Amazon Video Direct’s Upcoming Royalty Rate Change Will Be A Huge Blow To Indie Filmmakers

Most people would agree that the rise of streaming has benefited consumers. There are now so many highly rated shows, it can feel as if the world of prestige television is endless, and streaming has done wonders to connect indie filmmakers to audiences. Amazon in particular has been praised for its dedication to independent filmmakers and distributors, both because of its Amazon Video Direct (AVD) platform and its Film Festival Stars program. However, a recent change to Amazon’s AVD platform may force some distributors to take a major financial cut.

Decider has covered the Amazon Video Direct platform in the past. Unlike other streaming services, which painstakingly negotiate the acquisition of every title on their platform, Amazon gives any Prime Video subscriber the option to upload their own shows or movies directly to the Amazon platform. The self-distribution platform is a lot like YouTube’s model for uploading content but catered to filmmakers. Every uploaded show and movie has to go through Amazon’s content guidelines and contain captions and subtitles, but there’s no charge to upload titles. Once titles are uploaded and approved, the distributor has four options for how their title can be viewed. Titles can be made available for digital rental or digital purchase, placed onto Prime Video, added to the platform as an add-on subscription, or be made available on Amazon Video for free with ads.

The program was launched in 2016, and for some content distributors, it has quickly changed the streaming game. In August of 2017, Decider spoke to FilmRise’s CEO Danny Fisher about his decision to add full runs of classic shows like  Roseanne, 3rd Rock from the Sun, Cybill, Grace Under Fire, A Different World, and Grounded for Life to Amazon. Fisher largely credited the transparency of the Amazon Video Direct platform for his decision, noting that the platform gives distributors a highly detailed breakdown of how many people are watching each title — data that distributors typically don’t receive unless the networks and streaming services they’re working with hand over that information.

“People rate the movies and TV shows, they write comments, they watch it, and the more something is watched, the more something is liked, the more discoverable it is on Amazon, and the more successful,” Fisher said in 2017 about the Amazon Film Direct platform. “That enables us to actually find and identify content and also experiment with content.”

However, the platform has received the most attention for its Film Festival Stars program. Filmmakers with films in qualifying festivals have the option to distribute their project on Amazon’s platform in exchange for a cash bonus and an hourly viewing rate. After Amazon’s acquisitions from Toronto International Film Festival 2018, the program is expected to pay out $5.8 million in cash bonuses to rights holders this year. In the past the program has been criticized for potentially short-changing filmmakers, but Amazon has said it was created as a way for filmmakers who may not have received a major deal to have another distributing option:

“The way that we’ve kind of approached it is that it’s kind of a take it or leave it kind of offer,”  Eric Orme, Head of Amazon Video Direct, said to Decider last year. “We aren’t trying to get every filmmaker through our program with this. We’re trying to reach filmmakers who may not have access to a full-service distribution deal. We believe as a company that the theatrical window is really important to the industry, and so for AVD we made sure to have some kind of program that could support that.”

Amazon has worked hard to establish its reputation as a streaming service that’s friendly to independent filmmakers. That’s why this new change in Amazon Video Direct’s royalty rate changes is such a big deal. Currently, if a distributor uploads a show or movie to Prime Video — one of the four options available for distribution with Amazon Video Direct — they will receive $0.15 per hour streamed if the title is streamed by a customer in the U.S. If a customer in the United Kingdom, Germany, or Japan streams that same title, the distributor will receive $0.06.

However, starting on March 1, distributors will be moved to a tier system that’s far more complicated and likely less profitable for some distributors. This new rate card will apply to both standalone titles and seasons of shows and is, according to Amazon, “based on aggregate hours streamed by customers worldwide.” Basically, a title will start accruing hours when its streamed for the first time and accumulate hours for a year, or 365 days. Based on how many hours that title was streamed during this yearlong period, each title will be placed into a different streaming tier:

Titles that were uploaded before March 1, 2018 will be judged and sorted based on how many hours they were streamed between September 1, 2017 to February 28, 2018. All of this information can be found on Amazon Video Direct’s support page under the “Royalty Information” section.

Basically, unless a distributor’s title falls within Tier 3, meaning that it has aggregated anywhere from 500,000 hours to 999,999 hours from September 1, 2017 to February 28, 2018 or during a year after March 1, 2018, that distributor will be taking a pay cut. Director Michael Brown is one of those filmmakers and distributors who will be receiving less income from Amazon in his near future.

Currently, Brown has distributed three of his films using Amazon Video Direction’s Prime Video option — Haunted State: Whispers from History Past, Roller Life, and Haunted State: Theatre of Shadows. Once Brown received an email about the upcoming royalty rate change on January 29, he took to Twitter to explain how this royalty change will affect his income:

“I have distributed titles through Prime Video for over a year,” Brown said in an email with Decider. “I was a marketing consultant prior to that, and my dream has always been to be a full-time independent filmmaker. When I saw the light success of my first film — Haunted State: Whispers from History Past — get some good numbers, I knew I had a chance to finally live my dream. I invested my time and money into being a full-time filmmaker to create content for the Amazon Video Direct platform.”

“It was amazing to me a company with a streaming audience as large as Prime Video was taking independent film under their wing the way they did,” he wrote. “I loved and believed in the brand. Because of this, I gave them my loyalty and had confidence in every aspect of their business.”

When Amazon announced this royalty change, profits from streaming on Prime Video through Amazon Video Direct accounted for all of Brown’s income. While Brown claims he was originally making $1,500 a month through the AVD platform, under this new rate change he has estimated he will now be making $600. All three of Brown’s films would have to be streamed 500,000 hours individually to account for the rate he’s at now. “For any filmmaker to get to 100,000 hours streamed would be a large feat,” Brown wrote. “In my first year I streamed 89,000 hours.”

“Taking a 60 percent cut is devastating to my family. I have a 12-year-old son and a dog named Eddie. I also am in the process of making my longtime girlfriend my wife,” he added.

Brown also pointed to Amazon’s recent price increase from $10.99 to $12.99 for Prime Video as “salt in the wound.” The director claims he has tried to talk to Amazon Video Direct about his frustrations directly, but so far his attempts at communication have been shut down.

“I have written to Amazon Video Direct about this, just to start a dialogue, and they simply told me to stop writing them about this issue. They got mad at me for being upset,” Brown wrote. “I’ve seen AVD is offering a flat .20/hour (no tiers) for certain films on the festival circuit, but those films are not small films. The bottom line is, they are kicking around the little guys, like me, after we helped them grow. Amazon CEO Jeff Bezos was once where I am — the little guy. Because of that, I figured they would have a better concept of what it’s like to be an entrepreneur. I figured incorrectly.”

Amazon confirmed that the royalty rate change would be happening and that the company notified subscribers of the change on January 29. When asked why this rate change was happening, an Amazon spokesperson had this to say:

“The new structure aligns providers Prime Subscription Access (Included with Prime) rate with the level of customer engagement generated by each individual title or season (more engaging titles earn a higher royalty rate). This change offers advantages for providers, including elimination of the title-level annual earnings cap and expanded earnings potential in territories outside the U.S. We are always listening to provider feedback, and iterating on their behalf and occasionally that will mean changes to our service.”

The new rates for Amazon Video Direct’s Prime Video distribution option will go into effect on March 1, 2018. At the time of publication, there were no changes to AVD’s other distribution options — offering a title for digital rental or purchase, offering a title for free on Amazon Video but with ads, or offering a title as part of an add-on option through Amazon Channels.

Watch Haunted State: Theatre Of Shadows on Amazon Prime Video