Art on a wall with an eye in the palm of a hand.

Labor and Creativity

Originally published in Cultural Weekly on August 30, 2017

My first job in any creative pursuit was in IATSE Local 44. IATSE is the labor union that governs below-the-line people who work in film and television. I was a very junior set dresser, and my first assignment on my first day was to go to a department store to get make-up and beauty supplies to sit on Glenda Jackson’s vanity table for a scene that would shoot after lunch. “Get back here in 45 minutes,” my new boss barked at me. I hustled to the store and picked out bottles of Borghese make-up because I liked their shape. It was the first creative decision I ever got paid for.

It’s the Labor Day weekend, and I have been reflecting on how much labor, and labor unions in particular, are responsible for the creative culture we enjoy, the creativity that shapes the context of our lives, that entertains and enlightens us.

When I moved into theatre, I became a stage manager, and joined Actors’ Equity. Equity, like IATSE, is affiliated with the AFL-CIO. As an Equity stage manager, I made sure the actors were treated fairly and according to rules of safety, work hours, breaks, and overall working conditions, and I was treated fairly myself. On top of that, I got a standard salary and there were benefits.

As I became a producer in the film business, I joined the Producers Guild, and I worked with professionals from diverse areas of creativity in many unions — actors in SAG-AFTRA, directors in the DGA, writers in the Writers Guild (which I also became a member of), musicians in the AFM… as well as editors, scenic designers, art directors, drivers, make-up artists, and very junior set dressers like I once was.

Today, I also have become a faculty member of the business school at UC Berkeley, and I’m a proud member of the American Federation of Teachers. Here I have learned that Teamsters don’t just drive the trucks on movie sets — they also represent the graduate student instructors who make sure our courses run smoothly.

Labor unions have made a profound, positive difference in all of our lives. In the creative industries, in addition to the unions I mentioned, there are guilds and organizations that may not have collective bargaining power, such as the Authors Guild, but which nevertheless set voluntary standards for fair treatment, appropriate contracts, and support their members’ creative careers.

Today’s gig economy has benefits for creatives — flexibility of schedules, self-determination of projects — but it has a downside, too, because increasingly creatives’ jobs are being de-unionized and devalued. I don’t expect we can reverse this trend, because it is gaining momentum. Gig “employment” is 34% of the U.S. working economy, and is estimated to be 43% by 2020.

But in the rush toward an uncertain future, a future in which creativity and vibrant culture should play a salutary and transformative role, it’s worth remembering (even this weekend as we tend to the bar-be-que) the value of creative people in numbers, how labor unions have protected and enhanced the world we live in, and how creative people need to be supported in their ability to make a living.

Image: Street art in Los Angeles’s Arts District. Photo by Adam Leipzig.

The Perfect Marriage: Documentaries and Non-Profits

Last Tuesday, when the lights rose, vigorous applause heralded a milestone for our documentary A Plastic Ocean – because this was a milestone audience. We were screening at the United Nations, for more than 600 delegates, policy-makers, and engaged activists.

The film, which launched in January, and hit Netflix in April, was invited to the UN to engender discussion, and as an example of the social impact of documentaries. It is an example not just of social impact, but also of the impact non-profit organizations can have on documentary filmmaking and, in turn, the value documentaries can bring to non-profits. Because A Plastic Ocean is the product of documentary – non-profit/NGO marriage.

Value

As someone who has been in the film industry for three decades, I am critically aware that the greatest obstacle to getting a movie made is not getting the money. It is having enough value. If a potential film project can demonstrate that it has sufficient value, money rushes to it like a river coursing toward the sea.

In conventional, scripted movies, value is measured along a single vector, the vector of profit. If you are an investor, whether a studio or a high-net-worth individual, you want to know if you will get your money back and then some. You look at models and comparatives, run spreadsheets with sensitivity analyses. You realize you’re taking a risk, so you try to find downside protection while retaining your upside.

More Value

With certain documentaries, however, value can be measured differently: in terms of social impact instead of financial profit. As a producer, I am always straight with financiers about their potential for financial returns. I can’t look a documentary investor in the eye and say, “You’ll get your money back,” unless we’re in the rare situation where we have a pre-sale and distribution guaranteed.

But I can tell a non-profit organization that it could be the best money they spend. Because a documentary, unique among communications media, can spread a story, share a message, and motivate social impact.

What’s a Doc?

In this framework, I am talking about feature documentaries – fully-produced films with running times of 70-100 minutes. I am not talking about little video segments or other kinds of media.

There’s something special about a feature documentary. A feature-length running time allows narrative to unfold with grace and finesse, opens a set of characters to the audience, and offers sufficient time to go into details. It’s a truism that we don’t remember facts, we remember stories. The greater truth is that we remember facts when they are conveyed to us through storytelling.

That’s what a feature doc can do. It is long enough for an audience to get involved, and it does take some commitment, some setting-aside of time to experience it fully. Therefore, while feature documentaries are only rarely mass-market entertainment, they are profound opportunities for core audience connection.

Why Non-Profits?

Non-profits face a continuing challenge: making people care. If you’re running a non-profit organization, you need to keep your current constituents while also expanding your base.

But non-profits have a significant business advantage over other entities that may finance movies: non-profits don’t have to post quarterly profits or keep their shareholders happy. Many of them define success as sharing their message by engaging people in greater numbers and with greater depth.

Freed from the constraint of the financial profit-motive, non-profits are well-positioned to become the perfect financiers for social impact documentaries, because docs can provide exceptional social impact returns. For the same money as a few “opinion maker” TV commercials on CNN, MSNBC, or Fox News – commercials that most people will miss because they’re going to the bathroom or fast-forwarding – a non-profit can make, market, and distribute captivating documentary that can reach more people and will live for a long time.

As an example, A Plastic Ocean is now being seen worldwide, and has been screened for national legislatures, city councils, and environmental organizations. It is inciting policy change and social change. The film was financed primarily by three non-profit foundations (Plastic Oceans Foundation, Adessium Foundation, and Hemera Foundation), and our funders could not more pleased with the social impact value and return-on-investment.

The Model

To be clear: the model I’m describing is not for small, cash-strapped non-profits. It is viable for larger non-profits and NGOs, organizations that have a sound financial base and scale. It is also viable for collaborative partnerships among like-minded non-profits that, by working together, can achieve common goals.

To put some numbers around this, it costs $500,000 a few million dollars to make a feature documentary (the wide variation in cost is a factor of the scale and complexity of the film), and another $100,000 – $500,000 to market and distribute it. That’s the price of admission when seeking to put a large social impact issue onto the national or international agenda.

It’s a price many larger non-profits and NGOs are paying already but, I would argue, paying for media that will not be as compelling, enduring, emotional, or inciting-to-action as a strong feature doc. In the social impact arena, when the right non-profits/NGOs place their resources in the right documentary, it can truly be the perfect – and most cost-effective – marriage.

Park City Climate: Sundance Infographic 2017, Million $ Piracy Losses, Distribution Changes, and Slamdance Stats

Originally published in Cultural Weekly on January 18, 2017.

Park City has a change in the weather this year. For the first time in along time there will be snow, and, as if to counter deniers, Sundance has programmed a special section on climate change films. The festival will also be marked by social actions directed toward President Trump’s inauguration. As always, though, the action in the cinemas, events, parties, gifting suites, crowded restaurants, five-to-a-room-and-sleeping-on-couches rentals, and late-night negotiation sessions will not all be political.

Using Sundance data as a bellwether for the independent film industry, ground-truthed through interviews with producers, distributors, and sales agents, and, this year, also adding some data from the Slamdance Film Festival, which runs concurrent with Sundance’s opening weekend, here is our weather report on the independent film business. (Scroll to see the infographics at the bottom of this article.)

CLICK HERE TO SEE ANIMATED SUNDANCE 2017 INFOGRAPHIC
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$2.3 billion

Annual spending on independent films has remained fairly constant at $2.3 billion. This is because the number of submissions to Sundance seems to have plateaued. Our estimates of average budget levels are based on discussions with indie movie producers and sales agents. These estimates, too have remained constant since last year.

Piracy is worse than expected

The cost of piracy for independent films is significant. Working with Tecxipio, we are publishing the actual number of torrent illegal downloads for 14 films from Sundance 2015 and 2016.

To understand why our piracy numbers are probably low, I need to get geeky about piracy. There are two kinds of illegal downloads: torrents and streams. Torrents are able to be monitored and quantified; that’s what Texcipio does. Streaming illegal downloads, which in some cases comprise more than half of all pirated downloads of a film, cannot yet be reliably quantified. We are therefore only publishing torrent data.

In making our calculations for the amount of revenue piracy costs each film, we are assuming that only 5% of the people who did an illegal download would have actually purchased the movie, and that their purchase price would have been $3.

Our 5% figure could be a *very* conservative number relative to how much pirated downloads actually cannibalize sales. For example, peer-reviewed academic studies of sales displacement tell us that the rate of piracy displacement is in the range of 14% to 20% at the lower end, up to 100% on the higher end. To be conservative, let’s go with 5%; but I really think the lost revenue is much, much worse.

It’s interesting to compare pirate download numbers for 2015 Sundance films over a full year. For example, Brooklyn had an additional 4.3 million illegal torrent downloads in the past year. Nor are movies for older demographics immune: A Walk in the Woods has had 2.4 million torrent downloads. The film with the most illegal downloads from 2016 is Swiss Army Man (over 7 million torrents); by our minimal estimates that represents a loss of over $1 million in revenue, and based on the peer-reviewed studies cited above, that number could be $3-$4 million in losses.

Virtual reality

VR has fully come into its own, largely due to Sundance and Slamdance’s support of the emerging artform over the past several festivals. For the first time this year Sundance has an official virtual reality section; it received a whopping 346 submissions.

Distribution and sales

We also traced how many Sundance and Slamdance films got distribution – although I refrain from calling every instance a “distribution deal.” For our purposes this year, I am defining distribution as having the film available for sale on a legitimate and public platform – iTunes qualifies, as does traditional theatrical distribution. It costs more money to put a movie up on a major digital platform than it costs to press DVDs; that’s why not every film can get onto iTunes, as they and other platforms have become more selective.

Most of the films at Sundance will be distributed, and about half of Slamdance’s selections will achieve this milestone. However, the sales prices – when there are actual cash advances (or minimum guarantees) – will vary widely. Last year, Sundance saw a record sale of $17.5 million for The Birth of a Nation, an investment that proved ill-advised for Fox Searchlight. In contrast, the highest sales recorded at Slamdance was Batkid Begins (2015) for $1 million to Warners, primarily for remake rights. Last year, Slamdance’s Million Dollar Duck sold to Animal Planet and Lionsgate for a deal worth $350,000-$500,000. (The Slamdance infographic is right below the Sundance infographic.)

The Netflix of it all

Continuing a trend that began five years ago, streaming services like Netflix, Amazon, and iTunes will continue to be the dominant platforms for independent films. Netflix has four original features, one original documentary feature, and episodes from two documentary series screening in the festival.

In addition, the festival has fully acknowledged that some of the best “film” work is now done in episodic television. This year is the first year that episodic content has been eligible, and 403 episodic films were submitted. Nineteen episodic films will screen, including premieres from Netflix, Amazon, and YouTube Red.

Chillier

Like the weather, I expect a somewhat chillier buying season than in 2016. There will be even more responsibility put on producers and directors to deliver audiences for their movies, down-shifting traditional marketing efforts from the distributors to filmmakers. I suspect that buyers will be more cautious, and that even Netflix with its trumpeted $6 billion content-acquisition budget will be judicious. There is simply a glut of great content, not all of which is feature films, and Peak TV is already becoming a factor.

We can soon expect a cyclical downturn in our business, and we may see early signs of it in Park City this year, where the weather will be cold even while the politics will be hot.

Sundance Infographic

Sundance 2017 Infographic

Slamdance Infographic

Slamdance 2017 Infographic

Top: Jason Segel appears in The Discovery by Charlie McDowell, an official selection of the Premieres program at the 2017 Sundance Film Festival. The film will stream on Netflix in March. Courtesy of Sundance Institute.

Will the Movie Industry Contract in 2017?

Originally published in Cultural Weekly on January 4, 2017.

Movies are going gangbusters, and one studio—Disney—achieved a record-breaking $7 billion global box office last year. What could possibly go wrong?

According to my analysis of historical patterns, we’re due for a downturn. The film industry is often likened to a roller-coaster because we experience it as having surprising ups and down. The analogy is even more precise than we would like to think. Just as a roller-coaster rises and falls on a fixed and predictable track, so too the film business has an uncanny, regular pattern of peaks and valleys.

I first became aware of this pattern in 1988 as a junior executive at Walt Disney Studios when the Writers Guild went on strike. The strike lasted 155 days, during which time no new screenwriting took place, and even after the strike was over it took years before movies and TV shows achieved full levels of production. I imagined this was an unpredictable economic event. But when I talked with some of the old-timers, people who had been in the financial offices of Disney and other studios for decades, they told me it was to be expected: they didn’t know the writers would go on strike, but they had been certain the movie business would have a downturn in the late ‘80s. They had seen the pattern before.

How could that be? I started to do some research, going back to the beginnings of filmmaking in 1891, when Thomas Edison patented the kinetoscope, the precursor to the motion-picture projector. I discovered that innovations in technology and distribution have been driving the movie industry through rising and falling economic cycles, and that the cycles happen in a predictable, ten-year pattern.

I first wrote about this phenomenon in Screen International magazine in December, 2009. My editor dubbed my observations “The Leipzig Hypothesis.” At that time the movie business was in a downturn, and I predicted that the cycle would start to turn up in 2012. It did.

My hypothesis states: The film industry’s expansion and contractions — based on known milestones — for the last 120 years has followed a wave pattern which peaks with uncanny regularity in the middle years of each decade, then bottoms out in the decade’s last years, only to rise again from the ‘0’ year driven by new innovation. It looks like this:

Film Industry Cycle over a decade

I admit that the Leipzig Hypothesis is somewhat impressionistic. It relies, in part, on verbal data I got in conversations with finance people who had been in the movie business since the 1950s. It’s difficult to evaluate the entertainment industry’s profitability from the outside; studios play fast and loose with the numbers so it’s been hard to measure historical ups and downs. Box-office numbers, even when adjusted for inflation (which they usually aren’t) account for only a fraction of a film’s revenue, and today box office revenue matters less than it ever has before, because of the films being financed by streaming services Netflix and Amazon.

In addition, domestic numbers often seem to show patterns that alter radically when currency-fluctuating (and poorly counted) foreign sales are thrown into the mix. So the movie industry, unlike more numerically minded businesses, is never really sure whether its economic viability is rising or falling; it has always seemed more of a gut feeling, at least to people outside the highest levels of the industry.

However, based on my nearly three decades in the business, my knowledge of studio balance sheets, and my interactions with the financiers who keep this industry spinning, I’m ready to go out on a limb once again and predict that a contraction will happen starting in late 2017 or early 2018, and filmmaking will feel an economic downturn. If the hypothesis holds, it will make the movie business a bit more quantifiable for everyone. If the hypothesis fails – which it may, due to significant changes in business models – we can put it to rest as a historical artifact.

Here is how the hypothesis has functioned historically. (See infographic below.)

In the early years of each decade, as an innovation takes hold, the business tends to expand. There’s a sense of renewed optimism among industry executives and bigger movie budgets soon follow, along with higher salaries and richer deals for the talent. The expansion generally peaks around the sixth or seventh year of each decade, when higher spending has taken its profit-reducing toll.

Then, pessimism sets in, and industry leaders call for the business to be reined in. Budgets become smaller and negotiations become tougher amid prognostications about the ill health of the industry. In the final few years of each decade, which we are entering now, the business contracts, reaching its nadir at decade’s end, when, almost miraculously, the next innovation is born that will start the cycle anew.

Each innovation is an advance in technology or a new distribution market. For example, in 1900, the size of each reel of film doubled, allowing longer, more complicated takes. In 1910, black-and-white movies were enhanced with two-color tinting. Technicolor was chartered in 1921 and the first film in Technicolor’s Process 2 was released the following year. Synchronized sound technology started in 1927; silent movies ended in 1929. Then 1940 saw the advent of multi-channel sound; the screen image became much wider in the early 1950s with the innovation of CinemaScope; and special effects took a leap forward in the late 1950s and early 1960s.

New distribution markets have been the drivers for the past 40 years, beginning with the first multiplex cinemas in 1970, and the creation of HBO and cable television in 1972. Then, in 1976, VHS and Betamax videotape appeared, starting the trend towards in-home entertainment, which became widespread by 1980. The foreign markets exploded in 1990: films began making more money overseas than from the domestic market, and a new internationalism began to take hold in Studio-land. DVDs began to explode in 2000.

The most recent expansion was due to wide adoption of another new technology: streaming video services. Although Netflix began its streaming service in 2007, it really took off in 2012 when it went public and was able to grow exponentially. Since then, Netflix has grown from 27 million subscribers to more than 86 million today, and has a presence in more than 190 countries. Amazon Prime began streaming original content in 2013 and now has nearly 70 million subscribers.

I feel it is an open question if the hypothesis will continue to hold. For the first time, it is hard to quantify exactly what the movie business is. When Netflix and Amazon finance or acquire feature films to exploit their value on their streaming services – not at the box office – and further, not reveal how many people are watching (which they don’t) there is no way to tell if movies are economic success or failures. As Michael Smith and Rahul Telang posit in their book Streaming, Sharing, Stealing, the power-center of the movie business has moved from companies that create content (studios) to companies that own their audiences (Netflix, Amazon, YouTube, iTunes). This shift is fundamental, unstoppable; we may need a new model to predict expansions and contractions.

On the other hand, the cycle may hold. For one thing, the U.S. dollar is at record-level strength against other currencies, which means that international revenue will be lower than projected – this alone could incite a contraction. Also, the content acquisition budgets for Netflix ($6 billion) and Amazon ($3 billion) are unsustainable and both companies will probably begin to ratchet back their spending in the next couple of years.

My conclusion? Let’s find out together. I’ll meet you back here at the beginning of 2018 to take the pulse of our business again and see where we are on the roller coaster.

Film Industry Cycle Infographic

Film Industry Cycle Infographic for 10 years

Share this Infographic On Your Site: Copy and Paste the Code BelowTop image: Concept art for Captain America: Civil War, which earned over $1.1 billion in worldwide box office in 2016. Courtesy Marvel Entertainment/Walt Disney Studios.

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The Other Movie Industry

Originally published in Cultural Weekly on September 28, 2016.

Every morning when I wake up I drag myself over to my laptop and methodically delete 150 emails that have come in overnight, advertisements and spam my junk filter didn’t catch. Then, just as methodically, I study 50 important emails about independent film projects at various stages of their hectic, insecure lives, and respond to every one.

Except when I am traveling. The experience of travel throws me off my body-clock and game. I arrive in a distant city, schedule as compact as the clothes precisely rolled in my travel bag; I am somewhere else! I want to enjoy the people, take advantage of the place! I experience my new surroundings from morning ’til late night when, spent, I fall into the hotel bed. I yell at myself, inside my head, knowing the emails are piling up, until the yelling becomes white noise and I find myself awake the next day.

So it was in Helsinki, Finland, this past week, from where I have just returned, refreshed despite being burdened with 2,000 emails, most of which I will, of course, delete. Because the Finnish film industry has moved to an exciting place in only the past few years, and I wanted to learn as much as I could while I was there.

Why was I in Helsinki? It was the week of Love & Anarchy – The Helsinki International Film Festival, and, embedded within it, the Finnish Film Affair, three days devoted to movie industry professionals. For the Finnish Film Affair, I had put together a dream team of a panel: Mike Goodridge, CEO of Protagonist Pictures, the UK-based production, finance and sales company; Claudia Lewis, who served as President of Production for Fox Searchlight Pictures for 10 years; Laura Munsterhjelm, the talent agent and founder of Actors in Scandinavia agency; and Mike Runagall, Managing Director at Altitude Film Sales. We’d been asked to talk with Finnish film professionals about finding movie stories that travel. How could Finnish films go beyond the borders of Finland and find audiences around the world?

Finnish Film Affair event moderated by Adam Leipzig

Our panel at the Finnish Film Affair. Photo by Petri Anttila.

The question, in fact, does not apply only to Finnish filmmakers. It is hard to get an accurate count of the number of films made each year — I have heard estimates as high as 10,000 and more when Nollywood and Bollywood titles are added to the mix — and few of them capture global audiences. By and large, worldwide audiences are the domain of big studio ventures, movies that come from comics, pre-aware titles, and well-traveled franchises. Only big studios can commit the marketing resources, often topping $200 million, to open a movie everywhere. Other than big studio movies, most film distributors are only interested in locally-produced product: Indian movies in India, Chinese movies in China. Few distributors anywhere showcase “foreign-language films.”

Therefore, our panel concluded, there are two challenges Finnish films need to address: the worldwide disengagement from international cinema, and the fact that, outside of Finland, nobody speaks Finnish.

Could Finnish films travel better if they were made in English? In some cases the answer is yes, but I certainly would not want to see that happen at the expense of quality. During the festival, I had the pleasure of seeing The Happiest Day in the Life of Olli Mäki, directed by Juho Kuosmanen, which won the Un Certain Regard jury prize at the Cannes Film Festival and is Finland’s entry for the Oscar’s Best Foreign Language prize. Olli Mäki tells the story of the lead-up to the 1962 world featherweight boxing match. No rational sales agent would have wanted the film if it had been pitched before it was made: It is in Finnish, a period piece, shot in black and white, about a person few outside Finland have ever heard of. But the resulting movie is a grand happy surprise, deftly made, funny and charming, authentic and true to itself. Made in English, the film would not have worked.

Which brings me to the process by which Finnish film currently operates. If you want to make a movie, and you can do it for around 1.4 million Euros, and you can get a bit of money from the government’s cultural arm, as well as a commitment from Finland’s film distributor and broadcaster, you are done: You will have your costs covered. For the people who get their movies made, this creates a regular opportunity for work and creative output.

U.S. indie filmmakers would love to have so straightforward a process. Our movies would be less hectic and insecure. I found a rare, unaffected enthusiasm for film and storytelling among the Finnish filmmakers I met. They have a system, which works in its way; theirs is, fundamentally, the Other Movie Industry, one that does not play by the rules to which we Americans have become accustomed. The Other Movie Industry, versions of which exist in many countries, especially in Europe, allows filmmakers to make movies on a regular basis and, therefore, lead more sustainable lives.

Of course, there are limitations on the closed-loop of the Finnish system: budget limits, obviously, and also limits if you are not among the filmmakers blessed by official process. Therefore, the potential of expanding to audiences in other countries, as well as the game-change of a filming financial incentive that will go into effect next year, will allow for a greater diversity of films and filmmaking talent. That will benefit everyone, and up-level even the filmmakers who stay within the existing system.

Finnish filmmaking is quite accomplished, and is poised to expand and flourish in the next few years. Of that I’m certain. I’m also certain of one unintended consequence: Finnish filmmakers will have to deal with a whole lot more emails.

Image from The Happiest Day in the Life of Olli Mäki, directed by Juho Kuosmanen.

If You Want to Run an Entertainment Company, Here is Your New Bible

Originally published in Cultural Weekly on September 5, 2016.

I read just about every book that analyzes the entertainment business, both because it’s the business I’m in and I love to learn new perspectives. Streaming, Sharing, Stealing: Big Data and the Future of Entertainment, by Michael D. Smith and Rahul Telang (MIT Press), is the best book on the subject, bar none. Every entertainment executive who hopes to have a job in coming years should read it and follow its prescriptions.

I met Michael Smith, who’s a professor of information systems and marketing at Carnegie-Mellon University, at Sundance in January, where he gave a riveting presentation on digital piracy at the Sundance Institute. We struck up a conversation and, full disclosure, have become friends.

One of the things I most admire about Smith and Telang’s work is that they do not come from the entertainment business at all, and therefore have no axe to grind, no jobs to protect, and no legacy business models to justify. All they care about is data, and they collect lots of it.

Their data leads to conclusions that may not seem shocking to people who follow digital content enterprises, but will certainly upset traditional entertainment companies.

Some say that it’s inevitable for longstanding film, music, television, and publishing companies to survive as they have for many decades. Smith and Telang counter this viewpoint because, they contend, the fundamentals of the business have changed permanently. Where once it was enough to make and own great content — the province of movie studios, record labels, and publishing houses — now that is no longer sufficient. Today it is possible to own the audience, and massive amounts of audience data represent a near-insurmountable competitive advantage. The big question is whether large companies will take this information to heart and change their business models before it’s too late and data-driven companies, like Netflix, Amazon, and iTunes, leverage their understanding of the audience to topple a century-old hegemony.

As Smith and Telang summarize their thesis:

“In recent years a perfect storm of technological change has hit the entertainment industries. It involves the convergence of user-generated content, long-tail markets, and digital piracy, and it has diminished the profitability of these industries’ traditional business model.

“At first glance, none of these changes seems to pose much of a threat. User-generated content, after all, is amateur fare: videos of cats riding Roombas and kids playing Minecraft. Long-tail markets, for their part, are full of products that can’t compete: old, failed films and television shows, say, that don’t stand a chance against new blockbusters such as Avatar or The Sopranos. And digital piracy, while certainly harmful to sales, impacts all of the studios equally and therefore shouldn’t upset the competitive balance.

“But in fact this perfect storm has changed everything. Content is no longer hard to produce or easy to control because of the technological revolutions in hardware and software that we’re now witnessing. Distribution is also much easier now: long-tail markets make it possible to allow everything to be put up for sale, a big shift from the limited capacity in movie theaters and limited space on television broadcast channels. And thanks to digital piracy, it’s much harder to maintain the profit from the staggered release windows that are fundamental to all of the entertainment industry’s existing business models.”

For the benefit of existing entertainment companies, Smith and Telang provide a series of well-thought-through recommendations in their closing chapters. As someone who has been in the entertainment business for 30 years, it feels clear to me that Smith and Telang’s data are excellent and their conclusions are inevitable. Will movie studios, broadcast networks, music labels, and publishing companies view this book as the new rule of the road or the raving of Cassandra? Time will tell — and for legacy companies, time is running out.

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Image: The cast of ‘Arrested Development,’ a series Netflix picked up after it was cancelled on Fox’s broadcast network. Why did Netflix do that? They had the data. Image courtesy 20th Century Fox TV.

TOLDJA! Diversity Pays

Originally published in Cultural Weekly on April 13, 2016

Last month, I wrote about the make-believe economics of the movie industry that people use to convince themselves to cast actors who are white, and avoid actors who aren’t.

The diversity issue is particularly annoying because as much as the movie industry has reinforced racial and gender stereotypes, and it has, films have also pushed audiences to important social change. But diversity casting is often challenged based on a common misconception among my industry colleagues.

Here’s a true story from earlier in this decade when I was approaching a well-known sales company about representing a film I was putting together. I gave them a list of the actors we could consider for starring roles. They were not all white.

“You can’t cast these people,” the sales agent said, crossing the black actors off the list. “We can’t sell them overseas.”

“What about Will Smith?” I asked.

“Will would be OK. He’s not black,” the agent said.

Yep, that’s verbatim dialogue.

Racism in Hollywood is rarely that overt. But, as I wrote, “The lack of overt racism, like so much in the entertainment business, is an illusion. I have never had financiers or producers tell me they only want to cast white actors. Instead, they couch their racism in economic terms, explaining that the movie business is, first and foremost, a business.”

In my article I used historic box office performance numbers to dispell the myth that only white actors do well at the international box office.

Now there’s data to drive the conclusion further: diversity can be a key component of box office success. This week I attended CinemaCon, the annual convention of theatre owners, where Chris Dodd, CEO of the Motion Picture Association of America, and John Fithian, CEO of the National Association of Theatre Owners, presented their state of the industry reports.

Movies have had a record-breaking year, grossing $38.3 billion worldwide and $11.1 billion domestic. Globalization has its upside, and the expansion of international markets bodes well for diversity casting. Furious 7, with its diverse cast, grossed $351 million domestic and an astounding $1.16 billion international. As John Fithian said, “When movies look like the world, the world goes to the movies.”

Then there’s U.S. audience. Among the many facts and figures of the MPAA’s 2015 report, this one stands out:

U.S. moviegoers’ ethnic breakdown, 2015. Source: MPAA

“Hispanics are more likely than any other ethnic group to purchase movie tickets (23%) relative to their share of the population (17%).”

Let’s be clear. When it comes to social justice, money cannot and should not be our guide. There are far more important reasons than money to cast movies in a way that represents society. In fact, we should use the beautiful medium of film to represent barrier-free images of people of all ethnicities and genders.

Movies are often about the way we want the world to be, and we should not pander to audiences. But in this instance, the audience — global, rainbow-hued, and hungry for great entertainment — is there and they are right. When the false economics of racism fall, we’ll all make better movies.

Top image from Furious 7, courtesy Universal Pictures.
Headline with apologies to the legacy of Nikki Finke, Deadline.

Make-Believe Economics Bolster Hollywood’s ‘Sorority Racism’

Originally published in Cultural Weekly on March 2, 2016.

Chris Rock got it right when he called out Hollywood on Sunday night’s Oscarcast: “Is Hollywood racist? You’re damn right Hollywood’s racist. But it isn’t the racist you’ve grown accustomed to. Hollywood is sorority racist. It’s like — ‘We like you, Rhonda, but you’re not a Kappa.’ That’s how Hollywood is.”

Rock got it right because #OscarsSoWhite is merely the latest newsworthy example of #HollywoodSoWhite.

In my experience, racism in Hollywood is rarely overt. However, the lack of overt racism, like so much in the entertainment business, is an illusion. I have never had financiers or producers tell me they only want to cast white actors. Instead, they couch their racism in economic terms, explaining that the movie business is, first and foremost, a business.

“They don’t like black actors in Asia,” financiers and sales agents have told me behind closed doors. “Or in Europe. Or in Latin America. You just can’t sell them.” Their subtext is: Hey, I’m not racist, and we don’t have a race problem here in the US – but other countries do. We’re making movies for the world market, and we have to give the customers what they want.

Bill Maher, on his HBO show Real Time, said it in public:

Most movies are made now with an eye to the foreign market, and Asians really are racist…. I’m just honest. They don’t want to see black people generally in their movies. The Hollywood executives are, like, ‘We’re not racist; we just have to pretend to be racists because we’re capitalists. We want to sell our movies in China (and) they don’t like Kevin Hart.’

I have written and spoken at length how money and aesthetics are not measures of each other. A good movie can make much or little money; a financially successful film can be excellent or execrable. But what happens in Hollywood is that taste and money conflate: here, taste means you make things that make money, and you do not transgress the perceived wisdom of what makes money. Hollywood’s version of taste is supported by the economic argument that actors of color don’t sell tickets overseas.

Cultural critic Susan Sontag said, “Rules of taste enforce structures of power.” She was writing about womanhood and aging in the early 1970s; the dictum applies equally to race and Hollywood today.

One wonderful thing about the movie business is that so much information is publicly available. We can check out race-based assumptions, and see if the economic arguments are accurate or wrong.

The website the-numbers.com aggregates box office information about movies and actors. You can type an actor’s name in the Search box and discover the actor’s box office track record, split between domestic and international. The movie business today draws about 70% of its revenue from international markets, but because each actor’s box office history dates back to career beginnings, few actors actually get 70% of their box office performance from overseas markets.

We might take Tom Cruise as a benchmark – he’s worldwide star. Mission: Impossible – Rogue Nation got 72% of its box office from international.

On a career basis, 56% of Tom Cruise’s box office is international. Therefore, we might deduce that if an actor falls at or near the Cruise Benchmark, they are economically viable internationally, regardless of the color of their skin.

Here’s what the data says:

Will Smith: 58% of his lifetime box office is international
Samuel L. Jackson: 55% of his lifetime box office is international
Dwayne Johnson: 67% of his lifetime box office is international
Penelope Cruz: 67% of her lifetime box office is international
Sofia Vergara: 53% of her lifetime box office is international
Javier Bardem: 68% of his lifetime box office is international
Gael Garcia Bernal: 64% of his lifetime box office is international
Michael Pena: 57% of his lifetime box office is international
Michelle Rodriguez: 69% of her lifetime box office is international
Morgan Freeman: 51% of his lifetime box office is international
Chewetel Ejiofor: 64% of his lifetime box office is international
Idris Elba: 61% of his lifetime box office is international

Clearly, there are a lot of diverse actors who meet or exceed the Cruise Benchmark, and some that fall just below. According to the data, the perceived wisdom is incorrect. Still, I don’t want to misrepresent. This kind of data does not share a full picture; some of these actors gain box office bumps because they are members of ensemble casts or had supporting roles. Just because an actor has a lifetime box office performance percentage at or above the Cruise Benchmark does not mean they are a bigger star than Tom Cruise.

Casting is not a formula because art is not a formula. There are few if any actors who literally “open” a movie, whom audiences will see no matter what. The right casting is always the alchemical triangle of the right actor, the right role and the right audience. Put Gerald Butler in an action film, and he usually works gangbusters; put him in a romantic comedy, and audiences are mainly lukewarm. Audiences seem to pigeonhole actors as much as executives do, and maybe that’s why executives do it. But I believe, and the data suggests, that an actor’s race is not the governing economic factor. Still, many in Hollywood quietly assume that race is an economic factor and have not questioned this assumption.

When Alejandro G. Iñárritu accepted his second Best Director Academy Award on Sunday, he said: “What a great opportunity to our generation to really liberate ourselves from all prejudice and this tribal thinking and make sure for once and forever that the color of skin becomes as irrelevant as the length of our hair.”

The make-believe economics of acceptable casting choices is another version of tribal thinking. The real problem that the global entertainment business must confront is the structures of power, the ways in which power enacts creative “taste” that’s justified with an economic rationale – economics that are wrong. Seen in this light, the whole illusion tumbles down.

Top image: Chris Rock hosts the 2016 Academy Awards. Photo courtesy AMPAS.

A Plastic Ocean: First Look

Originally published in Cultural Weekly on February 3, 2016

“What are you working on?” people always ask me. For the past three years, I have been telling my friends about A Plastic Ocean. Today we’re sharing our trailer for the first time.

How did this project start? You may have heard media stories about the Great Pacific Garbage Patch. You may even think you have seen pictures of it. Jo Ruxton, an adventuresome soul who has produced for BBC, heard the stories too and started thinking about making a documentary. She joined a scientific expedition to the center of the Pacific for a month of research. Jo discovered there is no floating plastic island… instead, there a truth far more insidious. The doc she wanted to produce became her mission.

That was seven years ago. Documentaries take time! Jo and her colleague Sonjia Norman embarked on a fundraising drive. It was another two years before they had raised enough for the first filming trip to seek the elusive Pygmy Blue Whales in Sri Lanka.

Production continued in stages of fundraising and filming, resulting in trips to twenty locations around the world, all the time accruing more and more information as research was building within the scientific community. Journalist Craig Leeson became an on-camera explorer and the film’s director, and world record-holder free diving champion Tanya Streeter joined the team. I came on board as a producer as well. In A Plastic Ocean, Craig and Tanya investigate how plastics enter the environment and affect wildlife and human health. They join expeditions by world-leading scientists, diving to the bottom of the ocean, visiting first-world countries as well as the remotest island communities blighted by excesses of waste. Most importantly, they share solutions that are real and practical. The film will make you aware, present optimistic choices and, we hope, incite social and political action.

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We have locked picture and will have the film completed in a matter of weeks. At that point we will start to reach out to possible distributors to complete this journey with us. If you’d like to get updates along the way, please sign up here.

Every year humans produce more than 300 million tons of plastic, half of it designed for single use, and more than 8 million tons of it ends up in our oceans. Because the Earth is a closed system, we can’t throw things away: there is no “away.” Plastic does not biodegrade, and almost all the plastic ever manufactured still exists here, somewhere, in some form.

Perhaps the most poignant of all sequences, certainly in Jo’s eyes, was the situation in Tuvalu, a tiny island nation few people have visited. Once part of Kiribati and now independent, the islands that make up Tuvalu lie along the rim of an extinct volcano in the southern Pacific Ocean. Surely they should be everyone’s idea of a tropical paradise, with palm-fringed, white-sand beaches. Yet, as A Plastic Ocean reveals, they resemble an unregulated landfill of plastic waste. There is no space to bury it, more and more is building up daily and the only solution is to pile it up – or worse, burn it, forcing toxic fumes to permeate the air. In many ways, Tuvalu is a microcosm of our entire planet.

We are all extremely proud of this film, and I think it will astound you – just as it did our adventurers, who captured never-before-seen images of marine life, plastic pollution, its ultimate consequences for human health, and viable, practical solutions that are already working and just need to be put into global action.

Please share this trailer with your friends and all who will be interested.

Website: http://aplasticocean.film/
Facebook: https://www.facebook.com/aplasticoceanfilm/
Twitter: @awaveofchange
Instagram: https://www.instagram.com/aplasticocean/
Sign up for updates: http://aplasticocean.film/index.html#signup

From left: Free diver Tanya Streeter, producer Jo Ruxton, explorer/director Craig Leeson (photo: David Jones)

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Top image from the film’s key art. Courtesy Plastic Oceans Ltd.

Sundance 2016: New Trends Emerge

Originally published in Cultural Weekly on January 27, 2016.

The early deals have not been paltry and neither has the snow. Tempting, blanketed and idle, ski runs seemed to peer down upon Park City as Sundance buyers have been waist-deep in high-dollar negotiations. The 2016 Sundance Film Festival will be known as a historic turning point in the economics of the business, because this was the moment when digital companies showed their strength by making huge, swift purchases.

The largest deal in Sundance history, however, was made by Fox Searchlight, a traditional theatrical distributor. Its negotiations revealed the divide between traditional theatrical distributors and data-driven streaming companies like Netflix and Amazon.

Of course, there was the usual Sundancery. Uber, despite its giant tent and heated waiting area, vexed local authorties with the launch of UberCopter: apparently those helicopter rides and landing pads had not been properly permitted. There were over-full parties with one thousand of your closest personal friends, gifting suites and swag bars. Every brand had its day. You could even visit the Vaseline Lounge; I will allow you to supply the punch line.

Before the festival began, Netflix and Amazon made preemptive purchases; among them, Netflix acquired Rob Burnett’s Fundamentals of Caring for $7 million. Once Sundance officially began last Thursday, the first deals were from the streaming giants.

Prior to a screening on Saturday night, I asked an agent what she expected to get for the film she was repping. “If Netflix or Amazon want it, a lot,” she said. “If they don’t, it’s a whole different deal.”

There was a bit of head-scratching over Amazon’s $10 million purchase of Kenneth Lonergan’s Manchester by the Sea. Although well reviewed and highly praised (Justin Chang (Variety) called it a “bold merging of ensemble drama and character study, all in service of a story about how a person — and crucially, the surrounding community — choose to deal or not deal with the consequences of a fatal mistake”), it is a tragic and niche story.

Rebellion

Netflix reportedly offered $20 million for The Birth of a Nation, Nate Parker’s historical drama about the Nat Turner slave rebellion in 1831. But the filmmaker and his reps turned down the Netflix offer, and struck a deal for $17.5 million with Searchlight, a Sundance record. As has been widely reported (see this play-by-play in The Wrap), the choice came down to a matter of theatrical distribution over dollars.

While Netflix had promised a theatrical release, the filmmakers did not believe Netflix would provide the right kind of distribution for this film’s audiences. There was reason to be skeptical. Streaming and cable companies service the small screen with preferential vigor. For example, Beasts of No Nation, another Netflix film, barely got any marketing push for its theatrical run. (Beasts of No Nation played in 31 theatres for two weeks and grossed $90,777.) Similarly, Discovery Channel barely promoted the theatrical exhibition of Racing Extinction. They did achieve their biggest viewership ever when they aired the doc worldwide on December 2, and that was their objective, but this example points to the differing priorities of small-screen vs large-screen companies.

Will streaming companies continue to pay such large sums? Are they approaching movies because they care about cinema, or because they are using films as content-bait to gather more data on their customers? Their eager appetites could be temporary; in two or three years, after they experience first-hand the economics of the movie business, will they suffer losses on their investments and cut way back? Stay tuned; we’ll be watching closely.

Like this tarmac in Park City, the independent film business expands and contracts with heat and cold. It falls apart only to be put back together.

Piracy Debate

Last week we published our Sundance 2016 Infographic, which included never-before revealed data on pirated downloads of independent films.

We got a lot of comments. Indiewire picked up the piece, and Facebook discussion was lively. Some people contended that pirates actually drive legitimate ticket sales and disputed my estimate of how much piracy costs filmmakers.

On Monday, I attended an Artists Services presentation by Professor Michael D. Smith, who studies information technology and marketing. Smith, who takes the position that he has no position on the issues because he only cares about the data, revealed evidence that fully supports what we put in the infographic. His research will be published this summer as a book entitled Streaming, Sharing, Stealing: Big Data and the Future of Entertainment (MIT Press).

Are pirates taste-makers who drive ticket sales? No, says Smith. He and his colleagues studied 533 movies over two time periods, 2006-2008 and 2011-2013. The films included major studio and independent releases. Their conclusions? “If piracy could be eliminated from the theatrical window then box office revenues would increase by (on average) 15%…. All of the movies in our counterfactual analysis would experience increased box-office revenue if piracy were eliminated altogether.” (Ma, Montgomery, and Smith 2015)

In my article last week, I made the assumption that 5% of the people who pirate content would purchase it if there were no illegal alternative. I chose the 5% number because I wanted to be conservative, not alarmist. When I asked Smith about this assumption, he said I was probably low – the real number, he said, could be closer to 15%. If Smith is correct, the films I cited lost three times more revenue than was depicted in the infographic.

I checked with Excipio, the company that analyzed the BitTorrent results used in our infographic, to see if any of the films acquired at Sundance so far were getting illegal downloads. Sign of relief: they are not – so far.

The Free Range Reaction

Every movement begets its opposite; the Tea Party arose as a reaction to Obama’s election. While streaming giants make muscular plays, the free range distribution movement is becoming more effective and sophisticated among a growing cadre of indie filmmakers. As James Kaelan said last week, “You don’t need to wait to get picked anymore.” (Kaelan performed the hat-trick of having films in both Slamdance and Sundance this year.) In an example of the increasingly vibrant DIY movement, Quiver, a digital distribution service that charges a flat fee, not a percentage, now pays filmmakers more than $1 million a month.

In comparison to the record-setting deals I discussed at the beginning of this article, other film deals at Sundance and Slamdance will indeed be paltry. While pretty much every movie at these festivals will get some form of distribution offer, most will be for little or no upfront cash. Even with Amazon’s and Netflix’s big checkbooks, economics for indie filmmakers have not gotten easier.

We’ll continue to look at these developing trends in the months ahead.

Yes, Virginia, there really is a Vaseline Lounge at Sundance.

Top image from Nate Parker’s The Birth of a Nation. Courtesy Sundance Institute.