The Special Challenge of Special Interest

Albert Nader, president of Questar Home Video, is keeping his fingers crossed, hoping the documentary about Tibet his company is releasing this month will sell enough copies for the filmmaker to recoup at least half his investment.

Counting materials, production and time--14 months in the rugged Chinese high country north of the Himalayas--it cost cinematographer William Bacon upward of $100,000 to produce the 54-minute film.

“But all we could give him was a small advance,” Nader said. “Over time, say five years, we’ll sell maybe 50,000 copies, and he’ll get a dollar apiece. But that still falls far short of what he put into it--and he’s got to wait five years for his money to come in.”

Nader said Bacon’s experience in the video business is typical. The special-interest video market is a “labor of love,” he said, where the risks are high and the financial rewards few.

While the theatrical movie side of the video business is flourishing, with sales at an all-time high, the market for specialized video fare is expected to remain flat this year, according to a study by Cambridge Associates, an entertainment research firm based in Stamford, Conn.

Of the estimated $7.5 billion that consumers spent on videos last year, Cambridge says, about $853 million, or a shade above 10%, was spent on video documentaries, travelogues, classic TV episodes and other niche programming.

What’s more, Cambridge says, nearly 90% of special-interest video revenues are reaped by the top 15 suppliers, such as Time Life, A&E;, PolyGram and BMG.

The tiny slice of the pie that is left gets divvied up between dozens, perhaps hundreds, of independent program suppliers like Chicago-based Questar. For the little guys, Nader said, bringing special-interest video product to market is becoming tougher.

Cambridge estimates that 65% of special-interest videos are sold through direct-response marketing. But tiny suppliers can’t afford the multimillion-dollar national TV campaigns used by heavyweights like Time-Life to move millions of copies of “The Trials of Life” and “The Firm.”

“You’ve now got the majors in it, and they have learned how to really market it,” said Paul Caravatt, who runs the Educational Foundation of Special Interest Marketers and Producers. “That’s where all your growth is coming.”

*

On the retail side, which accounts for 35% of overall sales, video stores as well as big discounters such as Wal-Mart and Target are focusing on hit movies at the expense of everything else.

“We’re not in retail, because nobody wants to buy us,” Nader said. “When people walk into Blockbuster, they walk in for a feature film; they don’t expect to see ‘Seven Wonders of the Ancient World’ or ‘Great Cities of the Ancient World.’ ”

Further hurting the special-interest suppliers is price erosion. The price of new movies on video has steadily dropped over the last few years, to the point where even big films such as “Independence Day” or “The Hunchback of Notre Dame” sell for less than $15.

As a result, said Caravatt, “the idea of purchase has grown, but so has the belief among consumers that every movie should be priced at $12.95--a price point that special-interest video suppliers, who don’t deal in big quantities, find hard to maintain.”

Nader will attest to that. “Unlike movie studios, we don’t have theatrical, we don’t have TV, we don’t have airline,” he said. “When we produce a video, the only source of revenue we have is video, and the pressure of coming down to $19.95 and $14.95 makes it very difficult for us to break even, much less make a profit.”

*

No wonder, then, that at a special-interest video conference in February in New York, Cambridge Associates President Dick Kelly told the 100 or so attendees, “Your chances for success lie in forming a relationship with a major program supplier.”

But not everyone wants to do that--and according to some independent special-interest suppliers, there are other ways to make a buck.

Gary Goldman, president of Goldhil Home Media International of Thousand Oaks, notes with pride that “50% of the product we release is successful, and that’s a very high percentage in this business.”

He attributes this success in large part to “understanding the type of product the consumer is interested in purchasing” and then tailoring distribution to the target audience. Niche documentaries such as “Antique Farm Tractors” are best sold through specialty catalogs, Goldman said, while more “visual” titles, like “Volcano: Nature’s Fury” or “The History of the Bikini,” do well at retail.

Tie-ins also help, Goldman says. When the movie “Twister” came out, Goldhil put together a documentary, “Twister: Nature’s Fury,” that sold more than 400,000 units, mostly at retail.

Goldhil, founded in 1991, has a catalog of more than 500 titles that cost between $100,000 and $150,000 per hour of programming to produce and market. Its key retail accounts include Borders Books & Music, Store of Knowledge and Learningsmith, although certain titles have found their way into Blockbuster Video, Musicland and Best Buy.

“Building a relationship and establishing a confidence level between supplier and retailer is critical,” Goldman said. “The bottom line is if you have good nonfiction product, if it’s packaged well and if it’s priced competitively, retail buyers will still find room for it on their shelf.”

Peter Edwards, president of Acorn Media, said his company has doubled its revenue each year for the last three years by focusing equally on quality productions and niche marketing.

“If you need to sell 100,000 units of Ken Burns’ ‘Baseball’ because you paid an $8-million advance, like Turner did a few years ago, you’ve got some serious issues,” Edwards said. “But if you’re out there wanting to sell 10,000 units, like we are, then there are lots of ways to skin the cat, and we try to do them all.”

*

Edwards, a former NBC news manager, said he formed Acorn 10 years ago “in the basement of my home” in Washington, and initially produced much of the company’s video programming himself. Acorn now releases about 18 titles a year, nearly all of them acquisitions for which it paid “in the low tens of thousands of dollars” in advance money and royalties, Edwards said.

Recent titles include “New York: The Way It Was,” a three-cassette documentary of life in old New York; “Celtic Feet,” a how-to tape on Irish step-dancing starring Colin Dunne, star of “Riverdance”; and a trio of train videos.

Even though a typical Questar title sells between 50,000 and 100,000 units over a five-year period on an initial investment of $25,000 to $100,000, Nader is not nearly as optimistic about the business as are Goldman and Edwards.

“Unless PBS and special-interest companies come together, it will be difficult for both of us to exist,” Nader said. “PBS is struggling, and they could find tremendous sources of revenue working with people like us. And we, in turn, could find both quality programming and a ready audience.”