Monday, February 15, 2010

Film Business Remains Strong -- But Different

It's Monday morning -- a holiday in the U.S. celebrating our Presidents.  For those of us in the film business, that means one more day for folks to see another film before heading back to another week of work.  This weekend's box office was topped by a star-packed film that critics hated.  "Valentine's Day" made almost $67 million in its first three days of release.  That is a huge number for a light romantic comedy that opened to a pretty negative buzz.  The lesson here is that apparently some stars still matter.  You can argue about whether folks were more interested in seeing Julia Roberts or Taylor & Taylor (or Jessica or Ashton or Bradley or George -- or because they know that Garry Marshall is a great director), but the crowds definitely came out for the stars.

This is actually good news.  From the standpoint of my business representing producers, my initial reaction is to flinch at anything that gives bargaining power to the talent.  But the truth is that we are all in this business together and I want the audience to love actors. I want writers to write great scripts, directors to make stunningly beautiful and poignant films, and actors to deliver performances that stir the hearts of millions.  That is the essence of what makes the film business so wonderful, and such a great business.

And it is apparently working.  Even the number 10 film in this week's box office derby did over $4 million at the box office.  The overall box office numbers were huge.  I was at the multiplex with my family yesterday and there were several films that were selling out shows in the middle of the day.  The film business is doing great.

So why is it still a little (actually, more than a little) difficult to get films into production?  Why is film finance money so tight?  Tax incentives are still lucrative and plentiful. The talent is still willing to work for reasonable guarantees (compared to past years).  Technology allows us to make really high quality pictures for a fraction of what it used to cost.  Costs are going down and sales are going up.  That sounds like a place that most investors would want to put their money.  So what's the problem?

The challenge (I never like to use the word "problem") is that the revenue streams are changing and no one knows what the new revenue structure really looks like.  The studios are moving towards shorter theatrical release windows to allow for earlier DVD releases.  Except everyone sees that the DVD (and soon the Blu-Ray disc, as well) is dying a relatively speedy death.  Hollywood Video is done and Blockbuster is following (but hoping to use its market power to arise as something new).

Within a very short time, consumers will be pushing a button on their remote and pulling a high definition, 3D version of a relatively recent film onto their living room big screen.  That scares a lot of people in the industry because they aren't sure how they continue to make big bucks from that model.  So, they aren't sure how much to spend on a film or how to make deals that won't make them cringe when they pull the contract out of the drawer five years from now.

It is a time for vision and courage, my friends.  It is in times of change that the opportunities are greatest.  It is possible to create assets today that will be bearing fruit for years to come.  And the key is recognizing the power of the long tail.

A copyright lasts for decades, but we have been trying to make all of our money back in the first weekend of release.  If we look at each film as a seed that is being planted (rather than a pinata that is bursting open while we scramble to grab the most candy as quickly as possible), we can build strong, profitable businesses.  Each picture needs to be nurtured and encouraged to find new audiences year after year.  And we need to connect with those audiences in new ways that make them eager to spend a few dollars to engage and continue those relationships.  It's still about stars and stories and beautiful sights and sounds, but let's not think of each new film as a one-night stand.  Let's take the time to form relationships with our audiences that will pay dividends over many years.

Monday, February 1, 2010

Many Entertainment Opportunities for 2010

Here we are on February 1. We are fully into 2010 -- past the time when we are wishing one another a happy new year.  We're getting down to business.  We're also past January, which is the month of trade shows and awards.  In the past 30 days, the Consumer Electronics industry had their big shindig in Las Vegas, the musical instrument business had it's major annual conference in L.A., the independent film business gathered in Park City, Golden Globes were awarded, Grammys were awarded, the DGA honored directors -- the list goes on.

So what do we know as a result and how does it help us?  Here's a short (and certainly not comprehensive) list:

1.  We know that 3D is a huge phenomenon.  Will it last?  Probably, but it remains to be seen.  In the meantime, Avatar is the biggest film ever in terms of box office dollars, and the CES show was all about 3D technology for the home.  At the Grammys last night, the audience wore their 3D glasses without shame.  The technology has emerged from the nerd closet and become a part of the ubiquitous mainstream.

This creates big opportunities to capitalize on this phenomenon.  Everything from cool 3D glasses for the home to 3D networks to low-cost 3D remakes of classic content.  There is a lot of money to be made in the next few years by riding the 3D wave.

2.  Distribution continues to decentralize.  There are a plethora of small, specialty content distributors coming alive and many of them will do well.  The music business has showed us that technology gives power back to the artists.  When you can reach your audience directly, you don't need to pay a huge premium to large companies for market access.  Bad news for the huge companies, but probably a net positive for the artists and the audience.  There is infinitely more music to choose from than 10 years ago, and there are more artists making a living.  They aren't getting rich, but many small, specialty artists are actually able to survive through their art.  That is very different than it used to be.

And the same phenomenon is coming to film.  The DVD is in its final cycle before it dies all together.  Blu-Rey is nice, but it will also eventually go away.  Filmmakers are creating quality content for a fraction of what it used to cost.  The artists are gaining access and control; it is the same pattern as seen in the music industry.  Make no mistake -- if you want to make a living as an independent producer, now is a very good time to be getting into it.  You may not make the gazillions enjoyed by the successful producers of the past couple of decades, but you will be able to live a nice life from your art.

3.  The world is becoming one market.  More than ever before, we are all gaining access to the world market.  -- and the world's money.  Companies all over the world (like Reliance, for example) are investing in U.S. content and companies.  And international sales of films and other content is becoming an increasingly important part of the overall financial picture, even for smaller films.  When something catches on, it doesn't stop at the coasts of North America.  It is as easy to find an online audience in England or Norway or Japan or even China as it is to reach people in Chicago or Denver.

Of course, the real challenge is still in finding business models that will work in this new environment.  Advertising dollars are big, but limited.  Online commerce is a better model, but the value of content online is clearly much lower than in a physical environment.  But it is also less expensive to create the content, so technology has delivered both the problem and the solution.  And for consumers, that means a lot more choice.  But with that choice, marketers face the challenge of rising above the din to find an audience.

That's enough for now.  It is enough to spin your head.  Suffice it to say that it is a completely new world and many people will continue to gain wealth in this new environment.  Keep your head up and look for the opportunities, and there is nothing to stop you from being among the new crop of winners.