Thursday, March 06, 2014

A New Hollywood Business Plan

I will fuck you up gif Tropic Thunder Tom Cruise Les Grossman Imgur

I just finished reading an insightful book by filmmaker Michael Sellers on the way Hollywood operates entitled “John Carter and The Gods of Hollywood”.

It’s a look at how hubris, executive blunders and boardroom betrayals at Disney allowed a pretty good sci-fi movie to be perceived as one of the biggest box office disasters of all time.

I say “perceived” for despite Disney taking a $200 Million write-down on the film within 10 days of its debut “John Carter” has to date earned over $400 Million, far more than it cost to make and market.

Sellers argues that “John Carter” had the misfortune to be green-lit by an outgoing studio head whose vision didn’t align with the goals of his successor. Thus, through a process driven by incompetence and design, it was buried -- coincidentally just as Disney acquired “Star Wars” as a replacement franchise.

The book paints a remarkably vivid portrait of the ways in which we and the media can be fed whatever false or distracting storyline a studio wants us to believe in order to achieve its corporate ends.

Anyone asking why a studio would actively undercut its own profits has no understanding of how the Hollywood system works. Accounting 101 there makes it very clear that NOTHING ever makes any money.


Hollywood Accounting is a practise that the Judge in the infamous Buchwald vs Paramount case called “unconscionable” way back in 1990, yet it continues to operate virtually unchallenged by anyone hoping to continue making movies.

This is a world where a film with a budget of $6 Million like “My Big Fat Greek Wedding” can have a worldwide box office of $350 Million and still be $20 Million underwater.

It is an industry where the “Lord of the Rings” trilogy can take in $6 Billion yet be listed in audited financial statements as suffering “horrific losses”.

It’s an alternate reality in which “Return of the Jedi” can earn $475 million at the box-office against a budget of $32.5 million but, according to Lucasfilm "has never gone into profit".

Hollywood producers are simply immune to mathematical logic. Even as Box Office revenues achieve new records year after year, studios successfully sell the belief to governments that not only do they need tax credits to sustain production but that internet piracy will soon drive them out of business.

As a result of the latter argument, Voltage Studios, producer of “The Hurt Locker” and “Dallas Buyers Club” convinced a Canadian judge last month to order an Internet Service Provider to turn over the IP addresses of all those who had downloaded their product from torrent sites.

And no doubt Voltage deserves to be compensated for whatever losses they suffered because someone decided to download a free copy of their movie rather than buying a theatre ticket, VOD viewing or DVD.

Given the way theatrical revenues are divided among theatre owners, distributors, gross profit participants and the like, this means that Voltage was probably dinged for a couple of bucks per download.

But it appears that the company intends to seek further damages from Internet pirates to the tune of $5,000 per infraction.

Now that may be intended to nip this practice in the bud or scare off those considering piracy. But it got me thinking that it could also be a very lucrative new revenue stream for Hollywood.

But even then five grand seems a little high. Recently, the makers of 2009’s “Call of the Wild” went after pirates to the tune of only $2500 per –- and that film was in 3D!

At some point, courts may need to decide just how much a pirated film download is worth. Maybe the number is closer to the $14.99 charged for “The Hurt Locker” on iTunes. Although that could be inaccurate since you can get the movie from Amazon for $7.99.

Normally, courts are also the entities setting the number for damages legitimately incurred by the copyright holder. And what financial reports will be used to establish those losses? The same reviled ones profit participants now receive which insist the studio hasn’t earned a dime?

I’m not for a minute suggesting that Voltage would ever stoop to what follows. I’m only pointing out how easy it would be for any studio should they be inclined.

Before any film is green-lit, a great deal of audience research is conducted and numbers crunched to determine how much will be spent to make and market it. Frequently, if the budget can’t be pared to a certain number or the concept reveals itself as a particularly tough sell the project dies on the vine.

Despite all that, some films just don’t perform as expected. “The Hurt Locker” for example, is the lowest grossing film ever to win the Oscar for Best Picture. And its win did not translate into anywhere near the uptick in income winning a number of Academy Awards traditionally guarantees.

So, with investors perhaps disinclined to support upcoming product and distributors perhaps less willing to take on a film from a studio whose profit predictions haven’t been accurate while DVD sales dwindle to nothing, what could a producer do to ensure a vibrant and reliable revenue stream?

Well, as Hollywood Accounting has already proven, studio types are not averse to pushing the envelope of legally accepted practices. So what’s to stop one of them from using this latest court ruling to shore up their bottom line?

Every Awards season, much is made of the number of nominated films, clearly branded “For Your Consideration” which turn up on Torrent sites. Despite watermarking and threats of prosecution, industry insiders seem less than deterred from serving the pirate community.

And there are many stories of studios releasing their own product to the Pirate community. Or having it placed online by a competitor or a disgruntled employee or a previously ripped off profit participant who just doesn’t give a shit anymore.

Oddly, “The Hurt Locker” is purported to be one of those, since a pristine (not pirate cam) copy of the film appeared on Torrent sites following its very first screening at the Venice Film Festival.

So let’s say our mythical producer parks his own struggling feature on a torrent site, waits for it to go viral and then collects five big ones from everybody who took his baited hook.

Easy money, huh?

And far easier than admitting that maybe there’s something wrong with a distribution system that feeds theatres first (with all that system’s built in skimming tools for studios) or accepting that your income should be based on the interest the market shows as well as what’s left after accurately reporting financials to those artists you claim will be most damaged by pirating.

With this latest court ruling, a brand new and easily manipulated revenue stream is available to an unscrupulous studio exec which, given the history of Hollywood Accounting, appears to be all of them.

1 comment:

Tom Simon said...

I suspect that strategy could backfire.

‘Your Honour, my client lost over four godzillion* dollars on this movie, and by downloading the file from Pirate Bay, the defendant is preventing them from recouping their costs. We are asking for sixty jillion dollars in damages.’

‘What does counsel for the defence say?’

‘Your Honour, the fact that the plaintiff’s film lost four godzillion dollars, in our view, clearly shows that it is of no commercial value; or to be precise, it has a value of minus four godzillion dollars. If the plaintiffs wish to throw away their money making products of no value, that is their own concern. They are the authors of their own misfortune, and have no grounds to apply to the general public for a remedy. What my client has allegedly stolen was worthless to begin with, and so there is no tort.’

‘Hmm. This court finds for the defendant, and furthermore, finds that the plaintiff is wasting the court’s time and his own, and should give up filmmaking and go into a business that he can afford. Next case, please.’

*Godzillion: a number big enough to frighten off Godzilla. It is sometimes thought that the 1998 remake of ‘Godzilla’ was named after the title character. This is an error. It was named after the number on its bottom line.