Sunday, October 11, 2009

Current Trends in the Film Industry Create Both Challenges and Opportunities

In this article from Friday's Variety, Peter Bart and Michael Fleming paint a fairly negative picture of the current state of the Hollywood film business. In its subtitle, the article promises both the yin and the yang of the prevailing conditions, but by the end of the piece, it feels like a lot of yin and only a little yang. They don't really put much emphasis at all on the bright side of the picture.

That gloomy sentiment is echoed in this L.A. Times article from Ben Fritz and Claudia Eller. The focus of this coverage is Sony's decision to cut back on development and purchases, and how this is representative of a downward trend in a volatile industry. With the descriptions of upheaval in studio management positions, the implication is clear that this is a dark time for the film business.

I agree that we are in a challenging environment. DVD revenues are indeed falling and the studios are protecting their profits by cutting expenditures and hording cash. However, box office numbers are solid. Audiences are still looking for good films every weekend, and they don't necessarily need to see huge stars or big special effects.

This is the same weekend that Paranormal Activity managed to make over $7 million on about 200 screens. An amazing performance! This is a film that was originally shot for less than the cost of a studio executive's Prius. Paramount and the P.A. filmmakers are looking at huge profits as this picture rolls out to a wider release. The news is definitely not all bad.

The studio pullback is creating opportunities for alternative financing sources and new distribution companies. There are some very smart people entering the theatrical distribution business, and I don't think they are wrong. And I believe that Reliance, Imagenation and Barclays are not stupid for putting their money into the development of feature films (although @davidgeertz thinks I'm crazy for saying it and he might be right).

The Variety article makes the point that actors and writers are willing to work for lower wages, and we all know that there are a large number of attractive tax incentives available for productions of all sizes. This is a time when producers can make excellent films at a reasonable cost, and that is exactly what the market is demanding. The shrinking DVD market will eventually be replaced by revenue from PPV and other direct delivery systems. The decreased costs of digital theatrical distribution will eventually float down to the bottom line. The film business is changing, but it is actually improving in many respects.

This is a time when creative, entrepreneurial producers can make great strides. As is often the case, when the larger, more established players in an industry are pulling back, it leaves a hole for smaller, more nimble companies to gain market share. I honestly believe this is a time of great opportunity for independent filmmakers and distributors.

If you really think I'm wrong, tell me why. (@davidgeertz, that means you.) I invite and encourage other points of view on this.


david geertz said...


I think that there will always be groups that muster together funds from individuals that then get placed within films in a slate or single film scenario. I think the changes that need to be addressed are how and who gets to make the decisions on behalf of the investor. In addition to this there needs to be a restructuring of how the industry allocates monies to the film, its marketing and its above the line costs as a fee for performance.

with information wanting to be free once it is produced there needs to a new way of protecting investors who fund these endeavors and that should take priority over paying some actor or producer a huge fee, or allowing a distributor to take first position on the recoupment of marketing costs. Here's what's broken in my opinion that needs to be fixed first going forward using private investors funds.

1. The idea of pay or play with the agents holding a star as leverage within the deal for more money up front. This is probably one of the most ridiculous business models that will die first.

2. Star, Producer and Director fees based on % of the budget of the film. If you're so good...take in on a pari pasu recoupment along with the good people who are in fact funding your lifestyle.

3. The marketing budget and production budget must be merged into one single purpose entity and that distributors must put some skin in the game. If you're so good at marketing...prove it!

I could go on to talk about our method of crowdfunding and fractional ownership, but that's another conversation


Bailey said...

If Paranormal Activity is doing so well at the box office, why was it's release delayed?

Is there something to be learned from this?