For quite some time now, I've been preaching that indie filmmakers need to consider uploading their film to P2P sites and letting people have it for free, mainly because it's a great marketing tool to get an audience for you film. My argument, basically, is that you're not really losing any money from giving it away. Out of all the people that will download your film and watch it for free, the bulk of them wouldn't have paid shit for it, anyhow. However, if they do watch it, what they can do for your film is talk about it. So, now people who might actually open their wallets for it could hear about it, when they may not have otherwise. In any case, that's a way that I think giving your film away can work. Now, here's another way...
I'm a fairly regular reader of Wired and, I guess, so are the guys over at /film. They took the theory that Chris Anderson wrote about in his article "Free! Why $0.00 Is the Future of Business" and applied it to the theater going experience. Here's a link to the post, "Is The Future of Movies... Free?!" by Peter Sciretta on /film and here's a link to the original article by Chris Anderson on Wired.com. You should definitely read both articles, but to summarize the theory as it applies to the theater going experience - if you give away theater tickets for free, you're going to drastically increase your audience. If you drastically increase your audience, you can sell them other stuff, mainly concessions where popcorn and pop have way better margins than tickets sales. Also, with a larger audience, you can charge more for things like advertising and premiums, such as special seating, etc. Long and short, let people in for free and you can increase your revenue, everyone's happy. To be honest, though... fundamentally, it would never happen. Mainly because the studios would be making less money and they supply the product to the theaters - no product, no audience.... but, regardless, there's a lot you can take away from this.
Here's the point - think outside the box. Simply getting people to pay to see your film is not necessarily the only way you can make money... For example, what if you wanted to do a screening of your indie horror at a local theater? Maybe you're trying to make money, maybe you'd like a theatrical release. Either way, traditionally... it's probably not going to happen. They're just going to think, "Indie horror = empty seats". However, what if you found three or four local sponsors and gave them free advertising at the theater? (posters, banners, digital pre-roll, whatever) Further, what if you allowed them to give away samples to the audience and you put their logo's on all the promotional material? That's some good exposure and, remember, advertising's a write-off, so companies do have a budget for it. Now, you go to the theater and you can actually pay them to screen your film, if you have to. Further, you tell them that since you're paying, you'd like to split the revenues on the concessions and you're letting the audience in for free. As long as the theater is making some money (more than they would on a regular night), they'll do it. Now, you've given your film away for free, but you've made money from the sponsors and from the concessions AND you should have a full theater. I'm not saying it's a perfect example because there's going to be other variables, but it's a thought... and it could work.
In the end, the lesson to be taken away is... do what it takes, think outside the box and giving away your product isn't necessarily a bad thing.
A little P.S. here... Chris Anderson is an f'ing genius. As an indie filmmaker, his book, "The Long Tail" is an absolute must read - it completely changed the way I thought about niche, indie film and made me realize there's a big, big future for it. Here's a link to The Long Tail: Why the Future of Business is Selling Less of More on Amazon. Further, his article "Free! Why $0.00 Is the Future of Business" is being flushed out into a book and should be out in 2009.... I'm assuming that it, too, will probably be a must read.