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Categories: BusinessFeatureProfit

Money Is Important But There Are Also Bigger Issues

 Content Insider #803 – Biz Matters

By Andy Marken – andy@markencom.com

“I’ll need to see all those books for the past ten years. Bank statements, complete list of clients and vendors. Hard copies printed out, my eyes only. All the information’s right here.” – Christian Wolff, “The Accountant,” Warner Bros, 2016

Somehow, in the M&E industry, it feels that there are those that get … and those that get got.

After a few insanely great barnburner films being shown in large, darkened rooms, theater owners are telling everyone who will listen that life is returning to normal, and people are rushing (begging even) to put their seats in seats.

Streamers are greenlighting projects in almost every country around the globe to keep their show/film rosters fresh, so folks don’t rotate into/out of their services.

New studios are booked even before construction is complete.

Senior studio executives are getting major bonuses for streamlining/restructuring their organizations (firing folks), renaming their streaming services (new lipstick, same hog), cheerleading the idea of bringing back old stuff as a giant step forward and other great ideas just to get back to the position where they can pay shareholders dividends.

Let’s get something straight at the outset here.  

We’re not returning to normal.  

This is not the new normal.  

It is simply normal … just different!

Studios are pushing to make a profit pedaling their content everywhere possible – theater, pay-tv, streamer, TVOD (direct transaction), DVD, you name it.

Pay-Tv (day/time home entertainment) is struggling to keep its bundled customers even as people cut their bundled bill to select subscription/ad-supported/FAST services they want to watch on their personal/home screen.

The global streaming services – Netflix, Amazon, Disney, WBD, Apple, Paramount, Hulu, Google YouTube, Pluto, Tubi, Tencent, iQIYI – and more than 200 national, regional and specialty services are focused on getting their unfair share of the market which was valued at $90B last year and growing at a projected rate of 22 percent annually.  

Studio and streaming bosses are telling Wall Street analysts that they are very focused on creating/delivering a steady stream of content and will profitably deliver the video entertainment people want as well as superior shareholder profits. 

The picture they’re painting is so rosy that directors/talent and trade guild officers are saying that their lawyers/accountants want a closer look at the books.

For some reason, they feel their clients/members aren’t being properly paid for their long hours, expertise.

At the same time, the creative production team wants to address how some of the new technologies that are being introduced will affect their professional future.  

According to data from internationally recognized entertainment guru, Bruce Nash (www.thenumbers.com), the US led video content production with nearly 24,000 projects last year with an average production budget of slightly more than $37.5M per project.

It’s a big business that employs more than 45M people, which is down over 4 percent over the past five years, even as demand and volume have remained strong. 

Professionals in Nollywood, Bollywood and the other “woods” are reaping the benefiting from:

  • Their countries’ regulations governing how many locally produced films/shows must be offered to streaming customers compared to international fare
  • The economics of producing content there for viewing here
  • The rising demand for content genre variety – drama, sci-fi, horror, thriller, romcom, crime, etc. – studios, networks, distributors, streamers can show locally, regionally and globally

As a result, US producers/talent agents and guild officials feel…

The challenge is, it’s difficult to impossible to determine exactly if or how profitable films/shows really are because the most creative people in film/show houses are probably accountants.   

That doesn’t matter much except to directors and major talent who base their pay on a mix of front-end or agreed upon initial salary – and back-end payments based on global receipts as well as residuals based on reruns of the project.  Or, it can be simple negotiated salary for the show/film … done and done!

And of course the WGA, DGA, SAG-AFTRA (writers, directors, screen actors – American Federation of Theater and Radio Artists) folks have something to say about it so … it’s complicated!

The mind-boggling formulas have been the basis for countless lawsuits and settlements over the years.

It’s so complicated that even Lion King’s Rafiki has a hard time in reaching a settlement that both sides feel is equitable.

Stephen Follows, film industry researcher/guru, has done a very good job of explaining the mind-boggling (dry) economics of Hollywood.

Profit Odds – Based on a lot of detailed research it seems that about 50 percent of the films/shows will show a profit.  

In other words, it’s little wonder that Hollywood’s green shade, pocket protector folks are so well paid.

But for the majority of the people in the industry, it’s less complicated because the project budget is the project budget.

The big question is where and how will that budget be spent.

While many producers and talent prefer location shooting, studios and streamers are finding that virtual production – regardless of the country where the project is produced – can deliver significant time and money savings.

Virtually – To control the cost and quality of films, shows and ads, nearly every production facility around the globe has or is planning a virtual production facility and they are booked long in advance by studios and streamers.  

Nearly every studio around the globe has or is planning to install a virtual LED video wall for film/show production.  

The versatile facilities can slash such costs as travel, accommodations, set production/tear-down/disposal, lighting/audio and deliver savings in almost every area and aspect of the project.

Fast Turnaround – Producers, directors, talent and cinematographers are able to more quickly and economically deliver finished films/shows when multiple locations aren’t required.  

Whether the studio housing the production is located in England, Nigeria, Canada, Indonesia, South Korea or Hollywood, the work is the same just the people signed up for the work could be different.  

The uncertainty of guild negotiations/actions has already had production/distribution firms determining where 

upcoming movies/shows will be produced because the last thing they can afford is the disruption in delivering new, unique content to theaters and their service libraries.

Of course, the studios/streamers also have the option of using more of their production budgets to acquire the rights to projects that are already completed and can use advanced subtitle and dubbing technology to quickly and economically “Americanize” the films/shows for their audiences.

Since the last major industry strike in 2007/08, both sides of the US bargaining table have realized that folks in the US have come to enjoy/appreciate non-American shows/films.  

Imports such as Narcos, Dark, Squid Game, The Bridge, The Bureau, Schitt’s Creek, Tin Star and hundreds of other shows/films once considered local or niche market content have helped American audiences realize that good video content is good video content regardless of where it’s produced and the actors happen to have a unique way of saying things, drive on the wrong side of the road and enjoy a different cuisine.  

Work – Sure, everyone on the film/show production crew would prefer long breaks but they also know schedules need to be kept and time is money.  

No one ever really benefits from work stoppages because lost income can never be recovered, nor can studios/streamers make up for missed ticket/subscription opportunities.  

Right now, everyone is benefiting from a production/demand boom after finally emerging from a tough lull in global content completion. 

However, the pause/forced vacations will have a short-term impact on a lot of people whether it’s a micro or tentpole production.

                                                   Source – StephenFollows

It Depends – Only a precious few films/shows have seemingly endless budgets and crews to match but even then, the percentage of specialists working on the projects will remain relatively constant.  

Depending on the film/show scope and budget, the Hollywood discussions could impact folks; but more importantly, they can present an opportunity for both sides to clarify the guidelines for the use of new technologies that are being used and are on the horizon. 

On-set, in-camera editing has become increasingly common for crews to speed production completion. 

Camera to cloud to post storage has significantly reduced cost and production timelines.  

Major automation advances have been introduced in products from Adobe, Autodesk, DaVinci, Apple (Final Cut) and Frame.io as well as screenwriting and budgeting/scheduling tools to reduce production time, increase production quality and reduce staffing requirements.  

AI (artificial intelligence) is being used and discussed/planned for almost every aspect of film/show project work including automated script writing, animation, CGI, seamless dubbing, de-aging actors and yes, even bringing folks back to the screen who have long been deceased.

Frankly, bringing people back for an encore performance is not just spooky, it’s d*** spooky and no matter what techie programmers say, it’s just plain creatively/professionally wrong!

No, we’re not a neanderthal who wants to cling to the “good ol days” because honestly, they weren’t that good.

However, somewhere in the back of our mind there is this gnawing reality that HAL 9000 in 2001: A Space Odyssey will cut us out of the loop by saying, “I’m sorry Dave, I’m afraid I can’t do that.”  

Besides, we’ll bet that some of the best creative work that has been produced started out as a mistake.

Even more were the result of folks faking it till they made it.

Then they proudly proclaimed, “Yep that’s the way we planned it.”

Beyond the parties financial negotiations and rush to replace people talent with AI maybe executives need to spend a few hours with Matt Damon’s Air. 

The idea of a basketball player getting a piece of the action from every shoe sold is no different from people on the total production team getting a fair share of the income for every film/show presented on every screen…regardless of its size.

Tastes Change – What movies/shows people prefer to watch constantly changes and people in different countries like certain genre over others.  

People’s taste in films and shows constantly change and usually for completely illogical reasons.

In addition, content tastes are different from one region/country and another.

In other words, for the time being and hopefully well into the future, creative people not AI or accountants will be responsible for producing the films/shows we search for, put our seats in seats and sit in front of our home screen with fresh popcorn to watch and enjoy.

Yes, it’s unfortunate that at times, the industry has to hit pause and take a long/hard look at where we’re at, where we’re going and how we’ll get there.

But then maybe, just maybe, everyone involved in the film/show industry needs to realize they’re like Christian Wolff in The Accountant when he said, “I have a highly functioning form of autism.”

It still takes people – professional, slightly different people – to create the content folks want to have, watch.

Whether it’s an athlete or filmmaker, there’s something to the way Air’s Sonny Vaccaro led his life and pursued his career.  Profit participation provides the  incentive provides the incentive for everyone to do the best possible for every project.

Then everyone benefits…especially the folks who pay to put their seats in seats wherever they’re located.

Andy Markenandy@markencom.com – is an author of more than 800 articles on management, marketing, communications, industry trends in media & entertainment, consumer electronics, software, and applications. An internationally recognized marketing/communications consultant with a broad range of technical and industry expertise especially in storage, storage management and film/video production fields; he has an extended range of relationships with business, industry trade press, online media, and industry analysts/consultants.

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