Monday, November 9, 2009

State Film Incentives and Smoking: An Email Exchange About Competing Policies

I had an excellent email exchange with Jonathan Polansky yesterday and today. Jonathan is a media consultant, anti-smoking advocate and the principal of Onbeyond, LLC , a media consultancy in Fairfax, California. His current project is on behalf of the University of California.

I am going to reprint our exchange for you because I think it raises some great issues. The essential topic is the conflict between state tax incentive support of films which can influence children and adolescents toward smoking, and how this conflicts with money that those same states are spending on anti-smoking education.

There is an underlying issue that is perhaps even more interesting -- when states facilitate film production through tax incentives, should the state be concerned with the content of the film? This raises a fascinating First Amendment issue -- if a state were to look at film content as a part of the basis for its funding decisions, would a refusal to fund a film on the basis of content constitute a form of unlawful prior restraint? How about issues of discrimination? If a state refuses to fund a film that is perceived as influencing children to smoke, how about refusing to fund films that include drinking or premarital sex or ...? Once you're on that train, where is the last stop?

State tax incentives as a communication control mechanism. Read my exchange with Jonathan before you decide. He makes some very good points. You may or may not agree with him, but the guy is an excellent communicator.

I would really love to get some comments on this issue. It adds an entirely new facet to the discussion of state film incentives.

Jonathan initiated our exchange with this email:

From: Jono Polansky []
Sent: Sunday, November 08, 2009 1:37 PM
To: Roger Goff
Subject: Film incentives
Mr. Goff —
We noted your thoughtful post on the Iowa film incentive program — and what localities should think about before setting one up.
Whatever the job-creation value of film incentive programs, their indiscriminate funding mechanisms unexpectedly contribute to a serious public health challenge for states, according to a report to be released Tuesday, November 10, by University of California researchers.
Attached is a media advisory embargoed to 11/10. The full report can be downloaded, starting Tuesday, at
We hope you find this of interest. Thanks for your consideration.
I replied as follows:

On Nov 8, 2009, at 2:41 PM, Roger Goff wrote:
Thanks for sending this, Jonathan. As long as you took the time to send it and write a nice note, I'll take a few minutes to respond.
Let me preface this by saying that I am 100% on your side on the broad issue. I am very much against smoking. I recognize that it does create huge health problems and places a financial burden on all of us. I also recognize that kids are subject to a variety of influences, media among them. Here's where I depart a bit.
There are a few points that occur to me.
1. As a parent, I feel it is my responsibility to educate my kids. There is no way that I can keep them from being exposed to a wide variety of negative influences, nor would I necessarily want to. If I shelter my children completely from the temptations and bad behaviors with which they will be confronted, I lose the opportunity to shape their response to those issues. I have gone out of my way to make sure that my kids understand how unhealthy and damaging smoking (and drinking and drugs and unprotected sex) are so that they respond negatively to it when they are confronted by it. I feel I can only protect them by engaging them in the issue, not by avoiding it. So, I see smoking in films as an opportunity to reinforce their values in that regard.
2. I think your statistics are unfairly misleading. Taking the entire amount that a state spends on making films which include smoking, and holding it up against amounts spent on programs specifically aimed at anti-smoking education, is not comparing apples with apples. This would be like drawing a parallel between a film which contains a moment of contextual sexual activity and pornography. The vast majority of the money spent to support film production had zero impact on children smoking. Putting that entire budget in the negative column is ludicrous and in my view undermines the credibility of your position. When you're going to cite studies, if you do it in an obviously biased manner, you add little to the legitimate discussion of the subject matter. And that's something that I say often to a number of people on a variety of topics, because it is something we see often in this day and age of massive public discourse through the Internet.
3. I don't think I believe that a kid who would otherwise be a non-smoker will change his or her behavior because he or she saw someone smoke in a film. Obviously, this goes to my first point, as well. Kids need to have good parents and education, as well as a positive self-image and belief in their future. If you can give kids all of those things, then a cigarette in a film will have no impact at all. And if you don't do those things for kids, then they will probably engage in self-destructive behavior whether they see it in a movie or not. Am I saying that it is completely inconsequential? No, not quite. I understand that sustained exposure to behaviors can legitimize those behaviors in the eyes of youth and adolescents. But I don't think it is nearly as powerful as you make it seem.
And I am not saying that I am against anti-smoking education, although I am probably a little bit of a Libertarian when it comes to states spending money to promote specific ideologies. With that said, I don't consider anti-smoking to be an ideology because it is pretty hard to legitimately take the other side of the issue. Anyone who is pro-smoking is an idiot. I guess I can understand people who hold the broad belief that everyone should be allowed to do whatever they want so long as it is not hurting anyone else, but I also completely understand the public health arguments against smoking. Ultimately, as I said at the top, I am 100% anti-smoking and I find it hard to take very seriously anyone who tries to argue in favor of it.
Bottom line, you and I are on the same side of the issue, but I think you are standing much further out on the plank than I am. I balance the issue against other things that I think are also important, such as the First Amendment and support of the economy and the arts. I'm sure you value those things as well, but we probably have a bit of disparity in our priorities.
Again, thanks for including me in your discussion, and thanks for reading my blog. It is nice to know that neither of us is screaming into the wind and that someone is listening, don't you think?
Best of luck,
Jonathan's excellent response:

From: Jono Polansky []
Sent: Monday, November 09, 2009 11:05 AM
To: Roger Goff
Subject: Re: Film incentives
Thanks for your thoughtful response, Roger.
The evidence that exposure to on-screen smoking leads adolescents to smoke is conclusive. The full texts of numerous peer-reviewed studies supporting this conclusion can be found at, as can reviews of the research such as National Cancer Institute (2008). Rigorously controlled studies are the basis for the attributable risk used to estimate the impact of movie smoking on youth smoking prevalence.
Incidentally, the research evidence indicates that the children of non-smoking parents are at least as vulnerable to this recruitment channel as children of smoking parents. We all aim to influence our kids in the right direction. The problem is that other influences can be as strong or stronger.
The film industry is already grappling with the issue of smoking in kid-rated films — and no longer disputes the science. Major studios have largely eliminated smoking from G/PG films in the last couple of years (with trivial benefit to adolescents) and the majors have added anti-smoking PSAs to their youth-rated DVDs with smoking. The MPAA has also claimed to make smoking a consideration in ratings, but the record shows that it does not up-rate for smoking and avoids labeling smoking in most PG-13 movies opening wide. Pressure from state Attorneys General, Congress, and national health organizations has at least gotten the industry's attention.
As for your point about apples-to-apples, the investment that states make in film subsidies at this time directly conflict with the resources devoted to tobacco prevention. The report estimates that about 60 percent of the subsidy money is going to films with smoking imagery. That $830 million is about $100 million more than the states spend on all aspects of tobacco prevention. Because films with smoking account for about half of all new young smokers each year, indiscriminate state film subsidies of this scale significantly undercut the state interest in preventing kids from starting to smoke. Comparing the state spending on film subsidies and on tobacco prevention captures the budgetary emphasis placed on these two conflicting policies.
Perhaps a "consistent" libertarian would condemn the state film subsidies out of hand — and government anti-smoking programs along with them. For the rest of us, who want to see public resources used well, the wasteful conflict between these two programs begs for resolution.
The report does not advocate to end public film subsidies. We are proposing that these programs be amended to avoid subsidizing films with content that powerfully subverts another public good (and state policy priority): the prevention of youth smoking. If these film subsidies are economically justified, tweaks that protect young people from a public health danger that costs more lives than drunk driving, drug use, and criminal violence combined could assure the sustainability of these programs.
Given evidence that these film programs appear not to create jobs but merely shift them around from state to state, the broader public interest is probably best served by seeing if the $196 billion annual health costs from tobacco can be reduced, to a significant degree, merely by adjusting tax credit eligibility criteria in these programs. Based on 2008 data, three out of five domestic film projects would be completely unaffected by the eligibility change proposed in the report.
As the major studios and their parent companies have learned, the on-screen smoking issue is not going away. In part, this is because the film industry collaborated commercially with the tobacco industry to promote smoking and brands in at least six of the last eight decades. Those who back public film subsidies need to acknowledge this legacy, which the nation is still paying for, and recognize the continuing power of films to shape tobacco use. It is a problem. It can be fixed.
Thanks again for your consideration.
Best regards,
Jonathan Polansky
Consultant to University of California, San Francisco
Center for Tobacco Control Research and Education

Wednesday, November 4, 2009

Technology and The Collapse of Distribution Windows

An article in today's Variety details efforts by the MPAA to help its members gain the ability to broadcast first-run movies directly to consumer's homes. The article raises a few issues:

1. Apparently, approval from the FCC is needed for the MPAA members to use DRM protection on the broadcasts. Not surprisingly, the studios would be unwilling to give consumers access to broadcasts of first-run features without technology that prevents copying of the content.

2. Exhibitors are opposing the MPAA's efforts because there is a strong suspicion that the films would be broadcast during the first-run exhibition window. Exhibitors view this as a huge threat to their business. Logic dictates they are probably right.

3. A point not really addressed by the article is the impact of this action on the other distribution windows. Doesn't an early broadcast of the film essentially eliminate (or at least substantially devalue) the VOD, Cable and DVD windows?

It would seem that the studios are attempting to set up a model that eliminates as many middlemen as possible. Essentially, this goes back to the old days where the studios actually owned the theaters. They would make a movie and then have consumers pay the studio directly for the right to watch it.

The direct studio broadcast model being pursued by the MPAA is the digital-age version of studio-owned theaters. The studios can make a film and deliver it directly to consumers. However now consumers don't even have to leave their favorite chair to watch the film.

Here are some arguments on the studio side. Many knowledgeable people in our industry say that home viewing is not competitive with the theater experience. The superior size and quality of theater exhibition, together with the opportunity to get out of the house to do something fun, make going to the movies an "event." Plus, the social aspect of watching the film in a group of people definitely provides an energy that is impossible to duplicate in your living room. Bottom line -- many people will still go to theaters to see films, even if they can get the same film in their home.

Further, showing a film simultaneously to theater audiences and home audiences allows for a consolidation of marketing dollars. This means that the overall spend on advertising can be less, making it easier for the filmmakers and studios to make a profit. This ultimately should allow studios to release more pictures, giving consumers a wider range of attractive choices.

Further still, if studios can lower distribution costs by eliminating middlemen, this ultimately serves consumers. The essence of our economic system is to encourage business models which drive prices towards their natural bottom -- the real value of the product or service being provided.

However, when a single company controls the entire chain of a product or service, from development to delivery, it might have the ability to lower prices to consumers, but it has no economic motivation to do so. When it is not competing at any point in the process, it can charge whatever it wants. This is called a vertical monopoly and it is technically illegal. The argument could be made that direct delivery of content by studios is a violation of antitrust laws. (I'm not sure this is a winning argument, but it is an argument nonetheless.)

Certainly, if studios broadcast first-run features directly to consumers day-and-date with the theatrical release, it will have a huge impact on the current "windows" which are the essence of modern-day film distribution. I'm normally a proponent of change because I believe it often creates new opportunities as the old model dies. However, I'm not sure that's true in this case. Giving studios even more control over the delivery of film content does not seem to serve consumer interests. There are no new opportunities which will arise as a result -- unless someone has a really good idea for a way to use a bunch of empty movie theaters.