Riding the Shoulders of Creatives

I just finished reading Vanity Fair piece, "Beware Falling Stars" in the March 2009 issue (thanks to @frenchfifty for the referral. If you haven't read it, it's quick read and worth the time.

Peter Bart, who runs Variety, penned the article as a concise overview of the problems facing Hollywood today, including declining studio audiences, budgets and (Oscar) accolades and the resultant impact on the stars, their agents and publicists. Overall, it's a thoughtful piece and a great perspective from someone who has seen it all.

As I look at his analysis of Hollywood's troubles, I see several parallels to the world of technology and software and the potential of some lessons to be learned as a result.

Essentially, the world of film is dominated by 5-6 corporations-- the household names if you will. Due to the high cost structure (historically) of producing and distributing film, independent studios have been acquired or subsumed by the major studios; essentially a scale economy argument for consolidation-- he who controls the customer, controls the industry. This is similar to the world of enterprise IT where 5-6 names dominate as well, and smaller companies and products have had a hard time making it into the hands of customers directly. Look no further than EMC-- they have become a giant distributor of products, driven by incremental innovation and aggressive M&A activity to build their product lines. In short, they don't make new products any more.

Among the studios, the high cost of production has driven two axes of decisions around cost and investment. The first is to supplant artists and mavericks (high cost, high risk) with businesspeople (lower cost, dependable) who come armed with analytics and data. This leads to the second cost decision-- the data tells the studio which projects will, and will not work. And while this all looks good on paper, the results are not encouraging-- by the metrics of ticket revenue, awards, critical acclaim and profitability-- the studios are suffering through their worst performance in 40+ years. Clearly the scale economy argument is failing, and here's why.

Just as in all other facets of business today, consolidation for scale comes with a hidden cost-- one that ironically has the power to kill businesses altogether-- it kills innovation and creativity. As studios have sought to maximize financial performance, they have inadvertently killed the creative engine (storytelling) to the degree that cable TV, not film, is where the best content and shows are to be found. In other words, high costs mean high stakes, and high stakes breed risk aversion. Risk aversion foments a dumbing down, or creative conservatism about which pictures get the green light. The result-- lots of lesser (not low) cost movies that no one goes to see. In short, studios have lost the passion for their art, and in doing so, have lost their connection to their customers.

To be fair, cost controls have been long overdue. Though star-power has a direct impact on gate ( we love to watch our favorite stars ), the cost and terms of the contracts themselves are not bearable given the low yield. Flat out-- stars are paid too much money for the most part, and their high cost has driven the studios toward conservatism and risk management, rather than continuing to tell great stories (and sell tickets).

So, is this the deathknell for Hollywood? No. It's still the bastion of talent and creativity in the western world. Will the studios rise again once business economics and creative forces re-establish level ground and prosper again? Some will, some will not. The ones that will will bring the realities of cost into alignment with the need to tell great stories. Thankfully, armies of creatives continue to arrive, ready to work at lower cost to showcase their talents. For a proxy, look at the stuff being created and published online right now-- some good web serials with $1,500 budgets per episode! There is great talent and passion among many writers, directors and performers who want to tell a great story and work hard. The studios that will continue to languish will be the ones caught up in their unit cost analyses who fail to regard the passion that fuels the success of filmmaking.

So, let's net it out: success will return to Hollywood once again when the gutted creative process and talent is re-established at a bearable cost. And it will be on the shoulders of the creatives, not the accountants, that a return to greatness is achieved.

Comments

[Roxanne]

But what will truly prompt this substantial change back toward creativity (instead of just the high cost studio numbers game) - where fewer but BETTER quality movies are produced?

Certainly the "bastion of real creative talent" you describe, who are at the ready. But along with a change in HOW movies are made, wouldn't it also take a major shift away from old traditions in the way movies are DELIVERED?

Perhaps the company that can cause a small revolution and bypass studio contracts with theaters, by delivering "new releases" directly into the consumers' homes is the real catalyst. Ease of access for smaller (better) films to gain prominence, multitude of choices (competition) could be the agitator
to essentially force better movies to be made. It's similar to popular cable TV shows like Mad Men, 24, Sex and the City etc . . . where the content and quality has always been about great writing and producing to stand out, and gain loyal viewership. It's never been about making a bunch of random episodes that aren't very good - in hopes that the high cost numbers game will pay off if just one episode happens to strike gold.

[drake]

Thanks Roxanne. You make a good point. Disruption of high cost marketing and distribution, ie the current schema, is also the means for new studios and creatives to take the market. In fact, as we type, Hulu has just announced that it is pulling all content from their (Big Media/Studio) partners from Boxee, the budding new interface platform for web TV viewing. Old media does not see or support the potential of new distribution channels, and that creates opportunity.

[Scilla Andreen]

Great post Drake. You get this business better than I do and I have been living it for 25 years. I'd like to give a shout out to our company that is addressing precisely that of which you speak.

A top exec at Fox Searchlight said recently, "It's companies like IndieFlix that are f*-king with us!" It was a compliment I think? He then went on to say that he was paid a lot of money and liked his job very much; regardless of how archaic and broken the Hollywood system he was going to ride that pony as long as he could.

IndieFlix is a small revolution or perhaps an evolution. We're not trying to buck the system or take on Hollywood we're just doing our own thing. We can't afford to play by Hollywood's rules so, we're doing what makes sense for us.

Armed with a library of 1500+ film festival titles with worldwide rights we now have the ability to curate and program our content on to all major platforms such as iTunes, Hulu, Netflix, Joost, Tivo, Babelgum, Xbox, Youtube, Snag and Mobile. Filmmakers keep their rights, it's non-exclusive and they get 70% of all revenue streams. It's free to the filmmaker all we ask is that they work with us to promote and market their films.

Just like the early days of Hollywood, people thought we were nuts when we launched with 36 titles in 2005. We only wanted to control our own distribution and learned we can only do that with effective marketing. Lower budget and older films can afford to take risks and explore new artistic territory. Removing the Hollywood naysayers from the process has allowed us to find success. It's all grassroots, lot's of hard work and very time consuming but oh the freedom fuels our creativity!

Now we have bigger budget films working with us because they want to keep their rights and the lion share of the money too.

In April, IndieFlix is day and dating two feature films and completely bypassing the studios delivering two "new releases" theatrically, on DVD and directly into the consumers' homes via iTunes. Everything keeps evolving at an alarming rate. It takes a lot of work to convince exhibitors and platforms to share distribution windows and experiment with us but we're doing it.

Scilla
Filmmaker, CEO & Co-Founder IndieFlix