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February 15, 2006It took nine days and a few drinks to finally have an argument about the future of distribution on a ship filled with Canadians and film business civilians.
However, the late night conversation with four very smart non-civilians inspired yet another perspective on my behalf. One of the gentlemen was adamant about the notion that the expanding market will continue to float a healthy film industry. Another insisted on counting up the overall revenue spent on entertainment shown and heard via electronics and marveled at how hundreds of billons of dollars could lead to losses within the industry. Then there was the notion that exhibition has gone through great bankruptcy periods a few times and that they always seem to reemerge with a new look.
And all of that is true and makes sense.
In fact, there is no one more personally interested or who believes more in forms of future distribution more than myself.
The problem is that the film business is not a grand secret monopoly that acts on well thought out plans and executes brilliantly. There is no question that this is a business that operates on certain collusive ideas that serve as a foundation for the day-to-day business. Every studio operates on the basis that every other studio will behave in certain accepted ways.
There was a huge fuss, for instance, when Disney went after the fledgling DreamWorks animation division by re-releasing Disney classics on the same weekend or a week before DreamWorks' brand new animated films. Of course, opening any animated film in the period in which kids will be out of school and/or looking for animated films makes sense. And there is no "there can only be one animated film in November" rule anywhere. But the move by Disney seemed both personal and targeted against a potential competitor and it became a story for that reason.
Now if someone comes up with a serious competitor for iPod soon, guess what will happen - if possible - a month before that product is released? Yes. There will be another new iPod innovation, along with a $50 price cut across the line, along with a massive ad push. It is Apple's right and Apple's responsibility to its investors to bar the gates from invaders. It is also Apple's right and responsibility to avoid price competition with its own product, which is why you can't buy a non-video iPod with more than 10 gigs of space in a retail store anymore. (I think the next level down is even smaller, but the boat is rocking and the internet connection doesn't inspire research on iPod sizes.)
iPod knows what many smart people are forgetting about the film business right now. The film biz swims like a shark, smooth and relentless, and it never seems to stop. But it is much more complicated than that, like films themselves. A million tiny little decisions are made every day and any one of them can have a real effect on the subsequent response to films in all of their delivery modes. No one knows the "right" answer to each of these questions, so studios hire people they think have the most knowledgeable insight to the answers - the people who make the best guesses - and let it rip.
What is not done in the film business - look, nothing up my sleeve! - is to allow market forces to determine the future of anything. That is not to say that market forces don't matter, but if market forces are the massive ocean, each movie is a large ship floating in that sea. And every decision the captain and crew makes along the way helps guide the ship to the place they end up at... whether the destination was intended or not.
There is a spectacular allure to the idea of democracy in business or in art. And as far as the government is concerned, it should be an absolute democracy. But the reality of movies that cost money to make and distribute, true democracy leads to true failure in the majority of cases. I would love to be able to get onto the "they just have to make better movies" bandwagon, but there is no evidence to support this premise at the box office. First and last, the word "better" and the word "good" are completely subjective.
No one ever suggests that grocery stores serve only "good" food in order to boost business. True, there is a success with Whole Foods based on a higher quality, healthier (at least in perception) option in food shopping. But like early art houses, Whole Foods is a niche business that charges premium prices and serves an audience that is willing to pay more and make more effort in order to feel good about what they are eating at home. In addition, the stores have cleverly supplanted the mom & pop deli business and made large scale inroads into pre-made, but not pre-packaged foods. But if you have kids who eat junk, you're not going to find your Lunchables, your Cokes, your Glad bags, your Mach 3 blades or your Wonder Bread at Whole Foods. And what films are the biggest sellers in the world? Lunchables with a side of Coke and Wonder Bread that will make you vomit into your Glad bag and then try to slit your wrists with the Mach 3.
The reason why the film business doesn't innovate very often, when not under the direct threat of bankruptcy, is that collectively, it is like the world's biggest ship and simply turning a few degrees towards a different horizon is a few years' work. And now, as we face the more significant technology shift since the television, the cry of "we survived television, this will work out too," is as idiotic as "digital distribution... feh... never will amount to anything."
(The reason why Video/DVD was not nearly as impactful as TV or the current move to having greater access to all entertainment options than ever in history is one of size. Video/DVD added markets and changed the landscape, but the Niche-ing of Entertainment is a tsunami in comparison, absolutely out of anyone's direct control. There was never any real threat of being swallowed by Video/DVD. There is a threat in Niche World and my constant arguing about it has always been about learning to ride the wave, not pretending the wave isn't very near on the horizon.)
Movies are not widgets. As much as we talk about the grosses all the time, it is not a gross sales game... or at least not now it isn't. Each movie is, in the context of a large movie business tent, an individual event, from birth to marketing. Many are under the auspices of studios that engage in more than 10 such forays a year, trying to take advantage of economies of scale. But as soon as marketing costs started crossing the $20 million mark on a regular basis, each film, studio made or not, became its own city-state. Each movie took on the possibility of being a savior or a slap in the face. Each movie became a two or three year journey instead of the ongoing work of a collective.
The post-theatrical distribution world, in the era of the DVD, became like licensing was to major couture clothing brands in the 70s and 80s. Back before brand licensing, the Calvin Kleins, Guccis, Ralph Laurens, and Chanels of the world were exclusive products, accessible only to those willing to spend lavishly (to extend a theatrical moviegoing metaphor too far). But suddenly, these famous labels were available in easily accessible ways at prices that everyone could afford, whether as moderately priced clothes, perfumes, or underwear. And it was sensational for a while... until the success of the low-end business started eating away at the high-end business. And everything ended up in Filene's Basement or Loehman's... just more fodder for the racks of 50% off sales.
Going to the movies is a high end brand that is still extremely successful. And the post-theatrical market is wider, cheaper and also extremely successful. What needs to change is not the model (except perhaps for more differentiation, not less), but the processes within the model. Movies should be made for less with greater rewards for success for everyone. New ad models must be created. And when greater expense is called for, it must be spent... but as soon as everyone is dipping into the high-priced well, real money becomes Monopoly money and the stakes become untenable. Instead of simply repeating that cycle again, it is time to break the cycle and to use the future to the industry's advantage instead of behaving like plankton in a sea of green.
January 3, 2006 - Reflections On A New Year
January 6, 2006 - Sundance Preview
January 5, 2006 - The Business Of 2005, Pt 1
January 9, 2006 - The Business Of 2005, Pt 2
January 11 - Munich In Sequence | Act 1 | Act 2 | Act 3
January 12 - V For Vendetta
