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David Poland

By David Poland

Trying To Write Off Windows Again… Smart & Completely Wrong, All In One

Edward Jay Epstein is an interesting character. He writes with authority about the subject of the the business of Hollywood and is often much smarter about digging into the details of it all. And he is, often, lost in a fog of misleading, retro, inaccurate theory.
The latest is a new book, “The Hollywood Economist: The Reality Behind the Movie Business,” which I have not read. I feel I will eventually have to… and I am likely to face hours of eye-rolling and the frustration of deciding whether to deconstruct the guy’ work or not.
In any case, the first glimpse is offered on The Wrap, in an interview that is part dead on and part “huh?.”
For instance – “In 2005 , around when the (last) book went to print, studios looked at DVD sales and they extrapolated about future revenue and made decisions based on those extrapolations. Well it fell apart, the independent movie business collapsed, broadband expanded, creating new ways of delivering movies. Studios have cut back on production and development. They’ve entered the second phase of this digital revolution, which is nowhere near over.”
He is right about the studios projecting and losing. But this is not actually at the core of why Dependents were shuttered or why internet delivery started to become realistic. Cutting back on production and development costs does have something to do with DVD revenues, but has absolutely nothing to do with the “digital revolution.”
Or he tries to devalue the uptick in box office over the last number of years – “Revenue from the box office rose four or five percent, but you have to remember that there was a big ticket price increase. It was also a bad economy and audiences usually spike then.”
Perhaps he’s just simplifying for an interview, but ticket prices actually went up – according to the iffy NATO numbers – about 3%… as they do most years. And the box office revenue went up more.
On the other hand, I agree with what he seems to want to say about 3D not being some nirvana for the industry. The problem – and this is often my problem with this guy – is that he wants to pretend there is AN ANSWER… and that is the lie of this industry… which ironically, he poo-poos earlier… that the industry has convinced Wall Street that this is a consistent business.
That said, Wall Street is also getting a simplistic, inaccurate rap. The stock market has not been particularly friendly to Hollywood. Analysts are neither terribly well educated about the business nor are they generous to the industry… and the lack of movement in stock prices shows that.
Hollywood Suits would like to create an industry that is trendless, on the financial side. No risk… consistent reward. This brings me to my big beef with Epstein…
All this windows talk makes less sense today. I think that [Walt Disney CEO] Bob Iger and [Time Warner CEO] Jeff Bewkes understand this. If you’ve got a movie like “Avatar,” maybe you want to hold off on when it comes out on DVD so you can milk all the money out of theaters. For smaller films, like “The White Ribbon,” that’s only playing in three cities, why not release it simultaneously on television or DVD? Now with issues with piracy it becomes even less coherent. People don’t want to necessarily buy pirated content, they just are in a hurry to see a movie. The studios have warehouses filled with DVDs of movies they’re shipping to theaters, so why not release them quicker?
First… it’s kinda funny that he isn’t aware enough of the current business to know that Fox is not milking Avatar theatrically, throwing away $10m to $20m in box office by releasing the film on DVD in a couple of weeks. The same is true with The Blind Side, which I believe landed today.
On the other hand, Fox will probably try to come back into the theatrical marketplace – the revenues from which will wildly outsize the post-theatricals, as Titanic‘s did – to mine more money in 3D this summer or early fall before firing up another version of the DVD package, which will be followed at some point by a 3D release.
But I digress…
This is not a new phenomenon for the studios. The already-shorter theatrical windows probably cost each major studios $100 million or more in box office gross every single year for the last five years or so. The payoff in the past was that DVD revenues were so massive that getting to them was a key strategic choice… throw $10 million in revenues away to rush to $200 million.
The “digital revolution” that Epstein is so hungry for, ironically, is two steps forward to go five steps back. The “must move forward” attitude is not only wrongheaded, but it is, I believe, extremely dangerous to the industry. On the level of making the industry “safe,” it’s great… lower all the risk, lower all the reward, and turn movies into widgets. That’s where we are heading in IgerLand.
The fact is, only a very narrow group of moviegoers are “in a hurry to see a movie.” And the people who are in a hurry are – taa dah!!! – the most significant group that go to movies on opening weekends. And as we can see at the box office, they are going. They are going in large numbers. And as the DVD sell-thru business has stabilized, maturing naturally into being less of a massive cash cow than it once was, they are buying, renting, and downloading in the Home Entertainment window as well.
But the biggest problem with Epstein’s mentality, clearly sold to him by the studio execs who are obsessively pushing forward for a windowless world, no matter how the numbers actually break, is that he has bought into the idea that the one area that, as we move forward, has real upside… and some risk… Theatrical… is a problem or irrelevant.
Price Point… which is now only showing flexibility in theatrical… and Saturation, meaning we are now at he point where the amount of content is making each piece of new content something quite different than it was 10 years ago or even 5 years ago… are the two areas of absolute blindness amongst those with their whip hands pushing shorter windows forward.
What scares me is that it is all being done incrementally. None of these guys has the true courage of his convictions. And when the incrementalism continues and windows continue to shrink, really understanding how much it is costing the average studio release will be very, very hard to analyze. But these businessmen don’t really give a good g.d. about movies. They want to be Wall Street heroes. And as they continue to erode the film business from the inside, from the highest levels, there will be no going back.
There is only one window in the new era. Theatrical – WINDOW – Post-Theatrical. Period.
Eliminate the window and by 2015, studios will be subsidizing theatrical… not because there was ever a loss in demand for theatrical… but because they will have killed off a significant percentage of their revenues.
As we learned in the Big DVD paradigm, the cost of marketing will get bigger, not smaller, as the ability to differentiate gets harder.
If an “average” (no such thing) $100 million domestic grosser nets $250m – $300m in revenues before costs start coming out in 2010, with about 50 million people paying to see the individual film in one form or the other within the first year, I see this world of “digital revolution” creating 70 million people paying to see the same film in the first year… with a net of under $200m.
The main principle I see behind the fantasy that it will be otherwise is that, somehow, digital home delivery is going to replace or improve on DVD cash flow. But again… Price Point.
It’s pretty basic. You are all consumers out there. Are you paying more or less or the the same for Home Entertainment content in 2010?
How much will you pay to watch something on your iPhone/ITouch/iPad?
If you love Disney, the answer is mostly “zero,” because the same guys who are pushingpusingpushing to shorten the window are still using free downloads as bait for selling DVDs at – taa dah!!! again – a higher price point. And they are right to be doing that. They have to.
But where they lose me is the leap to the idea that at some tipping point, consumers will be willing to pay premium prices for convenient, but inferior delivery systems.
Look… I believe that we are headed to a very different model that what we have now, in which all post-theatrical is sold under wide-reaching flat rate deals on a monthly or annual basis, studio by studio or group by group. This may include using shortened post-theatrical delivery windows as bait. It will probably include choices about how much advertising we see when receiving the content.
But the theatrical window is the ONLY way to differentiate between what we now think of as Movies and what we now think of as Television. The theatrical window is the ONLY way to maintain the notion that there is financial upside to pushing the medium. There is no Avatar without a theatrical window. There is no Pirates 4 without a theatrical window.
On the other hand, there is a Hurt Locker and a Blind Side without a theatrical window.
And some would say, “God bless,” to that notion… a return to the 50s… or the 70s, if you will.
But the problem I envision is that it won’t take long for the process to become about how few new films, how few new TV shows, how little new product the distribution companies can produce and still keep their audiences interested enough to pay the monthly bill. This will, of course, inevitably lead to some “special events.” But it will also lead to a further narrowing of the marketplace, a further indulgence of brand laziness (Blind Sided AGAIN!… Chinatown Pie! “Forget the offensive line, Jake… just put your penis in there… it’s Chinatown Pie!”)
It leads to the lowest common denominator because it continues to disincentivize quality in favor of brand value. And then, The Hurt Locker will have no theatrical buyer – instead of one this time – and because of less revenue from non-theatrical windows, will not be able to muster even its $11m budget. Sure… if it gets made, somehow, it will get picked up to be on the HBO on steroids that Time-Warner will probably have. But it will be just another buy to fill the 360 hours a week of programing they need to fill.
But more realistically, there is no Hurt Locker. Not from a veteran filmmaker. Not even for $11 million.
Of course, Disney wants to lead… they are the most branded major studio in the world… perhaps the only branded studio left. If you don’t want to be in the movie business, don’t be in the movie business. And due respect to Sean Bailey, Disney is getting out of the movie business, aside from the service side and using it to increase the number of brands they have, to a great extent.
So that’s who the industry, which is not trying to get out of the film business – well, they are running from funding production like their hair is on fire- and that doesn’t have the brand build-out that Disney starts with, is going to follow?
Didn’t we go through this cycle before at Paramount, when the MTV and Nickolodeon brands were going to lead Viacom’s way into the future?
While the Clevers were giddily applauding the demise of the arty Dependents, did they forget that Fox Atomic and Rogue – genre divisions – bit the dust as well and that Lionsgate is still a company worth too much and too little at the same time?
Edward Jay Epstein just got caught in the crossfire for towing the line. He wasn’t the first. He won’t be the last. Sorry, Ed.
But hey… I’m in Bermuda… relaxing… I’ll just try to let this all sink in before I rant again…

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2 Responses to “Trying To Write Off Windows Again… Smart & Completely Wrong, All In One”

  1. “On the other hand, I agree with what he seems to want to say about 3D not being some nirvana for the industry. The problem – and this is often my problem with this guy – is that he wants to pretend there is AN ANSWER… and that is the lie of this industry… which ironically, he poo-poos earlier… that the industry has convinced Wall Street that this is a consistent business.”
    David, if you honestly think this is true, let me know when you are back in town. I have a boatload of just released reports from a number of Wall Street types you might want to look at. It will prove to you once and for all Wall Street is absolutely convinced 3D (especially alternative content 3D) is the second coming.

  2. David Poland says:

    Apples and oranges.
    “(T)his is a consistent business” refers to the overall business, not 3D.
    Yes, the Wall Street fools have jumped feet first into the 3D As Savior pond. And when they are shown to be wrong, they will blame someone else.
    This is another part of all of this… buck passing is necessary so people don’t have to admit making the mistake… “it must be windows… it can’t just be that we were irresponsible with the short boom of DVD sell-thru.”

Quote Unquotesee all »

It shows how out of it I was in trying to be in it, acknowledging that I was out of it to myself, and then thinking, “Okay, how do I stop being out of it? Well, I get some legitimate illogical narrative ideas” — some novel, you know?

So I decided on three writers that I might be able to option their material and get some producer, or myself as producer, and then get some writer to do a screenplay on it, and maybe make a movie.

And so the three projects were “Do Androids Dream of Electric Sheep,” “Naked Lunch” and a collection of Bukowski. Which, in 1975, forget it — I mean, that was nuts. Hollywood would not touch any of that, but I was looking for something commercial, and I thought that all of these things were coming.

There would be no Blade Runner if there was no Ray Bradbury. I couldn’t find Philip K. Dick. His agent didn’t even know where he was. And so I gave up.

I was walking down the street and I ran into Bradbury — he directed a play that I was going to do as an actor, so we know each other, but he yelled “hi” — and I’d forgot who he was.

So at my girlfriend Barbara Hershey’s urging — I was with her at that moment — she said, “Talk to him! That guy really wants to talk to you,” and I said “No, fuck him,” and keep walking.

But then I did, and then I realized who it was, and I thought, “Wait, he’s in that realm, maybe he knows Philip K. Dick.” I said, “You know a guy named—” “Yeah, sure — you want his phone number?”

My friend paid my rent for a year while I wrote, because it turned out we couldn’t get a writer. My friends kept on me about, well, if you can’t get a writer, then you write.”
~ Hampton Fancher

“That was the most disappointing thing to me in how this thing was played. Is that I’m on the phone with you now, after all that’s been said, and the fundamental distinction between what James is dealing with in these other cases is not actually brought to the fore. The fundamental difference is that James Franco didn’t seek to use his position to have sex with anyone. There’s not a case of that. He wasn’t using his position or status to try to solicit a sexual favor from anyone. If he had — if that were what the accusation involved — the show would not have gone on. We would have folded up shop and we would have not completed the show. Because then it would have been the same as Harvey Weinstein, or Les Moonves, or any of these cases that are fundamental to this new paradigm. Did you not notice that? Why did you not notice that? Is that not something notable to say, journalistically? Because nobody could find the voice to say it. I’m not just being rhetorical. Why is it that you and the other critics, none of you could find the voice to say, “You know, it’s not this, it’s that”? Because — let me go on and speak further to this. If you go back to the L.A. Times piece, that’s what it lacked. That’s what they were not able to deliver. The one example in the five that involved an issue of a sexual act was between James and a woman he was dating, who he was not working with. There was no professional dynamic in any capacity.

~ David Simon