

The economics of the film industry are changing - denzil_correa
http://www.economist.com/news/business/21572218-tale-two-tinseltowns-split-screens

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AnthonyMouse
This article is kind of disappointing.

> Between 2007 and 2011, pre-tax profits of the five studios controlled by
> large media conglomerates (Disney, Universal, Paramount, Twentieth Century
> Fox and Warner Bros) fell by around 40%, says Benjamin Swinburne of Morgan
> Stanley.

Mass-market luxury industry takes hit during largest recession since Great
Depression. News at 11.

>In 2011 American cinemas sold 1.28 billion tickets, the smallest number since
1995. Last year, ticket sales rose back to 1.36 billion and box-office
revenues to a record $10.8 billion

So the year over year volatility is in the single digits and following the
economic recovery they're back to making record profits.

It seems like the only point the article makes is that that TV is doing better
than film right now. But that isn't "movies are doomed," just "TV is doing
really well."

>A move from analogue to digital film enabled perfectionist directors to shoot
more takes and touch them up afterward, using up expensive production and
editing time. Studios have also started to make more “tent pole” films: big
releases that can support the bottom line like a pole holds up a tent. These
typically rely on expensive special effects, rather than compelling scripts,
to attract a global audience.

Jevon's effect in action. The thing is, that's not actually a problem: If
you're making more profit from doing that than it costs to do it, it's
sustainable. If you're not, why are you doing it? Stop it and go back to
creating a larger number of less expensive films based on compelling scripts
rather than special effects. It seems to be what people are asking for anyway.
You can't simultaneously expect to be taken seriously in complaining that what
you're doing isn't working and refuse to change what you're doing.

They keep talking about John Carter as a failure. I saw it. It wasn't great.
And the reason wasn't bad acting or bad special effects, it was that it had a
mediocre script. So yeah, try hiring some better writers next time. They
apparently cost less than special effects anyway. 

>Between 2006 and 2012, the six big studios also cut the number of films they
made by 14-54%, according to Nomura.

And then they wonder why they're not doing as well as they want to.

>And they started to pay actors and directors far less.

It's about time. Hard to find sympathy for "we're not making enough money"
when you're still paying eight figure compensation to individuals.

~~~
jivatmanx
"They keep talking about John Carter as a failure. I saw it. It wasn't great.
And the reason wasn't bad acting or bad special effects, it was that it had a
mediocre script. So yeah, try hiring some better writers next time. They
apparently cost less than special effects anyway. "

I saw it too, and thought it was decent. It failed because of the title. Even
the most hardcore sci-fi fans don't know what John Carter is.

If the title had "Mars" in it it probably would have at least broken even.

~~~
melling
John Carter was doomed before it was released. All the reviews doomed it. I
even read a critical article on the WSJ. With all the bad press and the amount
of money spent to make the film, I decided to see it anyway. I must say that
I've seen far worse movies and I found it to be quite entertaining.

~~~
broham
A book that "details every blunder and betrayal that led to the doom of the
motion picture - and that left countless Hollywood careers in the wreckage"
was written titled John Carter and the Gods of Hollywood -
[http://www.amazon.com/John-Carter-Gods-Hollywood-
ebook/dp/B0...](http://www.amazon.com/John-Carter-Gods-Hollywood-
ebook/dp/B00AFCZ1S4).

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saturdaysaint
_film-going in America is not a growth business, especially now that people
have so many media to distract them at home. The share of Americans who attend
a cinema at least once a month declined from 30% in 2000 to 10% in 2011._

You can get both a really good 60-inch plasma (or a good 1080p projector!) and
a solid surround system for well under $1500 these days (even five years ago,
that might've got you just a crappy 42-inch LCD).

At least for me, that's really lowered the appeal of going to a theater, even
if I'm pretty geeked about something. Add in the instant gratification of
Apple TV/Netflix, and I just don't see people going to theaters in five years
(when this level of quality has trickled down and even the $1500 tier will be
even more opulent). Kind of like when video arcades couldn't offer anything
that much more technically impressive than the current generation of consoles.

~~~
matwood
I agree. The only advantage the theater has now is the release date. Torrents
have mostly taken care of that advantage for those who know where to look.

~~~
pekk
Those who know where to look, and are willing to do something illegal.

------
kevin_morrill
I changed how I think think about movies after talking with a marketing rep at
a studio. Imagine you were launching a new software startup every single week,
and all the brand equity you built up before resets to zero each time. All of
a sudden you'd throw out any film purist sense about you and be looking for
tricks to prevent this, namely sequels, marketing on stars or director
reputation, etc.

~~~
bane
That's a really good point I hadn't considered...with production costs easily
breaking $100m, lots of the bigger fundraising news doesn't even reach this.
Color for example raised ~$40m, which in movie terms isn't even a small
romantic comedy. The Lord of the Rings trilogy had a budget of $281 million
and in many ways was a big of a gamble as any Venture Backed Company.

I'd imagine that the methods to raise that kind of budget aren't all that
dissimilar in truth.

~~~
intellegacy
"The Lord of the Rings trilogy had a budget of $281 million and in many ways
was a big of a gamble as any Venture Backed Company."

Not really. Lord of the Rings was an established brand before the movies with
a fervent fan base.

------
Mordor
I have a great Blu-ray player at home, but it's unused owing to the ridiculous
prices of the media. Sure the detail is great, but it's got to compete with
Netflix for home viewing. In addition, Netflix allows me pause and watch this
anywhere on my Nexus 4/7.

A Blu-ray copy of John Carter is equivalent to 2 months Netflix subscription,
or 3 months in Blu-ray 3D.

Could have watched John Carter 3D in the cinema (ignoring the poor reviews)
only to realize I'd never watch it a second time at home in Blu-ray. 1 month's
Cineworld subscription is the same cost the Blu-ray 3D.

~~~
roc
Not to mention the anti-consumer nature of blu-ray and dvd these days: the
unskippable commercials, trailers and anti-piracy warnings? These are also not
present on Netflix. Some commercials are present in some content on Hulu Plus.
But even that is far, far less than what you have to deal with when renting or
buying a retail disc.

To say nothing about new releases trying to push people into 3D prints that
were rarely good (let alone worthwhile), more-often sloppy and always carried
the negatives of eye-strain, dimness, unnecessary cost, etc. [1]

Which is all just to say that the economics of film are changing because film-
going and retail discs have been continually decreasing their value
proposition while their digital alternatives have been continually
_increasing_ theirs.

[1] Not letting people BYOGlasses is absurd. Even if theatres allowed it, most
film-goers would inevitably forget and just buy them anyway. They're really
only punishing families with that kind of policy. Families who already have
plenty of good reasons to ignore the theatre.

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SlipperySlope
My wife finds movies, especially action movies, too loud at the theater. So we
don't go anymore.

~~~
sampo
I use earplugs in movies, maybe they change the frequency spectrum (cut off
more in high frequencies), but I not so much of a purist to mind.

~~~
sparky_z
Just a heads up, you can buy a pair of frequency-neutral earplugs for about
$10-$15. They reduce the volume without giving the sound that "underwater"
quality. The only downside is that they aren't disposable, so you might need
to wash them with a damp paper towel between uses.

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fjorder
Hollywood is famous for playing so fast and loose with tax-loopholes that I
just can't trust any of the numbers quoted. Practically every Hollywood
blockbuster loses money on paper when it comes time to pay taxes, so you have
to wonder if they're reporting those same cooked numbers to drum up sympathy.
Let's also not forget that Hollywood films are filmed all over the place to
save money, and usually in places where studios are heavily subsidized.
Governments see a local film industry as a cultural gem, and pay through the
nose to attract productions. I find it difficult to believe that all those
free-rides aren't having an impact on the bottom lines of film companies.

------
wturner
I met someone recently who was a photographer/editor/camera op and recently
made a thousand dollars for some editing work on a commercial. The person that
gave him the gig was a former partner of a now famous producer. The editor
found out later that the entire budget for the commercial (the project he was
working on) was $50,000.

He also found out the entire thing was filmed on an iphone and the producer
pocketed the rest of the money.

------
niggler
For some reason the page crashes safari and chrome on iPad after loading
halfway.

There is an interesting issue regarding ticket prices which the article
mentions but doesn't discuss in detail. Many years ago it was affordable for a
family to go to the movies every weekend. Now, ticket prices have shot up so
much that its a pretty expensive habit. I wonder if a forced deflation of
ticket prices could improve the situation

