November 12, 2007

The Death of the Entertainment “Industry”

Posted in Life in Los Angeles, Movies, Music, World of Warcrack at 11:57 am by loolar

Thanks to Adam Shostack who forwarded this wonderful and simple breakdown (intentional word choice by me) of the current status of the demise of the Entertainment Industry, and it’s hastening by the current Writer’s Strike, as written by Marc Andreessen (co-founder of Netscape and inventor of the graphical web browser – you’re using one right now).

Those who know me know that I have been predicting, since I worked at MGM years ago (left the company in 2000), that this would all come to pass. I just never stated it as elegantly as Andreessen. My argument went something like this:

In the beginning, the studios controlled everything; actors, writers, directors, labor, etc. Actors were brought in and trained in song, dance, elocution, you name it; same with the others. It was an apprenticeship-based model where the studios acted as sponsors; in return, your loyalty was expected and given.

The actors were the first to defect, when big-name stars wanted to go make movies with other stars on projects they cared about, but which happened to be “under contract” at other studios. The actors unionized first, and seeing actors no longer as the “flagship brands” of certain studios became commonplace in the 50s.

The directors were next, heightened by the auter movement of the 60s, and the influx of foreign films. Suddenly directors were acknowledged as being more than glorified cameramen, and they were in demand for the unique perspective and vision they brought to a project. They unionized, and likewise were no longer beholden to certain studios.

The writers followed next in the 60s and 70s. Gone were the sweatshop-style typewriter farms churning out episodic, made-to-order serials and shows.

Finally, the producers got into the gig, separating themselves from the studio architecture to become “independent” producers; this was the birth of “indie” cinema in the 80s.

So what did Studios still provide?

Well, the talent was all independent, but someone still had to foot the bill. Studios provided production financing, insurance, post-production financing, marketing and distribution.

But the indie producers eroded the first three in the 80s. Soon venture capital and bank money was available from stodgy book keepers who wanted the sexiest investment you could find – making movies. Which left marketing and distribution.

When I joined MGM in the late 90s, that was all that was left. And once I got a look at the financing models (I worked in Budgets and Forecasts), I was stunned and appalled. Without exception, the amount of money spent to market a film was at least equal to half the production costs (and in most cases, more). So if we spent $60 million making a movie, we were spending at least $30 million to market it. That business model can’t survive for long (and for MGM, it didn’t). Studios quickly began to co-finance films in the mid-90s to share the burden and the risk. Most big pictures nowadays are co-productions, except for the “surefire” hits with built-in audiences, like SPIDER-MAN.

In fact, the only thing keeping the studios afloat was the DVD revolution. I know this. I was directly working with the numbers of a major studio every day. Without the DVD library, we were tits-up in a year. It’s no mystery that two years ago, once consumers had finished replacing their VHS library, MGM ran out of gas.

So I said, with only marketing and distribution keeping the studios relevant, how long is it before the distribution takes over (the movie theaters), and begins creating their own content? But the internet got there first.

Now, in 1999, most of the internet ventures failed. Broadband wasn’t available to enough of the market, and most desktop computers were barely up to the task. Additionally, content creators didn’t understand the new model, and just tried to create 1/2 hour shows like TV. But it was just a matter of time.

Enter YouTube. The user-creators have figured out that a short needs to be no longer than ten minutes, and most try to clock in at three minutes, just like a top 40 hit on the radio. So that’s the distribution. And the marketing? The best kind – viral, or “word of mouth”; or, email by forwarding, as the reality has shown.

The studios are already extinct; they just don’t know it yet.

They can repeat the mistakes of the now entirely irrelevant music business, or they can embrace the change, as Andreessen so elegantly outlines it. My guess is they will embrace nothing, and will sink like the bloated carcasses they are. Studios are no longer lean, mean vanity operations of a single creative executive such as Jack Warner or Daryl Zanuck in the 40s and 50s; they’re corporations, with boards and shareholders and entirely too many bureaucrats whose sole interest is in preserving the status quo. Moreover, since the various studios work together to create what the industry is, the motivation to innovate and break from the herd is even lower.

And so I predict they will continue to spend $150 million on movies that fewer people come to watch, spending in excess of the budget in vain efforts to reach someone, anyone, to convince them to come see. But they won’t be watching – they’ll be on the internet, playing World of Warcraft, watching YouTube, texting pictures and videos to friends, and finally, making their own entertainment, with cheap cameras, video game clips (the new “machinima” genre), and with their own friends and family as stars.

Good. Welcome back to the populist storyteller model. It’s been a few centuries.

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1 Comment »

  1. rob sama said,

    The studios will be copyright licensing companies. That’s it, if they’re really anything more than that now.

    Don’t forget, the Federal Government was the first to break up the studio system. Remember, the studios used to be completely vertically integrated, all the way down to owning the theaters where the movies ran. That ended with an anti-trust suit.


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