nocountrypic.jpgGiven that we’ve now entered 2008 fully, I suppose we should expect more post-mortems like this one from Variety on how specialty, niche films failed to find an audience at the box-office in 2007. While we can debate things like marketing strategies, audience preferences and other topics, those are really just symptoms. The real answer to the poor performance of these movies lies in the law of supply and demand.

Take a niche product like hummus. It’s not really mainstream, but is certainly popular with the people who enjoy it. Let’s say there are six large companies that make and distribute hummus right now. But then 10 more companies emerge, all backed by investment capital, who enter the hummus market and have the distribution to get their products out nationally.

People who go to the grocery store looking for hummus now have their choices more than doubled. So they decide to forego the brand they usually buy and try out one of their competitors. So that $5, instead of going to Hummus Company 1 has now gone to Hummus Company 2. The demand is the same, hummus is still just a niche product, but the supply has increased. A finite number of dollars is still in play, but now has over twice as many outlets they can be divided towards.

That’s what has happened with the niche and specialty film market over the last five years. Once the exclusive territory of a dozen or so players, there are now dozens. The previously existing specialty studios haven’t slowed their output, so they’re releasing roughly as many films as they were five years ago, but that’s now added to by the releases of these newer studios and distributors.

So, again, the audience for arthouse and niche-appeal films has not increased. But that audience now has exponentially more choices on how to spend their dollars.  While a few hits have emerged, the overall percentage as a portion of the number of releases has dwindled because supply has outpaced demand.

A chief problem here is one of my favorite talking point, that of distribution. All these films are competing for the same screen space instead of seeing online as a viable outlet. If people were able to hear about a movie, search for it online through a trusted e-commerce/distribution vendor and buy it at the moment they’re most excited about that movie, you’d see some of these problems dissipate. There’s little doubt in my mind of that notion.

If the studios insist on sticking with business models that were first put into place in the 1960s, they at least need to do a better job of reaching those niches with targeted, relevant and useful marketing practices. That’s Step 1.

Until then there needs to be less shock that films with niche appeal increasingly perform poorly.