Film Fund-amentals: Politics at the Box Office

 First published July 26, 2011

What do Sarah Palin, Ayn Rand and David Zucker have in common? They have all given us proof that political posturing often translates into box office poison.

The spectacular no-go of the recent release of the documentary The Undefeated may not have an effect on Palin’s own future plans, but it certainly tells us that Tina Fey doesn’t have to worry about being upstaged. Likewise, the quick defeat of The Undefeated follows a pretty consistent pattern of ultra-conservative movies and extremely empty theaters.

The pattern was first established in 2008 with the Zucker comedy An American Carol. Made for a modest $20 million, this farcical presentation of Michael Moore as the most dangerous threat since Soviet communism barely took in $7 million during its month-long run, despite heavy “grass-root” promotion through various right-wing websites and radio shows. Its DVD release has been equally lackluster, and it is now available in various $1 movie bins.

Next up to bat was the recent release of Atlas Shrugged: Part 1. Made for an extremely modest $10 to $15 million by hard-core Ayn Rand adherents, the flick barely took in $4.5 million during a singularly miserable five-week run made more lively by the movie’s producer insisting that he was the victim of a vast left-wing media conspiracy. Again, the film depended heavily on a “grass root” promotion campaign through various right-wing websites and radio shows.

Finally, the trend reached an inverted zenith with The Undefeated. Made for a meager $1 million, the movie barely squeaked out a box office return of $31.5 thousand (yes, thousand, not millions) during a disastrous two-week release in some of the most uber-conservative theater markets they could find. Again, the movie relied on a “grass root” promotion effort via right-wing websites and conservative radio shows. A re-release of the old John Wayne western would have been more successful. Heck, a few paying customers probably thought that they were going to a Wayne movie.

Obviously, the first major lesson we can learn from this is that you do not conduct a “grass root” campaign for a movie on right-wing websites and radio shows. These folks just don’t go to movies. Personally, I suspect that they are much happier venting their spleen either online or by phone rather than sitting quietly in a theater for a couple of hours.

Actually, I’m not joking. One of the problems with these films is an issue of demographics more than politics. The promotion campaigns for these movies have largely been targeting the talk radio audience model: a white male, 50-plus in age (often closer to 70). The current movie audience is primarily an ethnically mixed collection between the ages of 15 and 45, with females making up more than 50 percent. To be honest, it would be more accurate to describe these PR efforts as a “gray root” campaign, not “grass root.” Either way, they’re not even preaching to the choir. It’s more like shouting at the bass section only.

But these movies have also forgotten another important rule of the commercial film industry: The audience has a virtual Constitutional (and certainly God-given) right not to go to your movie. They just don’t have to spend their money to watch whatever you put on the screen. Even worse, the audience is quite capable of exercising this right on a regular basis. They can simply go to another film instead. This type of free and open selection by the audience is called capitalism. I don’t quite understand why I am having to explain this to right-wing filmmakers, but all I can add is, “Welcome to the pain of the marketplace, pal.”

The failure of these three films also reminds us of the old Sam Goldwyn quote: “If you want to send a message, use Western Union.” Today you would use a blog site, but otherwise Sam was basically right. As a general rule, people won’t pay money to see a movie that appears to be a political lecture, left-wing or right-wing. Ironically, one of the few exceptions to this is Michael Moore (Fahrenheit 9/11 took in over $220 million globally, more than half of that in the US alone). Sure, many right-wingers view Moore’s success as proof of the vast media conspiracy, but that theory makes about as much sense as my claim that George Clooney is stalking me. Besides, I think George has given up on me. Must be part of the conspiracy.

Nobody has a real clue as to the political convictions of the current movie audience. It is quite possible that even the audience doesn’t have a clue. But that is OK. Most people go to movies for a form of emotional engagement, not politics. In some respects, that has been the key to Michael Moore’s success. Fahrenheit 9/11 captured the anger and frustration of lots of people (while the arguably more “political” production of Sicko was vastly less successful). At his best, Moore engages the audience through a combination of smart-aleck commentary, man-bites-dog one-upmanship and a shrewd mix of farce and didactic arguments.

Otherwise, most attempts at political statements in movies end up sounding as if the filmmaker is hectoring the audience. As a rule, people won’t pay to be hectored. They come to see a story, not a harangue. Heck, they might even want a little romance on the side. OK, nobody is going to pay good money to see Michael Moore in love, but they want something more than a lecture.

Gosh, they might even want a story, and if the filmmaker is looking to send a message, he or she might just try slipping it through the back door while otherwise focusing on the story. It is an old approach to this issue, but it tends to work more often than not.

Film Fund-amentals: Just Send Money

 First published August 2, 2011

There are two ways to raise money for a movie. Dumb luck is one way. It is certainly preferable to the other method, which involves lots of hard work and a high tolerance for failure. A wistful hope for dumb luck can be found in the numerous “comments” peppered on every social networking site by people seeking rich sources of funds by way of desperate random postings. Mostly they find scam artists working every trick this side of the Spanish Prisoner.

The alternative is to create the dreaded business plan. I say “dreaded” because creating a business plan is about as much fun as beating yourself over the head with a ball bat just to see how long it takes before you pass out. But creating this plan is essential, as we are reminded by Louise Levison in her concise and excellent blog piece Why You Need a Film Business Plan. I’m sure that I’m the two hundredth person to recommend this article, and I strongly suggest that everyone should read it (heck, print it out and pin it to your desk).

Levison’s seven key points are a crucial guide, whether you’re approaching major donors or taking the crowdfunding approach. Arguably, a huge mistake some people have made with crowdfunding is the assumption that they don’t have to create such a plan. The result ends up sounding like a bad replay of Spike Lee’s old trailer for She’s Gotta Have It. The stunt worked for Lee but it will not work for you (besides, he already had the film in the can).

Of course there are some basic questions that a beginner needs to address before writing a business plan. One place to start is at the U.S. Small Business Administration, which provides a quick outline for such a plan as well as various other articles and services. At MyOwnBusiness.org you can go through a more detailed discussion on developing a small business plan along with various samples that can serve as a guide. At Bplans.com you can access an even more detailed discussion concerning the development of a business plan. They also offer a free simplified version of business plan templates from the Business Plan Pro software package.

As you pursue your business plan, you will discover that lots and lots of companies are looking to sell you various software programs to “help” you create a business plan. There are so many such “helpers” that you may need a business plan to create a business plan. The price range on the software alone will vary from $59 to $350 or more. To be honest, you ought to be able to develop your own template and other material yourself. Sure, it may take more time but it is a lot cheaper. Likewise, the cost of some of these software programs is way too high and probably should be avoided. Some are obviously borderline scams. As always, buy nothing until you have thoroughly researched the supplier. And remember, you don’t always get what you pay for.

As always, there are freeware alternatives. About.com provides some useful references to various types of free business software. Also, Cnet.com offers a wide range of free business software systems along with detailed consumer reviews. You might also want to check out the Free Film Business Plan Template page at SoftwareTopic.Informer.com. As always, keep in mind the difference between freeware and shareware.

Levison gives a great breakdown of how your business plan must operate within the movie industry. However, business is business and a beginner might learn from a wide sampling of plans written from a variety of different fields. Just Google “Sample Business Proposal” and explore the various items that pop up. Use Levison’s seven-point checklist as your guide, but also carefully study the approaches used in a variety of non-related businesses. Even if the company is simply selling hot dogs, there are still things to be learned. A good place to start is Reference ForBusiness.com.

One of the hardest parts of preparing a business plan is the first item, called the Executive Summary. Levison warns that you have to do items 2 through 7 before you can backtrack to the first item. Unfortunately, Levison is correct on this point, and you may want to learn more about the Executive Summary and how best to approach it. Both eHow.com and About.com provide a good breakdown of the process.

Another potentially tricky part on Levison’s checklist is item 5 (potential audience). Major film companies spend oodles of bucks attempting to determine what kind of audience a movie might reach. As is true with many things in life, it sometimes works and sometimes doesn’t. Your best estimate will be a combination of extensive research and educated guesswork. I have previously dealt with this issue with my tongue only half in my cheek. For better or worse, the standard reference on the subject is the annual Theatrical Market Statistics from the MPAA. The single most detailed discussion on this topic available online is the MA thesis Media at the Movies: Analyzing the Movie-Viewing Audience, by Sean Michael Maxfield at the University of Florida. After you’ve done all your reading, you will still need to make some good guesses. But at least you will be better informed as to how to guess.

Or you could just fall back on the dumb luck strategy. So just go to the social networks and ask people to send you money. Let me know if it works.

Film Fund-amentals: Viral Marketing and the New Reality

 First published August 10, 2011

As Ronald Reagan once said, facts are stupid things. In light of this, the impending release of the faux documentary Apollo 18 and the viral advertising campaign surrounding it is a pretty good reminder about the slippery post-modernist nature of facts in the virtual universe.

Much like The Blair Witch Project, Apollo 18 claims to be found footage that conveniently milks thirty years worth of urban folklore and displays an odd resemblance to the equally bogus (well, most likely) “lost footage” from Apollo 20 that has been on YouTube since 2007. Likewise, everyone involved with the movie is playing it cagey (for example, no names have been released for the actors in the movie). Maybe it’s real and maybe it’s not. It’s practically up there with the Alien Autopsy video.

Viral marketing isn’t really a new concept, though the term wasn’t widely used until 1996. In the film industry, the old Hollywood studio system of peppering magazines and gossip columns with manufactured tidbits about their “stars” was a forerunner to the approach. It was a means of creating a marketing presence that extended beyond any single film by etching out a persona that represented the star as a concept.

The key has always been to create a buzz that extended beyond any conventional forum created by any PR department. At its most successful, viral marketing results in a situation in which the consumer is actively engaged in pursuing (directly or indirectly) the product (either knowingly or unknowingly), which in turn allows the product to become an increasingly major component to the consumer’s environment. At its best, the viral marketing campaign will appear spontaneous. In reality, it is an induced state.

As The Blair Witch Project demonstrated back in the late 1990s, the internet is an ideal forum for such marketing strategies. This movie created the core model for viral marketing (and distribution) that was later advanced even further by Paranormal Activity. Both films have become essential studies for indie distributors. They have also demonstrated the wild power of such marketing techniques when released through the internet.

Thanks to social networking sites, the potential for viral marketing is now greater than ever. Contrary to what some people would like to believe, the approach is neither easy nor necessarily cheap. The Blair Witch Project spent nearly $1.5 million on its viral marketing campaign. Paramount Pictures spent nearly $10 million on advertising for Paranormal Activity. Viral marketing can be done for a lot less, but so far the success ratio has also been much lower. This is lunch money compared to what is spent on a major movie, but it is still a lot of dough.

Paranormal Activity made incredibly effective use of Twitter. In a way, it was almost too effective. Some folks have gotten it into their heads that all they have to do is set up a Twitter account and then kick back. It doesn’t quite work that way and the rules for creating a successful Twitter campaign are still evolving. So far the single greatest success in Twitter awareness has been achieved by Charlie Sheen in a grim reminder that it’s all publicity. Personally, I prefer the more honest state of Twitter befuddlement provided by Roger Corman in his account.

But one of the most unique aspects to viral marketing is not the marketing itself. Increasingly, the dominant focus of any viral marketing approach is to shape (and alter) our perception of reality. When it first came out, lots of people thought that The Blair Witch Project was a real documentary. A major part of the success of Paranormal Activity was its ability to look like footage from a security camera. Leaving no trick unturned, Apollo 18 is heavily promoting itself as the “truth” behind the “vast conspiracy.”

Pretending to be real is a big factor to this marketing method. Several years ago, when The Dark Knight was filming on location in Chicago, cell phone videos began popping up online from fans who managed to sneak onto the set. Of course this was all bunk (then and now, The Dark Knight sets are guarded more zealously than the NSA) and the amateur videos had been created by Warner’s PR department. It worked (and worked brilliantly) thanks to the already heightened fan interest in the movie.

On the negative side, publicity for The Fourth Kind kept hinting that the movie was based on a real case. If anyone were to Google the name of some of the main characters, the search engine would steer them to bogus newspaper stories that seemingly confirmed certain aspects of this claim. It was all bogus, and while the movie made a decent profit, it didn’t seem to have been helped all that much by this smoke-and-mirrors stunt.

The creation of this alternate reality can, when successful, heighten audience awareness of the movie. Unfortunately, it also heightens the general state of unreality that extensively pervades our culture. A lot of the recent political debate on the debt ceiling issue has been a dark tribute to the warped power of bad information and false realities. Everything has its up and down qualities, but the unique power of viral marketing through the internet has a potent feel that is sometimes almost scary.

But for many filmmakers, it is also becoming essential. Just watch out for going to the dark side.

 

 

 

 

Film Fund-amentals: 3rd Quarter Reports

 First published August 16, 2011

The 3rd quarter reports are coming in, and it has been a great year for the major studios. Too bad they’re all still stuck making movies, because that has been the consistent downer to the biz.

Disney had a net income rise of 11 percent thanks to the theme parks and TV systems. OK, the film division plummeted by 60 percent, which is one of the reasons why they have stopped work on The Lone Ranger. The proposed $250 million budget for this sucker (which in real money means something around $300 to $350 million) suddenly looked a tad high.

Viacom had a profit increase of 37 percent. Most of this was derived from cable TV and VoD deals. Paramount Pictures (a subdivision of Viacom) had a 29 percent drop in income despite the billion-plus revenue from the latest Transformers flick.

Warner is a tougher call. They have not yet released their 3rd quarter report, and their 2nd quarter report was designed to give everything a pretty rosy spin. By the end of the 2nd quarter, their profit was up by 14 percent, partly due to the NCAA college basketball playoffs. Film returns at Warner were more of a mixed bag despite the 13 percent increase (before adjusted operating profit). In reality, Warner’s film division is largely hanging in there courtesy of home entertainment profits and video games.

What does this mean? First off, if you want to make money, then go into television. Every one of these companies is being propped up by their TV and cable holdings (well, that and a handful of amusement parks). The movies are simply an ultra-expensive hobby.

Which is the other problem. To paraphrase that modern political philosopher, the movies are too damn high. The stalled Lone Ranger production is a good example. Seemingly all you need for this movie is a couple of actors, some horses and plenty of Western landscape. Sure, I am being very simplistic (even simple-minded) in this argument, but let’s get real, we’re talking about the Lone friggin’ Ranger, for gawd’s sake. So you should be able to do this baby for around $60 million easy (unless you’re planning to strap rockets onto Silver and really make things go Hi-yo).

Unfortunately, they probably were planning something like that. The pursuit of spectacle has become the predominate focus of modern Hollywood movies. Everything else (script, actors, etc.) have taken a backseat to the “Oh wow” factor. But there is only so much “Oh wow” to go around, and a lot of people still go to movies because they’re looking for a story. This is an issue that comes up repeatedly in every study and survey done on the audience. Even people working in Hollywood are making the same comments. But this has little effect on the current plans of virtually every major studio. Heck, in the case of The Lone Ranger, Disney is squabbling over a mere $50 million differential (they want the movie made for $200 million, which means they’re willing to spend close to $300 million).

As loony as the system is, it can be viewed as half OK. After all, the steady profits from TV, cable and ancillary markets (video games, etc.) have so far provided enough extra profit to keep the screwy system afloat. The growth of the VoD market also looks good. This is especially important, since the TV and cable market is already showing the first serious sign of loss to the booming online trade. Granted, the actual theater market is dying, and increasingly Hollywood is even helping to shove it onto the ash heap.

But it is a business model that has some major holes. All of the TV, cable and ancillary markets are in a massive state of change. Much of the current change has to do with an undermining of the kind of centralized control that the major companies must depend on. In turn, the major companies and the MPAA have been busy attempting to ram through new laws that broaden the legal definition of piracy and impose increasingly harsh penalties aimed at any website that looks even half cross-eyed.

Likewise, the major studios are still banking on the dubious concept that movies are recession-proof. In the past, movies fared extremely well through normal recessions (those economic events that usually lasted about six months). The current recession started in December 2007. To be honest, this isn’t even a recession anymore. It’s more like a slow-moving depression. And nothing is about to change (at least not for the good). It is a situation that has driven many politicians to wild fits of delusional thinking and a few seasoned economists to bizarre flights of desperate fancy. But no matter what, we are now in a strange zone of political and economic inertia in which unemployment and under-employment will stay at record highs while the general public will be forced to focus on basic needs in a modern struggle for survival. Oddly enough, going to the movies is simply not one of those basic needs.

Which is why we have the current contradiction. Theater attendance is going down. DVD sales have plummeted. Production costs continue to climb, with $200 million as the current going rate. The soaring budgets are a form of unstoppable force while the economy has become one nasty unmovable object. It’s an old dilemma that never ends well, and the Hollywood majors are no exception.

Film Fund-amentals: The Curse of Exhibiting

 First published August 23, 2011

Making a movie is often compared to crawling through broken glass. Trying to exhibit a movie is the same only worse. Often, it feels as if you are on your hands and knees in an exploded glass factory and it’s a long way to the exit door.

Most indie filmmakers find themselves in a classic paradox. To get a distributor they need to get the movie exhibited, and to get exhibited they need a distributor. Oh sure, there is always that magical Cinderella moment where they get the movie accepted for screening at Sundance, and the minute the lights come up, there’s Harvey Weinstein thrusting a contract at the filmmaker. It does happen. To a few people. Of course your odds are higher that you will be hit by lightning during a shark attack.

Which is why indie filmmakers are always looking for alternative means to exhibit their movies. Even getting into Sundance is a long shot, and even if screened, the chance of getting a distributor’s attention is still extremely slim. Some indie filmmakers would argue that the Slamdance Film Festival is a better venue for finding distributors. Maybe that’s why it’s also getting harder to enter.

But most indie filmmakers are never going to make it to Park City for either festival. Or for any of the other top-listed events. Cannes is always too expensive, and the rest seem so far away (especially if you’re looking for good reasons to procrastinate). Besides, the odds are about as bad (and sometimes much worse) of getting anywhere at any of these sites.

As for all the other festivals, well it can be a little bit like bad sex. They can still be pretty good, but not quite the same as something with a strong dash of romance. Most second and third-tier film festivals do not attract distributors. So the filmmaker can get some exposure at these festivals and maybe even flip it into a move for wider viewing. But you will not actually get a distributor.

Which is why some indie filmmakers start thinking about doing it themselves. Four wall distribution is a fascinating concept. Why, it’s right up there with the Dynamite Death Chair act. The process is labor-intensive and money-draining, and most efforts to four-wall never get much further than the filmmaker’s home town (at least if they have a local theater that is open to the idea). It can sort of work for a movie that has a very fixed audience (for example, a documentary concerning a political and/or social issue that allows the filmmaker to work through an established series of organizations related to the specific issue). But in most cases, it isn’t really worth the effort.

The Pop-Up cinema has become a new (well, not exactly new) idea. The No Wave/Punk cinema movement of the early 1980s had a similar idea and was originally screened at Max’s Kansas City and CBGB in between the music. A variety of alternative venues can be explored, ranging from nightclubs to empty store fronts or even just a convenient open lot. Of course, you may get more police attention than audience, which is why you will want to make sure that you have legal clearance for both the space and its use. You would also be strongly advised to develop the presentation in cooperation with various other organizations in order to tap into a potential audience.

Perhaps the most succinct presentation of the modern ups and downs to these approaches has been demonstrated by Kevin Smith and his tribulations with releasing the movie Red State. Due to the subject matter of the movie, Smith was not attracting any major distributor. So at Sundance, he held an “auction” for the distribution rights (OK, this was more of an attention-getter than an actual auction).

Since the auction didn’t work, Smith announced that he was preparing to four-wall the movie. He started organizing the Red State tour with the enthusiasm of a politico charting a national campaign. It was sort of a national tour (15 selected cities) in much the same way that Charlie Sheen’s recent live show was theater — a very limited run that mostly built PR value. But it did get attention from Lionsgate, who were willing to sign a distribution deal.

The movie will now go for its broadest release on Labor Day via VoD. In some crazy way, Smith has taken indie distribution through a history tour as he traced his way from the early days of four-walling to the contemporary Promised Land of commercial online release. If it works, it will be a bold move that will cement the online future for indie distribution. If it doesn’t work, well, so what. Basically this is still the future, no matter what happens to this one title.

Besides, VoD definitely beats the theater clean-up after the screening. It’s a lot of work, and you don’t even want to know what some of that stuff is on the floor.

 

 

Film Fund-amentals: The 1,000 Percent Sure Thing

 First published August 31, 2011

Recent box office may be slow, but it was a hot summer for the Feds. In June a series of major arrests were made against fraudulent film companies. In each case, the federal indictments read like a primer on boiler room flimflam. The cases are also a sharp reminder that sometimes the smartest people can make the dumbest mistakes.

The two main companies that were charged, Cinamour Entertainment LLC and Q Media Assets LLC, were both running operations that promised investors large returns for movies that were either never made or, if filmed, never really intended for release. Between the two companies, over $25 million is alleged to have been stolen from investors who responded to cold calls that were based on lists purchased from American Information Strategies, Inc., which has also been indicted in the investigation.

What is most interesting about these cases is just how much money was fleeced through a pretty low-brow effort. Basically, it was the same kind of scam used by bogus lotteries (for example, the “Microsoft Lottery“) and phony investment schemes. Half of what they promised sounded half-legitimate, and many of the investors had little experience with investing, so it had to have sounded half-real. Add to that mix the tasty magic of the movies and the deal was cooked. So, too, were the books.

Admittedly, film investment is a ripe zone for fraud. Even at its most mainstream level, the business is a convoluted and loosey-goosey enterprise that more resembles an old Monty Python sketch. Often the financial details move about in a random state with a cash flow that can seem more mysterious than the source of the Nile. The names of various directors and actors and writers come and go in a willy-nilly manner that sounds like a bad game of Clue. It is extremely hard to determine who might be legitimate, but ironically enough it is pretty easy (sometimes) to sort out the offers that are highly dubious.

For example, Cinamour was promising their investors a 1,000 percent return on investment. ROI is a tricky issue in the film business, with average returns varying from between zip to 655,505.52 percent, but the harsh reality is often in the negative category. Anyone promising a guarantee return of anything — least of all 1,000 percent — is being neither honest nor realistic. Many small-budget movies will have an ROI in the minus zone or, at best, a modest 1 to 10 percent. Of course, Paranormal Activity was the film with the 655,505.52 percent ROI, but that kind of success is extraordinarily rare.

Both companies were promising well-known stars for their movies. Not surprisingly, not a single one of the performers named had a clue that they were supposed to be committed to the productions. Names are cheap, especially if the “star” has no idea that you are using their name. Likewise, an actor may have actually given a passing nod to a project but has no intention of going anywhere near the movie. Until an actual legal commitment is made, none can be taken. Of course, this assumes that the actor in question has even been contacted about the movie. The companies under indictment didn’t feel the need to bug the named performers with such testy questions.

Besides, if a major player is interested in the movie, they’ll have signed a letter of intent. The LOI is a funny procedure. Since it’s not legally binding, it doesn’t really mean much. But a written confirmation that a major performer is interested in the project is a major help in attracting investors. Sometimes the most important aspect of an LOI is the degree to which it can help demonstrate the legitimacy of the project (as long as the document is legitimate itself — if the performer has gone so far as to sign an LOI, then that performer should be available for some form of support verification to potential investors).

Which gets to the biggest rule that any potential investor should follow: “Trust but verify.” In the case of the film business, I would suggest taking it light on the trust issue and going big on the verify part. Oh sure, everybody in this business is everybody else’s good friend. No matter. As I once pointed out to some business associates, the reason why people in Hollywood are always hugging each other is that is the easiest way to find the soft spot just before the backstabbing begins. So just remember that everybody is a sweetie and you just want to make a few calls to check things out.

One thing that is interesting to note about the cases against both Cinamour and Q Media is that they were both largely running call centers to find investors. Calling (or e-mailing) total strangers in order to pump them for money is a strange experience. It does happen and it can be basically legitimate (while writing this piece I got such a call that was legitimate). In such cases I can only say “Do not trust and most certainly verify.” To be honest, I would not particularly trust anyone making a cold call, sending an unsolicited e-mail or making unverifiable contact via a social networking site. We all have to work with all forms of the new technology, but we also need to know who the other person is and what they really represent before any actual transaction can take place.

Which is why it is always good to keep the key rule in mind: The minute it is too good to be true and too easy to be believed, then something is wrong.

Film Fund-amentals: The Strange Nature of the Digital Evolution

 First published September 6, 2011

As we all know, Betamax was better than VHS. Vinyl records were superior to a CD. Personally, I suspect it is safer to take a printed book to the bathroom than a Kindle (OK, I haven’t been quite the same since I was caught sitting in the bathroom during an earthquake).

But none of this matters. Quality is not the determining factor in the digital evolution (I am calling it evolution rather than revolution because the process is closer in spirit to Darwin than Marx). Betamax lost out to VHS due to a variety of bad business decisions. CDs took over from LPs largely because of their greater portability. The sound quality became secondary. To be honest, my assumption about Kindle and the bathroom is based on personal hysteria.

The factors that determine successful change within the digital domain go way beyond the merely technical. Instead, they are a chaotic mix of business strategies, sociological attitudes, cultural assumptions and individual adaptability. Then add in the greater economic scene and the fickle (and nearly unpredictable) nature of the buying public. If you were to chart these factors, the result would resemble a PowerPoint presentation created by a deranged chimp.

Both the film and recording industries have spent more than 25 years trying to adapt and control the changes being caused by digitalization and the Internet. The mainstream record business is half-dead while simultaneously various forms of online and downloadable approaches are rapidly developing. The film industry is going through many of the same changes. Digital screenings (and digital distribution) are becoming common at theaters. The major companies are beginning to move aggressively into the VoD market. Publicly, Hollywood has taken on the digital challenge and is ready to steer its way into a future so bright every studio executive will have to wear shades.

Last Wednesday, Variety announced that the summer box office of 2011 is about to break the record set in 2009. It sounds as if the Hollywood plan is working. Or at least it does until you put it into context. For example, the cost of movie tickets has sharply risen during the past two years while audience attendance has dropped. In turn, most of the summer box office has been dismal, with only a few movies doing any amount of serious business. Ironically, the few titles that did well were ludicrously large hits, reaching over a billion dollars each (the billion mark is the new standard for tent pole productions).

However, since movies like Harry Potter and the Deathly Hallow Part Two and Pirates of the Caribbean 4 basically cost around half a billion to make (once you tally up production as well as PR and all other connected costs), that big global profit mark just isn’t too hot. The only movie this summer that actually has produced an enormous return on investment is The Help. Made for around $25-$30 million, The Help has currently taken in $118.6 million in US box office and has a near stranglehold on the number one slot. Technically, it has done more business than the last six big movies made with Johnny Depp (and Depp is one of the few marketable stars out there).

In reality, the current Hollywood strategy is not working. Privately, most studio executives know this and are feeling desperate. That is why they are so busy storming the digital playing field in a heated attempt to take control. This is part of the reason why the question of internet piracy has been a hot issue in Congress, various majors have been fighting against Netflix, Viacom is still trying to win an appeal in its suit against YouTube, and everyone is trying to cozy up to the social media sites.

But they will most likely fail because of their own mis-assumptions. The current emphasis on the over-produced tent pole movie is based on the idea that the audience will go to the theater for an extravaganza. But the audience drop is most noticeable with these movies. The current data do not support the idea that the audience is chomping at the bit for more ultra-expensive superhero movies (unless it’s Batman).

They hope that 3D will save the business. But it won’t. A few 3D movies have hinted at the superior possibilities of the new digital process. Most 3D films could have been directed by a blind man and nobody would have known the difference. The most important thing that modern 3D has done is to pave the way for total digital production and distribution. This new approach will be of great value to indie filmmakers, since it vastly reduces costs at both ends of the process. Of course this wasn’t the intention of the major companies, but it is the inevitable outcome.

The major companies will ultimately fail in their attempt to control the VoD market. They are still too bound to the cable TV distribution format to fully comprehend the radical difference in this rapidly emerging form. They are offering too few titles at too high of a fee to truly excite (or even attract) the online crowd. They seem convinced that people will pay more for quality entertainment. A few of these folks may also still have a Betamax stashed away somewhere in their office.

But the biggest problem for the major companies is the issue of centralized control. Every Hollywood studio is part of a massive corporate structure. They may or may not be too big to fail, but they are certainly too big to understand anything outside of this type of structure. By comparison, the digital world has no center, very little structure in any corporate sense, and largely floats between a wide variety of individuals and concerns. The conglomerate world is composed of massive interlocked divisions that operate in a top-down hierarchical structure. The digital world has no top, no down, and is structured in a non-linear order that often defies national borders and any single company’s control.

Which is why I keep emphasizing that the folks in Hollywood haven’t a clue what is hitting them. This is also why the indie structure is the only one that can, ultimately, withstand the massive process of evolutionary change that is beginning to take place in the business.

 

Film Fund-amentals: More Lessons From Failure

 First published September 13, 2011

Sometime back, I suggested that one can learn more from a movie that has failed than from any ten flicks that were hits. At the time, I used the disastrous British opening of Motherhood as the prime example. But to be honest, that movie was kind of thrown out there in a haphazard experiment that was doomed to fail.

The movie Creature has achieved failure the old-fashioned way. Last weekend this movie had the single worse national release in box office history. It took in a mere $327,000 despite playing on 1,507 screens, averaging approximately $221 per screen, which roughly breaks down to about 28 viewers per screen during the whole weekend. By the end of its run (which may be this coming weekend), Creature will be lucky to hit the $500,000 mark. In fact, it may barely be able to reach the $400,000 mark.

This failure is most notable because Creature is a horror film, and normally horror movies will have an opening weekend of around $12 million to $30 million. Of course, after that opening weekend the bottom drops out of the market (normally), and it becomes a quick run to the DVD stand. But the first weekend is usually pretty OK within a certain predictable range. With this in mind, the failure of Creature is truly fascinating. It’s as if they worked extra hard at blowing it.

Since we like to pretend that we are indie movie financial hotshots (we even have a database), I thought it might be an interesting experiment to crunch the numbers through our system. Who knows, maybe something would pop up as a critical factor. At the very least, I could use the mental exercise with a software program that hasn’t been getting any major workouts lately.

So I did an initial crunching of the data on Creature and discovered that our own prediction for the US box office was $2,172,549. Not very good, but a heck of a lot better than what is happening. But the US box office figure isn’t the important one in our system. The real results are contained in the predicted revenue range, which for this flick is $50,011 to $4,440,819. The predicted box office is simply a basic average, but the revenue range is what will be most likely achieved by the film with the variations representing the different effects caused by certain other variables.

In the case of Creature, one of the important variables is the distributor. The movie was both produced and distributed by The Bubble Factory. Though the company has been around for 14 years, it has yet to produce a movie that has significantly scored at the box office. Until Creature, it had never previously tried distributing a movie on its own. Personally, I don’t think a struggling production company is in any position to move into distribution.

If Creature had been distributed through a larger and more established company, it most likely would have done slightly better. But only slightly. The database figures indicate an improvement of only a few percentage points. Besides, The Bubble Factory had managed to get this sucker into a lot of theaters, so they were getting a fair amount of the job done. Most likely the biggest problem was lack of publicity rather than distribution itself.

The relative inexperience of the movie’s director and certain key technical personnel didn’t matter. This part didn’t surprise me, since horror movies are traditionally a good starting point for many people, and inexperience isn’t necessarily a drawback. People have to start somewhere, and the horror genre is that somewhere. Likewise, the basic lack of any known names in the cast makes little difference. A better-known cast only resulted in an increase of a few percentage points. Besides, a better-known cast would have forced the producers to spend more than the $3 million that they used for producing the movie.

The issue of casting is one of the most illusory concepts in film production. People who invest in movies like to invest in stars. People who go to movies largely don’t care. Few of the so-called marketable stars have any real box office clout. Mostly, they sell magazine covers. The unimportance of the star is especially true in the case of horror movies. As long as the cast members can run and scream, they will do fine regardless of name recognition (or lack thereof).

The leading actor in Creature brings up another issue. Mehcad Brooks has some name recognition from his TV career. The filmmakers were especially banking on his role for one season on the cable series True Blood. Unfortunately, few people who do well on TV ever successfully make the leap into movies. George Clooney is a rarity. Most will never make it as far as Tom Selleck (and he’s back working on TV). This has little to do with the person’s merit as a performer. Heck, I like Tom Selleck on TV, but he comes off too flat on the big screen. It has to do with the strange nature of the movies.

Ironically, the $3 million budget was the one factor that made a noticeable difference in the database analysis. If Creature had been produced for $15 million, the projected revenue moved to a range of $269,899 to $24,413,736. Again, this is not a fantastic improvement, but it’s a heck of a lot better than what they got. Oddly enough, horror movies tend to play best when they have a production budget somewhere between $12 million and $15 million. Any significant amount either below or above this range is a problem. The minute a horror movie goes past the $18 million mark, forget it. Some might point out that Paranormal Activity did phenomena business and it was made for $15,000. But that movie wasn’t exactly a horror flick. It was an indie event and had a very different audience from the average horror film.

I hate to say it, but they didn’t spend enough on this sucker. By the way, don’t ask why that would make a difference. Even with a database, there are many areas in the film business that defy rational explanation.

 

 

 

 

Film Fund-amentals: Moneyball: Theory and Practice

 First published September 21, 2011

A couple of years ago, when Moneyball was about to start filming and Sony pulled the plug on the production, I predicted that it would end up as a George Clooney flick like Leatherheads. OK, the smart-aleck who wrote that was wrong, and I will be sure to take it up with myself at my next “staff” meeting.

Certainly the past effort at adapting a book by Michael Lewis would give many of us a pause for thought. The Blind Side was an extraordinarily successful movie loved by many (I liked it) and loathed by few (my attorney spent nearly thirty billable minutes telling me why he hated the film). But it wasn’t exactly the financial and business issues in football that Lewis was writing about.

Moneyball is much closer to the material. Sure, the book has been condensed like crazy, and the screenwriters are heavily focused on the most dramatic aspects of the material while skipping past Lewis’s own unique wry humor that makes the book a smooth and fun read. The movie does not take the more radical semi-documentary approach that director Steven Soderbergh got fired over (though some documentary footage — both real and recreated — is used). Incredibly strong performances are delivered by both Brad Pitt as a semi-irresistible force and Phillip Seymour Hoffman as a nearly immovable object. In many regards, Moneyball is an outstanding movie and will no doubt be on the roster at next year’s Academy Awards.

But how well does it handle the subject of the book? Lewis’s main concern was with the experimental application of statistical methodology into the tradition-bound world of professional baseball. As the general manager of the Oakland A’s, Billy Beane found himself faced with rebuilding the team on a $39 million budget against other teams with $150 million-plus bank accounts. Since he couldn’t afford the normal approach to recruitment (which is largely based on waving a blank check in front of a guy’s face), he turned to statistical science.

Moneyball does present a half-way reasonable introduction of this issue to the general public. Despite the repeated (but fleeting) appearance of spreadsheets, printouts from databases, and quick glimpses of numerical formulas, the movie tries not to tax the audience on mathematical understanding. Dramatically, this was a smart move. Most people do not stay awake long during math lectures. So it makes sense that a lot of this subject has been shifted into the personal confrontations between the old guard and the new ideas that Beane is trying to introduce.

Of course, some of this gets muddied up in the process. It provides a quick reference to Bill James and the early development of sabermetrics. In reality, Beane and his assistant general manager, Paul DePodesta, adapted and combined several methods in their approach. It might also be noted that one of the movie’s major false steps is the converting of the rather lanky DePodesta into Peter Brand, a chubby nerd who looks like he just wandered out of Comic-Con. DePodesta actually played baseball in college and had some understanding of the traditional elements of the game before he went to work revamping it.

Likewise, various aspects of this new approach were not really new to the Oakland A’s. Their longstanding status as an underfunded ball team had already sent them in various “creative” directions. The team’s owner was already steering them in the direction of sabermetrics (contrary to the movie’s presentation), and while some members of the old guard in the scouting camp were not happy about this, others were willing to give it a try.

The use and application of a statistical based cybernetics model for business and economic analysis is the rapidly emerging norm in many areas of finance and business planning. But certain professions, such as baseball and filmmaking, have remained largely resistant to the process. In both cases, the reasons are pretty much the same. Many people in the film industry insist that it is all based on gut instincts, blind luck and a profound sense of show business intuition. They also claim that they do it for the art and are not running a business.

In reality, the film industry is a multi-billion dollar enterprise run in an incoherent manner based on a strange combination of magical thinking and half-baked, extremely subjective impulses. Though the catch phrases and slang terms are different, the chatter in Moneyball from the baseball scouts can also be heard in every major studio office. Access to large sums of cash is the only thing that keeps the system afloat.

In that sense, the film industry is not a business. It is a catastrophe in the process of happening. But the business is strongly opposed to any moves to change, and has largely resisted any efforts to adapt to modern systems of analysis. The few systems the industry has tried have mainly been focused on the misguided attempt to predict success. They miss the point made by DePodesta in the book: “It’s looking at process rather than outcomes… Too many people make decisions based on outcomes rather than process.” This is the key point to cybernetic methodology.

The movie almost conveys that point. It doesn’t quite pull it off and inadvertently reduces the debate to the bogus issue of human instinct versus mathematical figures. Actually, there is no conflict. Cybernetic analysis is a process, not an end result in and of itself. In the film, the nerdy guy stares at his laptop and produces answers like a magician pulling rabbits out of his hat. It doesn’t work that way. A major drawback to the movie version of Moneyball is that it accidentally reduces the process to another (more technical) form of magical thinking.

But at least it introduces the concept. Hopefully, some folks in Hollywood will actually read the book. Then, just maybe, a couple of them will actually give it an honest-to-goodness serious try.

Film Fund-amentals: Winds of Change

 First published September 28, 2011

On the surface, Nikki Finke‘s Autopsy Report on the recent failure of I Don’t Know How She Does It is a good hoot of a read. It offers some stinging observations on the largely stalled career of Sarah Jessica Parker while allowing Harvey Weinstein plenty of room to develop his newly honed impersonation of a cranky geriatric patient.

Not much is really surprising in the article. Aside from Sex and the City, Parker doesn’t really have much of a film career. Despite his boast that 2011 would be a banner year for The Weinstein Company, old Harvey can’t win for loosing. As for Harvey’s theory that the movie was sucker-punched by The Lion King, well that’s still an extremely popular movie (and its conversion to 3D almost makes sense, since the movie was using 3D graphic effects in the first place). Maybe, just maybe, Harvey Weinstein is simply paranoid about Disney. So what. Many of us are paranoid about the Magic Kingdom.

But what is really interesting are the comments to the article. Especially the running themes in some of the comments (skipping the cheap shots at Parker’s looks). Several of the comments go after Weinstein’s notion that Parker has an immediate access to female viewers under the age of 30. Obviously this is a no-brainier. I haven’t a clue what appeals to women under the age of 30, but I know it isn’t Sarah Jessica Parker. No wonder some people in the business have had questions about whether Harvey is firing on full thrusters or not. His gut instinct for the box office needs a strong dose of Maalox.

Quite a few of the comments are refreshingly blunt about their disinterest in the comedic “angst” of a well-to-do upper-class housewife. Many of them reference the movie in terms of the current economic situation and make it clear that they have no interest in (and even a rising hostility toward) an illusory presentation of the current economic order.

In other words, they are mad as hell and they’re not going to take it anymore. This is not a surprising development, but it will come as a surprise to many people working in the film industry. The real problem with a movie like I Don’t Know How She Does It is not that it sucks (though there is a sizable body of argument in that direction). The problem is that it is totally irrelevant to the rapidly emerging new reality. About ten years ago, it might have slipped by as OK. Now, many people are acting as if they’ve just been whacked over the head by a fossil from some prehistoric shopping mall.

We have already given up on the concept that movies are recession-proof (much as the economy has gone past the concept of recession). The current economic situation has reached the point where fear and panic are more easily traded than stocks and bonds. A year ago, I painted a grim picture of the emerging conditions. In retrospect, I think I was too kind in my presentation, and now I don’t even like discussing the economy. Maybe we could talk about something more thrilling, like death or colon exams or any number of other more “fun” topics. However, I also keep getting the distinct impression that there is a major change taking place. Or should I say changes.

A lot has been written about the major changes taking place in virtually every aspect of the film industry, from computer graphics to digital presentation to video-on-demand and download streaming. But there is also a change taking place with the audience. Hollywood is vaguely aware of some of the changes (such as the changing age level of the audience demographics). They are beginning to hear the first rumors of the ethnic and racial changes taking place both within the American public and the audience. In both cases, they have barely made any rational move toward adaptation. Mostly, they hire Morgan Freeman as a means of covering both bases. Good thing Morgan is a strong actor with a high audience likability factor.

So I’m not sure that anyone in the biz is prepared to deal with an audience that is going broke, getting worried and generally just feeling totally pissed as hell. Heck, it’s no wonder the romantic comedy has gone belly-up as a genre. This is not a romantic crowd. It isn’t much of a surprise that three of the biggest comedy films of 2011 so far are The Hangover II, Bridesmaids and Horrible Bosses. The humor is more hostile than screwball, and these movies seem to provide a lot of people with a safe venting zone in the theater.

A major shift in audience sensibility is by no means unprecedented. It has happened several times before. For example, there was a slow but very steady shift that took place between the 1950s and the end of the 1960s. But a much more rapid change actually took place during the transition from the silent cinema to the sound era. It wasn’t just the technological change. The American cinema of the 1920s was heavily dominated by the Jazz Age image of slick and dapper leading men and wild, flirtatious flappers. But with the start of the Great Depression, this all came to a screeching halt as the audience just didn’t care anymore. Instead, the ideal leading man of the 1930s was flippant, with a working-class attitude and a hard-edged sensibility that would inspire a generation of French philosophers.

I suspect we are going through a similar process. Exactly how it will evolve remains to be seen. But one thing is for sure, Sarah Jessica Parker better hold on to her day job with the perfume company. I would hate to see her panhandling for her next pair of Blahniks.

Film Fund-amentals: Thinking of the Future of Film

 First published October 4, 2011

Socrates once said, “The only true wisdom is in knowing you know nothing.” Obviously, he was anticipating the current state of the indie film industry. Based on several recent articles, it would seem that there are not only two sides to every issue but also three or more issues to every side.

Last month The Economist published a short but spiffy piece on The Revival of Independent Film. According to their analysis, indie movies are poised to make a major market comeback because… OK, this is where the article gets little thin. I’m not so much arguing with their point. I’m just trying to figure out how they came up with it.

One of the examples they use is the recent success of The Weinstein Company with the release of The King’s Speech. Of course that was last year, and so far in 2011, The Weinstein Company has been striking out everywhere they turn. Two other companies they refer to, CBS Films and Open Road, are too recent to truly analyze (heck, Open Road still has their website under construction). So far, the track record for both companies is less than promising.

Likewise, the article’s observation about European financing — added to American production and distribution — may have taken a huge hit from today’s ruling by the European Court of Justice. Selling movies country by country has been a major plus to various indie filmmakers, and the legal requirement to deal with the entire European Union throws some gigantic monkey wrenches into the negotiation process.

But that’s OK, I guess, because The Economist also assumes that the collapse of the DVD market will be a boon to the indie trade, since it will possibly force the audience back to the theaters. To be honest, there is no rational explanation as to how they came up with this one (though what is stated in the article sounds more like a plea than a theory). Personally, I am of two minds on this issue. Might be nice if it develops that way. Too bad it just ain’t gonna to happen. The staff at The Economist sound as if they’re hoping for a return to the art house theaters of the 1960s, where coffee was served instead of popcorn and the word “existential” flowed through the lobby like a fine French wine.

But a better assessment of current trends can be found in a blog piece from last February by Roger Goff and a more recent piece by Nick DeMartino at TribecaFilm.com. To get an even better idea of what is really going on, just add last month’s interview with Todd Wagner of Magnolia Pictures regarding their VoD approach, along with a copy of Selling Your Film Without Selling Your Soul by Jeffrey Winter, Orly Ravid, Jon Reiss and Sheri Chandler. If this were a classroom rather than a blog, this would be the reading list for the intro course. As a teacher, I would only have to throw in a few obvious comments in lieu of a lecture and hope to collect a paycheck.

What is happening is that indie cinema is making a comeback, but not exactly in the way it used to be. There is still a market for modestly priced productions (despite its historical setting, The King’s Speech had a remarkably low budget of $15 million). Occasionally, there will be a surprisingly hot indie event like Paranormal Activity (which magically turned a $55,000 investment into $183 million in worldwide gross). But mostly, the future for indie will be in the direction of digital distribution, VoD release and other developing forms of online and mobile access.

There is no doubt that this is the immediate future of cinema. Every aspect of the developing technology is steering in that direction. Even current technological applications by the major Hollywood companies (such as 3D) are driving the system into the direction of an increasingly decentralized structure that is economically more suitable for the indie filmmaker. A careful reading of Cinema Projection in the Age of Digital Distribution outlines part of this development. So the distant shoreline has already been sighted, softly green in the sun’s dappled light. The only question is, how do we sail toward this land without hitting any hidden rocks close to shore?

In other words, how the heck is anyone ever going to make money out of this emerging new system? In many respects, the technology has surpassed the economic structure of the industry (which isn’t exactly surprising, since the economic structure of film is still a partial relic of the silent era). But certain aspects of the new economic model are already apparent:

1. The current fixation by the major companies on big-budget production will eventually implode. The economic structure to this model is totally lacking in sustainability and can only exist as long as the financial backers (mostly large lenders and multinational corporations) are willing to prop it up.
2. The emerging new model will be based on what DeMartino calls the “transmedia” movement. The primary focus on financial return on a movie will continue to shift away from theaters and will be increasingly focused on a mix of digital screenings and VoD distribution.
3. YouTube and other forms of online presentation are in the process of creating new forms that create a heightened (and extremely different) sense of engagement with the audience. The results will be equivalent to an evolutionary change within both the business and the art form.
4. Everything we currently know, think we know, or even hope to have learned from past experience will most likely prove to be wrong.

Or as that other great philosopher Doris Day once sang: “The future’s not ours to see.”

 

 

 

 

 

 

Film Fund-amentals: Conference Mania

 First published October 12, 2011

 

 

There are two reasons for going to any film conference. The first is networking. The second is… well, there is a second reason, though I’m having trouble remembering what it is at the moment. Free food if you’re lucky, but that’s more of a perk than a reason.

OK, educational development and hands-on training from professionals are the main focus for any conference. But networking opportunities are an extremely important component to the process. That’s one of the major promises made for the upcoming Film Production & Finance Summit on October 24 in New York. Well, networking and a lot of presentations by a long list of notable names in the field of indie film financing and entertainment law.

A quick scan through the Summit’s speaker list is impressive, including such folks as Lucie L. Guernsey from Woodland Bay Capital, Ltd., and Stephen Hays of 120 dB Films. There will be such exciting topics as Basic Mechanics of Film Finance and Updates on US and Canadian Tax Incentives. OK, some of the topics are pretty dry even if important, and unfortunately the Summit’s $495 a ticket price tag makes it an event largely reserved for well-heeled accountants and lawyers. Stuff like tax incentive programs are high on the need-to-know list, but gee gosh golly, it does sound a bit like the party Rick Moranis was having in Ghostbusters.

Too bad, because many of the conference speakers and topics are important to indie filmmakers. Unfortunately, most indie people will not be able to afford the admission price, either. And by the way, the Jolly Madison Hotel has only a few Deluxe rooms left for this date, with a price tag running close to the ticket cost. Sleeping on a subway train all night is not advised but may be necessary.

Of possibly greater interest to the average indie filmmaker will be the IFP and IndieWIRE Presents: Killer/Hope Masterclass on November 5. This day-long presentation by Ted Hope and Christine Vachon should function as a complete graduate course in the fundamentals of indie film production. Between the two of them, Hope and Vachon are responsible for many of the best-known titles of current indie cinema and have enough awards and honors to stuff a modest-sized museum.

People who have seen Hope doing this type of presentation tell me he is an incredible teacher. I’ve seen Vachon in action and she is an extraordinary and extremely thorough presenter. The Masterclass will be worth the cost, which is a pretty modest $125 early bird, $150 regular ticket price. So the biggest issue will be finding someplace to stay in NYC. I’ve already located my crash pad and will be looking forward to a lovely autumn in New York.

But not everything is happening in New York. From October 20 to 23, the Austin Film Conference will be offered, concurrent with the Austin International Film Festival. This year the conference is heavily focused on scriptwriting, with a sizable (and pretty solid) lineup of veteran screenwriters from both film and TV and a special presentation by Lawrence Kasdan. The scheduled topics cover a broad and extremely useful range, and the networking opportunities should be stupendous. The local food, music and scenery are also pretty darn good. The cost of the conference varies based on how many days you want to attend (check their website for full details). If you handle your accommodations by camping, just watch out for the rattlesnakes.

Of course the other major event in Austin isn’t until March 2012, when the SXSW Festival presents SXSW Startup Village: Networking – Mentoring – Funding. The SXSW event is more like a combination of trade show, conference presentation, party haven and all around meet-and-greet fest, with a major emphasis on bringing together young filmmakers, possible investors and seasoned pros. It has become one of the major indie trade events with an average attendance of around 5,000.

To be honest, a lot of us often act as if music in films is kind of an afterthought. It isn’t. It is also hard to do, even for experienced composers. The Billboard/Hollywood Reporter 2011 Film & TV Music Conference offers two solid days of workshops and presentations devoted to the soundtrack score. Held at the Renaissance Hollywood Hotel in Los Angeles on October 24-25, the event carries a steep price tag ($550 for the full program), but it’s a rare opportunity for musicians and composers to completely focus on their craft.

Prior to this one, you can also drop in at the Digital Hollywood Fall Event, which will be held October 17 to 20 in Marina del Rey. With a special emphasis on issues relating to Urban Media and Cross Platform Content, and with guests ranging from Quincy Jones to Brett Ratner, it should be lively. I have only flown over Marina del Rey, but I got the strong impression that the beach scene alone is worth it.

Back in New York, you can dive into the Digital Hollywood New York conference on November 17 to 18. Despite its title, the conference actually covers a broad range of topics related to digital applications, not just in film and TV but also in magazines, newspapers and advertising. Since the digital universe is based on a total synthesis of forms, this stuff is all interrelated, and there should be some good material to be had at the various presentations.

Finally, for those who are really hungry for the power lunch bunch, there is always the long list of events staged throughout the year by Variety. Just go to and scroll through enough conferences on both coasts to keep your travel bags packed and your bank account near empty. Just hope that food comes with the price of a ticket.

 

Film Fund-amentals: Pirates of the Digital Shores

 First published October 18, 2011

Last time I checked, the only boom profession offering employment is “Somali pirate.” Unfortunately, the work conditions are horrible, the benefits are non-existent, and the Navy SEALS turn out to be pretty good shots. So it isn’t a great career move.

But digital piracy is a major enterprise. Well, kind of. The recent posting from TorrentFreak of the Top Ten Most Pirated Movies of All Time presents some fascinating figures. For example, who would have guessed that Kick-Ass was almost as popular as The Dark Knight (though personally I have no doubt that Hit-Girl could whoop Batman’s butt).

The estimated totals for illegal downloads represent the kind of astronomical figures that have Hollywood shaking. The most pirated movie is Avatar, with an estimated 21 million downloads. If you translate that figure into a basic estimate of lost revenue (using a figure of 12 as an extremely low-ball figure for individual box office and DVD returns), at least $252,000,000 is roughly projected in lost profit. Even with the movie’s $2.8 billion in global returns, this is a pretty hefty chunk of change. James Cameron might even have to brown-bag it every so often.

Even more extreme is an item like The Incredible Hulk. With an estimated download of 14 million, this suggests a lost revenue of something in the area of $168,000,000 (again, a low figure). Since the movie’s global take was $263.5 million (with a production budget of $150 million, which probably means something more like $200+ million), the film has taken a major hit from piracy.

This is why everybody from US Congress to the MPAA to the European Union to the Hollywood craft guilds are all hopping mad and demanding major action. Late last year, US Immigration and Customs Enforcement lowered the boom on five major web sites involved in alleged acts of piracy (actually, ICE took out 82 sites, as noted by TorrentFreak in their more detailed report).

The cost of film piracy has been estimated at anything from $1.3 billion to as much as $6 billion. Obviously, this is a lot of stealin’ going on. But it also rises a question (which isn’t exactly being asked in some circles): what kind of money is actually being made by these digital pirates? Since we can all agree that this is a type of criminal activity, and most crime is committed for some form of profit, just what do these folks make by providing illicit downloads of recent movies?

Basically, they make nothing from the download. Most of these sites offer the movies for free. Sites that do charge are often not the preferred place to go (after all, if you have to pay you might as well get something that’s legal). There’s even a strong rumor concerning a suppressed marketing study that suggests that many digital pirates are some of the film industry’s biggest consumers. In some cases, they’re buying multiple copies of the DVD and then downloading it to the rest of the planet. Some digital pirates are motivated by a form of mad love rather than criminal drive.

So the actual money is for the most part not generated by the illegal material. The loot is derived from advertising. An extremely interesting blog piece by journalist/filmmaker Ellen Seidler details Seidler’s attempt to track down the advertisers who financially propped up the pirate sites that were illegally offering her movie And Then Came Lola. Basically, she discovered that the companies behind the advertising that operated behind the pirates were connected in various ways to Google, Sony, Pixar and Netflix.

In other words, the major Hollywood companies are being ripped off by digital pirates who make their money through adverting provided, directly and indirectly, by the major Hollywood companies. Which also means that at least some of the money that these companies are loosing from the piracy they are actually picking up on the other end of the system. Which is also kind of convenient, since they don’t have to deal on that end with all of those messy royalty payments and stuff. Which also means that the real losers in this situation aren’t the major companies so much as all of the second-tier players from the guilds and stuff who might be dependent on the upfront money made from the movie itself. Well, those folks as well as some indie filmmakers who stand to actually lose real money, which is how Ellen Seidler got involved in tracking down this information.

Personally, I do not in any way condone digital piracy. It really is immoral, unethical and illegal. It may also be fattening, but I haven’t seen the data on that issue. However, it is also a lot more complicated (and devious) than anything admitted to by the MPAA or any of the suits in Hollywood. As often happens, the major players are busy attempting to cover their bases on all ends of the equation. Only the little people (that is, the vast majority of us) actually stand to lose.

This gets even more complicated when the piracy issue is used by the major companies as a reason for increasing government regulation of the Internet. As many open net advocates have argued, much of the proposed legislation is designed to give corporations a greater degree of control over Internet content and access.

In principle, the companies are arguing that this will help control piracy. It all sounds a bit like an insurance company hiring an arsonist to burn down some of the property they insure just so they can jack up the rates on the remaining houses.

Film Fund-amentals: Seconding the Proposal

 First published October 25, 2011

According to the IRS, filmmaking is a hobby, not a business. Or at least that is the stand the IRS has taken against filmmaker Lee Storey in its attempt to collect $300,000 in alleged back taxes concerning business deductions she attempted to take from her documentary Smile ‘Til It Hurts.

The Storey case made lots of headlines within the indie trade last summer when Judge Diana Kroupa of the US Tax Court in Arizona ruled that documentary films were made to “educate and expose” and did not serve as a profit-making business. Since the core argument being made by both the IRS and Judge Kroupa is that filmmaking is not a for-profit enterprise, Storey (and any other filmmaker out there) is not entitled to the many business deductions available to any business (especially small businesses) attempting to stay afloat.

Storey’s case is still pending, and she is currently being supported by an amicus brief filed by the International Documentary Association, Film Independent, National Association of Latino Independent Producers, Women Make Movies, National Alliance for Media Art and Culture and the University Film and Video Association. The Storey case is extremely important simply because the IRS seems determined not only to strip various important business deductions away from indie filmmakers, but also to add insult to injury by reducing the whole field to a backhanded status that resembles stamp collecting. Though the “educate and expose” claim made by Judge Kroupa refers to the perceived function of documentary filmmaking, the full ramifications of the IRS case affect every form of movie making.

Despite what the IRS thinks, filmmaking is a business. OK, it is often not a very profitable business. I seem to recall that Spike Lee once speculated that selling tube socks on a street corner could be more profitable. At best, filmmaking is an extremely uneven business with a few highs and a lot of extreme and dismal lows. The process is virtually designed to break your heart forever as the business devours egos with the mindless enthusiasm of a hungry shark at a swim fest. This is why filmmakers really don’t need the IRS coming around to tell them that they are a bunch of losers (well, that is one result of this “hobby” theory they are pedaling).

For now, the case is still pending (a reminder that the obvious mascot for the court system should be a snail, not a half-naked lady with a sword and scale). But the effects are still being felt in countless blog pieces as folks in the indie business (yes, it is a business) find themselves reflecting on the particular nature of this business (yep, I am going to keep using that word in hope that the IRS notices the direction I am trying to steer it in). A few months ago, Ted Hope did an interesting breakdown on what kind of money an indie producer can make. The piece is extremely informative but a tad depressing, since selling tube socks on a street corner may indeed be more profitable (depending on the corner). But hey, I didn’t say it was an easy business. Heck, if it were an easy business it would be more like a hobby, right?

But what I have really been struck by is a recent blog piece at the Huffington Post by Josh Welsh, the Director of Artistic Development at Film Independent. Entitled Studying the Economics of Independent Film: A Proposal, Welsh’s article correctly zeros in on the lack of business data available in regards to indie filmmaking. Heck, many hobbies have more business data than indie filmmaking does (especially the people who do model trains).

I strongly urge anyone involved in the indie business to read Welsh’s blog piece. Even more important, I very strongly urge the pursuit of the type of study that Welsh proposes. It isn’t just the question of the IRS and crazy statements made by a judge in a tax court. The study that Welsh is suggesting would be an invaluable report for indie filmmakers. It would actually take the vast and nebulous state of indie film financing and create a clear and precise structure for the field. In other words, it would be a solid way of finding out just what the heck is going on out there.

However, I have a few suggestions for the study. Welsh is quite aware of the difficult nature of defining the phrase “independent movie.” These days, the term is only half-relevant, since almost all movies are technically “independent.” But for the purpose of this study, the field can be easily narrowed down by the budget. Basically, we would be looking at any movie made for a production cost of $20 million on down. If we wish to be a real hard case on the subject, then $15 million on down.

The parameters for the study would need to focus on a defined time period. Due to the rapidly shifting realities of current economics as well as radically changing distribution structures, the study would be best advised to focus on the most immediate past several years. Let’s say indie films made between 2008 and 2010. Likewise, titles should be selected on the basis of their release dates within these parameters. Production dates for certain indie movies can go on for a while, but the release date is when the movie is put into play and should be usable as the target for the study.

Welsh’s suggestion to use the list of entries at the Sundance Festival is half OK. Sundance is a major clearinghouse for titles. But it also has a system that too often weeds the selections down to a much too narrow range for the purposes of this type of study. A combination of titles from both Sundance and Slamdance would present a more diverse (and ultimately better) sample. It might also be useful to mix in titles from that same time period from the IFC cable system.

Then we would have to narrow the process down to the key variables needed for the study. Oh, did I mention that it would be very helpful if we got somebody to bankroll this project? Maybe the IRS? They seem to have a vested interest in the subject….