Friday, November 16, 2007

The Writers Strike & The Great Big Elephant in the Room


I’ve been dying to write about the strike, but I haven’t had anything unique to say that hasn’t already been covered by so many other writers and bloggers like Phil Robinson’s 4-Minute History of the WGA, United Hollywood, and Nikki Finke. I liked the posts from John Rogers (“Moral issues aside -- fair residuals mean more working writers, more working writers mean more product, more product means more physical production jobs, media sales, corporate profits and shareholder value. That's what we're striking for.”); John August (“Pencils down means pencils down. I’m not writing any features or television until there’s a contract.”); Billy Mernit (“Beyond all the negotiations, the percentages and the politics, lies a simple mistake, a kind of a basic mis-evaluation. We've always, since the dawn of the industry, been belittled.”); and Craig Mazin (“I hate this strike, I hate the circumstances that led to it, I hate the missteps that occurred along the way, and I really hate to say ‘I told you so’ to all the people who said ‘Patric Verrone will keep us out of a strike!!!’ …but the strike is here. Back it all the way. And if the companies are serious about eliminating residuals (which is what much of their proposal would achieve), then back it to the death.”). On the fun side, there’s Diablo Cody, screenwriter of Juno, (“Even striking can be fun when someone's blasting ‘Sir Duke’ and donuts abound,” and “The best part of this afternoon was when Jeremy Piven drove off the lot and we all screamed ‘PIVS! PIVS!’ at him like lovestruck Beatlemaniacs.”). I also got a kick out Ze Frank’s video blogs. Check it out. He’s hilarious.

I want to touch upon something no one else has written about yet, not even in the media, I don't believe. This problem honestly has nothing at all to do with the writers nor with any of the things the writers are asking for, especially when it comes to residuals. What the writers want in terms of percentages is so miniscule and would have such an inconsequential impact on the business as a whole that it’s stunning the AMPTP would even debate the subject. Our contract was 20 years old. What did they expect? It’s not our fault we’re asking for a revised (and still very reasonable) percentage of residuals, which should include internet downloads. The simple fact is, the fight against the writers is symptomatic of bigger industry-wide issues. Whether we ultimately do or don’t get what we asked for, this still won't solve the problem of the great big elephant in the room.


BIG, BIG ELEPHANT

Unlike some of my colleagues, I’m actually sympathetic toward the studios and their difficulties with endlessly rising costs of production and distribution. The financial risk has never been more sky-high than it is today, and it is a fact that many studios are losing money. Did you guys hear about the
recent report put together by Global Media Intelligence that was called, “Do Movies Make Money?” As reported in the NYT, “The study estimated that all such releases last year would yield a combined loss of $1.9 billion after collecting the revenue from an entire first cycle of sales to domestic theaters, foreign theaters, home video, pay television and every other source of income. Total sales for last year’s slate, the company figures, will ultimately be about $23.7 billion, down about 4.6 percent from 2004. Total costs, meanwhile, rose to $25.6 billion, up 13.2 percent.” Concurrently, the studios are “paying out shares worth $3 billion, while piling up an almost $2 billion loss on their new films.” Out of the $3 billion in shares, us lowly writers only got a mere $121.3 million in residuals. THAT'S NOTHING. Do you see how trivial all this arguing about residuals is?

The real problem with rising costs has nothing to do with writers, directors, or (most) actors but it has everything to do with this antiquated Hollywood film distribution system, which should’ve been demolished years ago. And I don't mean “restructured.” Or “re-organized.” I mean total annihilation. Gone. Poof. Out of work. You studio guys want to cut costs? Well, THERE is your big elephant. Fix that problem instead of punishing the writers. It’s absurd in this day of streaming videos and next day DVD arrivals from Netflix, that Hollywood should still live in the past and spend billions and billions every year to ship those heavy canisters of film reels to tens of thousands of theaters around the world, only to have it all shipped back to them a few weeks later when it’s over. In this day and age, it ought to be dirt cheap to get films into theaters. What costs billions should only cost nickels. That eliminates risk. But we've reached a point where the rest of the world has figured out all the things Hollywood could not and now more and more people stay at home to watch films because the quality of home theater systems is better than what you get in theaters. And no one kicks the back of your chair.

I’ve been thinking about this since the days when Lucas tried and failed to get theaters to install more digital projectors before he released Revenge of the Sith. There were articles and conferences and all this talk and NOTHING HAPPENED. Every business evolves. Yet Hollywood is unshakeable. And now the studios are quite literally paying the price for failing to embrace the digital revolution. It’s like this giant bloated cow that can’t move forward and actually chooses to waste mountains of money and manpower and expenses to stay propped up on this antiquated low-quality distribution system that’s been around since – what – the 1930s? If a director (like Spielberg) wants to film something on film – GREAT – but at least be willing to transfer the finished film onto some kind of digital platform to save costs on distribution.

As far as I'm concerned, the middle man should be cut, the studios should be dealing directly with theater chains, they should be shipping piracy-proof DVDs to theaters for next to nothing, digital projectors shouldn’t have to cost theaters one penny more than what regular projectors cost, and money can be transferred back to the studios at the point of sale. That’s not science fiction. That’s a practical business solution to rising costs. If I had the money, I'd start a new chain of theaters that would only project films digitally, refuse to talk to distributors, and deal directly with the studios and any other production company that has a good film to show. Fuck the system.


Check this out. Of the Global Media Intelligence report, Scott Macaulay recently
wrote, “…what I'd be curious about is whether distribution revenues are separated out from profitability analysis. Typically, a studio's distribution arm will take a distribution fee that is calculated as a percentage of box-office receipts. They also take video and foreign sales fees. What remains -- after gross participation and distribution fees -- is what's credited back against the film's costs. And yes, many films never see the balance sheet tilt into the positive. I've seen many indie-film business plans that simply look at box-office numbers and never try to figure out how much money is left for the producer after P&A, the theaters' cut, and distribution fees...”

Are you kidding me?

Friends, the problem is not with the writers. It’s with an old industry that's long overdue for a complete overhaul top to bottom, front to back, and side to side, just as much as it needed it back in 1945 when (as Warner Brothers was reworking The Big Sleep)
Raymond Chandler bitterly wrote, “I am not interested in why the Hollywood system exists or persists, nor in learning out of what bitter struggles for prestige it arose, nor in how much money it succeeds in making out of bad pictures. I am interested only in the fact that as a result of [the system] there is no such thing as an art of the screenplay, and there never will be as long as the system lasts, for it is the essence of this system that it seeks to exploit a talent without permitting it the right to be a talent. It cannot be done; you can only destroy the talent, which is exactly what happens - when there is any to destroy.”

-MM

26 comments:

Carlo C. said...

Mystery Man, have you watched this video? It touches on, more or less, the same things.

http://carloconda.blogspot.com/2007/11/long-term.html

Mystery Man said...

Hey Carlo, thanks so much for that. I did not see that vid. I don't entirely agree. I've heard talk like that on the picket lines, but I just think that the AMPTP was simply dead-set on not losing more money. Those were their marching orders. But everyone's ignoring entirely the real problems of the industry and bickering with writers, of all people, over tiny percentages.

IMHO.

-MM

Christina said...

Your ability to look at the big picture is commendable. I don't think many people have put the strike in its proper context - as a symptom of a much bigger problem with distribution, etc. Wow. We should all link to you so that everyone reads this post. Better yet, if you put on a funny hat and rap it into a video camera, you could have like 10,000 hits tomorrow on youtube. ;-)

Mim said...

Excellent. I've been wondering for a long time why films haven't gone digital. They could be so much more flexible.

Is it true that all the money collected at the box office goes back to the studios and the theaters are kept in business by the concession stands?

Matt Spira said...

Here's a very interesting blog post from Marc Andreessen:

http://blog.pmarca.com/2007/11/rebuilding-holl.html

He touches upon a lot of things, but particularly relevant to your post is the following:

What are the probable long-term consequences of an extended strike?

First, ongoing alienation of a new generation of TV viewers.

The music industry's war on digital distribution over the last 10 years, starting with their assault on Napster and continuing to all the present-day RIAA fiascos, has permanently alienated an entire generation of consumers, who are now voting with their wallets and not buying music. They're still going to concerts, buying artist merchandise, buying video games that contain lots of music, even voluntarily paying Radiohead directly for free album downloads -- but mainstream recorded music revenue is dropping like an anvil in a Bugs Bunny cartoon, with virtually no hope of recovery.

The TV and movie industry has already been conducting their equivalent war on digital distribution; as a result, most of the new consumers -- kids, college students, young professionals -- view iTunes and Amazon Unbox downloads as "too little, too late" when it comes to giving them the ability to watch what they want, when they want, on whatever device they want.

I think the TV and movie industry is at a turning point where things could go either way -- they could repeat the critical error of the music industry and permanently alienate their customer base; or they could get it together and create viable models for the future that make consumers happy and make money.

The situation already wasn't looking too good, but the one even more effective way to alienate viewers than attacking their viewing options is to actually kill the programs they are watching.

Which is what an extended strike will do.

Second, driving consumers even faster to the new range of activities they can engage in.

We all know the list: the Internet, social networking, user-generated content, blogging, video games, mobile phones, you name it. All the activities that consumers have discovered and adopted since the last writers' strike in 1988, that they just love, and that have already been siphoning away time, attention, and money from TV and movies even without a strike.

Obviously, the less scripted television and film content that's being produced, the more alienated consumers will shift over to all the new activities -- and the less likely they will ever go back.

Matt Spira said...

And to add my personal take on your post, I think one of the reasons why the industry is reluctant to go digital in theaters is even as it would reduce costs, it would also reduce control of and increase access to theater screens to competitors. The studios would in effect be ceding control of what is shown in theaters to the theater chains.

And as I posted on triggerstreet, "Hollywood has built it's reality on the fact that it had previously so effectively controlled the channels of distribution to deliberately create an inefficient marketplace to the benefit of its own products. (The same thing that sustained the music and publishing industries for generations.) They very effectively shut out other competitors from access. What digital distribution is doing is fundamentally changing that reality, and very soon, it is no longer going to be possible to rely on control of distribution to generate revenue or keep out the competition. This is going to be true on both the film and television sides of the house."

bulletin.triggerstreet.com/phpbb/viewtopic.php?t=42082

Joe Valdez said...

Great article, Mystery Man. Finally - instead of going round and round over cents and percentages - there's a writer who's actually dealing with the big picture here.

I believe the future will be who can get their movies to people in airports or to people in their pajamas at 12:45 am. Theaters have already begun to cease being the choice medium for audiences to see a movie. Digital theaters are interesting, but the big picture, to me, is a mass audience being able to pay for and stream full length movies over the Internet for their plasma TVs or their PDAs.

This is why I support the writers in principle, but I don't think too many of them realize the economic model they're haggling over is going to be extinct within 20 years.

If Radiohead no longer needs a record company to distribute their albums, in a decade, I doubt very seriously filmmakers are going to need a studio to produce, market or distribute their films in the short term future. Whatever deal the WGA negotiates is going to be worth as much as a non-aggression treaty during World War II.

Christian M. Howell said...

Great post MM. I actually stayed away from the writing trade because of the nonsensical structure of Hollywood.

I mean, screenwriters are like specialty surgeons that are called in to do a delicate, risky operation that requires return treatments.

But that $1.9B number sounds about right. Sure it's smart to divide the risk, but having too may hands in the pie is the problem.

I mean how hard is it to figure out that giving 30% gross participation costs a lot more than .3% for fifty screenwriters.

Do they actually have professional accountants at the studios? hey should be telling them the system is BROKEN and it's not the fault of screenwriters.

Limit the slices of the pie. Don't sign first dollar deals. Believe in the people who spend their lives in the pursuit of entertaining cinema.

Oh well, I hate talking about the strike. My year was going so well "breaking-in" wise. But I'd rather stand up to foolishness and greed. That's why I'm happily no longer a Microsoft employee.

You want to talk about a broken model.

Joshua said...

Nice post, and I certainly agree that one thing that has to change is how movies are distributed . . . one small problem . . . isn't there a projectors union?

Not that it changes anything, in my mind . . . just thought it should be brought up . . .

I don't know that studios are losing money on the bottom line when it comes to movies . . . they're losing it during regular theatre runs . . . but I think they're making up the lost ground via dvd, internet, etc . . . .

bob said...

This whole hollywood business model has me scratching my head. I found it enlightening that distributors are such a big piece of the pie.

Has anyone ever seen a breakdown of costs for a movie from conception to after release distribution that would give us schmoes an understanding of where all the money goes on a typical release? I always sensed that a great deal of inefficiency is woven throughout the whole process.

AlCielo said...

The biggest problem isn't studios not paying residuals to writers (which they should, from both an ethical and practical standpoint), it's studios paying writers for mediocre scripts.

I think your point about digital projection is valid, but it's a one-time fix. There's a larger problem, and it's that moviegoers / fiction TV watchers are turning to other forms of entertainment (not just YouTube, but NASCAR, girls' soccer, video games etc.). Until Hollywood (whether it's a megastudio or a pimply kid with a webcam) realizes that audiences don't have to put up with the B-movie fare that passes for feature films, or clones of clones of TV shows, then improved production and post-production efficiency will only slow the bleeding.

There's a mouse in the room too: the script reader. As long as spec scripts have to pass through this mouse hole (an intelligent, educated but untrained, inexperienced individual who has to play it safe to succeed), then the output (whether spec scripts or at the opposite end of the mouse hole, assignments made to writers whose previous film was a success, i.e. didn't lose as much money as other films) will be pablum.

There simply aren't enough enthralling stories being filmed. If I had to choose between "Dan in Real Life" and "Flavah of Love," I'd go with the reality show. At least I don't know how it'll end, and I care slightly about the people.

crossword said...

I remember when Buena Vista (aka Disney) experimented with digital distribution, back when they released "Chicken Little" (2005)... by all accounts it was a success, though there weren't many cinemas with that kind of projection equipment (a total of 85) and the 80 minute length of the movie helped immensely.

I think it's smart to consider the bigger picture, MM.

I'm not sure that distributors will ever disappear entirely though... after all, the famous Supreme Court anti-trust case in 1948 (U.S. vs Paramount) forced the creation of distribution companies in the first place.

Hey man, thanks for the post!

paclingan@yahoo.com said...

FWIW the DVD extras on either Robert Rodriquez's ONCE UPON A TIME IN MEXICO or SIN CITY include a Q&A at a conference or somesuch in which he says: "Film is dead." and he cites the expense and technological limitations as the reason he'll never use film again.

Of course, as things are set up now, even if something is shot digital it has to go through an expensive process of conversion.

My only question here is that, as posted, is the idea of pirate-proof DVDs. As I understand it, HD cameras are cheap and I suppose that the recordings could be done on Blue Ray or HD Disk. (I dunno, just taking a flier here because Rodriguez said he shot using HD cameras.)

And just out of curiousity, how do digital projectors work? What are they projecting? Can how they receive information to project vary? Could it be a direct HD feed? Do they use an HD disk or DVD?

thx,
Paul

Mickey Lee said...

MM

My college job was managing a movie theater (the one on 11th Street and 3rd Avenue to be exact) -- so I have a unique perspective on all this just because I've seen that end of the business. I have to say I agree with your points about distribution to theaters being a huge cost saving measure. I mentioned it on one of the TS boards but it kinda fell by the way side....

I remember carrying some of those big heavy canisters up to the projection booth! There's a lot of money wasted on that stuff. And if they break, you have to order a new print!

Josh -- there is a projectionist union in NYC, but pretty much everywhere else the managers run the booths (which is why you'll get the best screenings in New York!). But all that means is that there has to be a guy from the union running the booth. These guys are bright enough to be taught how to turn on a digital projector.

Interesting sidenote -- back in the mid 90s some of the Manhattan theater chains were in tough negotiations with the projectionists union. So they made some of us managers go to the state licensing board and take the test. Some of the most archaic, esoteric technology questions were on that thing -- Thomas Edison would've passed it with flying colors, but to someone brought up in the digital age, it was all Greek to me.

As much as I hate to say this, I almost think it would be a good thing if the studios were allowed to buy up all the theater chains again (they were separated back in the 40s or 50s, I believe). We've got so much conglomeration in other areas of the media, I'm not sure why this one thing has not be deregulated. It seems with so many ways to acquire visual content, it's not that big of a deal anymore.

That, and a reduction of some stars' salaries (the $30 million club to be exact) would do a lot to help put Hollywood back in the black.

Mystery Man said...

Christina - XOXO

Mim - No. Theaters get a cut.

Matt - That's a great article. I had not seen that and, of course, I agree with him with the exception of that part about more power put into the hands of the artists. The guys/girls who can greenlight will always have the power, but there won't be such an insane concern about diluting the stories to appeal to the broadest possible audience because the risk won't be so sky-high. Eliminate the risk and true art can begin again. IMHO, of course! To your point, Matt, I completely agree about the fact that giving up control is ultimately what it's about it, which is what will make the change near impossible. But losing 2 billion a year should open their eyes. They're behind an entire country and the longer they wait, the more money they'll lose.

Joe - Great points.

Christian - I stay away from trade, too, because it's not my specialty. I completely agree with you.

Joshua - Is there really a union now? Oh my God... They used to be making it up with DVDs when it was all so new, but now those sales have flattened and they have no where else to turn.

Bob - People in the industry get confused.

Alcielo - This "one time fix" would chop off, I dare say, about ten billion a year in expenses, and I don't think that's an exaggeration at all. Consider all the planes and the fact that every single movie has to be driven to every single theater in the country and a guy has to be paid $$ to carry those heavy canisters into every theater... It's the rising gas prices that's killing them. I mean, you guys are actually paying GAS for every movie to get delivered to every theater? Are you kidding me? DVDs could be shipped for pennies. With respect to script readers, some are actually quite brilliant. Like everything, it all depends upon the individual. I'm not bothered by that process so much. It's never hurt me. I mean, I love Billy Mernit. I trust him completely.

Crossword - Well, you're right in the sense that someone has to ship those DVDs. Get some interns to do it or something. Hehehe...

Paul - I think a DVD can have a protective covering to prevent it from getting popped into a computer, the kind of covering where, if you take it off, it'll ruin the DVD kind of thing. This isn't my area of expertise, but I KNOW it can be done somehow. With respect to your other questions, I'm not technically savvy enough to say. I just know that THIS is the problem.

Mickey - I, too, used to be a projectionist! It was in my younger days at an undisclosed theater somewhere in the U.S. I ruined a print of Terminator II. Cost my manager a bloody fortune to get it replaced. To this day, he still won't forgive me, but he can laugh about it now. I wonder how the cameras look nowadays. I wonder if they still use those three big flat platforms. My best friend at the time, Steve, did all the splicing for trailers. We had such a great time. Those were good days. I have likewise entertained thoughts about studios buying up theater chains and frankly, no actor is worth more than $10 million a film. Period. There should be salary caps.

-MM

Carlo C. said...

Christian, could you clear up what you meant when you said 'I stayed away from the screenwriting trade"? Are you a screenwriter or nay?

I'm probably missing something. :P

Mystery Man said...

I think he just means that he doesn't write in his blog about the trade. Like me, he just stays focused on the craft. Bottom line - our job is to deliver superb scripts, ya know? Others more knowledged than us can worry about the industry's problems.

-MM

Carlo C. said...

Ah, I see.
I'd assume knowledge of the craft would only help the honing of the craft, but I could also understand why others would see it the other way around.
In a way, getting into the 'trade' side of things could corrupt or taint the craft or - as I'd rather call it - the art of screenwriting.

Mystery Man said...

Ya know, I didn't say it right. With "trade," I think we mean the business side of things, but with "craft" it's studying the "art of screenwriting." Sorry about that. "Trade" wasn't the best word to use.

-MM

Christian M. Howell said...

Carlo,

I actually meant screenwriting as a career. I couldn't get used to the idea of everyone getting accolades EXCEPT the screenwriter.

Now I'm willing to fight for it. Respect, that is.

Mickey Lee said...

Mim --

The theater gets a cut based on how many weeks of release. I'm not sure if the system has changed any since 10 years ago, but generally it worked like this:

1st Week -- 90/10 Split (90 to the studio, 10 to the theater chain)
2nd 80/20
3rd 70/30
4th 60/40 and so on. This was based on the old system, when movies played in theaters for months, and in the case of some films, a year or more.

All that got chucked out the window when the theater companies inexplicably began building what are known as megaplexes. You know, the 30+ screens with stadium seating and all that jazz. So now, a movie is in wide release for all of about a month before it starts disappearing from the theaters, and since most films are seen on the 1st of 2nd week of release, the theater is mostly just getting the 10 and 20% cut.

Talk about shooting yourself in the foot!

So now, theaters have had to come up with other ways to make up for lost review from extended film runs. Higher concession prices and commercials before the movie are part of it.

MM -- I'd think you'd need something with more resolution than even a Blu-Ray disc in order to show it on a huge theater screen. I think the idea (Lucas's, natch) was to have the movie beamed to the projector's via satellite! No postage at all!

Mickey Lee said...

Man, it's embarrassing how many mistakes I make when I post --

I meant "revenue", not "review"

Mystery Man said...

Mickey - Thanks so much for that. Correct, as always. I never even noticed the mistake. I knew what you meant.

-MM

Mark said...

The difficulty with theatre distribution is the sheer amount of data that uncompressed high definition video is comprised of. Blue-Ray and HD-Dvd are great for the 40 or 50 inch screen but they are highly compressed formats.

Digital distribution would take forever given that the final print sizes would be in excess of 660 gigabytes for a ninety minute feature. Consder that blueray can hold 50 gigabytes on a double sided disk. This means that you have to come up with an effective distrubution system that allows for cheaper distribution.

The internet isn't viable for those kinds of transfer rates. I worked for Imax on Harry Potter and when the film was finished in the digital realm, it had to be brought, in person, to Imax Los Angeles for creating the release prints. You couldn't 'upload' that amount of data.

So yes, they need to come up with a cost effective way of going digital but it isn't as easy as it is being made out to be. The technology is still behind and there is a need for agreement on how to proceed.

By the way, Imax has been developing a digital theatre system that will be rolling out in 2008 (so the rumour goes).

Mystery Man said...

Mark - Thanks so much for that. I really appreciate it.

-MM

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