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Business Model for Making and Selling Instructional DVDs
Hello All,
I am interested in obtaining some feedback from other professionals about what works and what doesn’t work in terms of ownership, royalties, etc when it comes to instructional DVDs. I have already produced several successful instructional DVDs based on the following business model and want to see if there is room for improvement on future projects.
Right now, when I make an instructional DVD I collaborate with the subject matter expert who is a recognized authority on the subject. I do all of the production work – filming, editing, etc. I do not get paid for any of this. We share the costs of music rights, professional voice overs and replication when we create the physical product. We distribute through a distributor who takes 40% of the retail costs. My partner and I then split the remaining 60% 50-50. In other words, he is the expert and I am the production company. Recently we acquired another person who does the marketing of our DVDs so we included him into the equation with an equal share so we each get 20% of the royalties after the distributor takes their 40%. This seems to work okay but I have other opportunities to create more DVDs with other “experts” and wonder about the validity of the following model:
I tell the new expert that I will produce his entire DVD free of charge, explaining to him all of the costs and work that go into production, etc. I will retain all rights to the material and keep all money made from the sale of the DVD. He can purchase as many of them as he wants at a 40% discount to sell on his own. What he gets from all of this will be the exposure that the DVDs generate for his business and 40% of whatever DVDs that he sells. Is this too much to ask for or does it simply boil down to how powerful a negotiator I am?
Obviously the second approach is much better for me financially in the long term. I would be getting 60% of all DVD sales instead of 20%. What formulas do you know of or use when it comes to producing and selling niche type instructional DVDs?
Thanks for any advice,
Sterling Noren
Sterling Noren
Owner/Writer/Producer/Editor
WideWorld HD Productions
Seattle, WA -
5 Replies
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Business arrangements based upon “free” are flawed. you should have a contract with each subject matter expert, incorporating a list of your costs. Just because you are doing the work at no charge does not mean you are not incurring costs. For example:
Generic How To Video
Expert’s Costs
Parking $10
Lunch $20
Supplies $50Producer’s Costs
1-day video shoot $3500
Post-production editing (40 hours @ $50/hr) $2000
DVD authoring and package design (10 hours @ $50/hr) $500DVD units sold at $20/ea
Cost of Goods Sold (COGS) = total costs / #units
you have two ways of splitting the proceeds:
Subtract your COGS from the gross sales and then split the net according to your contractual percentage
or
Put the gross towards COGS until you make your money back, then split the gross accordingly.
If this is your primary business then you need to consider your overhead in your own costs.
For example, a one-day shoot may cost $800, or if this is your own business and you are not getting outside work, then make your shoot rate higher, so you account for overhead.
Mike
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Thank you for the input Mike.
Is there anyone else can shed some light on this subject for me. Appreciate all advice.
Thanks,
Sterling
Sterling Noren
Owner/Writer/Producer/Editor
WideWorld HD Productions
Seattle, WA -
I think Mike’s assessment is right on. You could even write a day rate into the cost of goods for the “expert”.
The problem I see with your second scenario is two-fold:
1. Your asking the expert for a financial investment.
and
2. Once he buys the DVD’s, then he has to do the sales/marketing which would probably turn them off to the idea because if for instance it is a doctor, when would they have time to sell.”
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Hey Noren 🙂 I have been looking for someone interested in the business of creating and/or marketing instructional dvd’s. I have been in the business for sometime. Even though the distance barrier may pose a problem, I hope we can communicate to look at what I consider to be a phenomenal business model. I am from Jamaica and currently the ceo of Jammtube ( Jamaica Multimedia Tube) and president of the New Era Entrepreneur Development Society (N.E.E.D.S). Jamtube’s main focus rite now is implementing developmetal programs (via dvds) into basic and preparatory schools. I dont usually give out my number via open forums but I think it would benefit us both if we talked.
Yours faithfully
Kemarandre Miller
President
Jammtube -
Hey Noren 🙂 I have been looking for someone interested in the business of creating and/or marketing instructional dvd’s. I have been in the business for sometime. Even though the distance barrier may pose a problem, I hope we can communicate to look at what I consider to be a phenomenal business model. I am from Jamaica and currently the ceo of Jammtube ( Jamaica Multimedia Tube) and president of the New Era Entrepreneur Development Society (N.E.E.D.S). Jamtube’s main focus rite now is implementing developmetal programs (via dvds) into basic and preparatory schools. I dont usually give out my number via open forums but I think it would benefit us both if we talked. Its 1 876 840 4334 rsvp
Yours faithfully
Kemarandre Miller
President
Jammtube
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