Steven Spielberg Predicts 'Implosion' of Film Industry

[High1ander]

The problem with sequels and "repetitive movies" is because Hollywood is too big for its own good. Marketing is what sells movie tickets, and it is way easier to market sequels and stuff like "The man behind The Dark Knight and Inception is producing this new Man of Steel". Hollywood has created a little black hole, where making a good cheap film won't just be enough to bring in the money, it needs to be exceptional in order to make big bucks (without "marketing"). They have made themselves too reliant on Sequels, that nothing else really makes sense for them, financially.

In all fairness, because tickets are so expensive here in Sweden (where I am now), 110-120kr = 15-17 USD, I don't go and watch a lot of smaller "good films" I go for the stuff that gives me the best bang for the buck when paying for a large screen and good sound, i.e. big productions like Iron Man 3, Man of Steel, etc... Now I try to go to the movies once a week (in the US and Australia when I lived there it cost me 6.50-8.50 USD/AUD I would go sometimes twice or three times a week. But now, I don't want to "gamble" on unknown movies since I can't "recup the loss of enterainment" as fast if the movie isn't to my liking. Only, when I've seen "the latest Hollywood movies that fits the 'worthy list' of not being crap" I watch smaller movies, or Swedish movies, so right now I still have After Earth on my 'worthy list to see,' not because I think it will be a better movie than other things playing but because it will be the best choice for a big screen, the others I can watch at home on a smaller TV or my 100" projector...

Also, since Hollywood depends more on the global market, they need big stars, that do well all over the globe, i.e. things that can be marketed all over the world that everyone can connect with. So stories becomes flatter so that everyone can get on board.

 

[Harry Lime]

Respectfully, this has little to do with my main two points -- but -- in a new age of specialized content for target markets produced by smaller (lower budget) production companies -- old style union "Wardrobe, set design, make up, hair, grips, electrics, DP, Gaffer, A list actors, editors, Colorist, Special FX post production, and so on" are going to be collecting unemployment insurance in Southern California -- spending some of their time complaining about all things new and remembering how all things old were better.

For one thing pretty much all low budget indie films shot in LA are non-union and the rates people are paid on such productions are not even comparable to what they are paid on a big studio picture. But they may not be low enough, if you expect highly skilled people to work for Walmart indentured slavery rates. Making movies isn't cheap. Even if rates are discounted, the sheer number of people involved quickly adds up to a major expense.

Second, one of the biggest reasons why there is a steady exodus of production out of Los Angeles is LA FILM. The cost for shooting permits has sky rocketed and you are now looking at $1000-4000 a day, between the actual cost of the permit and all the related requirements, like base camps, inspectors etc. The cost of the permit is almost guaranteed to exceeds the daily budget for a shoot on an indie. And all of that is incurred before you pay for anything else like insurance, the actual rental on the location, crew, actors, gear, transportation and everything else you need to shoot. The penalties for getting caught without a permit have also gone up. Now you are looking at a misdemeanor charge, having your gear confiscated (great if it's a rental!) and a $10,000 fine.

An even bigger reason why production is moving out of LA are the tax and cash incentives being offered by other US states and foreign countries. In most cases we are talking about a 30% cash back refund from the local government. And here's the kicker. That supposedly greedy vfx artist who was getting $35/h in LA is still getting $35/h in Vancouver, except the Canadian tax payer is paying 30% of his salary to the US studio. The vfx house or other post production facility doesn't see one nickel of that subsidy. It all goes right in to the pockets of the studio. As you can imagine the Canadian public was really thrilled, when they found out about that one.

So, please lets drop the Ayn Rand sing-a-long, where we lay the blame at the feet of those greedy, lazy union thugs and overpaid prima donna 'craftsmen', who refuse to work for minimum wage. The studios reap billions in profits and executives pay themselves more on a single show than most of us will make in a lifetime.

Making an indie isn't cheap. 'Upstream Color' was about $100,000 and that's because the director is a one-man-band and he begged, borrowed and stole whatever he needed. Anyone who has ever been down that road knows that it's a minor miracle he ever finished. Anyone who thinks they can make a movie over the weekend for a few hundred bucks is not being realistic or has no idea how this business works.

 

[pulpfiction007]

Thank god for smaller concepts and living under a big sky...
Low budgets are easier to deal with where I'm from, and permits? What are those? lol (not needed here unless you are being very stupid)

 

[stefancolson]

You keep comparing one company that started one service (for a number of reasons including self-distribution) to 'Hollywood' as if Hollywood was a singular entity. Valve is also an incredly unique company (if you haven't read their employee handbook you should stop reading this post and go read the handbook, PDF link) so it's not surprising that they do things other companies don't. Valve is it's own dev, publisher and distributor, all it's games are self-funded and it owns all of its IP. Not very many places like that and it gives them a lot of freedom.

On the polar opposite side of the spectrum is your typical movie or TV show where IP ownership, financing, production, distribution, etc., can easily be splintered across a dozen different companies. Movie Studio X can't just up and create a bit torrent killer because it most likely signed away the distribution rights of all it's films to pay for the making of it's films. Sure, once the contracts expire Movie Studio X could take a chance and boldly go where no movie studio has gone before... or they could just licence their content to another traditional distributor and cash a giant check. Back in the day ABC bought the broadcast rights for the first two Harry Potter films and cut a check so big that it covered over half the production budgets of both films combined. Is Apple willing to pay upfront like that? No, which is a big reason why iTunes gets treated like a red headed stepchild by Hollywood. A while ago (2010ish mabye) I remember reading that, on average, movie studios made about 0.5% of the revenue from the iTunes Movie Store. I'm sure things have changed a lot since then, but if Distributor A is basically willing to pay for half your production costs and Distributor B offers no money up front but just a cut of the sales from a relatively small sales channel, which one would you go with?

The vast majority of the content sold through Steam is produced and published by third parties (through the traditional developer/publisher ecosystem). In the early days Valve used the service as a distribution system for its own content, but it has become the defacto standard digital distribution method for the overwhelming majority of pc games (and is now branching out into productivity and general applications as well). The system is very different in the gaming industry than it is in the film industry, but it's still a complicated ecosystem where developers, publishers, IP owners, and distributers are independent entities with very different aims and interests. All Valve has done is create a new digital marketplace that serves as an alternative to traditional retail distribution. I don't see how a similar marketplace for film content poses radically different challenges, other than the stubbornness of the major players.

How much of what Valve sells is it's own content and how much of what Valve sells is third party content created in the traditional developer/publisher business model?

There are more than 2000 games available on Steam. Only 28 of them are published by Valve.

 

[visugeek]

Actually, the Canadian government pays 60% between city, state, and fed tax rebates for VFX work. That is why the companies are being told to move by the studios, and the artists are having to relocate. It's the main reason for the flight of production now. The studios count on that money to make their films. Who doesn't want a 60% ROI of negative costs without even selling your film yet. CA can't compete with that, we are broke. Short of jacking up taxes to cover the costs, we are not going to see similar rebates in CA. As a VFX guy for 27 years, it's sad to see it happen. I know a lot of very talented folks who are just too far along in their careers, people who worked on films that are household names, who no longer have a way to pay their mortgage or earn a living with the trade they have had for the last 30-40 years.
Nobody down here will be sad to see those tax credits dry up, and they will. It's going to be a cluster-F up North when it happens with a lot of very unhappy people. The only real winners are the studios, they are getting their films financed, and don't even need it.

This will probably be the biggest box office summer on record, and no one below the line will see a penny of it unless they are union, then the studios will kick some residuals in for their pension and health care. But they gripe about that.

As a reply to the main body of the thread, the Soderberg speech from May really hit the nail on the head before Steven and George added their takes. Marketing a $10mil film can cost almost as much as a $100mil film, but the global return on a tentpole like that can be half a billion dollars or more. The problem is there is only so much room at the B.O. and only so much audience bandwidth, and that is Steven and George's point about studios collapsing if they have more than one or two flops at that level.

One would think with the internet and all of the options available that smaller films could be targeted to narrower audiences more easily and the marketing costs cut dramatically, but I think you have a lot of "creative accounting" in the marketing divisions, and it's an easy way of keeping the film from making a profit and the big studios to hoard the cash.

 

[Gillvane]

So, please lets drop the Ayn Rand sing-a-long, where we lay the blame at the feet of those greedy, lazy union thugs and overpaid prima donna 'craftsmen', who refuse to work for minimum wage. The studios reap billions in profits and executives pay themselves more on a single show than most of us will make in a lifetime.

If you don't like making wages and want profits instead then start a studio. If you cannot start a studio then it seems to substantiate the fact that the people that can should make the profits because they are doing something you can't do.

People that make this argument against anyone making a profit never seem to remember the risk involved in making profits.

You go to work for your wage, there's little if any risk involved. You camera operate or whatever, and you get paid your daily rate. Whether the movie is a flop, a hit, or barely makes it's money back, you get paid.

If you want Profits, you have risk. You might make those Billions....but you also might make John Carter and lose 250 Million dollars.

People bitching about the "greedy executives" always forget about the risk.

Would you take a piece of the profits if it meant that if the movie flops you don't get paid at all for your work on the movie? If you want profit, you must also accept risk.

 

[Gillvane]

One would think with the internet and all of the options available that smaller films could be targeted to narrower audiences more easily and the marketing costs cut dramatically, but I think you have a lot of "creative accounting" in the marketing divisions, and it's an easy way of keeping the film from making a profit and the big studios to hoard the cash.

As you get a smaller and smaller audience, eventually you're competing with dogs that wear funny hats on youtube, and those are made for essentially ZERO dollars. If you spend any money at all it's hard to compete with a ZERO dollar budget, and people can watch dogs in funny hats on youtube for free if they put up with a couple of ads.

People will pay good money to see Robert Downey Jr. play Iron Man in a big budget movie. As you drill down, at what point do you get to people will just watch dogs in funny hats or people falling off of skate boards for free, rather than break out the visa card for a smaller targeted movie?

At the top end you're competing with Iron Man, but at the bottom end you're competing with 15 year old girls doing make up tutorials in their bedroom shot on an Iphone. Is there a happy middle ground in there that people are willing to pay cash for? Enough people to give you a decent budget to shoot with, and some left over for a profit? I don't know.

 

[visugeek]

There is a lot in between Ironman and dogs in funny hats. There was a point in time where the majority of films were not tent poles, they were mid-range films that had more specific audiences. They still exist. Movies like The Kings Speech, There Will Be Blood, romantic comedies, etc. There are audiences for these films, there needs to be a strategy that doesn't involve a happy meal tie in and a bus ad campaign to let audiences know those movies exist. As I stated before, the marketing budget is another way for large studios to keep from making a profit using their "in house" marketing team. The large P&A costs that still exist in this world where 90% of the theaters have a digital projector are a dodge and not real. They syphon the profits back into the parent company's coffers. Hollywood math.
This is after they have rented the production the equipment, the sound stage, and been paid a finders fee for getting the financing together. Those profits you speak of are small for a reason...on paper.

 

[adkimery]

I focus on VALVe and STEAM because they are probably the biggest innovators to date, but there is no reason why other companies can't do the same thing. EA has tried several times to replicate STEAM but they always fail in the end because they don't cater to their audience the way VALVe does. STEAM offers great value to their customer and the STEAM DRM is pretty much invisible to the end user, so overall it's a great user experience to their 30 million members.

Doesn't being a great innovator inherently mean you do things that others do not? If what Valve does can be easily replicated it would be and they (Valve) wouldn't be able to set themselves apart from the rest of the back.

The vast majority of the content sold through Steam is produced and published by third parties (through the traditional developer/publisher ecosystem). In the early days Valve used the service as a distribution system for its own content, but it has become the defacto standard digital distribution method for the overwhelming majority of pc games (and is now branching out into productivity and general applications as well). The system is very different in the gaming industry than it is in the film industry, but it's still a complicated ecosystem where developers, publishers, IP owners, and distributers are independent entities with very different aims and interests. All Valve has done is create a new digital marketplace that serves as an alternative to traditional retail distribution. I don't see how a similar marketplace for film content poses radically different challenges, other than the stubbornness of the major players.

The distribution is where the two industries really separate. Video games (like CDs and books) typically get sold wholesale to retailers who then sell to the general public. By contrast typical movie distribution is based on a series of timed release windows (theatrical, rental, cable/sat VOD, streaming, DVD, broadcast/cable, etc.,) across many global territories. Many times the distribution rights are pre-sold to raise funds to make the movie which links content distributor to content producer before the first frame has been shot. For TV it's different too. Many times TV/cable networks will pay to produce their original content (as opposed to paying for the rights to already created content) and then that content, at least in the case of b'cast TV, is aired locally by affiliate TV stations. B'cast TV revenue is also based around advertising which is based around scarcity (i.e. programing only happens at a certain time on a certain channel) and that is a much different dynamic than selling a game directly to a consumer. Many b'cast networks already air full episodes on their web sites (the CW and ABC even have streaming apps) but they are all restricted because the networks are trying to experiment with new distribution models w/o losing the support of the distributors that currently pay the bills (and will for the foreseeable future).

There is a much tighter, and complex, relationship between content producers and content distributors in the movie/TV arena than there is in the video game arena. A major network/studio jumping in feet first to a direct-to-consumer business model would be as odd as Best Buy or Gamestop suddenly footing the bill for a triple A video game and selling it as an exclusive.


Going back to the original article of the thread, I doubt we'll see 'Broadway' pricing for movie theater tickets unless movie theater showings become as rare as plays on Broadway. I mean, how many times a day is The Book of Mormon being presented across the US and how many times a day is the new Lone Ranger movie?


-Andrew

 

[Gillvane]

I think the original article is not so much about price but the experience of seeing a movie at the theater. Theaters used to be about content distribution. The way to see a movie was go to the theater or wait months and months for it to finally come on TV with commercial interruptions.

Then we got VCRs, then DVD, home projectors and large flat screens, then streaming, and now mobile streaming so the Theater isn't about content distribution any more.

Perhaps Hollywood is trying to hold on to Theaters as content distribution, delaying DVD releases etc. to force people into the Theater but that time has already passed. You go to the theater now because you want to see it on a big screen with other people while eating expensive popcorn, not because you can't see it anywhere else.

The people that don't want to go to the Theater are just waiting for other releases. Once you stop going to the theater there's always something new coming out, just on a different schedule. Maybe it's time to just release everything at once and let people go to the Theater for the Theater experience not just to access the content.

I know I still go to most of the movies I see in the Theater and still not see movies in the Theater I watch on other distribution methods if Hollywood did this. I go the theater because I want the Theater experience not because I can't wait for the DVD, streaming, Cable release, etc.

 

[TheDingo]

Doesn't being a great innovator inherently mean you do things that others do not? If what Valve does can be easily replicated it would be and they (Valve) wouldn't be able to set themselves apart from the rest of the pack.

In the beginning yes, but down the road ( STEAM is now 10 years old ) there is no reason why other companies can't replicate the same success. I think the problem with companies like EA trying to replicate STEAM is that they don't put the customer first, they put business and investors first, so they are happy to incorporate heavy handed DRM in to their titles, no realizing that a good chunk of the market will boycott their product ( or acquire it through illegal means ) to avoid the nasty DRM technology.

I agree that VALVe is a unique player in the gaming development world, and have always been impressed with their self-discipline in developing their own titles. Nothing gets released until it's truly done, so if it takes 7 years to develop Half-Life 3, then it takes 7 years. ( few companies would hold back a product like this )

Currently I wonder about the future of Apple and it's products, as I think Mr. Jobs was the main reason why Apple is where it is today, and I suspect they are going to struggle without him. He was largely the source of innovation/style/taste with Apple products, and going forward without him is going to be difficult.

 

[Gillvane]

http://wallstcheatsheet.com/stocks/did-the-lone-rangers-failure-endanger-future-films.html/?ref=YF

This says that the new flop of the Lone Ranger means Hollywood will stick to franchises and right now it's a big war to see who can gobble up the most franchises.

Obviously established IP is a safer bet but John Carter was based on a beloved Sci Fi book series. It was just poorly executed because it wasn't updated for 2013 and the story in the screenplay was crap. The original novels are very good but they are a lot more gritty and bloody than the homogenized screenplay.

 

[pulpfiction007]

$225 million budget for The Lone Ranger? That's just insanity.

 

[David G. Smith]

$225 million budget for The Lone Ranger? That's just insanity.

Yep, ain't it though? There was an earlier post that expressed confidence in an antiquated view of the "Free Market" and capitalism that said something along the lines that the backers of movies take all the risk and if it does not make money, they do not make money and that great "Guiding Hand of The Market" will make all the necessary adjustments to the market to make everything alright again. In the corporate dominated world that we live in now that is pure BS. Everyone involved in the making of "The Lone Ranger", even the decision makers at the corporate level, never had a personal make or break financial stake in its success. Of course, jobs may be at risk due to its failure but the folks that might be fired will still leave the company with huge compensation packages. Hollywood would rather make a $225 million flop western than a profitable $30 or $40 million film because there is more money to go around just by the making of the film. The actual "Owners" of Disney are the stockholders of the million or so outstanding shares of stock. The stockholders do not make the decisions about what the company does and those that make the decisions about what the company does are going to get paid huge paychecks no matter what.

 

[David G. Smith]

As an example of what I mean... Here is another article from the Wall St. Cheat Sheet. The CEO at Disney has had his tenure extended.

http://wallstcheatsheet.com/stocks/igers-term-in-disneys-top-job-extended.html/

 

[Gillvane]

As an example of what I mean... Here is another article from the Wall St. Cheat Sheet. The CEO at Disney has had his tenure extended.

http://wallstcheatsheet.com/stocks/igers-term-in-disneys-top-job-extended.html/

It's ridiculous to say that Hollywood tries to make flops and they COULD make successes but they just choose not to. If YOU can do that, you're set to be a multi-Billionaire. The truth is no one can predict with certaintity which projects will be a success and which will flop, or flops would never be made, only successes.

That IS the free market at work. The Stock Holders elect the Board of Directors, and the Board hires or fires the CEO. The Stock Holders have two ways to make their wishes known as owners. First, they can dump their shares of the stock if they have no faith in the company, which means share prices will go down and the company will have less capital to work with. Second, teh share holders can elect a new Board of Directors if they feel the current board should fire the CEO but won't for whatever reason.

YOU may think the CEO should be fired, but because that doesn't happen does not mean the Free Market is not working. YOU are not an owner so you don't get to make that decision, and even if you do buy stock so you are an owner, you must convince the majority of stock holders that your ideas are correct and they are wrong.

YOu're just saying if I was the owner of Disney I'd make a different decision. Well, sure, that's the free market. It just so happens you are not the owner of Disney, and the actual owners have a different idea about how to run THEIR company.

This is what the article says:

“Disney has hit new heights during Bob’s tenure, with total shareholder return of 193 percent that dramatically exceeds the S&P 500’s 54 percent, and a market capitalization that has risen to $113.7 billion from $48.4 billion when he became CEO in 2005,” Smith added.

 

[TheReverend]

If anything, "The Lone Ranger" failing helps buck the trend of Hollywood's habit of attempting to just repeat success. If you look, it is obvious that Disney was just trying to take the same "team" from Pirates, do the same schtick with Johnny Depp, and swim in profits. I'm glad it failed because it was just more of the same.

 

[Gillvane]

If anything, "The Lone Ranger" failing helps buck the trend of Hollywood's habit of attempting to just repeat success. If you look, it is obvious that Disney was just trying to take the same "team" from Pirates, do the same schtick with Johnny Depp, and swim in profits. I'm glad it failed because it was just more of the same.

The safest bet is to produce movies based on an existing successful Intellectual Property using games, TV, novels, comic books, web series, etc. All of these are cheaper to produce and therefore easier to establish and IP than starting with an expensive movie that may flop.

A good example is something like Harry Potter based on wildly successful books. It's cheap, relatively speaking, to release a new book as opposed to a movie. The book release establishes an audience, then you make the movie based on the book.

But what about Pirates of the Caribbean? It's a wildly successful franchise that is not based on an established IP. Well, it's loosely based on the Pirates of the Caribbean ride at Disney, but does that count as an established IP? Did anyone go, I want to see this movie because it reminds me of the Disney ride? I don't think so.

If you only make movies based on existing IP then you lose out on potential blockbusters like the Pirates franchise.

 

[David G. Smith]

"If Messrs. Verbinski, Bruckheimer, Depp et al. had managed to “right-size” the picture, at a budget level of somewhere around $80 or $90 million, let’s say, then all this fascinating postmortem analysis is not happening. The opening weekend gross for “The Lone Ranger,” even after all the dreadful publicity, was almost $50 million. Considered in the abstract, hey, that’s a lot of money! There is absolutely no question in my mind that the right combination of mid-level budget and oddball, niche-oriented marketing campaign could have produced a tidy little summer movie turning a tidy little profit. Everybody goes home happy.

But what fun is that? As anyone who happens to be reading this who works in Hollywood is already muttering, that’s a ridiculous scenario. It’s not that it couldn’t be done, but that Disney and Jerry Bruckheimer would never do it. The movie industry, at least at that level, operates on the same delusional principles as the military budget or Wall Street executive salaries, where bigness, waste and needless expenditure in all directions become markers of significance and ambition. To make “The Lone Ranger” for less money than Bruckheimer and Disney spent on the massively profitable “Pirates of the Caribbean” series might have been prudent. (OK, it definitely would’ve been.) But it also would have been seen, by the devoted priesthood of the industry, as being small-minded and grasping, as a failure to dream or an admission that the moviemakers really didn’t want the alluring devil’s candy of massive success and adulation, theme-park tie-ins and fast-food figurines and copyright-violation Tijuana parody T-shirts and all the rest of it."

From Salon.com,

“The Lone Ranger” failed because it wasted money
With "The Lone Ranger," Disney lost big on a bad idea. But in Hollywood, failure is almost as good as succes
By Andrew O'Hehir

http://www.salon.com/2013/07/09/the_lone_ranger_failed_because_it_wasted_money/

 

[Gillvane]

"If Messrs. Verbinski, Bruckheimer, Depp et al. had managed to “right-size” the picture, at a budget level of somewhere around $80 or $90 million, let’s say, then all this fascinating postmortem analysis is not happening. The opening weekend gross for “The Lone Ranger,” even after all the dreadful publicity, was almost $50 million. Considered in the abstract, hey, that’s a lot of money! There is absolutely no question in my mind that the right combination of mid-level budget and oddball, niche-oriented marketing campaign could have produced a tidy little summer movie turning a tidy little profit. Everybody goes home happy.

But what fun is that? As anyone who happens to be reading this who works in Hollywood is already muttering, that’s a ridiculous scenario. It’s not that it couldn’t be done, but that Disney and Jerry Bruckheimer would never do it. The movie industry, at least at that level, operates on the same delusional principles as the military budget or Wall Street executive salaries, where bigness, waste and needless expenditure in all directions become markers of significance and ambition. To make “The Lone Ranger” for less money than Bruckheimer and Disney spent on the massively profitable “Pirates of the Caribbean” series might have been prudent. (OK, it definitely would’ve been.) But it also would have been seen, by the devoted priesthood of the industry, as being small-minded and grasping, as a failure to dream or an admission that the moviemakers really didn’t want the alluring devil’s candy of massive success and adulation, theme-park tie-ins and fast-food figurines and copyright-violation Tijuana parody T-shirts and all the rest of it."

From Salon.com,

“The Lone Ranger” failed because it wasted money
With "The Lone Ranger," Disney lost big on a bad idea. But in Hollywood, failure is almost as good as succes
By Andrew O'Hehir

http://www.salon.com/2013/07/09/the_lone_ranger_failed_because_it_wasted_money/

The comparison between government and Hollywood is off base. Government spends tax money. There's an endless supply. You just get more next year, regardless of how much you waste.

Hollywood has to MAKE money so they can spend more next year. That's an entirely different ball game. The Government doesn't make a dime, they just spend it.

Big movies make the big money. I think that's really all there is to it.

Top box office last year was Avengers. Grossed over 620 million and cost 220 million to make.

I"m just sure what you're trying to say? Hollywood should only make small or medium budget movies and they shouldn't make something like Avengers? Why?

Look at the budgets and the box office:

http://www.imdb.com/list/JDxAaRqejrs/

Comedies are cheaper to make generally than sci fi or fantasy movies because there are fewer FX. Are you saying don't make fantasy or sci fi movies and stick to cheaper comedies? Or just make crappy SyFy channel budget science fiction movies?