June 2009

For Your Consideration… Best Picture Nominees Expand

If you’ve ever felt that your favorite movie got robbed of a Best Picture Oscar nomination, the Academy of Motion Picture Arts & Sciences (AMPAS) is here to help. Starting in 2010, they will be expanding the number of Best Picture nominees from five to 10. Woo Hoo!

Truth is, this change isn’t about you. It’s about the pursuit of the almighty dollar. For the last decade, the Academy has been under pressure to get better ratings and keep ABC and those advertisers happy. The theory goes something like this according to Sid Ganis, President of AMPAS, “Having 10 Best Picture nominees is going to allow Academy voters to recognize and include some of the fantastic movies that often show up in the other Oscar categories, but have been squeezed out of the race for the top prize.”

The Academy argues that they’re simply honoring an earlier tradition. Back in the 1930’s and 40’s, the Best Picture category welcomed 10 nominees. In 1931/32 there were actually 12 nominees. The 16th Academy Awards (1943) was the last year to include a field of that size with Casablanca being named Best Picture for the year. Too bad we don’t have the quality of films of say, 1939, when the nominees were Dark Victory, Gone With the Wind, Goodbye Mr. Chips, Love Affair, Mr. Smith Goes to Washington, Ninotchka, Of Mice and Men, Stagecoach, Wizard of Oz and Wuthering Heights. Now that’s a Top Ten list!

Such a move might have made sense back in the 1960’s and 70’s but today the American film industry makes very few great films. Just look at the theatre marquee this weekend when Transformers, Year One and Land of the Lost are all in lights. With such gems to choose from I wonder where the Academy will even find 10 worthy films this year.

I’m tempted to call this the “Dark Knight Rule” because it feels like it’s in response to the blockbuster’s awards snub which came back to bite the Academy on Oscar night with low ratings of the show. The thought might be to increase the buzz (and television ratings) by adding nominations. Ratings for the telecast have slipped steadily since the 1990’s when more than 55 million viewers tuned in to see Titanic win Best Picture. With other entertainment options like the Internet taking people away from what used to be must see television, 10 spots would allow popular films like Dark Knight or Star Trek to be nominated. That could cause more viewers to tune in.

However, the Academy has never been about recognizing action-adventure films and box-office smashes (the Lord of the Rings trilogy being the recent exception). They simply don’t resonate with voters. With so many more dramas released every year compared to popcorn films, this rule simply makes it easier for the Academy to include niche dramas (think The Wrestler) that wouldn’t have had a chance otherwise.

Personally, I think this move undermines the integrity of the Academy Awards. Whether you agreed or disagreed with the five nominated films each year, there was a cachet around being nominated. There’s a little less luster on Oscar now… and five extra montages during the telecast next year.

I remember being at a friend’s house and his 8-year old son walked in with a huge trophy. When I inquired what he won for he replied, “It’s no big deal. Everyone gets one.” I don’t know about you but I don’t want the Academy Awards to turn into a 10-and-under suburban soccer league.

Come on AMPAS, is this what you’re really about? Are you so obsessed with television ratings that you are willing to sacrifice the original mission of the Academy? The real winners in this are ABC, the Oscar consultants who lobby voters for nominations and the trades. I can envision the full-page “For Your Consideration” ads for Transformers even now.

The Digital Divide Just Got a Little Wider

D-day — June 12, 2009. Last Friday was the day when the remainder of the nation’s 1,700 analog television stations shut down in the long-promised changeover to digital broadcasting.

Cable and satellite viewers — or those whose TV has a digital tuner — were still able to watch American Idol, CSI and Heroes, unaware that anything has changed. But when the 21 million households using a conventional set with rabbit ears or an old rooftop antenna turned on their TVs, they saw … nothing.

The reaction from many tends to be, “So what? Its just television.” Ironically, this reaction usually comes from people already subscribing to cable/satellite and wired with broadband. They’re not the ones affected by the changeover. Or you hear people say, “Just go to the library.” But with libraries miles away in rural America and urban ones having long lines and limits on usage that’s not a viable alternative. When you are one of the “Haves” it’s hard to identify with the “Have Nots.”

Make no mistake, television is a need. We’re many technological advances away from the days when food, water and shelter were are only needs; a thirst for information and entertainment, while not a basic need still is important in person’s well being. With limited options, television becomes an even more important part of life for the poor, elderly and people living in rural America. We’d like to think that all Americans take part in the Tivo-Broadband-YouTube world we know now. That’s simply not the case. This digital conversion we’re undergoing threatens to turn a good portion of the population into Tom Joads, no longer participating in modern cultural life.

Although some have fallen in love with video over the Internet and believe broadcast television is dead, it still has the communications importance most media dream of. Aside from serving as an affordable form of entertainment, it disseminates important information concerning current affairs, public safety and security. And when you compare the ratings of Lost on ABC to an episode of Mad Men on AMC or an airing of 30 Rock on Hulu, both cable and Internet platforms fall far behind on influence.

Access and affordability are two huge issues. It’s hard to watch Hulu or YouTube if you’re not wired up in Western Kansas. Many poor urban neighborhoods might be wired, but the price of digital cable ($80/month) and/or broadband ($30/month) can be cost prohibitive for a family on the south side of Chicago. These consumers will have to rethink how they receive entertainment.

For argument’s sake, lets say everyone in America had a digital television set. Although that would solve one problem, it reveals another. Most analog stations switching to a digital signal are affiliates of the Big Four networks (ABC, NBC, CBS and Fox) or local public television stations.

Thirty years ago content provided from these networks was the gold standard of programming. Today, they represent a small sliver of what’s available. If you want sports, you better have ESPN. If you want the latest news you’ll need to tune into CNN. As networks scale back their news operations and provide cheaper reality programming instead of scripted series, higher quality shows and diverse programming has moved to smaller networks available only on satellite or cable.

The value of the Big Four isn’t what it once was.

Given the importance that television as a whole plays in the day-to-day life of most people, the government must take responsibility to ensure there’s equal digital access to all Americans. Over the years, they’ve done just that.

In 1935, Congress signed the Rural Electrification Act, which first brought electricity and then phone service to farms. When TV systems moved from black-and-white to color, the government made sure the new technology was compatible with the old system. And in February, Congress approved $7.2 billion to bring high-speed Internet to underserved areas of the U.S. That’s a good start.

It’s unlikely everyone is going to start watching American Idol on their computer anytime soon. Until that time, a larger spectrum of channels needs to be available for free or subsidized by the government. Cable and satellite prices need to be regulated or subsidized so that all can afford a basic tier of channels.

I’m sure a little brainstorming by the powers that be would reveal other possibilities as well. But a shortsighted policy of providing full digital content only to urban and a smattering of rural areas creates two Americas of information “Haves” and “Have-nots.”

We cannot make this mistake today.

Producers Talk Producing at 2009 Produced By Conference

Billed as a weekend of the latest information and innovation impacting the entertainment industry, the Produced By Conference at Sony Pictures Studios assembled some of the most important producers in television and film to talk about business, creativity and technology. Surprisingly, this was the first-ever conference of its type specifically for producers… hard to believe in a town filled with them.

The two-day event included such luminaries as Clint Eastwood, Jim Cameron, Kathy Kennedy, Norman Lear, Mark Gordon, Larry Gordon, Roland Emmerich, Michael London and Bruce Cowen. And that’s just a few of the 100 producers that spoke at event seminars.

Highlights were many and varied. The eagerly anticipated session with James Cameron was packed but had little new information. Cameron talked again about how he wrote the script for Avatar back in the mid-1990s when he and Stan Winston co-founded Digital Domain. But when he took the screenplay to their special effects lab, Cameron was told it was just not possible to make the film with current technology. So he shelved the project for more than a decade.

Cameron’s passion continues to be pushing the technological envelope of entertainment. He likened the current buzz around 3-D to two time periods, the late 1930s when making color films were considered a premium project and the early 1970s when filmmakers had to get permission to make black-and-white films. Overall, things are on schedule with Avatar and he’s happy with the results. Cameron hoped that by the time Avatar is released by 20th Century Fox on December 18th, several thousand theaters will be capable of showing the movie in 3-D.

In Financing Independent Film, a group of bankers and financial consultants gave an overview of the different types of financing for independent film (gap, mezzanine, equity and so on) which was interesting but a little over the heads of most of the attendees. After the Financing 101, the red tape of state and local tax incentives was discussed. With so many states in dire economic straits, several speakers wondered if states will be able to deliver on promised incentives.

Don’t look to banks to finance your next indie. Banks are “phenomenally scared,” said Clark Hallren, managing director of JP Morgan’s Entertainment Industries Group, of financing independent films and with the number of entertainment-focused banks falling from 30 to about a dozen, a new capital source needs to be discovered.

The panel on Episodic TV: Elements of a Hit was a bit of a disappointment. Although specific questions were asked, panel members (notably Matt Weiner, executive producer of Mad Men) preferred to focus on inside tidbits of their shows. Interesting but not very enlightening. They did agree that there’s “no such thing” as creating a hit TV series anymore. “A hit is a show that you manage to keep on the air,” said Bill Lawrence, creator and executive producer of Spin City and Scrubs. He noted wryly that all of the panelists had created scripted shows that received better ratings than American Idol… but none of those shows are still on the air. The consensus was that when a successful TV show eventually hits a peak, then it’s just about holding onto an audience for as long as possible. Don’t expect your broadcast or cable network to help, either.

In the Who Does What? session, Peter Bart got producers Kathleen Kennedy (ET, Jurassic Park, Schindler’s List), Lucy Fisher (Jarhead, Memoirs of a Geisha) and Doug Wick (Gladiator) to talk about the current filmmaking climate. Their major complaint was that the current blockbuster model doesn’t allow them to make the films they’d like to make. Big budget, high concept films get more care and feeding shows the problem has gotten even worse. No surprise there. Kennedy lamented, “You’ve entered the business of making movies by committee… It’s a challenge, once every department and the studio are weighing in, to protect the creative process.” Wick went on to say that with so much on the line, studios are taking fewer risks and variations from the tried and true formulas.

In a standing room only session, Clint Eastwood and his production company partner Rob Lorenz talked about The Malpaso Way. What is the Malpaso Way? It’s streamlined, actor-friendly and almost always under budget. Eastwood was almost embarrassed to admit that his films are under budget saying, “studios don’t really care if your last picture was under budget when considering your next.” In what eventually turned into a wide-ranging discussion, Eastwood said he wasn’t completely opposed to doing another Western someday, even though “when we did Unforgiven, I always felt that story lent itself to being the last western, at least for me.” Since he hasn’t seen a Western script he’d loved in a long time, that’s unlikely to change anytime soon.

The liveliest session was Gordon on Gordon: How to Be a Great Creative Producer. Formatted as a discussion between legendary producers Larry Gordon (Die Hard, Field of Dreams, Watchmen) and Mark Gordon (Speed, Saving Private Ryan), the one-hour gabfest was more anecdotal than practical. Mark Gordon talked about developing Saving Private Ryan by inviting writer Ian Bryce to his office once a week to brainstorm ideas until they found the one that clicked. Good to see that happens at even the highest level. Larry Gordon confessed that if someone had put a gun to his head when he was a young boy and told him, “Go to Hollywood, make fifty movies and run a studio, or I’ll shoot,” he would have told them to pull the trigger. Best advice from the conference came from here: Anyone who tells you you’re wrong, is wrong!

After two years in the making, the Produced By Conference not only got made, it sold out, with over 500 attendees. After attending I can understand why. You simply don’t have the opportunity to hear so many well-established producers share their thoughts with others in one location. Although I enjoyed many of the sessions, the opportunity to be in roundtables with both Screech Washington (Amazing Race) and Marshall Herskovitz (Thirty Something, Blood Diamond) was my highlight. Congrats PGA… the conference was a huge success. I’ll register for the next one ASAP.

The Incredible Shrinking Theatrical Window

The pressure has been building for studios to shrink the amount of time between a film’s theatrical and video release has been growing the last few years and I can’t help but wonder what the future holds. Proponents of this “day-and-date” paradigm stress that it gives audiences a choice of how and when they want to see a film.

Studios are starting to listen. There have been whispers for some time about Warner Bros. and 20th Century Fox releasing selected movies simultaneously on DVD and pay-per-view. Even further on the horizon is the possibility of consumers being allowed to watch high-def pay-per-view movies before the DVD release.

Tried and true formulas don’t change easily, however. Conventional wisdom held that a theatrical release was the springboard for successful releases in home video and broadcast television. Ancillary markets such as VOD, Web downloads, airlines, music and merchandise also relied on the theatrical window. In addition, major powerbrokers in the windows game have little desire to change. Exhibitors have long threatened to refuse to show films from a studio that tries to cut the time between the two releases in a way that undermines theater revenue. And no one knows how home video giants like Wal-Mart and Best Buy would react.

Even with that kind of resistance innovation still happens. Since Steven Soderbergh’s low budget film Bubble in 2006 there’s been a move towards simultaneous release for independent and foreign films. It’s worked best for niche distributors like Magnolia and IFC because they are vertically integrated and can control production as well as distribution. Magnolia is owned by Cuban / Wagner companies, which also own the Landmark Theatre Group, while IFC produces many of its own films and owns a handful of cinemas.

This spring, IFC’s French import Summer Hours and Magnolia’s The Girlfriend Experience (another film directed by Steven Soderbergh) have continued the march. Both were delivered simultaneously in theatres and video on-demand. In Experience’s case, the film was available a full month before on VOD before it hit theatres. The two films have done well in both arenas and avoided cannibalizing either revenue stream. That might convince distributors that simultaneous big screen and VOD releases could be an important piece of the indie distribution puzzle.

Release patterns for independent films already harken back to the time where a film would play in one theatre at a time in a city, then slowly expand if the interest allowed. Since these many of these films play in so few markets, VOD provides a bigger geographic footprint with more than 50 million cable and satellite TV subscribers. Audiences outside of LA or New York benefit from VOD premieres as they can watch the film immediately and not have to wait months later to catch it on DVD.

For studios with films with wide releases however, this model doesn’t work. Their logic goes that a simultaneous release would cut into profits of that critical first week in theatres and ultimately cannibalize the other markets. If a film is available on every platform initially audiences are only going to watch it once, maybe twice. In the traditional model you can watch a film in the theatre, buy it on PPV, buy the DVD and then see it on broadcast or cable. Small art house films don’t have the huge budgets and investments in P&A that blockbusters do. They need a staggered approach in order to squeeze out as much money as possible from each window.

People value exclusivity and “newness.” In all the debate about shrinking windows, people should remember some basic economic theory about premium pricing - there is almost certainly a way to still capture the value that people place on exclusivity while catering to the reality that not all of them will be able to get to the theatre to experience that newness on the big screen.

Bottom Line: If you are reliant on a certain number of theatres to show your film, you have to accept the exclusivity window. Any type of innovation, be it VOD or a web release will be severely constrained. So despite their growing acceptance, simultaneous releases work better for smaller films. Although it’s shrinking, the window between theatrical release and the home video launch will remain.

Stars Aligned for Studio Mergers

Is it time for movie-studio executives to get cozier with their colleagues? Economic conditions and the sharp drop in DVD sales in recent months, a long-running gold mine for film, have prompted studios such as Disney to look for ways to cut costs.

Besides cutting headcount and facilities, the fastest way to do that is to team up with another studio. There’s a history of co-productions on a single film project but mergers hold the potential for real cost savings. Time Warner, for instance, saved $140 million annually by combining New Line and Warner Brothers.

The film industry market share, whether based on box-office revenue or home video is fragmented. While market leaders such as Warner Brothers have close to 20%, others such as Universal and Sony are closer to 10%. The industry is ripe for consolidation.

Even if entertainment companies don’t want to sell their studios outright, they could get cost-saving benefits by partnering on some back-office functions, such as home video or theatrical distribution.

Studios have worked together before in those areas, most notably in international film distribution. Joining forces in home video could save tens of millions of dollars for studios. Adding theatrical distribution could sharply increase those savings.

Whatever happens, there is an advantage to moving first. Once two studios team up, subsequent deals will likely get more antitrust scrutiny. Working together won’t necessarily lead to bigger combinations immediately, but it would get the ball rolling.