Why the film industry needs disrupting

&#62; 6. Tricky Hollywood Accounting<p>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 <i>one</i> 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).

Wow, just wow.<p>Unfortunately I want to the other article, the one that I cannot get anyone in the 'movie biz' to fess up to. That is <i>what would it be like if it were perfect?</i> Would there be a mandatory licensing fee for scripts? Would there be non-discriminatory rights for theatres? What?<p>Someone needs to sit down and <i>design</i> 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).<p>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.<p>You don't yet have a way of disrupting production.<p>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.<p>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)<p>This is going to take some strategic planning and understanding exactly what things <i>really</i> 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 <i>how to disrupt</i> 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!<p>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.<p>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".<p>"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.<p>"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.<p>"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.<p>"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.<p>"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.<p>"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.<p>(Edited after my morning coffee to clarify submitter's thesis versus articles thesis)

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.<p>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.<p>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.<p>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.<p>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.<p>It makes me extremely sad about that state of affairs.

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.<p>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.

&#62;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.<p>And this is not exclusive to the film industry in any way.

Reminds me of a story about Mario Puzzo:<p>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.<p>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.

I really like the way Kevin Smith is doing stuff. I only wish he'd come to Israel with his movie.<p>As he is way better at explaining it then me, check out his blog for his way of distributing a movie:<p><a href="http://silentbobspeaks.com/" rel="nofollow">http://silentbobspeaks.com/</a>

For reference, the Indie film movement is focused on disruption, it's a fascinating time for experimentation.<p>An example: <a href="http://www.sellingyourfilm.com" rel="nofollow">http://www.sellingyourfilm.com</a> (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 <i>should</i> you get to watch On The Waterfront for free?

1 reason why the film industry needs disrupting : Internet