Snow Film Industry Summit: VAS’s Danny Grant

mike lewis

• May 14 2009
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It has been a busy year at VAS Entertainment. After coming off a rough stretch five years ago, new financial backing has helped the company launch numerous new projects, partnerships, and endeavors and helped get its hand in just about every action sports film, channel, and content avenue on the market. We caught up with VAS Senior VP & GM Danny Grant as part of our online film industry summit to get his thoughts on where he sees VAS and the Action Sports film industry heading in the coming years.

You guys have had a lot of news to share this year – give us a quick rundown on what’s gone down?
It’s been very exciting here the last 12 months. With the acquisition of Studio 411 last year, it fueled VAS to tremendous growth.  In 22 years of business, we had never seen revenues like this before.

We [also] just signed a partnership deal with MTV/ Viacom.  It’s a 3-year deal that will help us broaden the distribution of action sports content.  We certainly want to take advantage of all the new opportunities they present to us.  Its going to be great for all the brands, producers, and athletes in the content we license and distribute.

We also just inked a deal with the Playstation Network as the exclusive provider of action sport content for them.  The PS3 platform has a huge new launch slated for the E3 conference coming up.  VAS is playing a big role in that since many of Playstation’s users participate in action sports.

We also have almost 100 hours of TV licensing slated for 2009.  I’d say only about 20% of that is going to FUEL.  A lot of brands are giving content away free, just to be on TV.  Our model is to get paid to put the content up and it’s working so far.

Where do you see things heading over the next couple years?

Well, in this economy, this is a good business to be in during a recession.  What we’re providing is an inexpensive form of entertainment.  People [are] tired of the war, fuel prices, the housing market, etc.  They’re looking for a cheap escape from all of this. More people are staying home watching TV, going to the movies, or renting DVD’s.  Maybe a kid can’t afford another $80 lift ticket, but will buy a DVD for $24.99 and get stoked out that way.  Our DVD and TV revenues are in line with this thinking.  Also, the digital market place will continue to grow as new technologies emerge.

What are your thoughts on widgets that let people purchase downloadable movies through others’ sites?

VAS is sticking with proven technologies and partnering with companies like Apple, Amazon, Playstation, Xbox, etc.  These companies are not fly by night start-ups.   There’s a reason why you won’t see Hollywood blockbusters like Indiana Jones or Dark Knight on random widgets.  We’re kind of taking the same approach and transacting where we can get paid and protect the content as best as possible.

We have been growing [our digital distribution] on iTunes and it really hasn’t been cannibalizing physical DVD sales.

Where do you see digital distribution heading?

There are so many new revenue streams available to producers that they didn’t have 3-5 years ago. If you can protect [your content] and not give it away for free, than it’s viable.

We’re taking a wait and see approach for what Hollywood does next. They’re going to do it right as far as online distribution and not give their content away. I’ve gotta side with Paramount, Warner Brothers, and Universal. These enormous media companies are going to choose a very stable and correct format for their content. I don’t want to say we’re just going to be a lemming and follow the leader, but we really want to protect our content.

What percentage of your distribution is digital versus DVD’s?

I would say in ’08 [it was] probably 10 percent digital, in 2007 it was three percent. We launched a bunch of titles in January and February on iTunes this year, some really premium snow stuff [that] producers didn’t want to release when the DVD’s came out because they were afraid it would cannibalize sales. I tried to show them the math with TITA, Burton, and Rome, but they didn’t want to [release it then]. Our first two months of [2009] iTunes revenue was half of what we did for all of 2008.

How is working with iTunes?

VAS is certainly a low man on the totem pole when it comes to Apple, but we’ve convinced them that you can’t sell videos for $1.99. Three years ago, they were saying that’s what they would sell them for. Now we’ve finally gotten price points moving. We’ve taken baby steps. [Now] there’s a $5.99 [price point], an $8.99, and we’re pushing to $9.99. It’s doing these baby steps and then showing them the results: “Here’s 20,000 downloads at $8.99 and a comparable movie with 20,000 downloads at $1.99. People are still buying it. The price is not deterring them.” ITunes is ecstatic.

Because of the success, Apple is giving us better placement on the sports page on iTunes. They’re giving us billboard placement because we’re showing them the numbers and proving that this demo exists and consumes heavily on iTunes. It’s been an uphill battle, but the proof is in the numbers. They’re giving us the leeway and we haven’t let them down yet.

What are margins like on iTunes versus DVD’s?

Fair and very comparable.  Obviously with an 88% digital download market share [iTunes] has the leverage.  Their cut is inline with everyone else in the space.  It’s incremental revenue for the producers.  In this economy, with the physical DVD business being flat the growth in digital is welcomed.

But you’re not really seeing any DVD cannibalization from digital?

No, not at all.  The two formats are playing nicely together.  In fact I think we’re seeing double consumption of the product on some titles. For example with TITA.  They’re saying “I want to watch this portably on my iPod on my next trip,” [so then they download it on iTunes.] Here’s a funny fact, on Christmas day, we sold almost 1,100 TITA downloads on iTunes. When we spoke with Apple, they said it was attributed to gift cards.

But not everyone wants to sit and watch these just on their iPod or laptop, [so then] they’re buying the DVD. They want to enjoy them on the couch with their friends. I don’t know what the next technology is going to be, but DVD is going to be here for a little while.

What are your thoughts on Blu-Ray?

We released a few titles on Blu-Ray this year across four genres. Everybody’s shooting in HD, so we gave it a shot.  It’s expensive to author and replicate. We made that decision well before the economy crashed, and the only release that really moved well was TITA. I think everybody wanted to see that in HD and get that experience. Amazon picked it up and moved almost 300 units on the first day.   Core retailers were skeptical about the format, but gave it a shot and it sold.

“The Brain Farm crew is very professional, yet keep it fun,” says an under cover Grant.  “We share the same values and sense of humor here at the office.”

How has That’s It, That’s All affected the game?

It’s been a game changer, T Rice and the crew “Mean Business”.  We’ve been at this game for 22 years now and there hasn’t been a film like this, certainly not in the last five years. Even today, retailers are packing it up and calling it a season, but they’re still buying this movie. There’s still consumer demand. I don’t know if it was because of Travis Rice or all the marketing Red Bull and Quiksilver poured into it. It’s an incredible film and it’s turning in incredible results.

In a lot of ways it sucked a lot of air out of the room for smaller producers. There’s a big pie of money that gets spent on snowboarding DVD’s, I don’t know what the number is, X, and you either divide it up between 30 people that made films or 12 people that made films. The economy was rough and if kids were gonna buy one or two films, TITA was one of them and then you’ve got other bangers from Mack Dawg, Standard, Absinthe, the TransWorld film. There are a lot of other choices, and the next tier people didn’t see as many sales.

What are your thoughts on retailers carrying DVD’s going forward?

It’s a high margin, quick turning item.  DVD’s are an enthusiast thing.  It creates a stoke that keeps kids coming back in to their shops.  In leaner economic times they might cut back on the number of SKU’s they inventory but are still allocating the same dollars because they consistently sell.  Instead of stocking 15 winter SKU’s they might just go with eight.

This goes back to you point about the pie being cut into larger slices.

We saw this happen in the mountain bike industry in ’99-2002. There were so many mountain bike films. The big guys weren’t selling as many videos because of the little guys who were doing stuff with the Handycam, not properly licensing music, and [they] were chiseling from the pie. It got to the point where nobody was making a living and it kind of collapsed where two or three guys pulled through and now the ecosystem is back where it’s a comfortable situation and not saturated. Everybody can make money, the sponsorship dollars are there, and to some degree snowboarding is in that state.

What caused mountain biking to come back?

It was survival of the fittest. It was a little bit of Darwin’s way of right sizing the system. Let’s say the total pie is $2 million; you were splitting it up between 30 producers and now you’re splitting it up amongst 12 and they’re flourishing. People are making good movies, the marketing dollars are coming in, people are buying them. When it was spread out amongst so many producers, they couldn’t make a living. Those guys quit, some producers joined forces and it right sized itself.

What are your thoughts on companies like Burton focusing their marketing dollars on team videos? Is it going to move more towards skate’s model?

I think it was an interesting move. I don’t know how it’s going to pan out exactly. It’s going to be really interesting to see how it shakes out.

Mack Dawg’s not making a film. The guys from People are doing their own thing with huge support. Brad Kremer is doing the Burton thing. I think it’s going to be a good year for producers because I think there’s going to be a little less competition, to be honest, with the consolidation of things. There’s still going to be Standard Films, there’s going to be Absinthe Films.  And Absinthe is going to be the only film that has Travis Rice in it this year so it should do well.

Undoubtedly the Burton film is going to be a big title.  TITA raised the bar so a banger movie is definitely in the works. We’re encouraging them for sure. We just signed a worldwide exclusive on the Burton film and we’ve been in talks with them and have a great partnership with them as part of their distribution. They count on us to get their movie into TV, DVD, digital and that’s what we do best.