being delivered to you as a consumer was very, very commodity-based. So if you look at the films on our platform, you’ll notice that we take it a little step further. Rather than changing the model of the filmmaker being able to just put the films on our platform, and taking advantage of all these other features, even more so for a viewer, they are immersed into the world of that story, so they can stay in touch with the news of what’s happening with the film in the world in real life. Or they can watch other extras, or interact with the different components or games on the film pages themselves and immerse them a little bit further. So it’s about bringing the filmmaker and the viewer closer together, and that’s what we think the solution is there. Film is a very political and complicated industry, but we’re seeing that friction everywhere. As far as movie studios have been concerned, the business model for decades has been, put on a show, butts in seats, and that’s all you need to know about the people coming through the door. And obviously, that’s changing in terms of the concept of “engagement” now and gathering data on how users interact with media and different platforms. There’s a convergence happening there. Was that something you saw coming, in terms of the change to digital? That’s one of the characteristics of the entertainment business right now, as it pertains to film. Everyone is very different in their strategy. However, if I can speak generally, I think this would be a fair common denominator across the large studios at least, there’s definitely a defragmentation in their marketing and retail strategies, from a marketing standpoint. That’s one of the benefits of our platform. If you look at the way they would market a film through its lifecycle, you would have a theatrical team that would spend a ton of money promoting the release of a film in theatres, at the box office, and then it would go through that chapter of its life and inevitably, because of the artificial scarcity they’re trying to create, it would go away into no-man’s-land for some time, and then a separate marketing team would come about and try to market the film, wherever it was coming out, in the hotels, on an airline, or Blu-ray or DVDs or on-demand and that sort of thing, and so on and so forth. And every time they did that was an entirely new budget, an entirely new strategy. So the theatrical team would have a budget for plastering the park benches and the bus stops and the big takeovers on the street. But then, by the time it got to home entertainment, that marketing initiative and that buzz would dry up completely. And then you’d have to spend an entirely new budget on a strategy such as creating a Facebook page and drumming up an audience base long, long after the initial release of the first teaser of the film. So what Reelhouse does, it allows studios that agree with the strategy to consolidate everything in one place. If you recall, with a lot of movies that came out in the ‘90s the strategy was to create the “spiderman.com” site, and studios would pay a lot of money, over and over and over again, building those sites for each film. Not only do we replace that need and provide them a turnkey home base for their film, but it’s really more about housing all of the assets and the collateral that gets shared virally to promote the film organically at any given stage. However, unlike YouTube and Facebook and all the traditional means, it allows them to anchor it all back to the one single platform, where they can start building upon their audience. So when a theatrical team does their marketing from the Reelhouse platform, they can release the trailers, great, they can promote the ticket sales. However, you’re buying into that property and when it comes time for the marketing team of the home entertainment release, there they have a user base that they can leverage. "It's interesting that, in some cases, independents and Hollywood are very, very different, but we learn things from each of them. And in communicating with them, sometimes they ask for the same thing." When you were in the Warner Bros. Media Camp accelerator program last year, you managed to demonstrate to them some tangible numbers. In terms of how the audience was behaving, it was 14.6 specific actions per user, and I wonder if that was the moment where you were able to say to them, “It’s more than just a matter of putting more stuff on the internet, like extra features, but it’s actually guiding, to a certain extent, how viewers interact with a film, based on specific metrics.” Yeah, that was a turning-point moment in a couple ways. From a higher level, it was a huge success in getting a well-known studio to participate in that type of business model, where for the first time they were selling their films directly to viewers. Film is a very political and complicated industry, but we’re seeing that friction everywhere. If you look at Tesla, where they’re selling cars directly and circumventing the dealer organizations, there’s a huge backlash from them. So we encountered the same type of reaction from long-time traditional retailers, and put the studios in a very difficult position when they were talking about it. However, I talk about it as a success. Did it sell millions of copies? No, but we managed to stir the pot and demonstrated to the rest of the industry how quickly, and to what degree of quality, we could do this for the studios. In terms of tangible metrics and it being a turning point, absolutely, we discovered things that we never really anticipated. We believed that more interaction and more experience for a film was necessary, and that’s what we wanted. However, we didn’t necessarily maybe prove up until that point that, in some cases, free extras like videos other than the trailer that are put before the paywall actually convert viewers into customers better than the trailer, where they spend more time watching all these extras before they watch the film than the trailer itself. So there’s more leverage, to put it in business terms, although we see it more as an experience. You could argue that there’s a lot more room for growth in terms of enticing viewers to purchase a film than had been taken advantage of before. Gener8 Media took a 48% stake in Reelhouse in January, and then upped that to 70% in April. What has that meant for the company? Yeah, it has never gotten normal for me to talk about Gener8 as this other company, because it’s always been such a close relationship. Personally, Rory (Armes) and I worked together many years ago at EA (Electronic Arts). So whenever I’m asked about Gener8, I really do think of Rory as a person. But they’ve been an ongoing, very supportive investor in Reelhouse. And it makes sense. They’re in the movie business as well, yet distinctly different in the sense that they’re on the production side, and they work at the business and industry from a completely different angle. However, it’s nice to carry that theme, that there’s this relatively small team in Vancouver that is really pushing the boundaries and the envelope in L.A. They’re doing it with 3D big titles, and we’re doing it from a distribution side with large studios, and that allows us to really be on the same page about a lot of things and understand one another very well, rather than it being just what I would call “pure money” from an investor that is just looking for numbers. They understand how Hollywood works. Rory understands what they’re thinking and that’s allowed it to be a very positive investment relationship for us. It’s the case now, whether it’s major studios or independent filmmakers, that everyone can basically put up a website and put their stuff up on YouTube. Why do you think that filmmakers need a centralized platform like Reelhouse? I think we’re seeing a trend now, and it’s interesting because, although we’re in a separate world to the MCNs (multi-channel networks), like Maker or Machinima, you can see how there’s a little bit of a grey border there. I’m always looking at them very closely, to see what we can pick up and learn from them, and obviously, also, the studios have invested in and bought those multi-channel networks as a means to reach out to that young demographic. From a business model, though, I think a lot of the high-tier, high-performing companies or even individuals on those platforms, that are at rev sharing, once they hit that star level and start making some good revenue from it, they look to try and take things back into their own hands. YouTube was a great way for them to become something and have an audience. But then it’s at a point where the ad revenue doesn’t really make sense for them. They’re saying, “I have all the eyeballs, I’m making all the content, and I’m making a percentage of this based on ads that I can’t control that are on my platform.” And in some cases, they sign themselves to a multi-channel network, and they take a cut as well. So I think that we take a style of content that is really different than YouTube. We don’t have reviews on our site, although one could technically do that, but we provide, I think, for lack of a better word, a more robust platform, that serious people who have serious distribution needs really find that they want, and we provide for them. And that’s the result of these new features. We listen to the people who put their content on our site regularly, and we try and provide a series of tools that the majority of our audience wants. And when someone comes to us and says, “Hey, we really want to bundle something together,” we’re seeing that people will pay more for a bundled piece of content than content on its own when we test it out. Not only that, but we hear from Hollywood, on the other side of the spectrum, studios have been asking to bundle together on platforms like iTunes for years and they just haven’t rolled that out for them. So it’s interesting that, in some cases, independents and Hollywood are very, very different, but we learn things from each of them. And in communicating with them, sometimes they ask for the same thing. We believe we’re seeing early signs of niche groups, like extreme sports, that are doing really well out of Europe. There’s all kinds of little sub-communities that are snowballing. So us releasing all these features, we’re trying to make it more flexible, have it appeal to a wider range of different types of content creators. Someone who’s created a fictional film or a narrative that is trying to get into the Cannes film festival may or may not need the same thing as someone who jumped out of a plane and is making a documentary on extreme sports, or just trying to record a 20 minute stunt and turn that into a micro-purchase. So we try to create more and more features that appeal to our consumers on the filmmaker side, and when it comes to payment and things like that, we’re just trying to make it easy. We’re trying to remove ourselves from that, the middle man that’s trying to control everything, and trying to make it easy. We try and provide a cake-and-eat-it-too scenario, where the page that the filmmaker customizes and creates for their film is a standalone type page. It’s theirs. We’ll never impose anything of Reelhouse onto their page. We really believe that’s theirs to go and use. And they can have their own url and redirect to a dot.com, but we also very much believe in the sense that there should be a destination site, a community of viewers and filmmakers that are placing their work all in the same place. And it’s our job to help curate it for the benefit of both parties. And you see this especially when you look at filmmakers that are wanting to take advantage of direct-to-consumer distribution, yet they don’t have millions of people waiting for their film. So we’re talking to a documentary filmmaker right now who’s making a film based on sports celebrities, and each one of those celebrities has millions of Twitter followers. Marketing is not going to be a problem. They can put it anywhere and send their audience there. And that’s the beauty of direct-to-consumer. When you have that, you can make a higher percentage, you control your own audience, it’s great. But we talk to someone who is making their first film or they’re not that well known, the fact that we have a growing community is a terrific value-add for them, because some other popular filmmaker is going to bring them traffic when they’re side by side, next to them. So although it’s not fully transparent, we don’t have the numbers right now to guarantee to everyone putting a film on their page that it’s going to get the same minimum footfall that a YouTube does, or if you put your film on the front page of iTunes. We don’t have that much weight to channel to particular films. That being said, the community starts somewhere and we believe we’re seeing early signs of niche groups, like extreme sports, that are doing really well out of Europe. There’s all kinds of little sub-communities that are snowballing. So I think that’s what our role is. We’re building our features to appeal to the majority of filmmakers and content creators out there, rather than just a place to upload a film with ad revenues. We give them different monetization tools, different marketing tools, different ways to showcase their film, and different purchasing or monetization options. And we give them both the independence to go and point to their own page, their own player to embed elsewhere. Eventually, we hope that we can have an affiliate player, where people can make a percentage on the films that they embed elsewhere. But we’re also enabling a community, where viewers can discover their content if they don’t have an audience base. That’s the real key. This is how we’re different than a competitor like VHX. I don’t believe that every single film should have its own dot.com site and stand out on the internet on its own. We can offer that, and we do, but I think it should also be mirrored with being within a community, because viewers like going to a destination. They like going to a Netflix and having all their content there. Yeah, and at the very least, whether it’s a large film studio or an independent filmmaker, everyone can benefit from the increased engagement with individual viewers and having the sense of agency that you begin to feel when you know how viewers are behaving with your film, or the features around your film. That has to provide an extra sense of value, so that’s something. Yeah, and even just from little things like consistency of experience. On Reelhouse, you can sign up with Facebook, a one-click sign-up, and after you buy your first film and enter in your credit card, if that’s the way you choose to pay for it, we securely store that through a third party service. It’s completely private and protected, yet every time you buy a film from this point onwards, if it’s a Reelhouse film you never have to whip out the credit card again, which makes it a painless one-click process to buy things in the future. There are those types of benefits. Even from a usability standpoint, you know how to go through the flow. You know that every film that you land on in the Reelhouse marketplace is going to have a little extra, videos or extra news posts so that you can follow films, you can check out what your friends like. There’s that social aspect of it. So I think there are too many benefits to having a marketplace and a destination site to pass it up, when it’s so easy to offer that redundant feature, where they can have their own standalone site as well. Do you think the idea of buying a film is dead? I mean the physical object. That’s a big question. To be honest, we’re analyzing that every day, and I think that’s a big part of what we’re about, and I don’t think there’s anyone better to find out than us, because we’re really changing what it means to buy. Yeah, I think physical buying is declining. It’s bigger than you would think. The physical industry is definitely much larger than the digital industry today, believe it or not. And I ask people all the time. Whenever I get in a cab or talking with a coffee barista, I ask how they buy their films, and I’m shocked that people still buy Blu-rays. I get the attraction, the value of having a Blu-ray on your shelf, that shelf pride and having that case. Yes, physical is definitely declining. It’s still very large. But that’s an important part, though, because it’s still so big it’s very hard for the big content owners to sever that business and jump headfirst into digital. And that’s part of the politics there. Is the value of buying still there? Well, that’s again what we’re trying to constantly bring back, that value of ownership. And that’s what the test with Warner Bros. was about. Unfortunately, it was never given the legs that it needed because of the pot-stirring that we got into, so Warner Bros. couldn’t really market it and aggressively push it against their iTunes retail partners. That was very difficult for them to do. However, our platform allows people to bundle things together, it allows them to unlock things based on sharing, or it allows them to create more value for a particular price. There’s no other platform that enables people to give this much value for a purchase price. It really is going to come back to the rewatchability aspect. What are you paying for? If it’s just the fact that you can play it back as many times as you want, I don’t think that’s going to be enough in the digital space. If you’re getting access to something earlier, I even believe that’ll offset piracy. If you’re getting something earlier, in an easy, nice, high-quality fashion, that may be a way to bring back that value in a digital context. It’s got to be an experience you can’t really replicate with piracy. So that it’s possible to watch the film and also get an interactive experience. I think those elements really take advantage of the interactiveness and the online accessibility. The fact that it’s not coming on a disc anymore is key. And our platform is right there, to take advantage of that sort of thing. We’re seeing early signs of the purchasing behaviours of people expecting things to all be Netflix now, if everyone’s expecting everything to be $9.99 a month whether that’s sustainable or not, the good news is that we can easily morph into that model. It’s not a difficult thing. But we still think that there’s work to be done before resorting to that. "We’re trying to remove ourselves from that, the middle man that’s trying to control everything, and trying to make it easy." I’d almost make the argument that you’re returning the experience of media to a pre-VHS time, before people regarded movies as a commodity, even though there wasn’t the sense of user engagement between studios and people who were watching films. There wasn’t an expectation that people would actually own a film. It was always about an experience that you can’t replicate anywhere else. That’s exactly right. It was all about the experience. You could argue that accessibility wasn’t the best. You’d have to drive, and once upon a time a family got dressed up to go watch a film. Over time, what we’ve been doing is improving the accessibility. We went to VHS, that could be brought home. And then DVDs, thinner and lighter. And eventually now online. Quite simply, the focus has been on accessibility. Getting you that commodity, getting you that digital file faster and in an easier way, at your fingertips, however at the expense of experience. We get accessibility. We’re a digital company. We know how to do that better than anyone else. But we’re also trying to top that off with bringing back what experience really means in the digital world. What’s Reelhouse got planned for the future? Stay tuned. We’re bridging two very interesting worlds. As you mentioned, we started off in the independent space, and we still are very much about that open marketplace where great things can happen that’s under the control of both viewers and the filmmakers. We talk about democratizing video content. Case in point, we’re constantly rolling out features for them. But we’re still very much battling the good fight behind the scenes with the Hollywood world. The splash with Warner Bros. was great, and we want more of that. We think it’s our responsibility, based on what our platform can do, to really find out at the highest levels how we can disrupt the industry. It’s very, very difficult. It’s not easy. Things don’t happen very quickly. However, we’re well-placed, even with a different set of players, to do something that’s disruptive. So stay tuned. We’re working on it. And we’re going to constantly try different things on that end. We’re bridging both indie and Hollywood, and even getting into some enterprise-ish deals, B2B deals, and seeing what we can do there behind the scenes.

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