
Why the film industry needs disrupting - twidlit
http://www.filmschoolrejects.com/features/6-things-the-film-industry-doesnt-want-you-to-know-about.php/all/1
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glenra
> 6\. Tricky Hollywood Accounting

To film _Matrix Reloaded_, they built a fake freeway on the Alameda naval base
in San Francisco. I drove on it (as an extra in the movie); it was really
really cool. The company originally thought of keeping this set around for a
while to use in driving scenes for other film projects, but they ended up
destroying it instead. Why? Because the film was likely to be profitable! A
film set that's only used for _one_ movie and then destroyed can obviously be
deducted (as a necessary expense) from the profits of that movie, whereas a
film set that's reused for several films can't. So this "tricky accounting"
can have the effect of artificially inflating production costs (as well as
distribution costs).

~~~
MaxGabriel
Ok, so I get that a film studio would be willing to charge expenses like
Lucas' promotion of Return of the Jedi 3D to their accounts, because its an
investment for future gross profits (but the 'investment' doesn't cost
anything, because if they didn't make that 'investment' the money would go to
paying net-profit-share actors instead).

But how is it advantageous to them to completely _waste_ money on destroying
the freeway? The only way I can see this benefiting them is that lie in their
accounting and write down the freeway expense as much more than it actually
cost.

~~~
glenra
Suppose you use the same freeway set for exactly two films: (1) the big
expensive sequel _Matrix Reloaded_ (2) some cheap indie zombie film (being on
an _entirely empty freeway_ in the middle of the day is kind of creepy all by
itself) ...and then the set has to be destroyed - a storm knocks it down or
the land owners decide they want the space back for some other use.

One rational accounting method would be to split the cost evenly between films
(or perhaps you could divide it based on how many hours/days of filming was
done in that location.) But film #1 (a) made a profit, (b) owes percentages of
the profit to people who made the first film. Film #2 lost money and was made
by people with less negotiating power than Keanu Reeves, so having it lose
_more_ money doesn't benefit the studio. Given this simple case, you'd want to
allocate as much of the expense as possible to the first film, leading to
court battles over exactly how the cost should be allocated. Was this set used
for _more hours_ for film #1? Was it _more crucial to the plot_ for that film?

And okay, that might still be manageable. But what doesn't work is to leave
the number of films to be shot there _open-ended_. If the freeway set stays
up, the lawyers representing Keanu Reeves can reasonably argue that you
_intend_ to make _one hundred_ films there, so the _Matrix Reloaded_
production should only get dinged for 1% of the cost rather than all of it or
half of it.

~~~
mhb
I thought they could make films lose arbitrary amounts of money by charging
whatever they want to their captive distribution arms.

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ChuckMcM
Wow, just wow.

Unfortunately I want to the other article, the one that I cannot get anyone in
the 'movie biz' to fess up to. That is _what would it be like if it were
perfect?_ Would there be a mandatory licensing fee for scripts? Would there be
non-discriminatory rights for theatres? What?

Someone needs to sit down and _design_ a way to disrupt Hollywood. That
requires three things, production disruption (how movies get made),
distribution disruption (how they get distributed), and consumption disruption
(how they get consumed).

The good news is you might have an ally here in the form of NetFlix or Amazon.
They can handle distribution and consumption, which is to say they can 'sell'
views via their networks. You might also get some traction with 'Fathom
Events' which rents out digital theatre projectors for pay per view events.

You don't yet have a way of disrupting production.

To do that you probably need to re-create the old 'studio' model where you
have a staff of production people and actors. A couple of sound stages with
solid green-screen technology, and your own 'pocket' CGI capability for
putting together scenes. That is your 'back lot' equivalent.

More importantly you need a disruptive business model. That is because as it
stands bankers and other sources of capital understand exactly who gets rich
and who gets screwed in the movie industry, in your new model they won't know
and they thus they won't be able to understand how much (or how little) risk
there is to their capital. And you will need a lot of capital to make movies
or 'serials' (Think of them as sporadic TV shows where the episodes don't
necessarily come out every Tuesday at 8PM)

This is going to take some strategic planning and understanding exactly what
things _really_ cost. I worked on this sort of project to understand how the
periodical publishing market was to be disrupted (and to identify business
opportunities in the disrupted market) and its painful. There was no source of
'how much do editors make?', 'journalists?', 'folks who run printing presses'?
'folks to drive vans to drop off papers/magazines?' You really need to open up
a business from the inside, and dissect it to understand how it works, where
the money goes, and what the leverage is of each of the individual pieces. But
understand that doing this sort of dissection gives you to knowledge of _how
to disrupt_ and that means the person sharing it with you, if they aren't
already committed to joining the revolution, is writing their own death
sentence. Ouch!

The best you can hope for is to approach the problem like the CIA trying to
infiltrate an enemy government. Develop assets, interview people who are fired
or leave, do forensic accounting on suppliers and contractors and unions. Not
easy, you are a threat, the people who have the power know you are a threat
and they will do things to slow you down or stop you.

So take the current players and develop a parallel track. It will be hard, and
it will be expensive, and it will be beset with issues the entrenched folks
throw at you. But you do need a solid strategic plan and good backing.

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kitcar
While I do believe the film industry needs "disrupting", I do not believe this
was the point of the article, nor does it make any good arguments to back up a
thesis of "disruption".

"6. Tricky Hollywood Accounting" - this is purely a contract negotiation
issue, and it is is no way a hollywood-specific problem - in all lines of
businesses you will find companies which try to setup "royalty fee" or similar
buyer-controlled expenses to dry up profit to ensure as little is paid out as
possible to the seller. A good negotiation team will prevent this, both in
Hollywood and elsewhere.

"5. Extorting Theaters" - this is bullshit for 95% of theatres. The large
movie theatre chains in North America have leverage over the studios, as while
there is a large number of movies available at any given time, there are only
a relatively small (fixed) number of theatre screens. The price and revenue
split of a film in a theatre is based on supply and demand; movie theatres do
not cut the exact same deal with studios for every single film, instead they
negotiate based on the expected results of the film. In the cases where movie
theatres don't think the film will do well, the studios basically get screwed
into subsidizing the movie theatre to show the film. In cases where the movie
is expected to do very well, the theatres end up giving up more for the right
to have it on their screen. I'm sure small independent theatres are a
different story, but in all businesses small players have less negotiation
power, and therefore get worse deals.

"4. Fake Reviews" - this is just the work of dishonest marketers - I don't
understand how it is a reason to justify disrupting the movie business.

"3. Copyright Bullshit" - this is a US specific problem, not a film business
wide problem, as copyright laws change by country. It could also be viewed as
a good thing for producers in the film business, as they can profit off their
films longer.

"2. Strangling Consumer choice" - again, its a contract issue and has much in
common with 6, Extorting Theaters, and the resulting supply and demand
struggle. Theaters don't want to pay as high a price for a film if its
available in other channels, as that means attendance/viewership will be
lower. Same with TV stations, Pay-per-view, and so on. Therefore, if studios
want to be able to actually pay for the film they produced, they have to be
very careful as to where and in what order they show their content.

"1. Stealing Scripts" - This is just not a film business problem. People steal
ideas everywhere, all the time. Stealing ideas is easy, creating a good
product is hard.

(Edited after my morning coffee to clarify submitter's thesis versus articles
thesis)

~~~
technoslut
>1\. Stealing Scripts" - This is just not a film business problem. People
steal ideas everywhere, all the time. Stealing ideas is easy, creating a good
product is hard.

It sounds as if you're trying to justify this approach as well as the others
listed. We all know this but the reason it happens is because the writer needs
a studio to finance the film. This the most reprehensible of all those listed
because it punishes creativity.

~~~
kitcar
Not trying to justify anything, but rather suggesting pretty much all the
issues outlined are issues in every major industry, and hence highlighting
them as being specific and unusual to the film business is incorrect and
unhelpful.

An idea for a movie is a very different thing from a finished script, similar
to an idea for a new business is very different than the execution of the new
business.

If we applied the "you owe me money because I had the movie idea first" logic
to the tech world, facebook owes friendster money because they stole
friendster's idea.

~~~
technoslut
I can't speak for every situation and whether there was a finished script. I
may be an idealist but, from a standpoint of morality, any business that
abuses the power they have is severely lacking.

There are differences between Facebook and Friendster and I've always felt
uncomfortable with the way Zuckerberg behaved in the early days of Facebook. I
will argue that Zuckerberg's vision was greater that than just the Winklevoss'
original idea.

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missy
Sad to hear that these schemes are used to broadly in business. But not just
the business but also from a human side I ve often been left disappointed.

I had my bubble as 12 yr old burst about the innoncence of TV / Media when I
was with my parents at some Restaurant that had a big playground. There was a
TV shooting in that playground for some Fundraiser of a Down Syndrom Suffering
Child.

I just remember standing next to the camera who was having a cigarette break a
bit on the side from the family, and he said (more or less, I was 12) to his
colleage " Ok, just one final shot of the spastic running into the parents
open arms. Always a classic shot to raise money".

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robryan
Originality would be a big one for me, these big studios tend to make very
safe bets on stories that the know will have broad appeal, meaning we see the
same stuff again and again.

The other one is 3D, not sure what the situation is like in America but the
sooner that the 3D and 2D ticket prices become about the same the better.
Feels like so many movies that either don't need 3D or 3D really hurts the
movie are in 3D just to make more per ticket. I find myself seeking out the
non 3D sessions for a lot of films.

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whazzmaster
How can a cartel be disrupted? While this article makes me angry (especially
as a consumer, where the limiting of choice has a definite impact) I don't see
a way for anyone to 'disrupt' this behavior.

Tech- and entrepreneurial-minded folk like to look for disruption
opportunities and while they may exist in theory, these are industries
supported by mind-boggling displays of corruption. In this case, you couldn't
touch any of the six points on that list without offering a billion dollars in
campaign contributions to Congress yourself.

It makes me extremely sad about that state of affairs.

~~~
justincormack
Find a substitute product. Or just stop buying this one and wait.

There are lots of arthouse and Indy films, for example.

~~~
tsotha
And foreign films. I've seen great flicks from China, Iran, Israel, Mexico,
Brazil, and Sweden.

Almost everything that comes out of Hollywood is slavishly derivative anyway.

------
Jun8
Well, the most important item is not on this list: Hollywood doeant have a
frigging clue about what makes a film successfull (except some obvious
metrics, like big names, that anyone can think about), they're completely
divorced from the audxience reality. There are many movies that become
blockbusters to the great suprise of producers and vice versa, despite the
many preview audience screenings, market research, etc. I don't know of any
other industry that shares this characteristic.

With top-notch video camears as low as $2-3K now, I'm forever expecting a DIY
movie explosion, which never happens. People explain this as "it' difficult to
shoot,edit, etc. a movie" which is true but I think the much bigger factor is
the stronghold these companies have on distribution.

~~~
jws
Popular music has a similar dynamic. The studio model is to grab a bunch of
likely artists, get them in front of the public and see which ones get
traction.

Restaurants are similar. Only about 50% will get traction and survive. That is
a well studied business with a replicable model and still it's a crap shoot.

You might even extend it to HN style startups. Lots of expertise in choosing,
funding, and guiding, but you still can't say with confidence which will
succeed.

~~~
DarkShikari
_Popular music has a similar dynamic. The studio model is to grab a bunch of
likely artists, get them in front of the public and see which ones get
traction._

This has been changing in recent years and is becoming less and less true as
more companies start to import the Japanese pop music model.

In Japan, for the past 30 or so years, they've churned out cookie-cutter idols
in a machine-like fashion. They don't pick a person who'd make a good idol --
they design an idol that would appeal to their target demographic, and then
they find a person to, effectively, act out the role. Musical talent is
largely irrelevant: if they can't sing, just pile on the Autotune and vocal
filters, or even use a vocal double. And after a few years, when their idol
isn't cool anymore, ditch the old idol and find a new one.

The idols are so fake and inhuman that when AKB48, as a publicity stunt,
announced an "idol" that was later revealed to be a computer-rendering instead
of a "real" person, it didn't really seem any less real than the current
idols, and surprised hardly anyone.

The companies that do this have very high success rates: when they put
millions of dollars into marketing an idol, their idol becomes popular. And
then they make billions. Why have a guessing game of whether your band will
match the demographic when you can _design_ a band to do so?

This model has already existed in the West with boy/girl bands and such.
Disney is probably the biggest company trying to pull this model off today,
with machine-created "stars" like Miley Cyrus.

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BoppreH
>1\. Stealing Scripts Could be coincidence. The universe of possible scrips is
limited and dependent on historical context. Now think about how many writers
send their scripts to Hollywood. Of course there's going to be some overlap.

And this is not exclusive to the film industry in any way.

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gnubardt
Reminds me of a story about Mario Puzzo:

When he signed the contract for The Godfather to be made into a movie the
royalties he'd receive were to come from the net income of the movie, not the
gross. Due to the accounting practices described in the article the film
hardly made any money on paper (it grossed a lot but had exaggerated
expenses). Already wealthy, Puzzo bet his royalties (a fraction of what he
expected) on a roulette spin and walked away. The moral is to always get a
percentage of the gross, not the net.

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kia
In addition to #4.

I don't know about IMDB's relations with releasing companies but the ratings
for many movies behave strangely. When a movie is released the rating is very
often around 8 fading to 6 in several weeks when more people vote. It's odd
that the first batch of people usually likes the film and the rest don't.

~~~
troymc
It might just be that people who think they'll like the movie tend to go see
it sooner and post reviews sooner.

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mikle
I really like the way Kevin Smith is doing stuff. I only wish he'd come to
Israel with his movie.

As he is way better at explaining it then me, check out his blog for his way
of distributing a movie:

<http://silentbobspeaks.com/>

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marquis
For reference, the Indie film movement is focused on disruption, it's a
fascinating time for experimentation.

An example: <http://www.sellingyourfilm.com> (The PDF version is free)

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veyron
What percentage of movies actually turn a profit (real profit, not paper
profit) after all of the costs are taken into account?

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Tycho
The criticism of film copyright seems very short sighted to me. Are people
that cheap that they resent paying a few bucks for a great movie? Copyright
protection means producers can take much higher risks in the films they choose
to make, because even if something has a bad run at the box office, it's still
got decades of potential profitability ahead of it. Why _should_ you get to
watch On The Waterfront for free?

~~~
MostAwesomeDude
The point of copyright is to compensate advances in the arts and sciences.
Artists should not be compensated eternally for a single piece of artwork.

~~~
Tycho
Compensate advances in the arts and sciences? What does that even mean?

Anyway I didn't say artists should not be compensated eternally for a single
piece of work. Although in fact that's quite a strange way to put it. They
made the work, copyright means they have control over it. Why should YOU be
'compensated' for somebody else's hard work? ie. get it for free

The point however is that having lengthy copyright terms, eg. 100 years, means
producers will finance riskier and therefore better films more willingly. If
they only had say 20 years of royalties income to count on, the result would
be lowest-common-denominator movies being the only ones that get made.

I don't understand why someone would care more about being able to get 20, 30
year old movies for free than they would about paying a few £s (or watching
some adverts) to see an old classic. It's like complaining you have to pay to
get into the Louvre.

~~~
MostAwesomeDude
"copyright means they have control over it"

No, copyright means that they are entitled to be the only seller of the work,
for a limited time, to ensure their livelihood. It does not mean that they
have control over it. Notably, there are strong consumer rights, such as the
right of first sale, which limit the ability of the copyright holder to
restrict buyers from reselling the work. There are also exceptions to
copyright, known as "fair use" exceptions, which permit copyright to be waived
in certain situations.

Copyright used to be short. 28 years. It was anticipated that it would get
shorter and shorter, as methods of distribution improved. It is not intended
to ensure profits.

The big studios keep gross profit from leaking into net profit by cooking
their books. Most of the blockbusters of the past 50 years haven't turned a
net profit; they've been carefully rigged so that they appear to be in the
red, to keep as much money in the studio as possible. They don't have _any_
qualms about financing bad movies. (Pluto Nash is my favorite example.)

"It's like complaining you have to pay to get into the Louvre."

Most of the artwork in the Louvre can be viewed for free, online. Copies of
artwork hosted in the Louvre are quite cheap, and you could make your own for
free. Your payment goes towards upkeep of the museum, not towards the artists
who created the artwork hosted there.

Can you draw Mickey Mouse? I bet you can. Most people have him etched into
their memory, because he's so ubiquitous. Mickey is a character that, over the
past century, has become a cornerstone of American culture, in TV and film.
I'm sure that you know Mickey quite well. But, according to current copyright
and trademark law, you _don't own him_. Nobody does except for Disney. So you
can't have him, despite having grown up with him and having known him your
entire life. You _can't have_ a piece of culture. Do you really think that's
okay?

~~~
Tycho
I think you took a couple of my comments differently from what I meant. The
Louvre has an admission fee which is absolutely trivial considering the
treasurs within; it makes no sense to quibble over it, not matter what the
money goes to. Likewise having to watch TV adverts or spend a few pounds to
see a masterpiece like On The Waterfront, is not something worth complaining
about. Secondly, the issue was not that big studios are willing to make bad
movies, it's that currently they're also willing to make riskier, less
formulaic movies too. That could easily change if movies had little shelf life
for future profits.

And to answer your question, I'm perfectly okay with not owning Mickey Mouse.
I find it hard to believe anyone would get genuinely concerned over that. (In
fact if Disney did not aggressively market and control their intellectual
property, probably nobody would even remember Mickey Mouse by now.)

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Iv
1 reason why the film industry needs disrupting : Internet

