Film Fund-amentals: The Next Phase of the Digital System

First published July 7, 2013.

Film distribution is about to undergo the most radical transformation seen since the Lumière Brothers switched from private to public screenings. Heck, it may be the most dramatic change since Thomas A. Edison hooked a coin box to the Kinetoscope and began milking the audience.

The entire future of the film industry is changing as we enter the full blown digital universe. Which also means that we haven’t a real clue as to what is about to happen. All the standard rules and models for filmmaking, film distribution, and movie financing are coming to an implosion point. Oh sure, right now it all looks sort of normal (well, as much as the so-called “new normal” has ever looked normal). Some major figures in the film industry have begun a public discussion on these impending changes. Privately the industry is going half-crazy trying to second-guess and prepare for their advent. Bob Dylan once said, “You don’t need a weatherman/To know which way the wind blows.” But these days, even the wind direction is confusing.

What Christopher Nolan would like notwithstanding, the change to digital production in Hollywood is a done deal. The reason is simple: the vast physical infrastructure needed for the use of the photochemical film process is gone. These days, trying to find some place that can develop film is like popping over to the hardware store for a vacuum tube.

Despite what some small theater owners would prefer, the digital distribution system is well underway. In theory, it will confer many advantages. In reality, many major companies are working awfully hard to make sure that those advantages don’t become too advantageous to anyone. The cost of the digital conversion has resulted in fees to the theaters and the fees are designed to cover the cost of digital conversion and well, gee, gosh golly gee whiz, it just so happens that the fees pretty much are usable as a means of blocking any indie players with major distribution plans. What a surprise!

The real source uncertainty is what everyone is looking at: digital online distribution. Which leads to the obvious question: Digital distribution to what? PCs? Laptops? Cell phones? Tin foil hats? No matter what the winning platform turns out to be (most likely all of the above, including the hats), movie distribution will be splintered between ultra-expensive spectaculars shown in the diminishing realm of theaters, and everything else unloaded in a mad stampede through wireless systems.

The process of distribution will become a battleground for competing systems. In theory, it should offer new advantages to indie filmmakers. However, the major industry players are already attempting to move into these new venues in the hope of controlling the various emerging digital forms. What they have on their side is money and a culture of corporate aggressiveness. What they do not have, is a clue. They bring a pushy sense of utter incompetence to the game. It could almost be fun to watch if the stakes were not so high.

Film financing is collapsing all over the place. The sheer cost of the dominant tent pole movie model is impossible to sustain. But all the major players have placed all their eggs into this one basket and cannot conceive of any way to alter the broken model. The large financial players that furnish the financing for these movies could make a difference. But they are also clueless. They have convinced themselves that movies have to cost gazillion dollars and deeply distrust any film that has a budget of only one integer and six zeroes. A lot of financial guys also still think that the DVD market will save a major movie’s box bottom line. Many of these folks really don’t bother to keep up with the industry’s business reports.

Since mainstream financial venues for movie funding has largely vanished into the tent pole vortex, indie filmmakers have increasingly turned to crowdfunding and other alternative approaches. The success rate for crowdfunding is hard to determine, though some reports place it around 35 per cent (give or take – well, no one is sure what that means which is part of the problem). Even if the success rate were only 20 to 25 per cent, this would place crowdfunding way ahead of most other approaches.

Crowdfunding is about to undergo an overhaul by the SEC, though the SEC is taking its grand old time on moving forward. The effect of these impending changes are still difficult to factor. Though crowdfunding has been relatively free of fraud, the possibility of fraud risk has been raised. The SEC overhaul of Jumpstart Our Business Startups Act is supposed to deal with this concern. Paradoxically, it may contribute to a problem that didn’t exist before the SEC were told to fix it. Before the overhaul, crowdfunding was a ridiculously simple process; the more it becomes a junior league version of corporate enterprise, the more likely the junior league version of Bernie Madoff will be on the prowl.

Nevertheless, crowdfunding has become the alternative Hollywood system for financing. From Zack Braff to James Franco, the Hollywood pack that wants to make a movie budgeted for one number and six to seven zeroes have packed off to Kickstarter. These big names with big needs bring a lot of media attention to the Indie scene. Of course, you would think they could do a better job of tapping into their Hollywood contacts or something as they increasingly steamroll over the small indie filmmaker in pursuit of public dollars. It doesn’t sound equitable, and it isn’t.

Which means that the immediate future of indie filmmaking is about to become a free wheeling combat zone. OK, that is not exactly new. But it is going to get worse. Or, at least it will until the mainstream model goes into deep collapse, which is coming soon.