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Why the film industry needs disrupting (filmschoolrejects.com)
259 points by twidlit on Sept 10, 2011 | hide | past | web | favorite | 54 comments

> 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).

On the plus side, destroying that set freed up that location for MythBusters to shoot approximately every other episode. And watching Adam and Jamie accidentally drive remote controlled cars into the Bay is much better than any fake freeway in a Matrix sequel.

Right, most car myths get tested there. It's also the usual place you see Adam zipping around on his Segway.

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.

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.

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

> completely waste money

Money isn't wasted, someone earns it. The studio's want their subsidiary "Movie Construction, Ltd" earn that money rather than anyone else.

Fellini used to cleverly make use of sets from other productions, thus reducing his costs. This strategy points out that the 6 reasons mentioned in the article are simply damage. Be like Fellini and rout around the damage.

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.

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)

>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.

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.

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.

That was a lovely piece of spin-doctoring, breaking down the argument into small atomic parts to neatly excise the 'whole is greater than the sum of the parts' essence.

Also, "everybody does it" is not a defence for shady ethics or illegal activity.

Seems like the parent comment equates "This is a general problem in x industry" to "stop rabblerousing about problems!"

The author never said Hollywood needs disrupting. The HN poster did.

Real title "6 Things the Film Industry Doesn't Want You to Know About". IMO there are few legit reasons for changing an article name for a HN posting. This lowers the quality of HN.

"6 Things the Film Industry Doesn't Want You to Know About" sounds like I'm accidentally reading Gawker. "6 places for disruption" sounds like people are talking about startups.

Yeah, but I think that's what makes it a bait-and-switch. It's a Gawker-type article that was retitled with a more appealing-to-HN branding.

That's exactly why the title shouldn't have been changed. It's the same shit, but disguised so that it won't be (correctly) flagged.

and as a followup, I think there are a few stronger arguments available to support their thesis:

- Bloated production costs due to a slow migration to newly available production techniques

- Lack of adoption of alternative distribution / pricing models

- Bloated production costs due to unionization / inefficient use of labour

- Lack of interest in non-traditional formats for storytelling (i.e. produce "commute length" content for distribution to smartphones/tablets, versus 1.5hr long form content?

"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.

Unfortunately, anything the US does on this front, others will follow. The media giants very much prefer internationally consistent copyright laws, and they have the power to lobby the US government to exert considerable political pressure on other countries. It's not just the lobbiers themselves we have to worry about here in the Euroland.

Don't worry 3 and 2 are worldwide issues. In the EU copyright has just been extended another 30 years, THIS VERY WEEK.

USA is the country with the most choice also, and yet consumer is strangled. Well just guess how it is for the rest of us, Netflix doesn't even remotely exists anywhere else. anywhere

Based on this I have the tendency to trust the article author on the other points (which I don't know about)

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".

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.

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.

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

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

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.

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.

It is happening. It is just taking some time. People only recently got the cheap, high-quality movie cameras, and the experience level is still building up from the amateur phase. But some links to hit:

http://thatguywiththeglasses.com/ , especially their bigger stuff


Some good stuff is being produced by "amateurs", but it takes time to build up the skill and knowledge base. Work is mostly in the 10-20 minute range and a lot of bootstrapping off of other content ("reviews" of "real media" are a common format), but slowly-but-surely the confidence is increasing and more original large-scale work is being done.

I think you're underestimating-- making a movie is really, really hard. It barely matters how much the camera costs. Producing video of the quality audiences now expect takes dozens of people who all know exactly what they're doing. That's the major expense.

Anyone with a PC and a HD camcorder can easily produce good video for, say, the early 90s. But people now don't want to watch video from the early 90s, so it still costs a hundred million bucks to make a film.

I wholeheartedly disagree. Slickness of the film is important, I.e. editing, sound quality, etc., but thisis but one dimension. When I sit on a Friday evening browsing page after page of crap movies on Netflix, this dimensiona is less important than the actual content and originality. I can't believe that film school students, armed with a decent camera (not a camcorder) and audio equipment cannot produce watcahble and interesting content. Well-known examples do exist, most recently Paranormal Activity.

Your arguments (it's hard, costs millions) were labeled to some other industries, that are now trickling down to DIYers, e.g. 3D print, self publishing. You can now rent a professional studio to record your own CD and some groups have done so.

However all solutions about creation are moot if the created content has no way of reaching the buyers. I still think this is the main problem. Putting your movie on YouTube is not a viable solution.

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.

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.

The scale of your examples are dwarfed by the costs of a movie, a low-end one would be, say $10-15M. What restaurant, startup can boast such an upfront investment. Even a CD costs not nearly as much.

>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.

I agree with you to an extent. You can always find young, talented actors who are willing to do a film but the main problem is the script and finding a talented director who hasn't been signed by a major studio.

Another factor are the viewers themselves. They have been so conditioned to expect that only a major studio picture is worth watching (similar to the music industry) that they're not willing to give anything else a chance. How else do you explain the success of Transformers or the moderate success of the Green Lantern when most people have heard of neither unless you were a comic book fan or grew up on 80s cartoons?

Camera pricing is a small fraction of the cost. For example I was on a set today where we had a cheap RED camera (~$18k) and it was among the cheapest pieces of equipment we had on the set. Set wasn't even a movie set, but an interview set. Imagine that.

Of course, true for professional production. But for a perosn who is starting out, e.g. a film school student, camera and Final Cut is what'll get you started.

I agree. But, FCP7 :) Also, good lens and light is better to have than a good camera. People often forget that. I'd rather have a good, rock solid tripod, good light and lens than a great camera.

And good sound. You can get way with DV quality blown out crappy footage if your sound is top notch. Decent sound recording gear is fairly cheap and will last for a million years, so there's really no excuse.

Movies, not really yet, but TV, totally. There's many good shows on various Internet distribution channels that are made by a few people using DSLR's and small budgets.They're also high quality.

>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.

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.

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.

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

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:


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)

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

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?

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.

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.

"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?

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.)

1 reason why the film industry needs disrupting : Internet

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