

Hollywood's Completely Broken - JDulin
http://www.salon.com/2013/06/15/lynda_obst_hollywoods_completely_broken/

======
beloch
Bluray (and HD-DVD) came out just a couple years before the big decline this
article discusses, which is about the time they would have needed to get past
the early-adopter stage and start making a significant market impact. These
were the premium formats that were supposed to draw in people with their
superior quality and command a premium price with a correspondingly premium
net profit. These formats have not flopped, but neither have they given
Hollywood the boost they were looking for. In fact, I'd be surprised if
Hollywood execs aren't rather disappointed with Bluray sales.

The problem now is that DVD's are widely seen as an inferior format.
Superficially, they have all the disadvantages of Bluray with inferior quality
even to online streaming. Sure, they're pretty cheap, but not cheap enough to
justify the lack of both convenience and quality. If online streaming killed
DVD sales, Bluray was certainly an accomplice.

The reason Bluray hasn't gained as much traction as Hollywood hoped is that,
in practice, its even more inconvenient for users than DVD's were. Bluray's
are saddled with DRM so onerous that movies can take minutes to load and only
a player with an internet connection to obtain updates has a chance to play
the newest titles. Bluray discs almost universally have inferior user
interfaces to DVD's, and the consistency is awful. BD-J discs often break
basic player functionality such as auto-resume. On top of it all, Hollywood
has continued to pile on more and more warning screens and advertisements. One
of the selling features of the Bluray format, according to Hollywood, is that
Bluray discs can download fresh new trailers online and show them to users
instead of simply playing old trailers loaded on the disk. Yes, only Hollywood
would call a program that downloads ads and makes you watch them a _feature_!

Compare this to online video. The quality is still inferior to Bluray, but it
won't be that way forever, or even much longer. Arguably, the quality edge
Bluray has is already pretty slim on the majority of display's people are
using.

Hollywood should be serious about keeping Bluray competitive with online
video. They make a lot more when you buy a movie on Bluray than they do if you
watch it on iTunes. However, they clearly aren't. How do we know? They keep
updating the encryption on Bluray discs, forcing people to keep up with
updates to their players even though the updated encryption is frequently
broken before the Bluray's using it officially go on sale. Every time a user
has even slight difficulty playing a movie they just paid good money for, you
drive another nail into the coffin of the Bluray format. They keep piling on
trailers and warning screens. It still takes minutes to get to the movie with
many Bluray's. Onerous anti-piracy ads are still being shown to the very
people who have just paid for their content! Bluray menu interfaces remain
inferior to those of DVD's, and consistency has not improved.

The obvious answer for Hollywood is to treat their best (i.e. most profitable)
customers like their best customers, but this is simply not being done.
Instead, they're looking for the next big thing to fix everything. 3D
Bluray's! 4K video! 3D fatigue has already had an impact on cinema sales, but
it'll be great in the home! (Disclosure: I own a 3D projector and have yet to
watch more than 10 minutes of 3D to verify that it works). Yes, 1080p isn't
good enough! 4K will be the savior of Hollywood, nevermind that the average
viewer can't tell 720p from 1080p! The number is bigger, so they will come.

It's pretty hard to feel much sympathy for Hollywood these days.

~~~
thenomad
_nevermind that the average viewer can 't tell 720p from 1080p_

I'm a professional film director.

I'm not sure that on an average-sized (say, 42" to be generous) home TV, I'd
be able to tell 4k from 1080p.

If anyone thinks that's going to save the film industry, they aren't on a
winner.

(And I also actively avoid anything with 3D where possible.)

------
whazzmaster
A couple of thoughts (including some commentary on the article itself- sorry I
couldn't help it).

The central idea of this article, which is that slowing DVD sales due to the
explosion of streaming options are slashing profit margins, is fascinating to
me primarily due to the relative absence of blame-shifting onto 'piracy.'
There was a mention of it, but it seems Hollywood has finally moved past the
'Piracy is causing all our woes, DMCADMCADMCA' delusions of the late 90s/early
2000s. As a Slashdotter from back in the day that saw such scolding played out
on the front page I find it strange (yet optimistic) that they finally saw the
real writing on the wall.

However, even though the central conceit of the article is interesting to me I
find the language just goddamned terrible. I guess if you're looking for
properly-flavored industry news then sentences like "[h]is first picture was
the tentpole smash Rise of the Planet of the Apes, and he already had three
television shows on the air" and "[m]ore recently, he released the smash
Identity Thief, with Melissa McCarthy and Jason Bateman" are right up your
alley. I'm suprised the author didn't describe some upcoming SMASH deal as
BOFFO.

~~~
Vivtek
When will they admit that they killed DVDs themselves due to their fear of
piracy? The more copy protection they put on them, the less likely any given
DVD was likely to work. In the 90's we rented a _lot_ of DVDs. By the time
Netflix came along, we finally gave up even trying DVDs from the video store,
instead watching whatever drivel was on Netflix only because we had a
reasonable expectation that it would work all the way through without a
microscratch triggering the anti-piracy circuitry.

~~~
orbitur
Huh? I bought in to DVDs very early and I've either owned or used many DVD
players over the last decade, and I've never, not once, had an issue with DRM
preventing me from using the disc in a dedicated player.

The only situation I can think of is that you bought or moved your DVDs from a
different "region." And the number of people actually dealing with that is so
small it's not even worth mentioning.

Perhaps you meant Blu-Ray? While issues are perhaps more common, they're not
common enough to drive people away. BR's sales problems are due to high cost
and poor timing to market.

~~~
Vivtek
No, DVDs. It got worse with every DVD player we bought, until we finally just
gave up on DVDs entirely.

------
Gobitron
Based on the comments here, a key point of the article was missed. The quality
of movies right now is crappy because it is being entirely driven by the
international market, where they base things entirely on historical returns of
specific actors and/or narrow genres. This shift to focus on international is
due to the the loss of the DVD market. It's a lesson in how changing economics
can impact the core quality of a product, not just "we're getting disrupted -
damn the technology".

------
alan_cx
Well, call me a.... whatever... but reads to me like they want to blame
everything other than their rubbish movies that are not worth having a
permanent DVD copy of, and the stupid amount of money they insist on spending
to make a movie.

These days, it seems the best movies are low budget, and worth buying a DVD of
to keep. The big expensive "block buster" movies are very often watch once,
enjoy for the moment, and forget. That can be cinema, netflix, torrents, who
cares? The movie isn't actually worth caring about.

~~~
the_watcher
I actually disagree. I am more likely to go to the theater or buy a legitimate
copy of a big budget movie than a low budget one, since I'll pay a bit extra
for the highest quality experience of the effects. I still love going to the
theater, so I see more movies there than by any other method, but for small
movies like The King's Speech (not an example of a classic "low budget" movie,
but hopefully you get the idea, the scale is small), I'm way more likely to
wait for a way I can see it for free (or in one of the streams I already pay
for: HBO, Netflix, Amazon Prime, etc.)

~~~
cclogg
It may also be your movie tastes differ from his too. Right now I am noticing
basically two groups of people (not correlated to age): one group which enjoys
the effects, 3D, epicness... and the other which is disillusioned with today's
movies (ie yay another movie where I watch CGI dudes shoot around and then get
a 3D fly-over the battle-field every 5 seconds).

I think there is something to be said for the funneling of movie budgets into
a few MASSIVELY costing movies (ie per the Spielberg interview that was posted
on HN last week). I, myself, enjoy a good "Dark Knight", but also something
like the King's Speech or The Tree of Life. The question is whether both can
keep being made for their respective budgets, and both in film vs other media.

~~~
the_watcher
I actually enjoy both quite a bit, and am likely too see both types in
theaters. My point was simply given enough money to pay for the highest
quality experience of one movie, I'll pay for the big budget action film over
the small scale but still high quality movie. I feel I can enjoy the smaller
movies just as much on a TV at home. Seeing The Dark Knight in IMAX is a
hugely different experience than at home.

------
ChuckMcM
That was an interesting read. Strangely it would make a good movie. But the
really telling bit was the inaction. That is _classically_ how disruptions
happen. You see you get people who have been in "the business" (any business)
their whole life and they have learned the ins and outs and "how its done"
which is as much lore as it is practical advice. Now you change the rules and
an outsider can see the new path but the person who "knows how it is done" is
beset by doubt. None of their hard won information and learning applies (or
nearly none of it) and they are being asked to make Important Decisions.
Complete lockup. Lots of folks in the dot com world had the same experience
when suddenly "no profit" / "no investment" became the required thing and all
their slide ware and pitches were junk.

This is why the stuff we learn from Netflix's experiments with funding shows,
which changes the pipeline, will do. Soon we'll have the Netflix funded movie
production and it will be another shift in the bedrock of whose ass you have
to kiss to get a movie made.

I feel sorry for the folks who were revered for their expertise before and are
now worthless. But it is the way of these things. What the folks in the
studios realize is that movies are _still_ going to get made, but _how_ they
get made is going to change. And until the 'new' way has run a few movies
through the pipeline and the new makers have figured out what it takes, its
going to be scary.

------
na85
Wow, this article pissed me off.

First, we're dealing with people who are LOADED. Why should I care if they
can't afford to pay Tom Cruise, the director, the producer, and a bunch of
other people 20 million dollars each? Oh darn, they'll only get paid 4 million
dollars each.

This is a classic case of old, technologically-inept white men whose business
model was predicated on gouging the public for decades. The internet is
killing DVD sales because of convenience and theatre revenues are down because
the public is getting tired of superhero remakes and don't feel that the price
of admission is worth 2 hours of watching 3 actors standing in front of a
green screen and interacting with a bunch of CG extras, so they download it
instead. All of a sudden Hollywood can't continue their price-gouging, and
because they're basically Luddites, they fear change and can't adapt.

So they'll inevitably turn to the courts instead of letting their business
adapt to the free market that they all espouse to love.

It's basically the situation that the American car companies found themselves
in a few years ago. People are getting tired of their shitty products and
aren't buying them any more. Instead of making better products that people
would be willing to pay for, they curl up in the fetal position and cry.

~~~
ams6110
Would you feel better if they weren't white? What's race got to do with it?

~~~
na85
In the 60's, men didn't learn to type because it was "women's work" and your
secretary did the typing for you.

These are the same guys who are hunting-and-pecking nowadays because they fear
change.

~~~
ars
I think you need a smaller brush.

------
wisty
> “They said to me, ‘We don’t even know how to run a P&L right now.’” The look
> on his face expressed the sheer madness of that statement. “ ‘We don’t know
> what our P&L looks like because we don’t know what the DVD number is!’ The
> DVD number used to be half of the entire P&L!”

> “What are the implications of that?”

> He looked at me incredulously, as if to say, Haven’t you run a studio? Then
> he said very emphatically, “The implications are— you’re seeing the
> implications—the implications are, those studios are frozen. The big
> implication is that those studios are—not necessarily
> inappropriately—terrified to do anything because they don’t know what the
> numbers look like.”

What does this actually mean?

Is there simply high uncertainties in P&L predictions, due to the difficulty
in predicting international sales? There's a hard limit to the number of
foreign movies some countries, notably China, allows so there could be massive
fluctuations depending on whether it's good enough to send to China; and
international tastes might be hard to predict. Or is it because the profit
forecasts for every movie they do a P&L for falls short of what they can
accept, and they put a magic "international sales" estimate in to push it over
the line?

~~~
jbk
> What does this actually mean?

From what I understand, that they don't know what part of the Plan will be the
one actually getting the most profit. And so they need to multiply their
offers (and that increases the whole cost of the movie).

But to me, the important part is that this exact part is why we have yet
another Spiderman and yet another Avengers movie on screens. Because as they
are terrified, they are going to publish known beasts (movies), where they
know the financial ratios.

------
Pxtl
Since cutting the cord and going pure Netflix, I haven't seen a trailer since
like, ever.

This has a profound impact. I know longer know or even care what's coming out,
or what's impending on DVD release. I know there's a new Star Trek movie, and
the Hobbit came out a bit back, but I'm no longer edge-of-my-seat excited to
see this because I haven't been being bashed about by promos for months. I'll
wait for it to appear on Netflix, or maybe the Redbox thing. I saw Iron Man 2
on Netflix, so I figure I'll get to see part 3 there too.

~~~
ars
Sounds like netflix could make some money by adding a trailers area.

People could go there and watch whatever trailers they like (and I think
netflix could even suggest what they might like), and netflix would get some
advertising dollars.

------
jseliger
_This was, literally, a Great Contraction_

I think the basic problem is that contemporary movie studios are publicly
traded companies whose goal is to grow by 10% a year (or at least hit market
growth rates). In some businesses, that's just not possible because of limits
to the size of the market; book publishers, for example, have only rarely
grown at market or above-market rates.

Books are an interesting example for a couple reasons: book publishers have
been real businesses far longer than movie studios. In addition, studios for a
long time set up businesses that relied on people repeatedly re-buying the
same movie on different formats. Books have never really gotten away with that
(although we might be seeing some re-buying like behavior in the shift from
paper to digital). Now there's not an obvious successor to DVDs, and movie
studios might become, or be becoming, more like book publishers.

* Further background reading: Edward Jay Epstein, _The Hollywood Economist_.

------
everyone
I guess this article is aimed at film industry people, but still it is an
example of very obtuse writing. I could not understand it all as a consequence
of the many terms and jargon often used in it. The writer could do well to
expand their audience by writing more accessible prose.

------
te_chris
This is just awesome. They blame the lack of DVD revenues yet refuse to
license content such that full service stream services can set up in other
markets (like my own New Zealand). Well, believe it or not, we've got brains
and technology here too. As someone else said in this thread: Fuck 'em.

Just for a comparison, I've pirated one album since I subscribed to spotify
(yeezus to check it out when it leaked).

------
iamwil
I had two thoughts.

1) That the golden age for DVDs only lasted about 10 years. I think the golden
age of cinema lasted from late 1920 to early 1960's. Acceleration in
technology results in accelerated culture change and accelerated market
changes. We're use to it in tech, but I didn't think much of other industries.

2) Along those lines, I was surprised this was such as revelation to the
author. As soon as I saw Netflix go streaming, I knew this was the way I
wanted my movies delivered. And the attitude in the OP seemed to be, "Hey, we
can't make great movies and take risks on movies because you guys aren't
buying DVDs." Innovative films never seemed to be big-budget anyway. And for
an industry that's not use to change like technology is, they seem to fail to
see that with new technology comes new business models, and new opportunities.
I wonder how tech can educate hollywood on this.

~~~
VLM
"Innovative films never seemed to be big-budget anyway."

One interesting hidden assumption deeply embedded in the biz is that big
budgets are only for special effects and certain stars, and sometimes
costume/makeup/sets although thats all getting adsorbed into "special
effects". Obviously big budget never means the writers or any part of the
creative team that doesn't involve makeup or blood spatters. Unfortunately
that shows pretty strongly.

I would wager this budgeting anomaly is, in the long run, going to be a bigger
disruptor to the biz than tech.

~~~
waterlesscloud
Directors, and even writers, on big budget films are paid very well. Even
certain key behind-the-scenes people can easily make a million+ on a big film.

------
transfire
Let talk about the real problem with Hollywood: It's an enclave of nepotistic,
narcissistic, over paid ninnies.

~~~
VLM
No different that any other big industry. The "real problem" is their product
is no good compared to the expanding competition for consumers (shrinking)
entertainment budget.

If the disposable entertainment cash budget of the median consumer is dropping
fast enough, and it seems it is, then they could create the worlds best movie
and no one would spend money on it. So if there's no money to get, just go
thru the motions and collect the paycheck until it stops, the output is going
to be a crop of shovelware, which is a pretty accurate summary of the current
situation.

------
Melcher
Could the reason DVD sales have dropped so much simply be that Hollywood has
released the back catalog of films?

My guess is when DVDs first became the craze there were only a handful of
titles, as more titles were added people bought more - often going out to buy
their favorites and classics for the sake of nostalgia. In this way Hollywood
was making money by just re-releasing a lot of old content.

Now that all that 'catching up' has occurred and customers have already gone
out and bought their favorite films, only new releases remain - and those are
either a. underwhelming or b. not yet 'classic' status enough to bother
owning.

------
od2m
I stopped buying movies and going to the movies for the same three reasons:
1\. The often unskippable advertisements, anti-piracy warnings and FBI
warnings on Blurays. 2\. Most movies now have 30 mins of advertisements before
them in theatres. 3\. Hollywood isn't making good films anymore.

In other words, Hollywood is making shit products. They're just surprised that
we're not buying them anymore.

~~~
vinceguidry
You can't explain the decline of the DVD market with only your own reaction to
the product. Most people aren't as unreasonable as you are.

~~~
ams6110
I think it's quite obvious that the DVD market declined due to a combination
of low perceived value, unreasonable inconvenience, and extremely fragile
media.

Assuming people are like me and rarely watch a movie more than once unless
it's exceptionally good, why pay $20-$30 or more for a DVD when you can rent
it at RedBox for a buck or watch it on demand or on Netflix.

OK I bought the disk, but I can't make a backup copy or skip the ads and
previews?

Oops, I dropped it or my kids got ahold of it, and now there is a little
scratch on the disk, and it's entirely unplayable. Tapes were far more rugged,
if slightly bulkier.

~~~
vinceguidry
> I think it's quite obvious that the DVD market declined due to a combination
> of low perceived value, unreasonable inconvenience, and extremely fragile
> media.

Why would you say DVDs are fragile? Disk media replaced tapes, which were much
more so.

Markets don't decline due to negative reasons. People are generally willing to
put up with a subjectively poor experience if its absence would be worse.
Instead they die when something else offers something better.

In this case, Netflix. It is not poor DVD quality that stopped people from
buying them, it's Netflix and competitors. If DVDs sucked, they never would
have replaced video tapes.

~~~
ams6110
VHS tapes, being entirely enclosed in the cassette, are far more protected
from accidental damage than are DVDs which are naked platters and will be
rendered unplayable by minor scratches.

------
sp332
>“The DVD business represented fifty percent of their profits,” he went on.
“Fifty percent. The decline of that business means their entire profit could
come down between forty and fifty percent for new movies.”

>If a studio’s margin of profit was only 10 percent in the Old Abnormal, now
with the collapsing DVD market that profit margin was hovering around 6
percent. The loss of profit on those little silver discs had nearly halved our
profit margin.

This actually explains a lot about the studios' rabid antipiracy campaigns and
their unwillingness to make everything available streaming. DVDs aren't a huge
slice of the pie, but as a percentage of profit, it becomes a huge deal.

~~~
EliRivers
Profits down, are they?

Well, maybe if they didn't swear blind that they never made a profit on any
film ever and that actually they made a loss so there won't be any taxes, I'd
have some sympathy.

~~~
hobs
Frankly I have very little sympathy that their excuse amounts to "we spent too
much money on stupid things and now we are broke." Fuck em.

------
raldi
Is it me, or is this story impossible to read on an iPhone? I get about 1/3 of
the way in, and the text gets covered with a dark gray overlay approx 9000px
tall with a photo of Neil Patrick Harris in the middle.

------
mtgx
That's the thing with disruptions. The new business models can't support the
old cost structures, but they can support the _new_ cost structures from new
businesses built around the disruptions.

Hollywood would have to adapt, which means doing things in a very different
way than they've done it so far, and that's not something they'd like to do.
They'd rather try and hold on to what they have now for as long as possible.

~~~
wmf
I wonder if House of Cards has a lower cost structure.

~~~
ippisl
Yes. It was priced at 10 million per hour. For movies 20 million per hour is
considered a good price.

And I think house of cards is relatively expensive. Even game of thrones cost
6 million per hour. How is this possible? I have no idea.

------
PaulHoule
It's not that bad of a business.

Many people still subscribe to cable. I don't, but on some months I spend
upwards of $100+ on movie tickets and Blu-Ray disks (Yes, I buy them.) Other
months I realize I can do a zillion other things (go to a zoo or play golf)
for what movie tickets cost.

Things are going to change, but the unique concentration of talent and
intellectual property based around L.A. will be a force to be reckoned with
for years.

------
saturdaysaint
It's striking how little they learned from the music industry. Substitute "CD"
for "DVD" and lower the budgets a few orders of magnitude and this could've
been about the 90's/00's music industry.

And the author doesn't seem to internalize what's become common knowledge in
the music industry: the shiny savior disc (CD/DVD) was really masking the
deeper disruptions in consumer behavior.

~~~
ams6110
In retrospect, CDs and DVDs seem like a complete scam. They didn't offer any
significant benefits over vinyl and tape. They were still a physical _thing_
that you had to handle and store, and taking more than a few with you when you
went somewhere was a major hassle. And they were far more fragile.

~~~
thaumasiotes
let's see...

you can listen to a CD more than once in quick succession without permanently
distorting it

you can play a particular track on demand

you can reproduce a disc without quality loss

rewinding a DVD is pretty quick

DVDs include subtitles; tapes didn't

CDs and DVDs are significantly smaller and easier to store than records and
VHS tapes - I have a pocket-sized container that will safely hold a couple
dozen CDs, but that would be fairly difficult with records.

In summary, CDs and DVDs are both vast technological improvements over vinyl
and tape. And I have no idea what you're talking about with "And they were far
more fragile."

~~~
icebraining
Don't forget making accurate backups, assuming it's legal where one lives.

------
dlg
There are a few tech startups in Hollywood trying to help build a new model. I
recommend this recent post for a sense of where things are going
[http://briannorgard.com/2013/06/14/rewiring-and-
rethinking-h...](http://briannorgard.com/2013/06/14/rewiring-and-rethinking-
hollywood/)

------
artsrc
If offer content in a way cheaper for you, and better for me then you might
increase your revenue.

Our family buys DVD's and watch them.

DVD's are a pretty costly way to sell movies. Retailers take a big slice. You
have to create packaging, deal with inventory, distribution costs etc.

------
dobbsbob
Studios have never made so much money. Every trash superhero film is clearing
a billion dollars in foreign box office. Chinese had zero interest in
Hollywood until recently now they are the #1 film market.

------
paul_f
Film, as an artform, will survive. The current studio system, hoisting this
crap into the theaters will not. The faster we can end the current paradigm,
the faster we can move to the new order.

------
Tichy
Isn't that theory automatically refuted because films were successfully made
before DVD and Video even existed?

------
robomartin
The Innovator's Dilema: The studios should have started the streaming
services. Instead they were busy continuimg to optimize their existing
business model. It makes you wonder if any of those people even heard of the
book.

------
e3pi
> "....He looked at me incredulously, as if to say, Haven’t you run a studio?
> Then he said very emphatically, “The implications are— you’re seeing the
> implications—the implications are, those studios are frozen. The big
> implication is that those studios are—not necessarily
> inappropriately—terrified to do anything because they don’t know what the
> numbers look like.”

Regarding tech advance crushing DVD sales, 50% of profit.

