Structural Divergence

 First published March 13, 2013

There must be mornings when the typical indie filmmaker barely can crawl out of bed. On the receiving end of so much bad news, it’s a miracle he or she can even get in the mood to dress before noon.

Barely a week goes by without some new post of doom and gloom for the indie business. For example, a recent blog piece by Ted Hope could be mistaken for a zombie alert warning. Actually, it is an important read for everyone in the indie business. But man oh man, there are times when ol’ Ted starts to sound like one of those depression ads on TV.

Unfortunately, Hope does have some very good points. Especially in regards to the recent article in The Economist titled Hollywood: Split Screens. In turn, this article does a solid job of outlining many of the reasons why the current Hollywood business model is busted.

Busted?  It’s way past that point. Heck, the Hollywood business model is in worse shape than a guy who has just been run over by a truck and the truck driver backs up to see what that “bump” was in the road. Under the current Hollywood model, you spend around $300 million making a film and then hope to score a billion globally in its release. Once in a blue moon, a movie succeeds in pulling off this stunt. This is called dumb luck, and luck is not a business model.

This tent-pole madness has had profoundly negative consequences for indie movies. Why spend $100 million on ten modest movies when you could blow $200 million on one lollapalooza with all the glitz and glamor of big time showbiz?! A lot of the thinking that goes into producing movies is based on irrational impulses. Which is why the film industry is going down the financial sink. As the Economist article points out, the financing role of the film studios (within their larger conglomerate structures) has dropped (big time) over the years. They make movies that require enormous financial resources but with returns that are – at best – negligible. Basically, the TV industry is propping up the film business.

Obviously, this begs a question. Why do it?

The major media companies can’t exactly answer that question. Since they don’t have a working business model and they are engaged in a practice seemingly devoted to increasing costs with no viable returns, then what’s the point?  Fame, glamor, and lots of easy puff pieces on Entertainment Tonight is not a substitute for business management.

So yes, the once-unthinkable will become the highly probable as the major studios go down. Essentially, there are no more studios anyway and the value of their brand names is pretty meaningless. Film production companies are simply small components in large systems and as these small units become too costly to maintain, some one is going to be rude enough to start pulling the plugs. Since most of the majors have sharply reduced their annual production output already, several companies could be phased out with barely a whisper.

But what does this mean to the indie filmmaker?

It means nothing. For all practical purposes, low-budget indie cinema was booted out of the film industry several years ago. Oh sure, once in a blue moon some odd little item will get picked up by a major and then, for about two years, there will be the usual chatter about the industry rethinking their business model. After that, the big companies will go back to their main focus, to be the first to produce a film that breaks the $600 million budget threshold. Most likely this will happen by the end of 2013.

Meanwhile, a growing number of indie filmmakers are beginning to realize that being abandoned by Hollywood is a bit like being booted from the Titanic just before the iceberg arrives. They are losing access to production funds that, in all honesty, they were never going to get anyway.

They are also losing access to the theatrical distribution system, which, increasingly is controlled by the major distributors who foot the bill for massive digital conversion (see The Independent’s Guide to Film Exhibition and Delivery 2013) and now impose a usage fee, the Virtual Projection Fee or VPF. Averaging $800 to $1000 per screen, it places theatrical access out of range for many indie productions. As many indies are now going elsewhere either by direct online distribution or alternative systems like xBox Release, distribution eventually will become irrelevant as the video-game industry becomes the next wave for indie movie releases.

So in the broader scheme of things, indie filmmakers haven’t really lost anything other than their illusions, and that may be a good thing. With little else to lose, indie filmmakers have expanded into new venues to which the majors are still oblivious, and half-clueless.

And while the majors retain near-total control over the access to money, indie filmmakers have gone elsewhere by way of various crowdfunding approaches. Crowdfunding is not a sure thing. At best, it has roughly a 30 per cent success rate. But 30 per cent is already a vast improvement over nothing, which is all the majors have offered them for a very long time.

So yes, the current scene for indie filmmakers is very bumpy at best. But no, the end is not near. Not by a long shot. If anything, it is the major companies that ought to be worried.

After all, they are the ones fighting to achieve a monopoly over a bankrupt model.