May 23rd, 2009
I sure picked a great time to graduate film school and try to break into the movie business, didn’t I? I couldn’t have planned this worse had I been trying. After weeks of stagnation, there’s still no funding in sight. Lots of nibbles but no firm bites. At least it’s not just me, it’s everybody. We keep getting the “I love the concept but let us think about it” response.
I did manage to confirm my DP’s LOI - he’s busy wrapping a shoot this and next week but I can get a reply through email without disturbing him. I’m still looking for a director who’s interested and has the experience (Sci-Fi, mystery, and feature film videography) I think necessary to make the film.
Other than that, I think our only chance of getting funded in the near future is if I win Powerball. I’d better go and buy a ticket, I guess…
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I keep hearing people saying the movie business won’t die and attempting to prove their case through references to the Great Depression. Frankly speaking, I don’t think the two are the same at all. During the Great Depression we didn’t have television, DVD’s, video games… The movie theater was, then, a primary source of news and entertainment. With today’s communications and entertainment choices, this is no longer the case.
If the economy doesn’t start moving soon I think we’ll see studio budgets in the $10-15M range and independents in the $1-2M range - with the obvious lowering of production values. If this happens most movies might be shot without signing any guild or union agreements in states where the guilds and unions have little or no influence (i.e., outside of California and New York!). A-listers might well have to start drastically lowering their quotes to levels they wouldn’t have thought possible just to get work.
I think, in the long run, this marks the beginning of the end of the big studios and of Hollywood as the center of the movie biz. In twenty years, the word studio will mean a sound stage to shoot on, not a movie-making empire and film students won’t quite understand what it was like to have a first look deal or a studio office. They’ll say, “My office is wherever I put my laptop.” The theater system will never quite disappear but it’s going to continue having trouble filling seats, closing first the single screens and then many multiplexes. Like the drive-in, it will eventually become more a novelty than a commonplace form of entertainment.
As depressing as this nominally sounds, I think this will result in a renaissance for the independent producer. The current system of releasing movies through major distributors for an additional $35M in P&A in addition to the cost of the movie, itself, means very few movies get a fair chance at cable & TV.
Again, that voice from the back of the room asks, “Why?”
Other than MOW’s (Movies Of the Week), a movie’s cable, broadcast, and home rental value is seriously reduced if it doesn’t have a theater release that gets noticed. Playing in a theater in L.A. for two weeks is a prerequisite for an Oscar nomination. Everything is geared to what a movie does in the box office and that means a big movie release on hundreds or thousands of screens.
The theater chains get the majority of their films from the major distributors, aka major studios. The major studios want the real money going to their own pictures (where they make money both as distributor and investor if not also producer!), not the ones they distribute only.
Additionally, distributors are now requiring producers to come up with the $35M in P&A on their own and still demanding their 40% of the rentals and box office. Exactly how a producer of a $5M movie with no equity left can raise that additional $35M for P&A I haven’t figured out.
We all know that no movie produced for theater release (i.e., for more than $2M) that goes direct to cable or DVD is going to earn out since nobody will have heard about it without the massive - and expensive - national or international hoopla advertising campaign that goes with a big theater release. So the real choice for making money - or even the possibility of making money - is releasing through a major studio.
However, if an independent movie is released through a major studio, it is not likely to earn out even if it makes gobs of money due to two factors: the house nuts of the distributor and theater, and the idiot studio accounting systems.
We’ve discussed the first of these, in part, in a previous post, but let’s review.
If the distributor and theaters each take 40% of the box office that leaves only 20% for the producers. A $5M movie with an additional P&A of $35M means the movie has to earn $200M in box office for the producers to break even. That’s not making a thin dime in profits; that’s just earning out the original investment!
And then there’s the studio accounting system. Due to no real regulation, the studios hide any possible profits. First they charge their 40% distribution fee, nominally to take care of overhead and profit, then charge addition astronomical fees for ’shared services’, meaning overhead and profit… After that, any money from all the distributed movies are rolled into a single account with no individual accounting. If the box office of one movie is in danger of earning out they simply claim it’s really from another, less profitable movie. Since any audit is wholly dependent on the ledgers provided by the studios, there’s no easy way to know if what they say is true or not.
Some system, huh? No wonder the studios can release bomb after bomb and still show a profit to their shareholders.
But, I think, this is going to change in the next decade or two. When the studio system collapses under its own weight and inertia, independent producers will be able to insist on independent accounts and accounting as well as audit rights that mean something. With Hollywood no longer a major part of the movie scene, as independent producers seek cheaper, friendlier places to shoot, distributors will be forced to become more competitive with each other. This will lead to more reasonable terms and conditions.
Also, as the distributors have fewer and fewer studio pictures to distribute, the theaters, having to still fill their screens, will have to offer better, more competitive terms to producers to get movies to show. This means theater systems will become less profitable and the number of theaters will start to shrink.
Once the theater system becomes more a novelty than the center of the movie distribution system, the perceived dependence on a theater release to maintain the broadcast and home rental value of a movie will collapse. This, I think, is the best possible eventual news for independent producers.
Think about a time a movie is initially released directly to subscribing customers, plays for a few weeks, then goes to cable, TV, DVD, etc. Instead of today’s hideously expensive P&A costs, there would be no P and only inexpensive A.
And, I think, I’m not the only one who is of this opinion. Two years ago Kodak got out of the still film business - because there wasn’t enough money left in it to pay for R&D, manufacturing, etc. Ironic, isn’t it? The very company who’s stranglehold on camera patents and readiness to sue for damages, in conjunction with Thomas Edison, made the original generation of producers leave New England and head west to a stretch of apple groves called Hollywood, is now starting to get out of the film business. Kodak was the only manufacturer of motion picture film in America at the time but, to use the film, you had, by contract, to use the Edison camera and pay the patent fees. Now the patent fees are gone and, with the new and up-coming digital technology, film, as a medium, is fading fast. R.I.P.
And the studios are following suit.
