Moviesandmoney.com

The Best Is Saved For Last: The Box Office Races To the Finish Line

2009-12-24T10:36:00.000-08:00

Many things have changed in the Motion Picture Industry over the years but one constant is the fact that the week between Christmas and New Years remains the single best moviegoing week of the year. The best is saved for last with the quality and quantity of movies to see and the extra time people have on their hands after they get through with their holiday celebrations. The marketplace expands dramatically from Christmas evening to the end of New Year's weekend, a span of ten days, being able to absorb more movies to coincide with increased moviegoing availability. So on the 52nd week of the year the movie business kicks into high gear, unlike so many other businesses, taking advantage of everyone else slowing down, schools being out, vacations being taken. Even with today's multitude of delivery platforms, one of the favorite traditions Americans enjoy during the holiday break is going out to their local movie theatre and watching movies. In addition, there is a lot more momentum going into Christmas this year. The week before Christmas last year saw a Jim Carrey comedy, "Yes Man," as the top movie at $18 million; last weekend "Avatar" opened to $77 million despite the east coast blizzard which kept attendance down in several major markets. With the box office already passing $10 billion for the first time earlier this week, distributors and exhibitors are in great position and looking forward to an explosive week at the ticket counters. This final stretch will determine how high the record will be, some are predicting as high as $10.5 billion.

When something unexpected like a blizzard hits big market cities during the opening weekend of a movie, that can spell doom for most movies and their distributors. The way the business is structured, new movies hit the marketplace each week and the marketing campaigns are positioned to accomplish one objective, to deliver the biggest three day gross possible before the next wave of releases open the following weekend. That's why we see a new number one movie almost every week. If a movie fails to maximize it's opening gross for whatever reason, that lost business may never be recaptured, lost in the crunch of new competition. The adage goes, "a film has one chance to open and you better get it right." Well, "Avatar" isn't most movies and last weekend's blizzard is a mere hiccup that was easily shrugged off by its distributor 20th Century Fox. Fox knows they have the goods and with that great holiday playtime looming ahead, every admission lost to the storm will find its way back to the theatres and then some in the next couple of weeks. "Avatar," which has been described by Steven Spielberg as the best film he'd ever seen, is far from being a one week wonder. After seeing it myself, this should be the dominant film for several weeks and where it's eventual gross will land up is anybody's guess. If "Transformers" could gross $400 million, "Avatar" could surely match that and could even approach $500 million, especially with the higher 3D ticket prices. James Cameron dreamed big and he hit it out of the park. It was an experience for me that was similar to when I first saw "2001: a Space Odyssey" as an 18 year old. I saw some things on screen that I'd never seen before and it blew me away. It looks like it could indeed be the game changer the industry was hoping for.

Just about every critic and moviegoer who has seen "Avatar" is raving about it and repeat business is already being reported. The movie almost demands a second viewing because Cameron fills the screen with so many wonders you want to go back to see if you missed anything. The big question is how it will affect all the other movies, including the five films that will be going wide for the first time on Christmas weekend. When a movie opens and grosses more than all the other movies combined, that's pretty formidable competition. Let's look at the five films opening wide across the country:

"It's Complicated" - Universal - new
"Sherlock Holmes" - Warner Brothers - new
"Alvin and the Chimpmunks" - 20th Century Fox - new
"Up in the Air" - Paramount - national expansion
"Nine" - Weinstein Films - national expansion

Each of these movies have their strengths or they wouldn't be opening or going wide on Christmas Day. Lionsgate found out the hard way last year when they chose to open the less than stellar "Spirit" on Christmas and did very poorly, not able to compete with much higher profile and star driven films by the likes of Brad Pitt, Tom Cruise, Adam Sandler and Jennifer Anniston. This 2009 crop of movies should be able to hold their own and the fact that many moviegoers plan to see several movies over the next ten days will turn many of the holiday movies into profitable successes for their studios and financing partners. Let's start with "It's Complicated." In a male dominated Hollywood, director Nancy Myers is the industry's most successful woman director and her latest has the look of nice hit for Universal because it's core audienece of women 35 and over is the one demographic least interested in seeing "Avatar." Even though women make up half the population, Hollywood almost always seems surprised when women are able to carry a film by themselves. Last Sunday's New York Time's Magazine cover story posed the question, "Can Anybody Make a Movie for Women?" The article was mostly a profile of Nancy Myers and pointed out she's one of only four or so women directors getting steady work in Hollywood. Myers knows her way around romantic comedies and with a cast of Meryl Streep, Steve Martin and Alec Baldwin she can't lose on this one. The article also pointed out how difficult it is to make a winning romantic comedy. Sony's total misfire of "Did You Hear About The Morgans?" a week earlier with Sarah Jessica Parker and Hugh Grant confirms that as the movie received some of the worst reviews of the year and flopped with a $7 million dollar opening. There always seems to be one studio every year that falls short at the end of the year and this year it's Sony, whose only other December movie was the generic "Armored," which has come and gone after its December 4th launch. Oh well, there's always next year.

Warner's "Sherlock Holmes" has matched the "Avatar" marketing campaign dollar for dollar with each probably spending $50 million to open their films in North America. The strength of the studios remains their unmatched marketing and distribution organizations. They know how to get the job done on a massive scale. With their non-stop television commercials over the last two months, they've successfully re-postioned the Sherlock Holmes brand as a witty, fast moving action franchise which should pay off for today's audiences. Robert Downey Jr., between his two "Iron Man" stints, should help bring in both men and women. With all the adult films in the marketplace, Fox's "Alvin and the Chimpmunks: The Squeakquel" may actually be in one of the better positions to compete against "Avatar" because there's little overlap with the two audiences. With Fox as the distributor of both films, no studio is in better position to reap the rewards of the holiday season. Those who question the wisdom of another chimpmunk movie only have to be reminded that the 2007 "Alvin and the Chimpmunks" grossed over $200 million dollars. Nuff said.

Of the two Golden Globe nominees going wide, "Up In The Air" and "Nine," the George Clooney starrer should be able to withstand the competition in the best fashion. For one thing, the reviews are much better for "Up In the Air" than they are for "Nine" and there's better momentum and want-to-see for the corporate comedy/drama than there is for the musical based on Fellini's "8 1/2." They both add a touch of class to the marketplace but both run the danger of running out of steam before the Oscars in early March. What both movies are looking for is a spot in the top ten over the next two weeks and establishing a good base and word of mouth which can carry them throughout January and into February. The competition across the board is fierce. In addition to "Avatar," other holdovers like "Invictus," "The Blind Side," "Princess and the Frog," "New Moon" and "Brothers" will continue to draw audiences. In the larger cities, another part of the mix are the upscale films opening in art houses with Oscar dreams themeselves; Jeff Bridges in "Crazy Heart," Colin Firth in "A Single Man," Emily Blunt in "The Young Victoria" and Penelope Cruz in "Broken Embraces." This is the time of the year when movies for adults outnumber the ones for kids and teens. One of the laments heard often this time of year is why can't some of these films be spread out throughout the year. We'll be saying the same thing again next year so all we can do now is enjoy what's out there right now.

Christmas Day is a day unlike any day of the year, regardless of a person's religious beliefs. There is an eerie silence when you venture out because the roads are fairly empty and most everything is closed for the day. If a business is closed for one day of the year, it's Christmas. People are home with their families. Out of this vast wasteland of empty parking lots and quiet solitude stand the movie theatres, popping the popcorn and projecting the movies as usual, open for business as they are for each of the 365 days of the year. Always open. Never closing. Dependable. Trustworthy. Often maligned, taken for granted, but there in a pinch when you need someplace to go to get out of the house, get some entertainment, mingle with people, to feel alive. Even as most studio heads and many executives from various production and distribution companies do slow down, take some much needed time off and go on vacation, there is no rest for the weary for those who work in the movie theatres. Theatre managers, operation execs, projectionists, ticket takers, ushers, concession workers. The unsung heroes of the motion picture industry in which Christmas is not a day off but just another day on the job and a busy one at that. Some would call it the bottom of the food chain in the movie industry and perhaps it is, but it's a noble profession nevertheless and essential work that has remained the primary and lead platform in the exhibition of movies for over a 100 years. So when you go see some movies over the holidays, remember the workers who are there making it possible for you to enjoy yourself at a business that never closes. A thank you would be nice.

This is the world I began my film career in back in 1973 managing the Woods Theatre in downtown Chicago. My last Christmas Day I worked was in 1974 when Universal's "Willie Dynamite" played and it was, I recall, a full day of hard work
which began at 9:00 in the morning and concluded at around 6:00 p.m. By the time I reached my parent's house, Christmas was winding down and some relatives were already leaving. That's the life of a theatre manager, though it was only the start of a career which enabled me to do many things in the film business over the next 30 or so years. I'm also in the process of winding down my most recent career as a movie industry analyst for First Business, which gave me the platform to break down the economics of movies for 72 weeks in a row and provided the opportunity to begin the movies and money website. I felt it was a good time to end my participation in the show because the last week of the year concludes the 2009 movie season in what has turned into an historic, record breaking year at the box office. Analyzing and writing about the cycles and story lines of a 52 week season provided me with an excellent opportunity to study up close all the important movies, surprises, business trends, deal making and current economics which makes the motion picture business what it is today. I'm going to be working on expanding my writings into a definitive book on the 2009 season and adding much more material to it. In the meantime, this site will remain up to revisit all the archive entries as you choose. I'll keep you posted on my progress and I thank you for your support and interest in Movies and Money throughout the year, hoping you may have learned a few things along the way.
2009 Copyright David Sikich. Video clip used with permission by First Business LLC.

The Time Is Now For Avatar

2009-12-18T07:53:00.000-08:00

Finally. On the next to last weekend of the year, "Avatar" is set to open on about 20,000 screens around the world. In a year of big movies, this is the biggest, in scope, in budget and in expectations. If it seems like everything that has happened in 2009 has been a prelude to this weekend, well, that's not too far from the truth. If that's putting a lot of pressure on one movie, director James Cameron says "bring it on, I can handle it." The hype, of course, all begins with Cameron. It's been twelve years almost to the day that his last film, "Titantic" opened, still the all-time box-office champ at $1.8 billion worldwide and winner of 11 Oscars including Best Picture. We've been hearing about this film for years and Cameron has been biding his time waiting for technology to catch up with his ideas, while also doing his part in developing and creating new camera systems and software to pull off his grand spectacle. The time is now. The question is, can he deliver again? When you think about it, the timing of "Avatar's" release couldn't arrive at a more crucial and opportune time for the industry, in the waning days of the first decade of the new millenium and as the cleanup hitter for the dozen 3D movies that have played in 2009. "Avatar" is being called the industry's first real 3D blockbuster and everyone has been pointing to this movie all year saying it will validate the entire 3D business, for exhibitors to convert more of their screens to digital 3D and for audiences to prove that 3D is the real deal and the wave of the future. Since most of the prior 3D movies have either been animation or horror, the hope is that "Avatar" will hook more of the regular moviegoing audience and really bring it into the mainstream in a big way. In addition to being asked to be the exclamation point for the 3D movement, his movie is also being looked on to advance current film production with the technology that he helped create. In essence, "Avatar" is being asked to carry the torch for the entire industry. That's a tall order for one movie to have on its shoulders.

I read in one of the press interviews with Cameron where he referred to himself as being a modest man. I had to laugh at that one. The self-proclaimed 'King of the World' is anything but and that's what makes him who he is. He is bold, confident and knows he's good. He doesn't shy away from telling anyone who will listen that "Avatar" is groundbreaking and will change the way movies are made and how audiences experience them. When someone in Hollywood achieves great success and openly brags about it, there are those who will openly root against a film or filmmaker to fail, the old build him up, tear him down syndrome. Throw in a dash of envy, jealousy and bitterness and you have the recipe for Hollywood at its most spiteful. But that's not going on here with James Cameron and "Avatar." The man hasn't been around in twelve years. He made the most successful movie of all-time. Big movies help all companies, bring people back to the theatres, get the public excited, get eyeballs in front of trailers from competing distributors. He provided employment for 2,000 workers for three years, technicians, actors, camera operators, editors, caterers, special effects houses. Then there is the 3D factor, how can any distributor or producer not root for the movie which can be the game changer for the industry and solidify the process for years to come. 3D means higher revenues and hopefully a stronger theatrical business for years to come. Hollywood is coming together rooting for this movie to be as big as it can be, to propell the end of the year to record heights, pulling the rest of the films along with it. For once, the industry is looking at the bigger picture, DVD sales are down, digital downloads aren't picking up the slack, the theatrical business, though attendance has been up a few points this year, has been flat for a number of years. Specialty companies are being eliminated, studios are getting by with fewer workers. People are scared, worried about the future. Hollywood needs hits, the bigger the better. Hollywood needs visionary filmmakers, big ideas, giant productions that no other country can produce to fuel the global marketplace. Dream big, execute big and deliver big. They need James Cameron and "Avatar," right here, right now to do killer business everywhere.

How much did "Avatar" cost to make and how big of a risk is it for the studio? The guessing game of what the actual budget is for "Avatar" has gone to some ridiculous heights with a figure as high as $500 million being thrown around. This occurs in the press because studios seldom reveal their actual production budgets and it's up to sources in the industry to conjecture about it. 20th Century Fox's co-chairman Jim Gianopulas is on record saying "Avatar" is the most expensive movie the studio has ever made and pegs the production at around $230 million, $30 million more than what "Titantic" cost. But no one believes that figure. The best estimate is that the movie cost somewhere between $250 and $300 million and that Fox is spending $150 million to market the movie around the world where it is opening in 106 territories. The $500 million figure comes from journalists who add production and marketing costs together which is misleading. It's true that each of these costs are recoupable distribution expenses but they are separate expenditures and are not the same line item. Nevertheless, Fox will have over $400 million riding on it which will need to be recouped. That's a tidy sum. It's even more of a gamble on paper because "Avatar" is not a pre-sold entertainment from best selling books like "Lord of the Rings" or "Harry Potter," nor is it based on comic books like Batman or Spiderman. Rather it's an original story sprung from the mind of James Cameron. However, Fox is confident they will turn a profit and believe Cameron has delivered again. Does it have to do "Titantic" numbers for that to happen? No, I think Fox would take $300 million in North America and $600 to $700 million from foreign territories and they would be very happy with a global gross of about a billion, with the real profits coming from ancillary markets like DVD and television. It has a long way to get there and this weekend is just the start.

What does "Avatar" have to gross the opening weekend to put any worries at ease for 20th Century Fox? Well, it doesn't have to set any opening weekend records and it probably won't. It is the week before Christmas and people are still pretty busy getting ready for the holidays. Throw in a huge snowstorm scheduled to hit the big Eastern cities over the weekend and it becomes even harder to predict. Historically, this week is somewhat slow. It's interesting to remember that "Titantic' opened to only $28 million, but showed some of the best staying power in history by being number one for 14 weeks in a row on its way to a $600 domestic gross. With 3100 3D screens playing the picture with higher ticket prices and critics raving about it, "Avatar" will easily surpass the "Titantic" opening and should open to $70 million or more. It's not so much how it opens, it's how long it plays. Fox feels the key will be word of mouth and strong critics' reviews which is a whole lot different from most blockbusters which do it with pre-sold marketing and merchandising tie-ins. Fox makes their tentpole sound more similar to the formula used by smaller art films.

Be that as it may, Fox is not cutting corners on their marketing budget. Since it's an original story, the studio realizes it has to spend big money to make big money to establish the movie as a must see with the public. In the U.S., they're probably spending $50 million on prints and advertising. They have been running longer length television commercials for a couple of months now and it certainly looks like it's the most expensive media campaign of any 2009 movie. What has the money bought them so far? Well, not the female audience. The appeal is predominatly male and young men will initially drive the box-office as it does for the majority of action adventure blockbusters. This is what separates "Avatar" and "Titantic." The core audience for "Titantic" was women and repeat business by younger women and teenage girls fueled the record gross. "Avatar" will get its gross in a different way and hope that women will eventually come around as the result of good word of mouth and strong reviews. One of the problems Fox has had to deal with in their publicity campaign is the lack of a great single still image that makes the movie look interesting and compelling. One image, one scene from the movie which can capture its essence and become the face of the film and hook the audience all at the same time. With "Titantic," the photo of Leonardo DeCaprio with his arms stretched out with Kate Winslet at his side on the front deck of the ship with a sunset in the background became the indelible image seen in publicty stories, on billboards, posters and newspaper ads. Romance, grand adventure, spectacle, freedom, the power of love, all of that captured in one photo. The challenge of all marketing campaigns is to find that one strong image that can sell the film. Sometimes it's just not there. The publicty power of the single image is missing in action with "Avatar." The main photo image that publications and the internet have been running for months are the faces of a blue skinned man and woman which comes across as unreal and computer generated. Every time my wife has seen it she has commented "I have no interest in seeing that." As we have gotten closer to the film's opening, the face of the actor Sam Worthington has been used next to the female blue alien which is a bit more of a compelling image but still not very exciting. The problem with women being cold toward "Avatar" starts with that image. Is that a crippling blow for the film? No, but I am surprised Cameron and the 20th Century Fox couldn't come up with a more compelling single image to sell the movie's concept to the world.

With strong reviews and a Golden Globe nomination for Best Picture, "Avatar" seems destined to follow "Titantic" with an Oscar nomination for Best Picture. That will also be a boost for the movie industry and the Oscar broadcast since it will be the first blockbuster since "The Lord of the Rings" to do so. It won't be the favorite, at least it isn't now, but it will be a player. Critics are calling "Avatar" tremendous and spectacular and also mention the strong story with its context of anti-war, pro-environment, anti-imperialism themes running through it. That's pretty heady stuff for a big, sci-fi film and that's what separates it from the pack from all the other blockbusters who seem to always fall short in the Oscar race. The movie has some depth to go along with the spectacle and that's what voters look for. When James Cameron accepted the Oscar for Best Picture for "Titantic,' he screamed 'Im King of the World.' Maybe he'll prove he still is and we'll see another Return of the King.
Copyright 2009 David Sikich. Video clip used with permission by First Business LLC.

As Christmas Draws Closer, The Stakes Get Higher

2009-12-11T06:14:00.000-08:00

With Christmas Day only two weeks away and as the temperature and snow falls through large parts of the country, both the Oscar race and the boxoffice heat up as some of the most anticipated films of the year are set to open. There is always a debate about why the studios backload their best quality films in the last few weeks of the year but when you look at the situation more closely, it comes down to rational decision making by distributors. It's just great positioning. The timing couldn't be any more perfect with end of the year critics awards, top ten lists and the upcoming Golden Globe nomninations smothering these films with love and attention which in turn creates extra awarenesss and want-to-see among moviegoers. Last year the five contenders for Best Picture all came out in the last seven weeks of the year with three of the five being December releases. It's too bad we have to wait until the absolute end of the year to see some of the best films, but it does make for excellent moviegoing during the holidays. The ante is raised this year with the Best Picture race being expanded from five to ten films which gives more movies a chance at the top prize. To prove the point about December being crowded with potential award nominees, up to half of the Best Picture candidates could be opening within a three week span in December. Take a look at the following films in the order they are being released this month:

"Up in the Air" - Paramount
"Invictus" - Warner Brothers
"The Lovely Bones" - Paramount
"Nine" - Weinstein
"Avatar" - 20th Century Fox
"It's Complicated" - Universal

These are some heavy hitters and the competition is going to be fierce. I can't remember a December where so many Oscar candidates are coming from the studios rather than from independent distributors. At least two of the above films probably won't make the cut for Best Picture, but it still points to the fact the studios should be major players in this year's competition. A reduction in studio specialty divisions certainly plays a part in this dynamic. Not that independents won't be involved in the race. Earlier releases from independents such as "The Hurt Locker," "Precious" and "An Education" will no doubt be part of the mix also. An interesting movie that has an outside chance to work its way into the top ten is the Coen Brothers "A Serious Man." If it accomplishes that, it will be due to Focus Features's strategy of keeping the release very small and being able to retain its core art theatres, biding time until the field gets sorted out. There are two basic realities at play here. A distributor never wants to have one of their top candidates be considered a commercial failure. Recognizing soon after the film's limited debut that suburban runs would be a challenge, they made the smart decision not to push supply before demand to keep the perception that the movie was doing fine. In addition, it's easier to book those good suburban theatres at a later date if they hadn't already played the film and failed with it. Focus has been engaging in the fine art of distribution.

One of the uncertainties in the Oscar race is whether or not one of the big commercial summer movies will be invited to the dance. The movie that is most mentioned as a possiblity to be nominated for Best Picture is "Star Trek," a very good and entertaining film. I wouldn't have a problem with that but if there was one summer film to include I would go with Michael Mann's "Public Enemies," one of my favorite movies of the year. The big mystery for me is how this film has never been part of the discussion and has been totally dismissed as having even a remote chance of getting nominated. The film received some excellent reviews including Manohla Dargis of the New York Times who called it "a grave and beautiful work of art" and it did fine commerically with just under a $100 million in boxoffice gross. I think it's a beautiful, stylish, hard edged crime drama which delivers on a lot of levels and has a superb Johnny Depp performance at its center. The criticism I hear the most is that it lacks depth and character development but I don't agree with that line of thinking. Universal must have read the tea leaves early on and has never attempted to position the movie as a Best Picture contender. Studios have to pick the movies they are going to push very carefully because it's an expensive ordeal which can add millions of ad dollars to an already expensive campaign. Perception is everything in Hollywood and "Public Enemies" is perceived to be a disappointment which didn't deliver on its full promise. But no one is going to tell me that "Public Enemies" is not one of the top ten movies of the year.

Just as the Oscar race is heating up, the boxoffice is beginning to build up steam, even though mid-December is a time moviegoers are still busy with school, work, shopping and holiday activities. Two movies are opening wide this weekend which matches the same output as last year when "The Day The Earth Stood Still" and "Nothing Like The Holidays" combined to gross $33 million betweem them. This weekend's two releases, Warner's "Invictus," and Disney's "Princess and the Frog" should easily beat that figure at somewhere over $40 million. These two movies couldn't be more different from each other but they happen to be both dealing with the issue of race. Let's look at "Invictus" first. Clint Eastwood at the age of 80 continues to make important films and his film on Nelson Mandella is almost certain to be in the running for Best Picture. Unlike last year when Warners opened "Gran Torino" on this very same week in only six theatres, "Invictus" is opening on over 2,000 screens. The difference in distribution strategy between the two films is striking. Warner's platform release of "Gran Torino" worked to perfection as they waited to early January to go wide, creating a huge demand and market for the film after they let the dust settle on the other big Christmas films. The curious thing is that "Gran Torino's mass appeal blue collar audience would seem to have been more conducive to a wide release and "Invictus," with its subject matter and more upscale appeal, could have easily gone with a slower, more deliberate pattern. That could be true but one can't argue with success. "Gran Torino" became Eastwood's highest grossing movie at $148 million, a figure the studio would gladly take on "Invictus" but probably will fall short of. Each year's crop of films are different and there are a number of different considerations studios make in deciding how to release a film. Is Warners showing more confidence with "Invictus" by booking over 2,000 theatres from day one? I believe so. It may come down to having more marquee power with three major names, Eastwood, Morgan Freeman and Matt Damon to sell to the public rather than just Eastwood's name on "Gran Torino." Or Warners felt more comfortable in mid-December after sizing up the competition it will be facing in the next few weeks. With "Gran Torino" there was a bit of mystery of what the movie was actually about so a few extra weeks in limited release landed up helping to define the movie more and grow the buzz. Getting back to this weekend, "Invictus" is positioned nicely to capture the adult audience with the animated "Princess and the Frog" as its only new competition in the multiplexes. If the film can establish an audience base and open in the mid-teens with its gross, it should have many weeks to play because Eastwood's films generally have strong legs. On the other end of the spectrum, Disney also is positioned nicely with the family audience with their latest animated film. Two weeks ago "Princess and the Frog" opened one theatre in New York and one theatre in Los Angeles with a $25.00 ticket in exclusive engagements which offered much more than just the movie. With interactive displays and Disney's stable of former princesses on hand, the movie has already amassed an unbelievable gross of $2.8 million, setting it up perfectly for its expansion into 3300 theatres. At this point, does it even matter that the movie stars Disney's first African American princess? Disney has a lot riding on this movie and could use a big hit. I think they're going to get it. Their princess merchandising line is a $4 billion annual business for the company and so far the merchandising for "Princess and the Frog" has been jumping off the shelves so it looks like it's another one of those movies that could be the right movie at the right time. These animated movies take years to make so Disney had no idea who was going to be in the White House at the time of the release. Having the Obamas and their own princess daughters in Washington only adds to the sizzle.

Speaking of being timely, right now "Up in the Air" is the movie with the most Oscar heat and is considered the front runner for Best Picture. That could change anytime in the next couple of months and it probably will since all the potential candidates haven't even opened yet. This may be a year when various films keep jockeying for postion and trading off on the lead and it stays a wide open race. But in the space of a few days last week, everything came together for this George Clooney starrer about corporate downsizing. The day before "Up in the Air" opened in 15 exclusive theatres last weekend, the film was voted Best Film of the Year by the National Board of Review; it then went on to gross $79,000 a theatre with long lines and sellouts all weekend with critics and audiences alike praising its charms. Yes, people are still being laid off, it's still a tough economy, but a movie that's timely and rings true, in the hands of an excellent director, in this case Jason Reitman, can become the movie of the moment. Audiences are connecting with it. It's real, heartfelt and entertaining all at the same time. It's the type of film we seldom see from a studio anymore, a story dealing with what's going on in today's world. When a movie is bold and hits the zeitgeist, it can go far. It reminds me of 30 years ago, Christmas 1979, when one of Columbia's Christmas films was "Kramer vs. Kramer." Back then, the studios had two tracks at Christmas and labeled their releases 'A' and 'B' based on boxoffice potential with the 'A' track films getting the better theatres. It was funny but often the studios guessed wrong with their own movies and the so called 'B' track movies became the more successful films. This is what happened with "Kramer vs Kramer," a film which tapped into the era of working couples, a yuppie divorce and the eventul child custody fight. Columbia didn't have much faith in the film and put it on their 'B' track and all it did was gross $109 million ($250 million in today's dollars) and win Best Picture of the Year. Will "Up in the Air" be this year's "Kramer vs. Kramer?" We'll see. By Christmas Day, the film will be playing everywhere in the country and the other films will also have had opened so the Oscar picture may have another favorite by then. Then again, it may not.
2009 Copyright David Sikich. Video clip used with permission by First Business LLC.

A $10 Billion Dollar Year Allows Exhibitors To Play Hardball

2009-12-04T08:15:00.000-08:00

You would think that after two record breaking weekends at the boxoffice and the holiday season upon us, peace and good will would be the order of the day with the studios and the exhibition community. But business is never as good as it seems or as bad as it seems. With distributors and exhibitors there is always a level of angst of what lies around the corner. For the studios, perhaps more than anything else, it's the dramatic fall off in DVD sales that has cast a dark shadow over profits. The studios have taken a big hit and they realize some kind of change has to happen. For exhibitors, it's the growing experimentation by the studios that threatens to shorten the exlusive window theatres enjoy. The latest example is with Sony, the only major studio with a hardware component, which is making their animated hit, "Cloudy With A Chance of Meatballs" available through their own internet enabled televisions, Bravia, free of charge a full month ahead of the DVD release. That's less than three months since its theatrical release and that follows Paramount's DVD release of "G.I. Joe" which also had a similar shortened time frame. Theatre owners monitor each DVD release closely and protest loudly when they see any departure from the slightly over four month industry average currently in place. Exhibitors know full well that shorter windows can start affecting their business. With the domestic boxoffice poised to pass $10 billion for the first time in history, theatre owners are adept at playing hard ball with the studios. This is the nitty gritty nature of the business, part of the inherent checks and balances, the tug of war where two large powerful forces are on different sides of the table but still depend on each other deeply.

It's timely that theatres are generating so much revenue this year, if that starts slipping, watch out, because that would give the studios reason to tweak things even more, similar to what we're seeing in the home market. When DVD sales were so strong for about a 10 year period between 1997 and 2007, studios would never have thought to upset Walmart, their most important customer, but now they are moving up Video on Demand dates and testing out other technology which directly impacts the big box retailers. Those retailers are losing some of their clout not only because they're selling fewer DVDs, but also because of their decisions to decrease the aisle space afforded to DVDs. This has given the studios an opening to go ahead and make some changes that affect the exclusivity of the DVD window. When your customers start contracting, they have less reason to push back. The opposite is happening with movie theatres where the major circuits have spent hundreds of millions of dollars upgrading their theatres, continuing to add digital, 3D, ultra screens, restaurants and other upscale amentities which have played a huge part in keeping moviegoers in the habit of spending an evening outside the home watching movies in theatres. Those powerhouse grosses the studios are enjoying are happening for a reason. The studios have asked for improvements in theatres and the theatres have delivered, betraying that trust at this time would not be acceptable. Studios have always been respectful and protective of their relationship with theatres, sometimes even to their own detriment. When I started in the business in the early 1970's, new patterns of distribution and exhibition were needed so movies could be delivered more quickly to audiences in a more convenient manner closer to where they lived in the suburbs. Downtown theatres still existed and they still needed product and the circuits operating these theatres controlled many of the top grossing theatres in the country. They wielded enough power and clout to have a say where pictures opened and the circuits had to protect their large investments in prime downtown real estate by insuring that enough of the top movies opened in them, including films like "The Godfather" and "Towering Inferno." Change was inevitable and by the mid-70's, downtown theatres started closing, never to be a force again. The point here is that exhibition has always had its needs and distribution often has worked along with them to preserve important relationsships forged over many decades of working together. Change eventually happened but it took its own course.

But something different seems to be in the air now. The big, lumbering studios seem to be moving more nimbly now, led by studio heads like Robert Iger of Disney, who would like to move into the digital age sooner than later and has shown a willingness to alter existing windows to accomodate a younger consumer audience who wants access to their entertainment in a more immediate fashion. Add to that this week's announcement of Comcast buying NBC/Universal and suddenly the movie business is looking at a potential new world order. A new set of dynamics enters the picture when the largest cable provider in the country buys one of the six major studios, an announcement no theatre owner was cheering. All of a sudden, the probability of a more aggressive VOD policy takes on a whole new meaning and urgency. It's a certainty that Comcast will be squeezing the theatres with shorter exclusivity and they have already indicated they would like to see a higher priced VOD tier in the neighborhood of $25.95 while movies are still playing in theatres. Anyone who thinks theatres would allow that to happen and be willing to play movies at the same time they're available inside the home is drinking some spiked kool-aid. That's not going to happen. It's weird sometimes that as more things change, the more they stay the same. There is a strange deja vu quality to this. In 1983, Universal attempted a day and date release with "Pirates of Penzance" in theatres and on pay-per-view. That was very radical back then and needless to say all of the major theatre circuits boycotted the movie and refused to play the picture and it proceeded to disappear rather quickly. There wasn't much interest in the pay-per-view showings either. A strange movie to attempt a day and date release on well before its time; I guess you can it "The Bubble" of its day. One thing that hasn't changed 26 years later is the cold hard fact that theatres will not be participating in anything that could lead to their demise. Remember, Universal is only one of six major studios, not the only major studio, so there will always be other movies to play.

It seems like Comcast is ready to start calling the shots over at NBC/Universal even as the acquisition faces tough anti-trust scrutiny and has to be approved by federal regulators. That can take up to six months to a year. It's been that long since regulators have been looking over the merger of Live Nation and Ticketmaster and there hasn't been a verdict on that one yet. The Obama administration came into office with a reputation of being against big media mergers. I thought there was no way Live Nation and Ticketmaster would be allowed to merge because the elimination of competition could lead to some serious ticket price increases for the public. I wonder what's taking so long to make a decision. President Obama also was elected on an antiwar platform and he's now sending 30,000 more troops into Afghanistan so I guess anything is possible with the eventual decision on the Comcast deal.

Getting back to the current situation on the screens, the marketplace is ready for another of its breathers. There are points in the year when moviegoing levels drop off and the first week of December is one of those weeks. 30 to 40 years ago some smaller theatres actually closed their doors in early December because there was nothing to play and there was so little business. It was a dumping ground for orphan films and movies that were considered losers by their distributors that just had to get played off. When you think of it, it's a long three weeks until Christmas and the whole idea of Christmas playtime is for a distributor to have his film in as strong a position as possible playing between Christmas Day and New Years Day, the absolute best moviegoing week of the year. Why risk jeopordizing your December movie with an early knockout when you can place it on December 18th or 25th instead. The first film to buck this trend was when Paramount opened the first Star Trek movie on December 7, 1979 and grossed $17 million in its first three days, a strong gross at the time. Universal tried to duplicate the feat the following year on the same week with "Flash Gordon" and got burned. The movie was off the screens by Christmas. It's much better than it used to be but the three national releases this week reflect the diminished expectations that early December offers. Miramax is opening "Everybody's Fine," a modest holiday offering starring Robert DeNiro as a father who decides to visit his four adult children scattered around the country after they couldn't find time to come see him. It has a chance to make it to Christmas if it's able to establish itself on the first weekend, but since Disney is downsizing Miramax I wonder if there is going to enough advertising support for it to make any kind of impact. Lionsgate's strategy to open "Brothers," their gritty wartime drama, wide on 2,000 screens is definitely risky and could be looked upon as an acknowledgment that the film will be a tough sell for audiences. They could have decided to use a platform release but instead they are rolling the dice and taking the screens and seeing how far they can go. The difference between now and 30 years ago are the megaplexes with all their screens. That gives a film like "Brothers" a fighting chance to stay on some important screens during Christmas, but if anyone really wants to see the film, they should probably see it in the next couple weeks. The third movie is Sony's action movie "Armored" which might be considered the old dump and run and getting the picture played off before the big heavy hitters open later in the month. Look for business to start perking up again next week as we move closer to Christmas when I'll also take a look at the Oscar caliber films opening in December. One of the top front runners for end of the year awards is Paramount's "Up In The Air" which is opening on exclusive runs this weekend and will be playing wide around the country by Christmas Day. Much more next weekend on the challenges and strategies Paramount is facing with "Up In The Air" and how some of the other acclaimed films are being handled by their distributors during this final stretch of 2009.

Finally, I would be remiss if I didn't mention the incredible performance of Warner's "The Blind Side" after only two weekends in release. In a 4th quarter where there have already been several sleeper hits, this inspirational football film has accomplished some pretty impressive things of its own. With an 18% rise in ticket sales, it became the first wide release of the year which saw its gross grow in the second weekend. On the other hand, "New Moon" opened on the same weekend and saw its grosses fall by 70%. For grosses to rise in later weeks, superb word of mouth is needed and exit polls proved that out. It was only the second film all year, along with "UP," which received an A+ grade from market research firm CinemaScore. Generally, big grosses are driven by big grossing theatres in the largest cities but "The Blind Side" is performing just the opposite. The smaller the theatre, the bigger the gross. Theatres in Texas, Alabama, Tennessee and Indiana are leading the way and proving once again different movies perform in different ways and that the theatrical marketplace continues to be full of surprises. Warner Brothers is enjoying the success of the film but they would be enjoying it a lot more if they actually financed "The Blind Side." As the studios continue to lay off risk and allow independent production companies to totally finance some of their releases, studios are often content to take just their distribution fees. This is the case here where Acon Entertainment financed the movie at a cost of $35 million. Warners will still make a tidy profit on the film with all their distribution fees, but it's nothing compared to what they would have reaped if it was actually a Warner's in-house production.

Questions for Discussion:
1. What gives exhibitors the right to play tough with the studios and what is the number one way they can wield their power?
2. In years past, why would some theatres actually close their doors during the first two weeks of December? Do you think this made sense at the time?

2009 Copyright David Sikich. Video clip provided by First Business LLC.

A Season To Be Thankful For

2009-11-25T14:07:00.000-08:00

The weekend before Thanksgiving 2009 was one for the record books. The feeling going into it was that it was going to be big with the opening of "New Moon" and some tasty holdovers but no one could have predicted that this particular weekend would become the second biggest boxoffice weekend of all time, behind only the July, 2008 frame when "The Dark Knight" debuted. Those weekends are usually found in the summer, not in a non-holiday November weekend. For that to happen, a giant opening movie is a must and this year the second installment of The Twilight Saga was the chosen one with numbers that simply were mind boggling:
Biggest midnight show debut: $26 million
Biggest opening day: $72 million
3rd biggest weekend of all-time: $142 million
All-time biggest November/December opening, $38 million more than 2005 Harry Potter
A first week gross of $188 million, $3 million short of the entire $191 million gross for "Twilight"

As the Thanksgiving weekend unfolds, there is a lot for the industry to be thankful for. When "New Moon" beat most estimates by $40 million, it was just the latest example of the various tracking services under-estimating opening weekend numbers. It got me thinking about the overall marketplace in terms of the surprising movies we've seen just in the last five or six weeks. "Paranormal Activity,"
"Precious" and now "New Moon" have done things and established records that no movies had done before and they couldn't be more different from each other. A low budget horror movie, a gritty urban drama, a teen vampire love story, and it's interesting to note that none of these were in 3D getting higher admission prices to pad their grosses. Whereas the big numbers and new records are welcome news for the movie industry, I was wondering about the real meaning behind the eye popping numbers. Was it a mere coincidence that the three movies came out so close to each other in the October/November corridor and performed so well? Was it tied to superior marketing by the distributors? Was it because all three had loyal, large niche bases that they were able to reach? Certainly these were factors in the overwhelming success stories of the films but I believe there's something else in play here. It's an affirmation of how healthy the theatrical business is and how it continues to function at such a high level. As everyone worries on how to turn the internet into a more profitable business model and wonders where other new technologies will fit in, movie theatres continue to generate huge returns for distributors after more than 100 years in existence, proving time and again they are not only a viable business model but remain an essential business model for the motion picture industry. The approximately 40,000 movie screens are not going anywhere and the internet will not be bringing them down. The indisputable fact is that the movie theatre is an out-of-home experience and the need for people to get out of the house will always be there. The internet is mostly an in-home entertainment competing more against DVDs, television, cable and video on demand than it does with the theatres.

The resilency of the theatrical experience is impressive. It's not that everyone is a regular moviegoer or people enjoy every movie they go see. It's that the people who do go to the movies are loyal and go often. Every poll ever taken on moviegoing has shown that the frequent moviegoer (one who attends a movie at least once a month,) makes up somewhere between 75%-80% of the total moviegoing population. That kind of support has been good enough to keep the theatre business humming along. When the market expands for specific movies and taps into the occasional moviegoer (one movie seen in theatres every 2-6 months,) and the infrequent moviegoer (two or fewer movies seen every 12 months) that's when we see records fall and history being made. If the studios made better movies on a consistent basis, would more people become frequent moviegoers? Possibly, but patterns of behavior are pretty much established in people so the percentage of frequent moviegoers might not change much with better quality movies. Moviegoing is a subjective experience and people enjoy different movies for different reasons. Good movies sometimes fail at the boxoffice and bad movies can find a big audience, that's the way it is. It's easy for critics and others to look down on audiences who support movies they feel are a waste of time, but it's tough to play God on the personal preferences of others. They're paying customers and it takes all kinds of audiences, from high brow to low brow, to support the theatrical marketplace and they're doing a pretty good job of it in 2009.

As long as the theatres keep producing the grosses they've been doing, theatre owners will continue to carry a lot of clout with the studios in protecting their first run exclusivity. A little simple math on the first week of "New Moon" shows why. The first week gross of $188 million will return to Summit Entertainment somewhere in the neighborhood of $110 million to be paid in full within 14 days of the completion of the first week. With the intense demand for the film, that assumes Summit was able to negotiate an aggregate deal of 58% to 60% film rental for each week played on the picture. Collecting $110 million within 14 days is some very serious money. With a production cost of $50 million and a marketing cost of $25 million, profit was reached almost immediately with many weeks left to play and worldwide and DVD revenues to follow. Movie theatres are a cash business and when something hits, cash flows back quickly to the distributors. There is no waiting around for quarterly financial statements to hit and payments to clear 60 days later. The speed at which revenue can be generated and money can be collected is at the crux of every business deal. The theatrical deal remains a solid one.

The five day Thanksgiving weekend is an important holiday for movies, but a pattern has been developing over the years where the studios don't wait until the day before Thanksgiving to open their strongest movies. They know to put their biggest November movies earlier in the month so they can play longer and build up steam for the holiday weekend. The Friday after Thanksgiving is still one of the single biggest moviegoing days of the year, but the problem is beginning with Monday of the following week, business falls off dramatically. It happens every year as the calender shifts into December and it takes a little time for movie theatre traffic to build back up again. It's one of those seasonal cycles that is hard to buck. That's why the Wednesday before Thanksgiving releases never seem to be too exciting. "Old Dogs" and "Ninja Assasin" are average programmers that could be placed just about any other time of the year. The five day window is just too short of time to risk a stronger commerical movie because early December can easily suck the momentum out of even the strongest movies. Then when the new movies start opening in December, a movie can become yesterday's news very quickly and fade from view.
Copyright 2009 David Sikich. Video clip used with permission by First Business LLC.

World Savvy Summit Entertainment Proves its Mettle in Hollywood

2009-11-20T08:33:00.000-08:00

The six major film studios control a lot, but they don't control everything, and at times they make mistakes and allow projects to slip through their hands. That's always been the beauty and challenge of the movie industry for independent film companies, opportunities are out there, all you have to do is recognize what they are and then make the right decisions in figuring out how to capitalize on them. There are four commodities in Hollywood that matter most, power, money, talent and respect. For a distribution or sales company, respect comes from having your own domestic organization and proving you can successfully distribute films in the United States, still the crucial component that buyers everywhere look for in determining a film's value. Summit Entertainment had been a very successful foreign sales company since the early 1990's when they decided to start a U.S. distribution company in 2007. The key was to be able to strengthen their position by guaranteeing a U.S. release on all their movies they were selling internationally, something most other international sellers can't offer. A decision like that has buried companies in the past because marketing and distribution costs can make money disappear in a hurry, especially if boxoffice success proves elusive. And the hits were elusive for Summit in their first year as a domestic distributor with movies like "Penelope" "P2" and "Sex Drive" opening and closing without a whimper.

Even as Summit's first wave of releases were tanking, they had an ace in the hole because the company had earlier bought the rights to the Twilight books, taking advantage of Paramount choosing not to renew a $750,000 option they held on the rights. At the time, the book hadn't really taken off yet so it was a speculative risk. Being aggressive and jumping on the opportunity to purchase the rights to the four books proved to be the game changer for Summit. Exactly a year ago this weekend, "Twilight" opened to $69 million on its way to a $191 million gross, ($390 million world-wide) a tremendous success for a movie that cost $35 million with an unknown cast at the time. The momentum just kept growing in 2009 when the "Twilight" DVD sold more than 8 million copies, more than any other movie of the year. What we are looking at this weekend with the second installment, "New Moon," could be a record breaker, a gross in excess of $100 million, that would really send Summit to the next level. Pre-sales for tickets have been through the roof and "New Moon" has set the all-time record for pre-sold tickets on both Fandango and movietickets.com. There has been only one other movie in history to gross $100 million in its first three days in either November or December and that was "Harry Potter: Goblet of Fire" in 2005 with $102 million. Look for that record to fall this weekend. It didn't take long, but after that very first weekend last year, "Twilight" became an instant franchise for Summit because they were sitting on three additional books to film. That's the holy grail for any distributor, find new brands that have the potential to become franchises, and if that happens, maximize it to the fullest and don't try to screw it up. So far, they have been flawless in their execution and they didn't waste any time getting more productions started, actually shooting the second and third films of the series back to back over the summer with the third film, "Eclipse," scheduled to open June 30, 2010. All along, they have been able to keep production costs down, $50 million for "New Moon" and $60 million for "Eclipse," and needless to say, with their experience in international sales, Summit controls world-wide rights on all the properties and knows how to maximize those rights to the fullest. World-wide revenues for "New Moon" should top a half billion dollars. Very impressive.

Without a doubt, Summit is building their company around this series of movies and there is nothing wrong with that. Blockbusters of this kind can make up for a lot of box-office flops. But taking a closer look at the eight movies Summit has released up to this point in 2009, without the "Twilight" series, they are a struggling independent with a 2.25% market share. With it, they're a Hollywood player. The following are the 2009 releases and their grosses:

Push: $31 million
Knowing: $79 million
Next Day Air: $10 million
The Brothers Bloom: $3 million
The Hurt Locker: $13 million
Bandslam: $5 million
Sorority Row: $11 million
Astro Boy: $17 million

It will only take about the first ten days of release for "New Moon" to out gross the total grosses of all eight of their 2009 releases. That's the power of the franchise movie but it also points out the difficulty a distributor has in formulating a 12 month release schedule of diverse product that can deliver a profitable season. What they do from this point on will be interesting to follow. As the studios continue to withdraw from the specialty art business, there will be opportunities for other companies to pick up the slack on the upscale scripts and finished films that will be available to acquire. Summit has proven they can successfully handle a platform release when they nursed "The Hurt Locker" to a gross close to $13 million in the heat of the summer, not an easy task. They also experienced first hand how difficult it can be to make a star driven specialty title like "The Brothers Bloom" work in today's theatrical market, seeing it sputter out at the $3 million range despite giving it a strong marketing push. It would be good to see Summit as well as Overture Films (Capitalism: A Love Story) become bigger players in festival type films because there will be plenty of qualtiy films looking for distribution. Is the quality independent film just experiencing a temporary lull because the choice of recent releases hasn't been up to the output of past years? That's a question that will need to be answered by distributors like Summit and Overture as they map out their release schedules for the next couple of years. Summit at least will have a lot of those teen vampire dollars to spend as they look for which new movies to back and take a gamble on. I'm hoping they choose more upscale films like "The Hurt Locker" rather than low brow fodder like "Sorority Row" and "Next Day Air."

From a pure distribution standpoint, when you have a sure thing like "New Moon," there is nothing quite like it in terms of the clout you gain in dealing with theatre owners. 4,000 theatres throughout the country are playing it and they all wanted to play the movie, they all needed to play this movie. No convincing was necessary, no arm twisting was needed and since every distributor has to sell their share of dogs, it's a sublime feeling when your movie is the one that is most in demand and you have the power to demand a few things yourself. Especially when you are an independent like Summit. A few things are in play. It becomes the movie that will wipe your books clean, that will get all your accounts receivables paid in full before the prints are shipped. "You want the picture, this is what you owe me, and in addition, this is the amount of the advance that I would like from you seven days before you open the film. And by the way, our deal calls for full payment of your film rental 14 days after each week of playtime for the duration of the engagement."
Believe me, I've handled hot films like "Platoon" and "Silence of the Lambs" and it's an outstanding feeling knowing that you can call the shots, get all your past bills paid off and demand and get quick payments on your new film. Money sticks to whoever has it at the time and exhibitors get to keep it first so it makes the job a lot easier to collect it. That's the way the game was played in the past and that's the way the game is played now. When you have the upper hand in any negotiation, take advantage of it because you know the other side will when their chance comes up.

Summit Entertainment does a great job containing and cutting costs and during this economic downturn that has been the mantra for businesses everywhere. The studios are no different in this area and they have been addressing their costs in a couple of different ways. First, they're going after the big A list actors offering them less money upfront. It's harder to get that $15 million dollar payday now and even on the backend, greater compensation is being awarded only after a movie breaks even and starts showing a profit. The studios want to see the stars earn their paychecks. Too many stars have failed to bring in audiences like they used to. Stars like Julia Roberts, Will Ferrrel, Adam Sandler and Russell Crowe have had bad years at the same time movies like "Paranormal Activity," "The Hangover," and "District 9" have been huge grossers with no stars attached. Bad timing for the stars. The other thing the studios are doing is similar to what many other large companies have done, streamline their organizational structure. Both Disney and Paramount have recently streamlined their marketing and distribution divisions, replacing a number of separate divisions, now going to a single team to handle marketing movies every step of the way from theatres to DVD to pay television to digital downloads. What they are responding to are shorter windows and rapidly changing audience tastes. So formerly tall, deep organizations are becoming flatter, laying off mid-level managers and trying to be more efficient with fewer employees. Jobs that may never return. Good for the studios' bottom lines, bad for workers and those who would like to find jobs with the studios someday. This is the problem that's happening everywhere and you wonder when the jobs will return and when companies will start hiring again. Film companies have always employed huge numbers of people. I remember back in the 80's when Orion had home offices in both New York and Los Angeles and employed 500 people in total. That's when there were still 8 to 10 sales offices but I still wondered what everyone did. I guess it took the worst recession in 70 years for studios to wonder the same thing.

Questions for Discussion:
1. What has been the road to success for Summit Entertainment? The path they took was unusual. Where did the company come from?
2. What is the best way a distributor earns respect in Hollywood and if it arrives, what comes next?
2009 Copyright David Sikich. Video clip used with permission by First Business LLC.

A Gritty Urban Drama Turns Heads and Sets Records

2009-11-13T05:16:00.000-08:00

In the field of economics, the term 'invisible hand' refers to the marketplace behaving as if some unseen force is guiding it, sorting out all the goods and services, winners and losers, in accordance to overall market demand. Perhaps it was time for the market to really embrace a serious independent film in 2009 after so many disappointments at the box-office, to go along with the contraction of viable distributors with the resources to turn small movies into successes. If that was the case, the 'invisible hand' didn't act alone last weekend, it received some big help from two outside forces. There were a lot of question marks surrounding the festival sensation "Precious" as it opened in 18 theatres in New York, Los Angeles, Atlanta and Chicago on Novemebr 6th. Many of them were answered with an exclamation point. When I drove to AMC's Country Club Hills Theatre in the south suburbs of Chicago on opening night for the 8:15 show, I didn't know what to expect. All I knew was something was doing business as I circled around a very crowded parking lot trying to find a place to park. When I walked into the theatre, I had my answer. "Precious" opened to blockbuster business, selling out every show of the day and night and I couldn't get in, deciding to come back Sunday morning to see it. Talking to the manager, he had already ordered two additional prints, saying it projected out to be the biggest movie of the year for his theatre and this is a theatre that plays every studio event movie released. The sell-outs continued all weekend and the theatre landed up grossing $150,000 for the 3 day weekend, one of four runs in the Chicago market which totalled $443,000 between them. Nationally, the 18 theatres grossed an out of this world $104,000 per theatre, an all-time industry record for any movie opening in more than five theatres.

The box-office performance of "Precious" is a singular, historic achievement never before seen in motion picture history. Whereas "Paranormal Activity" had "Blair Witch Project" to compare it to, there is no such comparison to be made with "Precious." Grosses like this just don't happen with black art films, which in the past have made for a very small sub-category of films. "Precious" entered the Sundance Film Festival, like so many other independent films, looking for a distribution deal and it got the best one, securing a $5.5 million deal with Lionsgate and emerging as the most heralded film of Sundance winning two awards. There have been countless, other excellent films that have emerged from festivals that couldn't catch a cold once they opened in commercial theatres. Just a year earlier at the 2008 Sundance Festival, "Ballast," another hard edged drama with an African American cast, won two awards and had critics and audiences raving about it. The director decided to self distribute his film after an earlier deal broke down and the movie grossed less than $100,000. Unfortunately, this is a typical performance for a gritty urban drama. It's tough to get audiences to come out to a movie theatre to see any independent film these days, much less one depicting a 16 year old black girl experiencing every form of abuse you could imagine, much of it coming from her own mother and father. Four star reviews and festival awards are not enough in most cases to insure success in the marketplace. Tough, depressing realism is a tough sell however way you slice it. This is where the two outside forces I referred to earlier enter the picture. Oprah Winfrey and Tyler Perry, perhaps the two most influential black Americans in American pop culture, have been promoting "Precious" non-stop for the last eight months. Even though they weren't involved in making the film, their passionate praise and calls for support for the film helped create the intense demand seen in theatres last weekend. That kind of influence is real power, marketing, money can't buy. Winfrey's commitment to do multiple shows on the film and Perry's use of his 40,000 plus e-mail list provided the platform to get the word out that the vast majority of films could only dream of. Good for director Lee Daniels and everyone involved in making this excellent, gut wrenching and yes, in the end, inspirational film. They won the lottery and they earned it.

For agreeing to promote the film, Winfrey and Perry were given executive producer credits, generally reserved for those individuals or companies who actually finance movies, arrange for outside financing, or through their participation lead other investors to come on board. The actual investors of the film are a wealthy Denver couple, Gary Magness and Sarah Siegel-Magness, who invested $10 million to produce "Precious." In many ways they have been pushed aside by the high profile duo of Winfrey and Perry, but they also realize what their support has meant to the film and what it means for potential profits down the road. It looks like they're leaving their egos at the door and if there are any Oscar wins, they will be the ones going on the stage to claim the prize along with the director, Lee Daniels. With a field of ten Best Picture nominees this year, "Precious" is a lock to be nominated. Hell, if it was still a field of five, it would probabaly still be a lock, that's how good the entire package looks at this time. So attention turns to the distributor, Lionsgate, on how they're handling the distribution strategy. In the last couple of years, Lionsgate has moved away from smaller artier films and has concentrated on their bread and butter of more mainstream action movies. It's interesting to note that the only film festival acquisition to ever go on to win Best Picture was "Crash," bought by Lionsgate at the 2003 Toronto Film Festival, but lately they haven't been players in the festival acquistion game. That all changed for the company this year at Sundance after hearing Tyler Perry was on board to promote the film. Being in the Tyler Perry business has been very good for Lionsgate and they out bid Harvey Weinstein to make sure they got "Precious," knowing full well the potential of Perry's huge core audience of loyal fans. I questioned the fact that none of the five theatres in the original Chicago run was a traditional art house with Landmark's two theatres in the market left out of the release. Lionsgate's most crucial decision and the one which broadcast their belief in the film was to choose the mainstream City North Theatre on Chicago's upscale north side over one of the three main art theatres, Landmark's Century Centre, AMC's Pipers Alley or the independently run Music Box Theatre. After the City North grossed $89,000 over the weekend, it would seem Lionsgate knew exactly what they were doing. They were putting their money more on the Tyler Perry audience than they were on the traditional white art audience and they were booking the theatres accordingly. The audience I saw the film with at the Country Club Hills Theatre was made up of 95% African American women, the exact audience of Tyler Perry's movies. That's good distribution. It was reported that the exit polls showed the overall weekend audience to be split 50/50 between black and white audiences but I have my doubts about that. It appears that with the help of Winfrey and Perry, black women were the primary target audience while the white art audience was relegated to the secondary position. That's how I see it and if that's the case, we're experiencing another first with an art film.

With the Oscars four months away, platform releases are very tricky affairs for films with Academy Award potential. Do you strike when the iron is hot and go wide, or do you stay small and gradually increase your runs, recognizing you are in it for the long haul? Lionsgate's decision is to be aggresive and push the envelope. For their second week, they are expanding from 18 runs to 174 theatres, opening up some additional large markets and adding a substantial number of theatres in the original four cities. In Chicago, it's going from five theatres to 27 theatres, a strong push that will answer another important question, how deep will the white suburban audience support be for this tough minded film set in Harlem's ghetto? Since there is really no precedent to follow, Lionsgate is blazing their own path, forcing the issue and going after the audience that could make it into a true blockbuster. Will they be successful capturing the mainstream audience, like I said last week, stay tuned. On November 20, Lionsgate is taking the film out wide across the country in time for Thanksgiving. In a year of nothing but bad news for independent films, "Precious" is the one film with heat and is the one to keep watching.

The major studio release this weekend is Sony's disaster movie "2012," going out in over 3400 domestic theatres and 13,000 theatres in 105 countries, the second time in three weeks following "This Is It," that Sony is blitzing the global marketplace looking for gold. This summer-like special effects blockbuster was actually originally slated to open in the summer on July 10 before Sony decided on switching it to November. They did it for two reasons; to stand out more as the only big movie of its kind at this time of the year and to take advantage of a month that has seen tentpoles like Harry Potter and James Bond do blockbuster business. That sounds good on paper but it's impossible to know in advance if the results will match expectations. Big movies in November are asked to open to summer-like numbers but that doesn't always happen and instead of seven days of business in the summer, in November it comes down more to what happens over the three day weekend. Every weekend is pressure packed and a bit of a crapshoot. Already November has started 14% behind 2008 because Disney's "Christmas Carol" opened to less than half of "Madagascar II's" $63 million on the same weekend last year. New movies are released 52 weeks of the year and they're compared to the previous year's output, sometimes the current ones just don't match up. With a $200 million production cost, "2012" is projected to open around $50 million, a nice number, but it will be compared to last year's James Bond's "Quantum of Solace" which opened to $67 million. Whatever figure it opens to, the pressure is there in November more than it is in the summer to be more than a one week wonder and a movie like "2012" needs to show some staying power. Diffrent times of year, different dynamics. One thing it has going for it is that it's pure mindless entertainment, over-sized grand spectacle where audiences can go to forget their troubles for a couple of hours and watch the world end with a big box of popcorn in their hands. And for a lot people, that's what movies are all about.

Questions for Discussion:
1. Name the factors involved in the film "Precious" becoming a big box office success? How important was the release date and release pattern set by distributor Lionsgate?
2. Discuss the various differences between "Precious" and "Paranormal Activity" in the marketplace from type of film, release strategy, distributor to target audience.
3. Analyze two current films in the marketplace with platform releases; one that looks to be successful and the other which looks to be struggling.

2009 Copyright David Sikich. Video clip used with permission by First Business LLC.

Competition Heats Up at the Box-Office for the Final Stretch Run

2009-11-06T05:38:00.000-08:00

All industries have their own particular business cycles and the movie industry is no different. With Halloween in the rear view window and the pumpkins still out at the curb, the studios waste no time in turning their attention to the all-important final two months of the year. The month of November is the equivalent of May when the summer movie season opens and each of these months have evolved into prime playing time for some of the biggest, most anticipated movies the studios have to offer. It becomes a furious race to the end of the year and the releases are broken into two parts, the November movies which peak over Thanksgivng weekend and the December movies geared to Christmas and New Years. It took a number of years for distributors and exhibitors to work out a release arrangement that made sense for both parties. When movies used to open in mid-November, distributors expected theatre owners to hold those movies through the end of the year, but many of those movies faltered in the early parts of December and it would become unrealisitc for some theatres to hold on, leading to shouting matches, threats and a lot of chest pounding. The situation now is more rational and addresses the fact that movies have shorter theatrical runs. It becomes the law of the jungle. The strong movies will hold on and play as long as audiences are coming out to see them and the movies that falter will fall on the wayside and be allowed to die in peace.

What a difference a week makes. Last week Sony's "This Is It" was the sole opener and did its thing to the tune of grossing $104 million worldwide, the only way to really approach the performance of this movie since the studio paid $60 million for world rights and they blitzed over 100 countries day and day with the United States. Sony didn't even wait until the weekend was over to announce the two week limited engagement was being extended through Thanksgiving. That was a no-brainer. I don't remember a studio ever sticking to its announced limited time frame. You first create demand, then you extend the run. It works every time. The first weekend of November brings much more competition with four wide releases dueling for moviegoers and looking at the titles, all the movies seem to share a strange connection to some form of paranormal activity, something that's pretty hot at the moment with the movie of the same name. Even though they are all different from each other, that's not necessarily a good thing for business. Warners is opening "The Box," a Twilight Zone type thriller where a strange box is left at the doorstep of Cameron Diaz and her husband and where all they have to do is push a button on the box to get a million dollars, but the catch is a stranger will die because of it. Universal has "The Fourth Kind," a sci-fi thriller about supposed true accounts of missing people who have been abducted by aliens; Overture is opening perhaps the weirdest sounding title of the year in "The Men Who Stare at Goats" with a good cast including George Clooney, Jeff Bridges and Kevin Spacey in a story about a U.S. military unit investigating telepathy and other psychic phenonomenon. The movie is being positioned to get laughs but whether it's a farce, a satire or a dark comedy is hard to figure out and its tagline "No Goats No Glory" doesn't help to decipher it. It's funny sounding but a distributor has to have guts to go out with a copy line that makes no sense and doesn't advance the story. Even with that cast, if audiences don't know what it is, it's hard to be successful. Finally, Disney's big budget remake of "The Christmas Carol" kicks off the holiday season in the position to be this weekend's runaway box-office champ and even though it's a bit of a stretch, it also has the paranormal angle with the three ghosts visiting Scrooge. A romantic comedy would look pretty good about now. The key to big weekends is serving many niches and the new releases this week will fall short in that category.

November is the best month to release a Christmas movie because of the lead time and it's not unprecedented that one is opening on the first weekend of November ("Elf," Tim Allen's Santa Claus movies) but there is also an important consideration this year - maximization of all available 3-D theatres in the country. 3-D has been a fantastic growth generator for studios and theatre owners and there are only two 3-D movies left in 2009, "A Christmas Carol," and the biggie, James Cameron's "Avatar" on December 18th. Opening this weekend will give Disney six full weeks to control up to 2,000 locations, which is up from 900 theatres that had 3-D capabilities at the beginning of 2009. That's impressive growth, over a 100% gain in 3-D theatres. With the promise of huge grosses for "Avatar," that number could reach 2500 theatres by mid-December. Getting that extra $3.00 per admission is too good to pass up, but the question still remains what the long term appeal for 3-D will be, is it here to stay or will the public eventually tire of the process.

I've always admired Robert Zemeckis and his movies from his early "Used Cars" to "Back To the Future" to "Who Framed Roger Rabbit" to "Forrest Gump." Ever since he's gone to using the capture motion technology, combining live action and animation, I've cooled on him because I just don't like how the characters look in the process, somewhat creepy and unnatural looking. "A Christmas Carol" is his third movie in the row using this technology following "The Polar Express" and "Beowolf."
But it doesn't matter what I think, it only matters what the paying public thinks and with grosses of $180 million and $82 million for his two previous films, there is plenty of support for both his movies and the capture motion technology. Zemeckis has been a big commercial director in Hollywood for 25 years and has directed a lot of moneymakers for the studios and every indication is he will continue to deliver the hits. He also is a shrewd businessman and knows his marketing. His recent statement "the face of the industry is changing and mass advertising isn't going to be enough anymore. It's getting harder to capture a broad audience because so many TV stations and publications are niche-oriented today" was in response to Disney's out-of-the-box marketing stunt of a six month whistle-stop train tour promoting "A Christmas Carol." Following what other studios have been doing with movies like "Paranormal Activity," "District 9" and "This Is It," the studios continue to impress, coming up with new creative ways to sell their movies. Disney just completed the train tour which started in Los Angeles on Memorial Day weekend and ended last weekend at Grand Central Station in New York. It stopped in 40 cities, big and small, and stayed in each city for up to three days. The train was a six car passenger train decorated on the outside with key art from the poster campaign and showcased different aspects of the production, a digital gallery, props from the movie, demonstations of the technology used and interactive games for the entire family. It was free to the public. A train criss-crossing the country, town by town, city by city, harkens back to the earliest days of showmanship and shows the studios are intent in pushing more non-traditional approaches to marketing to go along with their national television buys. When they are successful in creating awareness in other ways, that means they can cut back on their TV campaigns when they deem appropriate.

November is also a month where some of the most prestigious, Oscar worthy films of the year open in theatres. There is no movie arriving with more anticipation and festival acclaim than Lionsgate's "Precious," finally opening in theatres after conquering Sundance, Cannes and the Toronto Film Festivals, the three most important and influential festivals on the circuit. "Precious" depicts the bleak story of an overweight black girl abused in every conceivable way by her parents, who contracts aids and then struggles to rise above her situation with the help of a kind teacher. There is no other film out there that has the aura of social significance and importance that this film has. On the other hand, there is probably no other film with tougher subject matter in it. This is the one to watch very closely and I plan to see it this weekend with an audience in a big commercial theatre in the south suburbs of Chicago that caters to a predominately black audience but also attracts some white moviegoers. Several big questions will begin to be answered this weekend. How many people will show up in theatres to see it? What will be the makeup of the audience? Will Oprah Winfrey and Tyler Perry be successful in convincing the African American audience to pay to see what in its essence is a black art film? Will the white liberal art audience be the primary audience or will it be the rare film that is carried by both the art audience and the black audience? Will the very depressing subject matter, the relentless misery and ugliness the movie depicts be too much for audiences who prefer their movies to be light and escapist entertainment? There are three stages of attracting audiences to a movie; creating awareness, creating want to see and motivating to go to see. I think the first two stages are somewhat answered but the final-go-to-see stage is the one with the question mark. People can say they want to see something but often they just don't quite get around to it and figure they can catch it later on DVD or cable. I'm rooting for "Precious" to be successful because it's been a tough year for independents and it would be great to see a big diverse audience come out to experience a such a challenging film. I'll be talking about "Precious" on television and writing about its theatrical performance next week in this space. Stay tuned.
2009 Copyright David Sikich. Video clip provided with permission by First Business LLC.

Tickets Available At Theatres Everywhere

2009-10-30T08:25:00.000-07:00

Tickets Available At Theatres Everywhere. With that simple line on top of all the ads this week for Michael Jackson's "This Is It," Sony's Columbia Pictures changed their marketing campaign on a dime and proved once again, smart marketing is the number one key to success in today's Hollywood. What? Aren't tickets always available everywhere when movies open in 3500 theatres like "This Is It" is doing this weekend? Yes they are, so why is it so special? After Sony created demand by positioning the movie more like a limited concert event and pushed the fact that it would be playing in theatres for only two weeks, they starting selling tickets a full month in advance, garnering big time publicity from every media outlet and internet site imaginable. Mission accomplished. Fans came out in droves, camped out for days to buy tickets, eventually selling out more than 1600 showings. Now it was time for a simple, perhaps even subtle shift in their marketing to remind people and to send them the message that the movie is available everywhere and that there is a seat for everyone so come on out and see it. So simple, yet so brilliant.

In this day and age of belt tightening by consumers, it's all about creating demand for your product. Instead of dropping prices like so many businesses and retail outlets have been forced to do to attract customers, movie studios are doing it the old fashioned way, creating ingenious distribution and marketing strategies that keep moviegoers coming out to their local movie houses. Just in the last month, Paramount and Sony created demand for their movies in totally different ways. With "Paranormal Activity," Paramount started small with 11 midnight showings in college towns and used a website allowing people to demand the movie come to their towns, adding more theatres each week. Sony, on the other end of the spectrum, staged simultaneous world premiere events in 15 cities around the globe with a global marketing blitz that will see "This Is It" playing on 18,000 screens in 110 countries on an announced two week limited engagement. This follows Sony's masterful campaign for "District 9" in the summer where they turned an offbeat sci-fi movie shot in South Africa with no stars into a $100 million dollar hit. Who would have thought that such cutting edge marketing strategies would be coming out of the studios on such a consistent basis, helping to fuel the record breaking 2009 box-office. In the past, independent distributors have been the ones who have been at the forefront of innovative release and marketing strategies from four-wall bookings to television saturations to internet campaigns. The studios are often stuck in their old ways of doing business, producing more atrophy than innovation with their aversion to risk of going against established practices. Not this year. The studios are blowing away what the independents are doing. I posed the question last week whether or not independent films have become or need to become more marketing driven than product driven. Without the right marketing even the very best films don't have much of a chance these days. Simply put, independents need to create better campaigns and be able to motivate their audience into believing their films need to be seen in theatres right here, right now. They only have to look at the studios for some inspiration on how it's being done.

This is the first year since 1998 that Halloween has fallen on a Saturday and according to Box Office Guru, grosses over that weekend fell off 26% from the previous weekend. This is one holiday that presents problems for distributors when it falls on the biggest moviegoing night of the year. Too many costume parties, too much trick or treating, too many alternatives to moviegoing. Before Sony chose Halloween to open "This Is It," the only movie scheduled for release was a minor film from Weinstein which has now disappeared from the schedule. If there is a movie that can hold its own this weekend, it's one starring Michael Jackson. In a weird coincidence, Halloween was Jackson's favorite holiday so it's perhaps fitting that his final swan song will be playing on the holiday, offering his fans an opportunity to dress up and have fun going to a movie theatre to watch his final performances. It's pretty amazing what Sony has done in getting this movie made and promoted in only three months. There is no real precedent for this type of film so it's difficult to predict what the box-office will be this weekend, but it should be somewhere between $30 -$40 million over five days. Most of the other movies in the marketplace will have to battle to overcome not only Halloween but Saturday and Sunday night World Series games between two large Eastern market teams. This is the first year World Series games are being played this late in the year with Halloween falling on a weekend, so it's not surprising that the other studios have decided to sit this weekend out. Other than "Paranormal Activity," look for "This Is It" to devour everything else in its path.

As predicted, "Paranormal Activity" ended the five year reign of "Saw" movies opening number one at the box-office, but no one could have predicted it would only gross $14 million after debuting at $30 million or more for four straight years. Finally with some formidable competition to contend with, "Saw VI" wilted under pressure and I say good riddance. The "Saw" franchise is the lone survivor for what was termed "torture porn," horror movies featuring gruesome, very explicit violent deaths and torture scenes so it was good to see it brought to its knees by a horror movie which had more implied scares than explicit ones. It would be nice to report that we have seen the last of the franchise, but that's not the case because next Halloween audiences will be asked to endure "Saw in 3D." Getting back to "Paranormal Activity" for a moment, becoming number one at the box-office for the first time in its 5th week of release is a rare feat to accomplish. I thought "My Big Fat Greek Wedding" achieved number one status in one of its later weeks, but in fact it's distinction is that it's the highest grossing movie ($241 million) in history to never have been number one in any of its weeks. Another thing about "Paranormal" is that in its early weeks, a big chunk of its television campaign were spots on MTV, a sister company of Viacom's Paramount. I was asked by a student whether this would be considered self-dealing and if Paramount indeed paid the full amount to advertise on the station. This would not be considered self-dealing and be assured Paramount paid the going rate that anyone else would pay and they wouldn't have it any other way since all marketing expenditures are normal distribution expenses that are deductable right off the top. It goes back to the standard net profit deal in Hollywood between distributors and producers. By paying full freight, the money goes to MTV which helps another Viacom division while Paramount has more legitimate charges to deduct before paying out any overages to the producers. But the way this movie is grossing, there should be more than enough dollars to carve up at the end of the day.

October marks the 15th anniversary of the release of "Hoop Dreams," a movie close to my heart since I was one of the producers reps for the film and helped market and sell it to Fine Line Features. It's legacy and singular achievement continue to grow in stature with each passing year. I was thinking about "Hoop Dreams" as "More Than a Game," a documentary about LeBron James in his high school years, opened this month in select theatres. LeBron James is one of the NBA's biggest stars and gives the documentary some serious star power and an inside look at him growing into the player he would become as a professional. Distributed by Lionsgate, the most successful independent distributor, supported by strong critics' reviews and debuting in the same month "Hoop Dreams did at the start of the NBA season, this was a documentary to keep an eye on to see if could be a factor at the box-office. After only a few weeks in limited release, the movie has failed to catch on and is showing no signs of any box-office strength. The movie will probably top out at around $1,000,000, far short of the $7,800,000 "Hoop Dreams" grossed in 1994's dollars. That's not too surprising because the sub genre of sports documentaries has been full of underachievers. In the last 35 years at least, "Hoop Dreams" is the top grossing sports documentary with "When We Were Kings" with Muhammand Ali, coming in at $2,500,000. Another basketball documentary "Year of the Yao" a few years ago grossed only $35,000 before being taken out of release. You would think there would be more room for another basketball documentary to be successful but that hasn't been the case. Even the biggest NBA stars can't draw audiences to their movies and any independent documentary which tried following a team over the course of time, whether it was a women's team or Native American Indian basketball players, seemed to be crushed by being compared to "Hoop Dreams" or being relegated to copycat status. That's a shame because there have been some good basketball documentaries, but living in the shadow of one of the all-time greats is a tough place to compete.

Question for Discussion:
1. Falling prices in physical media continue to cause problems for all distributors. Thus studios like Disney are exploring new ways to distribute and monetize their product in the future. Describe how the Keystone technology would work and whether or not it could work for smaller films also. As a consumer, what do you think of ownership of media shifitng from physical ownership to merely having access to the movies, televsion shows, etc. you wish to view?
Copyright 2009 David Sikich. Video clip supplied by First Business LLC.

The Biggest October Weekend in History Brings Little Cheer to the Specialty Business

2009-10-23T06:30:00.000-07:00

The fall season is referred to as the the serious movie season where more quality films emerge with the upscale audience coming out in force to support them. In a year where some type of industry record seems to be broken every month, including last weekend becoming the all-time top grossing weekend in October, the independent, art, specialty, upscale, whatever you want to call good, quality films for the discerning audience, haven't joined the party. Big commerical movies continue to drive the market, crowding out the smaller films in a month where they historically have had a better chance to succeed. The thrill is gone. But why? Are this year's crop of specialty films having an off year? Is it because art films lack the 'must see' aspect of the past? Is the core audience of baby boomers staying home more and going out to theatres less? Have audience tastes changed? What has been the impact of the studios losing interest in the specialty business and taking their marketing dollars with them? What part does Netflix and Video On Demand play in viewer habits? Have specialty films become more marketing driven than director driven? Have the remaining independent distributors become more complacent and even sloppy when distributing their films? Has the declining interest, readership, and loss of some top critics in newspapers had a major effect on box-office? Are there younger audiences in line to replace the boomers in their support of art films? Is the interest gone? Does anyone care?

Those are a lot of questions and I'm not here to answer each and every one of them in this space. Before there can be answers, there has to be the right questions and there's much to ponder and discuss about the plight of the independent film business, where it has been and where it is headed. There will always be quality films made, but will there be an entire industry to support them as there has been for the last 30 years? That's the trickier question. In a competitive marketplace, there is an ebb and flow in each industry, where businesses form when there is consumer demand for a product or service, more companies start chasing after profits, competition heats up, prices rise, profits fall, and it's left to the marketplace to sort out the winners and losers based on risk/reward, success and failure. Only the strong survive, if any survive at all, and out of the ashes, comes a better use of talent and resources in a different type of business.

We're approaching the end of a cycle. Just as the years between 1930-1950 is considered the Golden Age of the Hollywood Studio System, 1980-2009 will be known as the era of the Amercian Independent Film Industry. The golden years are over. What emerges will be something different than what we have now, a system that will depend less on theatrical and more on emerging distribution models. It is an issue of demographics and economics. Let's start with another question. Where have the adult moviegoers gone, the core audience that has supported the independent business for the last 30 years? As a card carrying member of the baby boomer generation, I have to agree with a recent article stating that the baby boomers are finally starting to lose their influence, and aren't the driving force of everything that's going on in the marketplace anymore. We're most important now as a generation that will be retiring in force in the next 10 years and what that's going to do to the solvency of the Social Security Program. We're getting older, slowing down a little, not willing to drive that extra mile to search out the latest art film, willing to wait for Netflix or pay for Video On Demand. Our generation helped build the independent industry and our generation formed its core audience. We came out of the 60's where we took dates to see the latest Fellini or Bergman film, we made "The Graduate" and Easy Rider" into smash hits and we rode high into the 70's as the first film generation and we were rewarded with the films of Altman, Ashby, Coppola, Scorsese, Lukas, Allen, Mazursky and many other American auteurs. Then when the studios shifted gears in the late 70's to go after the youth audience, we were there for John Sayles's "Return of the Secaucus Seven" in 1980, in my opinion the starting point for the entire independent industry. The low budget story of a group of radical college friends getting together for a weekend as they were turning 30 spoke to us directly as we were turning 30 too. That movie set the tone for years to come with many others to follow that were both important and relevant to our lives. Now we're turning 60. The problem is there doesn't seem to be another audience following us with the same size and passion to see art films in theatres. The interest and buzz just isn't there. Their attention is elsewhere, with the event movies.

It's an economic issue also. Three studios have already made the decision to pull out of the independent business because the dollars don't add up anymore. Costs are up, grosses are down, the audience base is dwindling and the DVD market brings in less money than it used to, especially for the artier films. Some could say the studios used independent films, took over the business and abandoned it when the going got tough. That may be true but they also have to be credited with helping to grow the business with their economy of size and the money they invested in filmmakers, films and marketing budgets. The point in time when independent films really took off was when Disney bought Miramax in 1993 and Harvey Weinstein used the studio's bankroll brilliantly in creating great marketing campaigns and then being able to buy bigger newspaper ads and television spots to reach a wider audience than ever before. Other studios saw the results and jumped in to get a piece of the action. It's easy to rip the studios but a lot of people made a lot of money off them including filmmakers, sales agents, ad agencies, newspapers, publicists, film festivals and many others. And the bottom line is that the studios grew the business. I've heard some people say the indie business can go back to where it was, but there is no going back, the genie has left the bottle. What I'm seeing today are smaller ads and marketing campaigns which is in response to lower expected revenues, but spending less is not the way to produce more hits and higher grosses. Sony Classics opened "An Education" today in Chicago with a 8 inch ad in the Tribune and a 4 inch ad in the Sun-Times. For such an accomplished film, that's a pitiful looking newspaper campaign. There's still close to a million people in Chicago reading the dailies and that's how a potential Academy Award nominee is positioned? Film distributors are running scared and it's not a pretty sight. No one likes to lose money and they're watching every dollar.

2009 has been a record breaking year for the studio movies but the entire year has been lousy for specialty films. Dark clouds started forming when three Best Picture candidates, "Milk," Frost/Nixon" and "The Reader" failed to get the expected bump at the box-office after Oscar nominations were announced in February. It went from bad to worse from there and even upscale adult dramas from the studios like "State of Play" and "Public Enemies" have fallen on hard times. September and October are months where solid independent films have opened and have played well into the Oscar season, movies like "Sideways," Being John Malkovich," "Lost in Translation," and "The Queen," among many others. "The Queen" opened in October, 2006 and played five months and grossed $56,000,000, a huge success, but to keep the movie in the marketplace for five months cost Miramax (and Disney) $30 million in marketing costs which points to the expense involved in creating a hit film, regardless of whether it's a studio or independent film. Look at what's playing in art houses today and there are no films to compare to the above mentioned titles. The buzz isn't there. The films aren't as good or vital or as relevant as they have been. It's an off year. Bob Berney, one of the best distributors in the business, has found that out after starting his latest company, Apparition. The company's first film, Jane Campion's "Bright Star," was a hot title from the Cannes and Toronto Film Festivals, opened in September with an aggressive marketing campaign and strong reviews only to see the film stumble when widening out. The gross sits at about $3.5 million and the film continues to lose theatres each week. It appears its theatrical run is sputtering out and has to considered a big disappointment.

When famed art house directors like Spike Jonze and Wes Anderson have turned to making children's films for studios, that has to be considered within the context of what is happening to the diminished fortunes of the independent film business and the credit crunch that's impacting the financing of more challenging subject matter. They can be making great films for wider audiences, but they're not art films and that's a loss. The business is moving forward. Then when you see the one true breakout independent hit of the year, "Paranormal Activity," being distributed by a studio, that adds another nail in the coffin. File the next item in the embarrassing category and how the mighty have fallen. Earlier in this piece, I mentioned some sloppiness is creeping into the distribution business. When the Weinsteins ran Miramax, they ran it with an iron fist where no detail was too small to ignore. It may have been hell working for them, but they got the job done just about better than anyone else in the industry. Last weekend what happened in Chicago was not one of their proudest moments, who knows, they may not even know about it yet. In the Chicago Sun-Times, two huge gaffes occurred. On the front page of the Friday movie section, Roger Ebert ran a review of "The Road" and gave it 2.5 stars. The only problem was the movie doesn't open until Thanksgiving. In the same paper, an ad ran for Weinstein's low brow "Janky Promoters," starring Ice Cube, which after checking all the theatre showtimes, also didn't open in Chicago. Situations like that should never happen; having two mistakes from the same company on the same weekend is careless and inexcusable.

Two other independent films that have surprisingly underperformed this fall are "Capitalism: A Love Story" and "Whip It," both stuck at around $12,000,000. There was a great opportunity for both of them to gain some traction on their second weeks when only "Couples Retreat" opened, but they both landed up falling 40% and their eventual fates were sealed. Michael Moore will have his worst gross of the decade and the girl power of "Whip It" never materialized. When Fox Searchlight emphasized the mother/daughter relationship in its second week ad campaign, I realized even the best of the distributors can stumble from time to time. That's been the story of 2009 for the independent film business, still breathing and hobbling along, pushing forward and wondering what changes are in store for them as a new decade looms ever closer.

Questions for Discussion:
1. Filmmakers have to convince potential investors there is an audience for their films and a chance that their investment has a chance to be profitable. With the specialty film business in a downward cycle, how is that done?
2. Are there younger audiences in line to replace aging baby boomers in their support of theatrical independent films?
3. Have specialty films become more marketing driven than director driven? If there is a change happening, how will that affect the search for financing?

2009 Copyright David Sikich. Video clip used with permission by First Business LLC.

Paranormal Activity: A New Twist on an Old Release Pattern

2009-10-16T08:28:00.000-07:00

Last weekend made me a believer of "Paranormal Activity." I admit I had my doubts on the way Paramount was handling the low budget sensation, expanding it into regular run theatres with showtimes around the clock without any apparent traditonal advertising to support the shift away from midnight shows. I posed the question, are they arrogant, dumb or brilliant? Well, they sure aren't dumb, possibly arrogant (distributors can get that way with theatre owners when they have a hot film on their hands,) and I'd have to say pretty brilliant up to this point with their marketing and distribution strategies. I started working in the business in 1973 and I've seen everything that has happened in the modern era of the Motion Picture Industry and Paramount has accomplished something I've never seen done before. Open a movie exclusively on midnight shows for two weeks, then shift into regular runs across the country with sold out theatres everywhere. Let's recap the specific weekend numbers for the three weeks the movie has been in release:

September 25:
12 theatres (all midnight shows in college towns) 3 day gross: $77,873 for a $6489 per screen average. 48th top ranking gross in the country.
October 2:
33 theatres (all midnight shows in larger cities) 3 day gross: $532,242 for a $16,129 per screen average. 24th top ranking gross in country.
October 9:
160 theatres (all regular showtimes throughout day) 3 day gross: $7,900.695 for a $49,379 per screen average. 4th top ranking gross in country.
October 16:
Expansion to 800 theatres nationwide, opening in many new markets.

To have a movie go from a $6489 per screen average in its 1st week to a $49,379 average in its third week, while adding theatres, is an unprecedented, historic occurrence. It was easy to have doubts because there is really nothing to compare it to. This type of release is called a platform release and it's been part of all the distributors' playbook for decades. A platform release is a staggered release where theatres are added slowly over weeks and at times even months with the idea of allowing word of mouth, critical acclaim and strong buzz to permeate into smaller markets before opening. In an era of wide releases and quick play off, the platform release remains an important strategy for distributors when handling smaller, harder to define films. So Paramount didn't invent a new release strategy, they just turned it on its head and gave it an innovative twist. The standard platform release has a handful of theatres open in New York and Los Angeles before expanding into markets like Chicago, Boston and San Francisco, then widening out in additional cities based on size and performance over a period of time. Instead of the weekend per screen average growing each successive week as the theatres increase, per screen averages fall as more theatres are added. A perfect example is "A Serious Man," the latest Coen Brother's film which opened on October 2nd. The film opened very strong in six theatres in New York and Los Angeles averaging $41,890 a run. Focus Features expanded to 21 theatres last week and the per screen average while still strong, fell off to $21,872. That's a typical type of performance and drop off.

Other films in the past have chosen to open away from the New York and Los Angeles markets and other films have increased their per screen averages in later weeks, but they didn't open as midnight shows and their box-office increases were never as dramatic as what we're seeing with "Paranormal Activity." Paramount pulled off a gutsy, bold move because there was always the risk of marginalizing the movie as a cult item; that didn't happen because they moved swiftly and confidently into regular runs in a seamless fashion after creating an incredible internet demand for the hard to find movie. (more on this later.) I recall the independent movie "Henry: Portrait of a Serial Killer" opening on midnight shows at the Music Box Theatre in 1986 and it was later picked up by a distributor for general release, but that's a different dynamic than "Paranormal Activity." More likely than not, the movies that have become successful at midnight were movies that failed in their original theatrical runs. By far, the most successful midnight movie in history that followed that path is "Rocky Horror Picture Show." In 1975, 20th Century Fox opened the movie commercially and it immediately died at the box-office. About six months later, a New York theatre owner started playing it at midnight and the rest is for the history books. "Rocky Horror" has been continuously playing somewhere in theatres for the last 34 years and has amassed over $150,000,000 from midnight shows, a feat so unthinkable and unreachable that it boggles the mind.

There have been plenty of past films that have had sensational platform releases. Ten years ago, Artisan opened "Blair Witch Project" in 50 theatres in the largest cities for two weeks creating long lines and demand before blasting the movie out to 2,000 screens in the third week, eventually grossing $140 million. In 2002, "My Big Fat Greek Wedding" took a slower route to success. Bob Berney masterminded a release that had the film open on 108 screens in April of that year and the movie never grossed over $2,000,000 in a weekend until its 11th week, the last weekend in June when it was playing on 493 screens. The picture played in theatres for 10 months and grossed $241 million. For a distributor, managing a platform release is the most challenging and labor intensive release there is. When it's successful, there is no better satisfaction for a job well done. When I worked at Orion Pictures, the company was the king of the platform release and I was pleased to see when "Paranormal Activity" set an all-time record for per screen average last week for that amount of theatres, it broke the record set by Orion's "Platoon" in 1987. I hear that Paramount wants to be in 2,000 theatres next weekend. That's probably a smart move because you want to strike when the fire is hot and before the inevitable backlash of some negative word of mouth begins. There is already some muttering from people that the movie isn't that scary but the same thing happened to "Blair Witch" and that didn't stop that movie from grossing $140 million. How fast or slow a movie expands is always dependent on prior box-office performance. The market demand will dictate to a distributor its course of action. The tricky part of it is not to get ahead of the marketplace or fall too far behind it and that's where the distribution pros make their living. There are always a lot of casualties among platform releases, many of them good movies, when they just can't find enough critical and audience support to sustain an ongoing release. When a film falters, it is allowed to whither away for reasons tied to both distributors and exhibitors. For distributors, it's the thought of putting good money after bad and they lose the motivation to continue spending money on additional prints and marketing and start preparing for the DVD release. On the exhibitor front, they lose the motivation to book an underperforming film at the expense of another, so both forces are in play and the parties come to the same conclusion, let's move on to the next film. It always hurts but it's the nature of the business.

Did Paramount set out to create this new type of platform release for "Paranormal Activity"? As more news about the release starts coming out, that doesn't seem to be the case. Paramount acquired the movie after Dreamworks bought the rights for $500,000 and the movie was left to them to distribute. If there was any movie to experiment with, this low budget acquisition was the perfect one to do it with. Paramount's marketing department was allowed to take a leading role in developing an internet campaign built around social networking sites and a website which gave fans the opportunity to demand the movie play in their town. The eleven original college towns chosen to play the film won the right to play it with fan voting as did the 30 larger cities the following week. All this was pretty ingenious and this was the rare case where the marketers drove the bus and the distribution people were there responding to the demand and providing prints and cutting deals with theatre owners in those towns where fans were voting it to open. "Paranormal Activity" is destined to become a classic case study just as "Blair Witch Project" was. The difference is the full story remains to be written. Each week as "Paranormal" expands, it has to keep proving itself. We don't know yet where the story will end. When I questioned the lack of advertising last week, I wasn't aware of all the T.V. spots that were airing on MTV, a sister station of Viacom's Paramount Pictures. So there was some traditional old media marketing reaching the core audience of 16 to 22 year olds to back up the internet word of mouth. What still perplexes me is Paramount's continued refusal to have any newspaper ads, especially as it opens in 800 theatres. They have proved their point that newspaper ads weren't needed to open this movie, but with additional screens opening, what's the downside in announcing the movie's sucess and existence to a wider audience? The only newspaper ad I've seen was an excellent full page ad in last Sunday's New York Times with the topper 'Across The Country Audiences Have Demanded It! And Critics Agree...' Perhaps Paramount's ultimate experiment is to prove that they can avoid buying newspaper ads in most cities and still do a lot of business over an extended period of time. But come on. Share some of that wealth and throw some business their way. Newspapers could use it. You still like reading those glowing reviews and publicty articles, don't you? With the way the dollars are streaming in, there's plenty to go around.

Questions for Discussion:
1. Describe what a platform release is and how Paramount's "Paranormal Activity" turned this type of release on its head in a unique way?
2. How do distributors decide the amount of new theatres to open each week as a platform release evolves?
3. What would be two reasons a distributor would choose to go with a much wider release on a movie as originally planned?

Copyright 2009 David Sikich. Video clip used with permission by First Business LLC.

An Eventful Week off the Screen is Harbinger of Trouble Ahead

2009-10-09T06:44:00.000-07:00

The weekly box-office is only one barometer of the industry's health. Though it's certainly important as a bellwether of the continued strength of the theatrical marketplace, the decisions made off the screen, inside the boardrooms of the distributors and exhibitors, the buyers and sellers, the retailers and media outlets, dictate the direction of where the business is today and where it is headed in the coming years. Looking over the events of the past week point to some rocky days ahead for both the studios and independents. Over the past 15 years or so, a solid foundation had been built based on the growing success in the independent sector, the studios' involvement with them, and DVDs as the guaranteed revenue generator where the actual film profits kicked in. That foundation is now showing serious cracks.

First, in a move that many in the industry could see coming, Disney has all but thrown in the towel on their Miramax division. Miramax has been awfully quiet this year while producing no hits and their latest film, "The Boys Are Back," starring Clive Owen, just opened to very mediocre business. Disney announced Miramax will be down to three films a year, the staff has been cut to 20 employees and the studio will now take over it's marketing and distribution duties. With those kind of marching orders, what's the purpose of even keeping it a going concern? To put it in proper perspective, when Harvey Weinstein ran Miramax under Michael Eisner, the company had 500 employees. Art films aren't performing like they used to and it's just another indication that the studios are abandoning the independent business, joining Warners and Paramount, who in the past 18 months have discarded their specialty divisions. In another boardroom across town, Universal's terrible year has led to the firing of the two co-heads of production and the new replacement wasted no time in announcing the company will focus on "reasonable risks" in choosing what movies to produce, implying there will be fewer adult dramas like "State of Play" and "Public Enemies" and more cookie cutter branded entertainment for families and kids. The deals Universal has made recently with toy companies provide a glimpse of what to expect from the studio in coming years, movies based on the board games "Battleship," Monopoly," Candyland" and "Ouija," among others. Taken together, the news from Disney and Universal present a sobering reality for lovers of character driven quality films. There will be fewer of them down the road. With several companies like Comcast kicking the tires of NBC Universal as possible suitors, its parent company General Electric might have had enough with the entertainment business and may be looking to get out. There have been a minimum of six major studios in Hollywood for many decades, but it's possible that number could shrink in the next 5 to 10 years as the media landscape and reliable distribution channels continue to experience seismic shifts. Who knows, another studio may even buy Universal.

Talk about seismic shifts, the other shoe dropped in a boardroom in Arkansas when Wal-Mart announced they are cutting back on their DVD presence in their stores across the country, saying they will even do away with display cases used to promote the hot new titles. I have no idea if any of the studios saw this one coming, but that announcement coming in the 4th quarter ahead of the holiday season has had to send shock waves throughout Hollywood. The falling DVD business has been a major storyline all year and Wal-Mart is responding to the decline in consumer demand among their customers in buying DVDs on the same level they did in the past. Wal-Mart is not totally abandoning the DVD business, but any contraction from them will have a significant effect on the bottom lines of all the studios since the company accounts for more than a third of all the retail DVDs sold in the country. Where can the studios pick up the slack from the revenues they will lose at Wal-Mart? Rental revenues are up due to Blu-ray's growth and Redbox's popularity but rental revenue doesn't return the same kind of profit sales do. There simply is not a strong enough alternative at this time to match the dollars that Wal-Mart and other retailers have produced for the studios by directly selling DVDs to their customers. It has to really burn the studios to see Wal-Mart allowing Redbox to put kiosks around their stores. Can't they see the connection between $1.00 rentals and declining DVD sales? Maybe they do and they don't care, figuring they don't make the movies, they just sell them. Everything is connected. The recent decisions and change of direction made at Universal and Disney were not all caused by the problems in the DVD market, but certainly it has played a part.

Speaking of Redbox, 20th Century Fox is one of three studios who are being sued by Redbox and last week Fox filed a motion to dismiss the suit. The following is part of what the court documents stated:

"Antitrust law does not require a seller to provide its product through the distribution channel that the buyer demands, on the date that the buyer demands, or at the price that the buyer demands. To the contrary, sellers have considerable freedom under the law to sell (or not to sell) to whomever they want, how they want and when they want. To this end, a seller's distribution policies do not violate (antitrust law) unless the plaintiff proves a contract, combination or conspiracy that injures competition. Redbox cannot meet any of these elements."

Fox is right, distributors have a good amount of leeway on how and to whom they sell their movies to. Conspiracy certainly can't be proven since three studios have gone ahead and cut their own deals with the kiosk company. I believe the suit will be dismissed but the damage has already been done. The studios who made their deals and caved into Redbox will be proven to have misplayed their hands. Fox, along with Warners and Universal, never said they wouldn't sell Redbox, they just wanted to delay it for 30 days or so. I've conducted my own survey with the people I know who rent movies from Redbox. Every single person said if they had to wait 30 days to rent the latest titles, that would not be a problem for them and they would rent them when they became available. Did the studios do any surveys on this issue?Sometimes the studios can be their own worst enemies.

Studios also can get lucky and it sure looks like Paramount hit the jackpot with the independent horror sensation "Paranormal Activity," a movie they're distributing and widening out to 159 theatres this weekend, following two weekends of sellout midnight shows. The back story of movies that seemingly come out of nowhere is generally fascinating and the story behind "Paranormal Activity" is a good one. It's the stuff Hollywood dreams are made of, especially independent movies made on a shoestring budget of $15,000 like this one. The first question I had was, why isn't an independent distributor involved in this? How can Paramount be distributing this tiny movie after they got rid of their own independent division? It's been such a bad year for independents and everyone is always on the lookout for the next big thing. This movie was made in 2006 by a video game designer named Oren Peli and has been kicking around film festivals and Hollywood looking for a distributor for three years. What happened? Did every independent distributor drop the ball and fail to see the movie's potential? Are they all too shell shocked to recognize potential and take a risk anymore? This movie should be in the hands of an independent and it isn't and it looks like a lot of acquisition execs blew it. When the sales agent was peddling it around, the only interest came from someone at Dreamworks, where it eventually found its way to Steven Spielberg's desk. The story gets pretty weird from this point on. According to a Paramount spokesperson, Spielberg watched the movie at his home, got freaked out with it and thought his house was haunted when his bedroom locked from the inside and he had to call a locksmith to get it opened. He then got a messenger to take the screener back to the studio in a garbage bag, not wanting to touch the damn thing. However, he was so impressed with the power of the film his company bought the rights, thinking they may want to re-make it. When Dreamworks later split from Paramount, the movie's rights, along with other movies, remained in Paramount's possession. Two weeks ago, Paramount opened it at midnight in 11 college towns where it did great business and last weekend they expanded to 30 larger cities where the movie grossed over $500,000 and audiences went nuts for it.

Can it become the next "Blair Witch Project?" Well, it has about $139 million to go to match that gross and this weekend will determine an awful lot. I have to give Paramount credit up to this point because they have helped create a frenzy for this film without spending hardly any advertising money. It's been a viral campaign that's been growing on the internet and through twitter users. This weekend is a game changer because Paramount is opening it on regular runs with full daily showtimes and on multiple screens. This is where Paramount may be stumbling. In Chicago, it's going from one theatre playing midnight shows for three nights to eight theatres playing the movie every half hour to an hour from morning to night. One area theatre is playing it 20 times just on Friday. We're talking about a dramatic shift in supply and demand here. There may be close to 300 showtimes over the three day weekend for Chicago moviegoers to choose from. And this is the head scratcher - THERE IS NO ADVERTISING FOR THIS MOVIE. NO ADS AT ALL IN FRIDAY'S PAPERS. MARKETING CREATES DEMAND. WHERE IS THE MARKETING? Is internet buzz going to fill theatres at 10:30 in the morning or 3:30 in the afternoon? Will a movie that was so cool and edgy with a full house at midnight have the same allure in the light of day where some people may be watching it in empty theatres? Is Paramount going to kill the golden goose by mishandling it? Are they testing whether just an internet campaign can carry a film and old media isn't needed? Are they arrogant, dumb or brilliant? Those are a lot of questions that will seemingly be answered on Monday morning when all the grosses are reported. A movie out of nowhere with the potential of "Paranormal Activity" comes around maybe once every five years. For the managers and marketers fortunate enough to be handling a film like this, every decision along the way becomes crucial to maximizing that potential and turning that movie into the biggest possible success it can be for both the distributor and the exhibitors. That is the art of distribution and when it's staged correctly, it's a beautiful thing to see. I have my doubts about what Paramount is doing this weekend, but stranger things have happened. We'll see what happens.

Questions for Discussion:
1. What did Walmart do in reaction to lower consumer demand for DVD's in the fourth quarter of 2009? Is this good news or bad news for distributors?
2. What does anti-trust law say about how distributors can sell their product in the marketplace?
Copyright David Sikich. Video clip used with permission by First Business LLC.

Capitalism: The Bedrock of the Motion Picture Industry and Michael Moore's Career

2009-10-02T07:31:00.000-07:00

As we enter the month of October, the finishing line to the 2009 movie season can start to be seen in the distance. Friday, October 2nd starts the 40th week of the year, 12 weeks to go, the crucial final quarter which will determine whether this year will be one for the record books. Ticket sales have just passed a billion admissions and year-to-date revenues are still running 7% over last year. From the start of January, the entire year has shown tremendous resilency and strength. Talk of fewer movies for the rest of the year hasn't materialized yet, at least not for the wide releases, five more movies hit the screens this weekend. Picking a storyline for this week among the openers was easy. Michael Moore's "Capitalism: A Love Story" is the one to talk about.

The American Film Industry from its very beginning at the start of the 20th century has celebrated and embraced the idea of capitalism. The Eastern European Jewish immigrants who basically built the movie industry from the ground up, seized the opportunity through their hard work, talent, passion, drive and ambition to make themeselves rich and successful while at the same time creating and shaping the film industry we know today. America is not Europe or any other socialist country who helps subsidize their local film industries. The American Film Industry has always had only one primary goal, to make the highest profits through the production, distribution and exhibition of films. Close to 100 years later, Michael Moore is following in the footsteps of the first moguls and has forged a very successful and lucrative career making movies. The free enterprise system has served him well.

That being said, I'm not here to knock Michael Moore and call him a hypocrite for attacking capitalism in his latest film and saying it has to go. We have come to expect contradictions involving Moore's films and that's why he elicits such passionate responses in people, both positive and negative. That's also one of the reasons for his success. The worst thing for any artist or entertainer is to be ignored. Michael Moore doesn't have to worry about that. Just because he's calling capitalism evil doesn't mean he won't be monitoring all the box-office numbers over the weekend and adding up the grosses as they come in. The opening weekend gross will be as important for him as it is for Sony with "Zombieland." For better or for worse, that's the way success is measured in the film business today. Looking at who is distributing "Capitalism" is also a head scratcher. Overture Films is a division of Liberty Media and is owned by John Malone, a staunch conservative who has run into problems in the past for his Wall Street dealings and has amassed some significant fines for questionable activities he's been involved with. Nevertheless, love him or hate him, Moore is the only filmmaker, fiction or non-fiction, who makes timely, controversial political/economic films on a regular basis for a mass audience. For that, we should be thankful. All anyone has to do is to take a close look at the movies playing at the typical suburban multiplex this weekend.
Zombieland
Fame
Surrogates
Pandorum
Capitalism: A Love Story
Whip It
Love Happens
Jennifer's Body
The Invention of Lying
Sorority Row
Cloudy with a Chance of Meatballs
The Informant
Toy Story Double Feature

Michael Moore brings a dose of reality to the big screen, some real bite that stands out from the clutter of releases. In economics, that's referred to as a distinctive advantage. For what he does, he has no competition on a national basis. Other wide releases have no interest in tackling the important issues of our time and the documentaries that have confronted similar subject matter in the last few years are relegated to opening in a couple art houses, and thus have no awareness or impact for the regular moviegoer. Opening in a 1,000 theatres puts his movie on a national stage and that's no small feat. In a free enterprise system, the cream rises to the top and supply and demand for any product works itself out. Moore has helped create demand for his movies and he deserves all the credit in the world for that. His career started 20 years ago with "Roger and Me" and over the years he has become his own brand, not an easy thing for a documentary filmmaker to accomplish. He is simply a great promoter, marketing is a large part of his arsenal. Over the last two weeks he's been everywhere on television, from Jay Leno to Larry King to The View to Bill Mahr on HBO, night after night selling his movie and his message on mainstream outlets. Where some would call him a showman, others would call him a grandstander. He's a populist, able to combine humor with tough facts and commentary, and his ability to make his documentaries entertaining while working tirelessly to promote them is the key to his success in the theatrical marketplace.

Moore's critics have said "he's preaching to the converted," used in a dismissive fashion as if that automatically makes an effort less than successful. There is another way to look at that when thinking about marketing movies or really marketing any kind of art or entertainment. In the niche world we live in, you can say the majority of movies preach to the converted, they have a target audience and go after it and count on that base to show up and support it. Whether it's Tyler Perry, horror movies, upscale dramas, teen comedies or female romances, specific audiences are targeted and often those audiences are enough to turn a film into a profitable success, especially when the budget is reasonable in relation to its commercial potential. If you are able to motivate your core audience and at the same time
be able to attract a percentage of people outside it, a film is in in good shape. "Capitalism" will no doubt attract mostly a liberal audience but it will also get some curious and conservatives to check it out too. There are not too many "Titantic's" anymore which reach out and attract everyone. The real problem for a lot of independent movies is that they fail to attract even their niche audience, or worse yet, they failed to even identify who their audience could be and thus are doomed from the start. Michael Moore doesn't have to worry about that, he has built a dedicated audience who he count on to show up on opening weekend.

The budget and the financing for "Capitalism: A Love Story" has been pretty secretive and I don't know if that's because of the film's subject matter or not. Since he's attacking capitalism perhaps he's extra sensitive about the money part and would prefer to not have the movie's financial information become part of the dialogue. You know what, if that's the case I have no problem with it. When you come down to it, a film's budget is nobody's business except for the filmmakers, the financiers, the accountants and the distributor. Revealing budgets are tricky and can be part of the strategy of whether to reveal it or not,or even float a misleading figure that's even higher or lower than it actually is. What serves a film the most is the crucial decision in the process. It used to be in the independent world once upon a time, it was a badge of honor to reveal how low a film's budget was, but nowadays that can backfire when trying to sell a movie. It can be labeled as too low budget and small to distribute, not worthy of even a small advance. Sometimes it's best to keep them guessing. If I had to guess Moore's budget, I would tag it at between $10 and $15 million. It was a very long 16 month production schedule, a lot of people worked on it, there was a lot of traveling involved and many music rights and other copyrighted material to clear. In regards to financing, there are three companies over the title, Overture, Paramount Vantage and Weinstein so no doubt the financing came from several sources. Michael Moore does not have trouble raising financing. The bottom line, his movies make money. Worldwide, his movies are popular with foreign audiences and that just seals the deal for him even more.

This is a weekend in which the two most interesting releases come from independents, Moore's film and Fox Searchlight's "Whip It," a coming of age woman's roller derby movie directed by Drew Barrymore, her first time behind the camera. As I've chronicled all year, it's been a tough year for independents as only one release has been able to gross $30 million, and that also came from Searchlight, "500 Days of Summer." Buzz has been building with "Whip It," sneak previews were held last weekend, and it's girl power, sisterhood and female empowerment themes are firing up the young female audience. Perhaps the biggest thing it has going for it is having Fox Searchlight as its distributor because no company is better at marketing this type of film and they have an exciting, colorful campaign underway. That is no disrespect for the movie itself, Drew Barrymore, the roller derby subject matter or any of the actors, which includes Ellen Page. What it points out is the absolute importance of having the right distributor for the right film, and having that distributor passionate and skillful enough to totally get behind it and to be able to create a marketing and distribution campaign to take it as high as it can go. Searchlight did it with "Little Miss Sunshine," "Juno," "Napolean Dynamite" and "Slumdog Millionaire" and they have positioned "Whip It" to also have that kind of success. Whether that happens or not remains to be seen but the campaign has hooked me and I plan to see it and I'm far from being the targeted audience. In an off year for independents, we could be seeing the two biggest independent movies of the year open on the same weekend.
Copyright 2009 David Sikich. Video clips provided with permission by First Business LLC.
As an added video bonus this week, watch the following clip as Tom Hudson and I critique "Capitalism: A Love Story."

Changing Economics Comes Down To Who's In Control

2009-09-25T07:21:00.000-07:00

The matter of control hovers over everything that happens in the Motion Picture Industry, who has it, how to get it, how it's used, when to fight for it and how to co-exist with it. Events in the last week have crystalized the issue of control both at the box-office and what happened (or didn't happen) at the Toronto Film Festival. The economics in the industry for both the biggest and the smallest players has been changing for some time now due to the recession, evolving market trends and new technology, so it's helpful to take a closer look at what happened in the last week to figure out how the various players are managing those changes. First the studios. They are managing very well for themselves and have decades of experience, in good times and bad, of being in power and being in control of their own destinies. It was very telling when three different studios spun similar storylines after their movies all opened rather softly on the weekend of September 18th. Warners with "The Informant," Universal with "Love Happens" and Fox with "Jennifer's Body" each were proclaiming positive results and predictng profitable outcomes for their movies despite their mundane grosses. Take a look at the results:

The Informant: Cost: $22 mil. Opening Gross: $10 mil.
Love Happens: Cost: $18 mil. Opening Gross: $8.5 mil.
Jennifer's Body Cost: $16 mil. Opening Gross: $6.5 mil.

Outside of their super expensive tentpoles that are made for a wide global audience, the studios are showing better fiscal restraint with the more modest movies that fill out their release schedules. In fact, they are using the economic downturn to their advantage by keeping their production costs down, taking on partners to lower their risk and getting stars to take lower salaries, as Universal did with Jennifer Anniston on "Love Happens." Universal is having an off year, but was confident enough following the weekend to proclaim "Love Happens" already profitable because their exposure was covered by foreign pre-sales. The studios remain firmly in control of their businesses. Fewer movies being made and tough economic times have increased their leverage with the stars, especially in a year where concept and story are trumping star power at the box-office. Weekend box-office numbers often don't tell the whole story. Especially in a month like September, lower grosses can still lead to profits by containing costs and allowing others to share the risk.

Speaking of control, the most interesting storyline this coming weekend is the return of MGM as both a producer and distributor with a remake of their 1980 hit movie "Fame." Their film distribution operation has been dormant all year, before that they were distributing movies from other companies like the Weinsteins the last couple of years. MGM is trying once again to reinvent themselves and become relevant again by going back into production. This is a company that hasn't been in control of their own destiny in quite some time and quite frankly, I'm surprised they are still out there fighting. MGM was once the largest, most successful studio in Hollywood but that was 40 or 50 years ago. In the last 40 years, the studio has been sold too may times to count, picked apart for its famed library and other assets and left for road kill time and time again by the likes of Kirk Kerkorian (several times,) Ted Turner in the mid 80's, Italian financiers in the early 90's who went bankrupt, and a consortium led by Sony Pictures several years ago. Their independence from the Sony deal was improbable to say the least and came with a lot of financial baggage. MGM is saddled with $3.5 billion in debt, the company has about 150 lenders, the CEO has recently been ousted and a turnaround specialist has been hired to figure it all out and try to keep MGM out of bankruptcy. "Fame" will be their only release of 2009 and it could do o'kay at the box-office, but MGM is going to need a whole lot more than that to become a significant industry player again. Several movies are on their 2010 release schedule, including a February movie called "The Hot Tub Time Machine," so it doesn't look like the Lion is going to be returning to their glory days anytime soon when they made classics like "Wizard of Oz,' "Grand Hotel," "Ben-Hur" and "Doctor Zhivago." It would look a lot better if they still controlled their library classics with this week's 70th anniversary of "Wizard of Oz" and all the hoopla involved with the one day theatre showings in 400 cities and the newly restored hi-def DVD and Blu-ray editions hitting the stores. But those rights were bought by Ted Turner 25 years ago and later absorbed by Warners, so Warner Home Video is in control of the rights,the release and all the subsequent profits.

Living down to its low expectations, market activity at the Toronto Film Festival was dismal. Out of 130 movies up for sale, only a couple deals were made. More than ever, it's an irrefutable fact that filmmakers and their investors who make movies with no guarantee of distribution, are partaking in a total crapshoot of wish fulfillment if they are counting on receiving a traditional all rights deal from an established distributor. It doesn't seem to matter if the movie has fantastic production values, has a great script, has critical support, tells a compelling story and has some stars attached; it's still left to the whims and pocket books of the distributors and right now they're not buying much of anything. The buyers have all the control and the sellers have none. The high stakes poker type deals this decade that led to bidding wars at festivals is officially over. Festival dealmaking is harkening back to the mid-90's when most deals happened weeks and months after festivals instead of during them. That's what happened at the 1994 Sundance Film Festival when I was one of the producers reps for "Hoop Dreams." "Hoop Dreams" had a slow build up of interest during the 10 day fest and won the Audience Award on the last day, but it took another month of negotiations with interested parties to finally complete the deal with eventual distributor Fine Line Features. There will be more deals made for some of the Toronto films but it will be for lesser amounts than hoped for, and be based more on the distributor's terms than on the sales agents' terms. That's not the scenario in which the top talent agencies like CAA got involved in repping unsold films in the first place. They live for the action, the bidding wars, so it will be interesting to see how long they stay with repping films in this sluggish climate. When top independent films today can easily cost in the several million to 10 to 15 million dollar range, it makes for a pretty tough negotiation and sale. Whereas a sales rep may be looking for something in the area of a $5 million advance and a $5 million P & A commitment on a film that cost $7 or $8 million to make, the distributor would be staring at $10 million in spending before the movie even opens. With so many independent films grossing less than $5 million this year, that kind of risk is too much to stomach.

Despite the tough sales market, some independent film mavens and consultants are cheering on and championing the arrival of hybrid distribution, a new state-of-the-art business model where filmmakers maintain control of their own movies by splitting up the various rights and selling them off separately. Instead of all rights deals with one distributor which can tie up rights for 15 to 25 years, filmmakers look to sell specific rights like Video-on-Demand, direct DVD and digital download to distribution partners who can handle those rights well. This type of deal
will become more common in future years, but for now it's best suited for lower budget films that don't have much to recoup. There wouldn't have been 130 films at Toronto willing and able to sell their movies to one distributor for all rights, if that type of deal was so bad to begin with. Filmmakers make movies. Distributors distribute them. The same consultants who are heralding the hybrid deal also warn filmmakers it's important to hire a distribution team of a producer's rep, foreign sales agent, webmaster, outreach coordinator, publicist, theatrical and semi-theatrical bookers, online aggregator and a print fulfillment company to help make all this happen. What's lost in the translation in this new world type deal is how much it's going to cost filmmakers to keep control of their movies and the time and effort it will take to generate revenues. Nothing is easy right now and it would be best for filmmakers to keep their eyes wide open, watch out for any potholes on the road to the new world deals and figure out in advance how much that control will actually cost.

Questions for Discussion:
1. Explain what a hybrid distribution deal is and how it's different from a traditional deal with a distributor.
2. Why is the hybrid deal becoming more of the norm for the independent filmmaker? List some positives as well as some negatives that any filmmaker must be aware of if they go down this route.

Copyright 2009 David Sikich. Video Clip used with permission by first Business LLC.

Film Festival Season Ushers in Hope and Question Marks

2009-09-18T08:15:00.000-07:00

The fall moviegoing season is going to be a crucial bellweather for quality adult films, from the smaller American independents to foreign films to the higher budget upscale prestige films. It's always refreshing when fall arrives and brings with it a mix of better quality films for audiences to enjoy, but the big question is, will discerning moviegoers flip on the switch and start supporting these films better than what they've been doing. The box office performance for adult dramas and upscale films in general has been dismal this year and you can almost call it a make or break time for the specialty business to start showing a pulse and turn its fortunes around. There's no better time to do it than beginning right now. The overall economy is showing signs of picking up, there's more confidence and optimism in the air, and the six month stretch of great playing time leading to the Oscars in late February has begun.

Going hand in hand with the smart movie season are the film festivals. It's hard to imagine one without the other. Over the last 30 years, festivals have become a vital cog in the independent film business, providing a tremendous cultural experience for people in cities large and small, introducing art films to cities without an art house, building new art audiences where previously there was none, creating a networking hub for filmmakers to meet fellow filmmakers and industry professionals, getting their films noticed and buzz started. Taking all that into account, there are still two roles the top festivals play that loom larger than all the others; acting as a commercial launching pad for prestige films that already have distributors, and doubling as a marketplace where unsold films are looking to sell their films to distributors. In the fall, there is a trifecta of important festivals that set the tone and establish what films are going to be the ones to watch out for, which ones are going to be the Oscar contenders. The ball gets rolling at the Venice Film Festival in late August, shifts to the Telluride Film Festival over Labor Day weekend and kicks into high gear with the Toronto Film Festival that begins the second week of September and is now headed into its final weekend, completing its 10 day run. So in less than a month, three of the most important festivals of the year take place that will define the pecking order of the best films of the year for the next six months. Powerful stuff. What makes the best festivals so influential is the fact that all the important gatekeepers are there. The leaders of the industry, the power brokers, the decision makers who help filter the good from the bad; festival programmers, acquisition execs, distributors, sales agents, theatre owners, critics, the media, cable programmers and audiences.

Toronto as a launching pad for films getting ready to open commercially is as important as ever. This weekend we'll be seeing the first of the bunch with Steven Soderbergh's "The Informant" opening nationally and arriving with strong buzz. Other films from Toronto that will be opening in the next couple of months that will be Oscar candidates are Jason Reitman's "The Air Up There," starring George Clooney, the new Coen Brothers movie, "A Serious Man," Michael Moore's "Capitalism: A Love Story" and smaller titles like "Bright Star," "Precious" and "An Education" which may not be too well known now, but will gain in prominence after they open. More commerical movies debut in Toronto also like Drew Barrymore's "Whip It," her movie about women's roller derby set to open in a couple weeks. But there is a cloud hanging over Toronto that is the same one that has been hanging over the independent business for more than a year and it has to do with tighter money, lower revenues, too many flops and fewer viable distributors. This is putting a major crimp into the business of selling movies at festivals like Toronto. More than 130 movies debuting at Toronto are unsold and looking for distribution deals, including some with stars like Bill Murray, Michael Douglas, Demi Moore, Robert DeNiro and Ed Norton. The question is, how many of them will find buyers? Up to this point, there hasn't been much action and distributors are being very cautious with their money. It's strictly a buyers market and distributors can afford to wait until asking prices come down. It's pretty much a crisis for anyone involved in trying to sell a film today and much has changed in the last two years.

Following on the heels of the huge success of "Little Miss Sunshine," the 2007 Sundance Film Festival was a seller's paradise where 15 films were sold for $50 million. Distributors were spending money like drunken sailors on a weekend leave. Looking back at that festival and the sales prices paid for individual films is a lesson in irresponsible spending and miscalcualtion of the marketplace which has led to the downsizing of the specialty market and much tighter distributor purse strings.
One can say that some of the individual buys made at that festival no doubt played a part in the eventual shuttering of several distributors. Three distributors no longer in existence had big buys which proved to be disasterous; Warner Independent paid $4 million for "Clubland," a movie I don't recall even being released, Paramount Vantage paid $6 million for "Son of Rambow" and Think Film paid $2 million for the documentary "In the Shadow of the Moon," which didn't find much of an audience. Also, this was the festival that Harvey Weinstein bought "Grace is Gone," starring John Cusack, for $4 million and went on to gross a grand total of $52,000 in its theatrical release. Those spending days are long gone and its much tougher to sell any kind of film in today's downsized marketplace. One of the problems in selling a film is that there are so few proven ways to make a sale outside of trying to get into one of the top film festivals. Other methods are staging group distributor screenings in Los Angeles and New York, arranging screenings for individual distributors in their private screening rooms and the most desparate one of all, sending DVD screeners in the mail to theatrical distributors, DVD distributors and cable television outlets and hoping for a response. It's hard to sell a film. If most of the movies go unsold at Toronto, I wouldn't be surprised if there is even more downsizing in distribution and production. How can movies continue to get financing, even with stars attached, if distributors aren't willing to distribute them.

With talk of Oscar candidates coming out of Toronto, it got me thinking about how the Best Picture category is going to play out this year with the field expanded to ten nominees. One of the reasons given for expanding the field was to be abe to recognize more popular,commercial movies that the general public was familiar with to go along with the art films that have recently dominated. A funny thing may happen on the way to the Academy Awards, it could look a lot like the most recent shows, only with even more specialty titles in the running. There have been over 8 months of 2009 releases and I've seen some early lists of possible best picture candidates and the only two movies that have actually opened that show up on the lists are "UP" and "The Hurt Locker." The mainstream movies that have received strong reivews like "Star Trek," "Harry Potter," "Public Enemies," and "The Hangover" are nowhere to be found. The only one of those films that I would consider worthy of a nomination is "Public Enemies," but there are enough mixed reviews and detractors that it doesn't seem to be getting much respect at this time. The Academy could find itself in a pickle. Why expand the field to honor more art films, they're already being honored the day before the Oscars at the Independent Spirit Awards? The academy voters not only have to consider good reviews and commercial acceptance when compiling their candidates, they have to look deeper into the substance of a film, whether is has layered themes, deeper meaning, important subject matter, is it groundbreaking, is it inspirational, is it timely, does it speak to the zeitgeist? Most Hollywood studio movies lack those components. Will it come down to whether or not James Cameron's "Avatar" can bridge the commercial and Academy gap as his "Titantic" did 11 years ago in order for a big studio release to be a part of the Best Picture race? Either way, the race is tilting toward specialty fims like it has been for a number of years. The hard truth is that the studios aren't in the business of chasing Oscars, they're in the business of chasing box office. You can't squeeze a square peg into a round hole.

The struggles newspapers are going through in trying to keep their businesses afloat while maintaining their audience base is similar to the struggles the independent film business is experiencing with their theatrical operations. Even though blockbusters could live without newspapers, quality films have always counted on papers for support and promotion, so the shrinking fortunes of newspapers are adding to the pain and hardship of specialty films. Local movie critics being laid off, entertainment sections being downsized, less space and interest for publicty articles have all been affecting the marketing of upscale films and the internet, bloggers and websites aren't offering the same payoff. On top of that, the two largest national theatre circuits, Regal Entertainment and AMC Theatres, have eliminated running movie showtimes in local papers in some major markets, looking to cut costs while following the lead of studios which have drastically cut back their own newspaper budgets, down 50% from what they spent five years ago. This is not happening everywhere, but it looks like it could be a trend of the future where additional theatre circuits could abandon the service of listing movie showtimes in newspapers. Newspapers and independent films are fighting the good fight, but it seems like if it's not one thing, it's another, in their battle to stay profitable and relevant in a changing world.

Questions for Discussion:
1. What six months of the year make up what is referred to as 'the smart season' and what role do film festivals play in this time period?
2. What are the options for the filmmaker who is trying to sell a completed movie to a distributor? How does supply and demand enter into the equation?
3. Research the films which debuted at the 2009 Toronto Film Festival and separate them into the following three categories: films which had distributors; films which were sold to distributors and film which went unsold. After compiling the list, what conclusions can you draw?

2009 Copyright David Sikich. Video clip provided with permission by First Business LLC.

Fewer Movies, A New International Record and the Most Unlikely Tycoon in Hollywood

2009-09-11T07:59:00.000-07:00

There's no shortage of story lines as the industry slinks into what is historically the slowest week of the year at the box-offce, the weekend following Labor Day. Earlier in the year, I had made a point about how the studios break down the twelve month release schedule into four parts: January-April, May-August, September-October and November-December. So far, so good, the first two 4 month blocks have more than held their own and the overall box-office is still running around 5% over the same period in 2008. The last four months of the year are always trickier to figure out. When publications like Entertainment Weekly do their seasonal forecasts of upcoming movies, they always group the September to December films into one huge category of Fall Releases and I can see why they do it that way, but the reality is that September-October and November-December are two totally different animals. The September-October frame is one of the two slowest months on the release schedule with numerous genre, mid-range commercial and art films fighting for attention. Not that there won't be some very good films out there, several box-office successes and a few pleasant surprises, but studios won't be putting too many of their heavy hitters into this period. They wait to put those in November-December, which is now considered the eight week holiday season, leading up to Thanksgiving and Christmas, two of the more lucrative moviegoing holidays of the year.

According to research done by Jeff Block of Exhibitor Relations, a box-office tracking firm, the last four months of the year will definitely be different from years past in regards to the number of releases hitting the theatres. Everyone in the industry has been waiting for a real shakeout from the glut of films that has jammed the theatres during this decade, due to the easy money that has flowed from Wall Street and private investors, but that party is now over. Last fall's economic collapse and credit crunch took care of that and finding film financing has become much more difficult which, needless to say, leads to fewer movies. If Mr. Block's math is correct, a dramatic fall off of movies is about to occur. His research shows that there will be 135 movies released this year from September to December compared to 199 in 2008, down a whopping 32%. Even though the numbers can be misleading because many of those films can very well be smaller art films that get minimal releases in a few markets, it's a remarkable drop off nevertheless. Many of those films found their way into the month of October, which has crowded that month with specialty flms like no other month of the year. Back in 2005, I remember a three week stretch in Chicago which saw 38 movies being released. The critics didn't have the time or space to review them all and it was complete insanity. The vast majority of those films never had much of a chance and disappeared as quickly as they arrived.
On paper, fewer movies will give more breathing room to the films that get distributed and that should be a good thing. But will it produce more successes at the box-office due to less competition and more available screen time? Will the drop off in releases be felt only in the independent arena or will it be also felt with studio releases, and what would that do to the weekend box-office tabulations? I can't see how Paramount moving Martin Scorsese's "Shutter Island" from October to February is going to be a positive thing for the box-office because that looked like it could have been one of fall's bigger releases. It's going to be very interesting to track the releases in the next few months to see if in fact there will be that many fewer movies and how that will impact the marketplace one way or another. The marketplace doesn't operate on paper, the movies that do open still have to prove to be the right movies at the right time with the right marketing that moviegoers want to see.

Summer not only set a new domestic box-office record with about $4.3 billion, but also a new international record with $5.8 billion, which gives the studios more than a $10 billion summer in worldwide grosses. Pretty impressive numbers when you consider where the economy has been this year in many countries throughout the world. Those numbers reinforce a couple facts. The theatrical business is not only hanging in like a rock in North America but it remains the foundation of the business throughout the world. People everywhere still love watching movies in movie theatres, despite all the new ways they can see them. The second indesputable fact is that big Hollywood movies continue to dominate the world's screens as they have done since the 1920's. Despite dealing with territorial quotas for local films, studios are still able to carve out a 60-65% market share in many countries. No other country on earth produces blockbusters like Hollywood and foreign audiences can't get enough of them. Looking at the top grossing summer movies in the following chart tells the global story:

Title: International Domestic Worldwide
Harry Potter: $613 mill. $295 mill. $908 mill.
Ice Age: $640 mill. $193 mill. $833 mill.
Transformers: $429 mill. $400 mill. $829 mill.
Angels & Demons: $351 mill. $133 mill. $484 mill.
UP: $156 mill. $289 mill. $446 mill.
The Hangover: $160 mill. $270 mill. $430 mill.
Night at Museum: $233 mill. $176 mill. $409 mill.
Star Trek: $126 mill. $256 mill. $382 mill.
Terminator: $246 mill. $125 mill. $371 mill.
X Men: Wolverine: $166 mill. $180 mill. $346 mill.
source: Variety

There are 40,000 theatre screens in the United States and about 90,000 screens in the rest of the world. The number of screens in America isn't expected to change much, but internationally is a different story where countries like Russia and China are on the rise and other countries are modernizing and building new screens. What a contrast between the U.S. market share in foreign countries and foreign films market share in America where they enjoy less than 1% of the market. It's similar to the situation the majority of smaller American art films face when trying to crack the overseas market; there's not that much room or interest for these films. International territories are interested in the big Hollywood films and on the rest of the screens they prefer to play films made in their own countries. Just like in this country, it's a tale of two distinct business models that produce two distinct revenue streams that are worlds apart from each other.

The most unlikely tycoon in Hollywood has to be Tyler Perry, who is opening another movie this weekend entitled "Tyler Perry's I Can Do Bad All By Myself." This will be his 7th movie since 2005 and they have all been hits. I haven't seen any of them but that doesn't mean anything because I'm not his target audience. Here's a man who epitomizes the entrepreneurial spirit and proves how far a person can go in life and what can be achieved in the movie business through hard work, perserverence, talent and finding a niche and a market that Hollywood leaves alone and now he has come to own. For Perry, it wasn't about who he knew, because he didn't know anybody in Hollywood. It was about starting with nothing, scratching out a living and paying his dues. He's the classic rags to riches story who was homeless and living in his car when he started putting on plays with his Madea character in churches throughout the south, slowly building up a strong base of middle class African American women and churchgoers which kept growing and growing when he sold DVDs of his plays. When he moved to films using the same characters and stories, he had a target audience he could count on and knew how to reach. Now he is a very rich individual who is said to have made $75 million last year, owns all his movies and became the first African American to open his own studio, which isn't located in Hollywood, but in Atlanta. He has not only become a force in movies but has conquered television with "House of Payne" and "Meet the Browns." Perry has done a couple very smart things, stay within his niche and stay away from opening against the big Hollywood blockbusters. It's easier to dominate and be number one at the box-office in September or February than it is in July or December. Blacks make up only 12% of the population but 20% of the moviegoing audience so Mr. Perry has a little goldmine on his hands. Over the years, I've come to understand how difficult it is to achieve success in the marketplace with independent projects. To achieve not only success on his own terms, but to also become a brand name in the process, is a life and career achievement that is rare indeed.
2009 Copyright David Sikich. Video clip used with permission by First Business LLC.

Labor Day Blues: The Box-Office Slows Down

2009-09-03T17:28:00.000-07:00

Throughout the year, I've written about the ebb and flow of the motion picture marketplace as if it's a living, breathing organism that can take on a life of its own. Yes, I believe that to be so and those who have worked in the day to day business of making, distributing and exhibiting movies know what I mean. 365 days, 52weeks, 12 months, 7 days a week, movies light up the 40,000 screens throughout the country. Day in and day out, week in and week out, month in and month out, the movies bring life to the marketplace but it's a fact not all movies are created equal and not all playing time is either. Some would argue that a good movie could do business anytime of the year but that isn't quite the case and it isn't that simple of an equation. If it was, we would see a big,important, expensive film be released on Labor Day weekend one of these years but that has never happend. Why?

After four months of another record breaking summer movie season, the marketplace is about to take a breather and slow down. As the leaves start to fall, the business falls along with it. It happens every year at this time. Just as September is historically the worst month of the year for the stock market, it's also the weakest month at the boxoffice and it starts with Labor Day weekend and the usual less than stellar slate of releases. This year is no different when you look at the three movies opening wide nationally, Lionsgate's "Gamer," Fox's "All About Steve," and Miramax's "Extract." Labor Day never gets respect as a weekend to open a movie and it's not only about the weekend itself but the entire month that follows. It's tough to buck historical trends and numbers and enough data exists that shows moviegoing levels drop dramatically in September for a variety of reasons from vacations being over, kids going back to school, money being tighter, moviegoers being spent after four months of big movies, people taking advantage of being outdoors or the new television season. Whatever the reasons, it's tough to change an historical pattern. Other times of the year we have seen distributors take a chance and try something different, but I don't see anyone bold or perhaps foolish enough to open a big blockbuster on Labor Day weekend anytime soon. It would be just too damn risky to go against the percentages. Would someone put their job on the line to be the first movie to prove the entire industry wrong? No way. Jobs are too valuable these days. Out of about 12 national holidays in the year, Labor Day will continue to be the one studios either avoid or use as a dumping ground. Labor Day signifies more of an end than a beginning and it takes awhile for the marketplace to rev up again and when it does, it takes on a different look and feel with smarter films and smaller films better able to compete in the months ahead. I recall a movie I was very fond of when I worked for Orion, John Sayle's baseball movie "Eight Men Out.' It was the summer of 1988 and Orion already had a big hit with the Kevin Costner baseball movie "Bull Durham," which was released in the prime June period and grossed $50 million. We all knew "Eight Men Out" wasn't going to be as commercial as "Bull Durham," but slotting two baseball movies into the same season was a tricky propostion for the company. The two best periods to release a baseball movie are spring and summer; even though the playoffs and World Series are in the fall, fans are more into football by then. So when we got the word to book "Eight Men Out" for Labor Day weekend on a wide release, I knew that wasn't good news for the movie and it wasn't. It only grossed about $6 million. Later I found out it was in the contract that the movie had to be released in the summer and since Labor Day is considered the last weekend of the summer movie season, the movie lived up to its contract. Was it the best for the movie? No, but those type of compromises and decisions happen in the movie industry from time to time and those unfortunately caught in the middle of those decisions feel the pain.

Looking back at the summer movie season, the studios relearn some of the same lessons every year, it's the season for big action tentpoles, animation and comedies. On the other hand, dramas, independent releases and more gentle fare seem to struggle to get a foothold a little more with each passing year. Focus Features found that again last weekend when "Taking Woodstock" only opened to $3.7 million. Their hope that the younger generation would show up didn't materialize and not enough baby boomers supported it. It's been another bad summer for the independents. Fox Searchlight's "500 Days of Summer" is the lone standout with a $25,000,000 gross and is still playing in theatres. Another film I'd like to give a shout out to is Summit's Iraq drama "The Hurt Locker' which is closing in on $12,000,000. I have to admit, I'm surprised at how well this film has held its theatres in the heat of the summer, the distributor has done a solid job marketing it. The gross isn't a world beater, but considering Summit acquired the film for $1.5 million, it will be profitable for them and it will be heard from again at Oscar time. It's difficult to conjecture whether "The Hurt Locker" could have grossed more at the end of the year when it would have faced stiffer competion for the specialty dollar, but needless to say they held their own in the summer, didn't get buried and made the movie stand out. That's no easy task in today's climate. Getting back to the blockbusters, the critics didn't much care for many of the top grossing movies, but summer isn't for the critics, it's for the audiences and they certainly didn't seem to mind the releases. Even though no movie could match "The Dark Knight," there were many more hits than misses. There have been about a dozen movies that have passed $100 million at the box office and it got me thinking whether this financial benchmark is even still relevant for many of the big budget releases. The industry has been acknowledging this standard for four decades now as a beacon of success but does it carry the same magic? Of course, a film's budget plays a huge role in determining how important reaching $100 million is. It's certainly a different equation for the $30 million "The Hangover" than it is for the $175 million "G.I. Joe." But that being said, that figure still carries a fair share of magic and that's why it has survived. Just think of all the movies that never get close to it. Don't you think "Bruno," ($60 million) "Funny People," ($51 million) "Land of the Lost," ($49 million) and "Year One" ($43 million) would have been thrilled to join the club? And how about "Public Enemies" sitting at $97 million with a dwindling number of theatres playing it. Universal would be much happier at $100 million than finishing at $98 million. $100 million is such a round definitive number with a much happier ring to it; it's a little like a hitter in baseball finishing with a career batting average of 299 instead of 300. Yes, $100 million still means something, especially for those movies that can't quite get there.

3-D continues to solidify itself as a force at the nation's theatres and is playing a part in helping the business grow. Whether it's kids, families or teens, the grosses for the 3-D screens are impressive. Last week's "Final Destination" saw 70% of its $28,000,000 gross come from the 3-D screens. The majority of theatres playing 3-D also offer regular showings of the same film but moviegoers invariably choose to pay more for the 3-D experience. That fact alone can't be overstated; as prices are going down in all kinds of retail businesses to entice consumers, theatres are charging more and getting it. Is this a short term blip? Will audiences eventually tire of the process or is it here to stay as Jeffrey Katzenberg keeps preaching? Everyone is looking at James Cameron's "Avatar," opening at Christmas, to supply some of the answers. What I'll be keeping my eye on in the next few months is the number of new screens theatre owners will be converting to 3-D in anticipation of "Avatar." The confidence level among exhibitors will be a telling sign of things to come. Unfortunately, the opposite is happening in the DVD market as prices continue to drop along with demand. This applies to both regular DVDs and hi-def Blu-Ray. The studios have come to the conclusion that the best way to grow the high-def market is to drop prices from the mid $20 range to the low $20 range, even as low as $19.99. The overall problem for the studios as they move forward is that the DVD business is more down than what the theatrical market is up. For the theatrical market to stay strong, the DVD market needs to be strong; the bottom line profitablity of movies is too interconnected for it to slip anymore than it already has. If the slide continues, it will affect the number and types of movies that get released and also impact to studios' ability to spend the huge dollars needed to market their movies in a way that will keep moviegoers flocking to the theatres.

The big news of the week was Disney announcing a deal to acquire Marvel Entertainmnet for $4 billion in cash and stock. For Marvel, it's a great move immediately for their stock and their future prospects. In the past year, Marvel had taken control of their own destiny by raising their own cash and changing the deals they have with distributors like Paramount so they would be able to keep more of the profits on movies like "Iron Man." What Marvel didn't like so much was having to be responsible for the $60 million or so that it takes to market their superhero movies to a worldwide audience. With this deal, they not only will have Disney's cash but Disney will be the one spending the marketing dollars through their international marketing and distribution channels. That suits Marvel fine. For Disney, they're looking at the deal more long term, 10 to 20 years in the future, because they will have to honor exisiting contracts and won't take control of all the characters and movies for several years. The stock market tends to look at deals more short term and the day after the deal was announced, Disney's stock took an immediate hit and lost $1.5 billion in value. But this deal looks great for Disney when you look a little down the road and imagine the value of acquiring 5,000 characters in the Marvel family. There is gold to mine in merchandising, theme parks, as well as movies, and Disney is in much better position to take full advantage of all the opportunities than Marvel ever did. Along with last year's deal to distribute future Dreamworks' movies, this deal will also fortify their annual release schedules. What I'm wondering is if this deal will have any impact on Disney's Miramax division. The art distributor has been pretty quiet with releases in 2009 and with last year's contraction of Warner Independent and Paramount Vantage, there is a distinct possiblity that the fate of Miramax could be in question. With the independent business having another down year, anything is possible.
Copyright 2009 David Sikich. Video clip used with permission by First Business LLC.

How "Woodstock" Helped Usher in the New Hollywood

2009-08-27T17:29:00.000-07:00

With the 40th anniversary of Woodstock, there's been a lot of talk about the importance of that singular event from a cultural and generational standpoint, and it was certainly a watershed moment in time that still resonates today. As the new movie from Ang Lee, "Taking Woodstock," opens this weekend, I'm not here to add to that discussion; instead I'm going to take a look back at the precarious situation the movie industry found itself in during that tumultuous period and how "Woodstock," the movie, played an important role in helping the industry get back its financial footing and usher in the new Hollywood.

Between 1969 and 1971, the seven studios were in the worst three year slump the industry had ever experienced, even surpassing their struggles of the Depression years. The motion picture industry found itself with one foot firmly in the past while at the same time trying to dangle its other foot into a future they didn't quite fully understand. Several of the earlier moguls were still hanging around the boardrooms and stubbornly conducting business as if it was still the 1950's. The country was changing, the Viet Nam war was raging, but old Hollywood continued to churn out big budget traditional war movies and musicals such as "Tora, Tora, Tora," "Darling Lili," "Chitty Chitty Bang Bang" and "Paint Your Wagon" that simply weren't working anymore. An independent company, Embassy Pictures, had a huge hit with "The Graduate" in 1967-68 which hinted at the influence of a new young audience and Columbia picked up the rights to "Easy Rider" in 1969 which was a smash, but it was far from a real changing of the guard. The studios fell on their faces trying to cater to this young audience by making clunkers like "The Strawberry Statement," "Getting Straight" and "R.P.M.," a radical campus film starring Ann Margret as a revolutionary student and Anthony Quinn as the president of the university. The studios just couldn't get it right, whatever they tried, didn't work. The year 1971 reached the absolute low point of the industry's 25 year decline from the apex of 1946's 4 billion annual admissions to a paltry 820 million admissions in 1971. The Academy Awards epitomized the schism of tastes and styles in the films that were being made and honored. In 1968, the old fashioned G-rated "Oliver" won Best Picture of the Year, the following year, "Midnight Cowboy" won, the only X-rated movie to ever win Best Picture. All the studios were on the ropes, a few were selling their back lots to raise cash, their futures were up in the air. The studios were bleeding cash and when a movie flopped in the theatres, it was almost a total loss, there wasn't much ancillary revenue to tap into.

This was the state of the industry in the summer of 1969 as the Woodstock festival approached and the concert promoters found themselves running out of money. They approached Warner Brothers with the idea of making a movie and Ted Ashley, who was running the studio for conglomerate Kinney National at the time, figured they didn't have much to lose and things couldn't get much worse than they already were, so Ashley signed on for Warners to produce and distribute the movie. That decision turned into one of the sweetest deals in history. For $50,000, Warners purchased all movie and soundtrack rights and spent $600,000 to actually make the film. When the documentary opened in theatres in the summer of 1970, it became an instant hit and played for months to packed houses, becoming one of the top grossing movies of the year with a box-office gross of $50 million, which would translate to more than $200 million in today's dollars. This one movie probably saved the Warners film division from being closed down. That's how dire the situation was. Impressive as the gross was, that didn't begin to tell the story of how influential "Woodstock" became in helping to pave a new way for the studios to unlock the potential of its various film properties. It not only showed Warners the value of cross marketing and merchandising, but it reminded all the studios of the huge potential and upside that movies had if they were able to make the right movies that audiences actually wanted to see. With the huge success of "Woodstock," Warners pursued other opportunities and a few years later, became the first studio to get into the pay television business when they bought HBO and after that, they purchased their own cable network to show HBO on. One by one over the years, the other studios followed Warner's lead, buying various television stations, networks and cable stations, eventually becoming the global media giants they are today.

Change didn't come overnight because as the 1970's started, the motion picture industry had more of its share of problems to figure out. Patterns of distribution were evolving away from the big downtown theatres and the industry needed new theatres in the suburbs to play movies closer to where moviegoers lived. The invention of the enclosed shopping mall with free parking played a crucial role in growing the business as various theatre circuits like General Cinema and AMC leased out space in these malls to build new multiplexes. Finding outside methods of film financing to lower the risk for the studios also became a priority and when a tax loophole was discovered by an attorney in the early 70's, private investors flocked to invest in movies, which in turn stabilized the studios' bottom lines and brought even more interest from larger companies and wealthy individuals who wanted to get a piece of the glamorous movie business. Finally, the industry needed new blood, new directors to connect with the growing young audience hungry for entertainment that they could relate to. "Woodstock" showed the way here too. After Ashley purchased the rights to make the movie, he went out and hired as many film students he could find from NYU and Columbia film schools who could work a camera or edit the thousands of feet of film footage they had of the concert. One of the editors was a young Martin Scorsese. The 70's saw the first wave of film school graduates take advantage of the industry's need for new talent and directors like Scorsese, Coppola, Lukas, DePalma and others seized the opportunity and became powerful forces when their movies proved to be successful with audiences. However, the director who didn't go to film school became the most successful one of them all, Steven Spielberg.

That brings us back to "Taking Woodstock." In no way, shape or form will this movie be comparable to "Woodstock" in its gross or influence. It's a modest movie with modest expectations. With a $30,000,000 production budget, it actually looks fairly risky for a distributor to take on such a low key, period movie about the festival without any of the music in it. But Focus Features is not just any distributor. Focus is a division of Universal and is on firm ground and along with Fox Searchlight, they are the two strongest remaining studio specialty divisions. The company has a couple of aspects which really distinguishes them. They have a very strong international distribution organization which serves them well with distribution partners scattered throughout the world and they have a CEO in James Shamus who is a filmmaker himself. Shamus is the longtime filmmaking partner of Ang Lee who has written his last 11 screenplays, including "Taking Woodstock." That is how the movie got made. A movie like this is tricky to market and tough to predict. The company is hoping to attract an audience of older baby boomers feeling nostalgic and younger moviegoers who are interested in either young star Dimitri Martin or discovering more about an event they have heard so much about. Grabbing either niche is not a certainty. When you go down the route of not being able to sell the music but instead tell a back story of how the festival came together is inherently a risky venture. I learned that myself when I distributed "Tie-Died: Rock n' Roll's Most Deadicated Fans" in 1995. This documentary was about Grateful Dead Fans and the parking lot sub-culture during a summer tour that didn't include any music from the band itself. The rights were too expensive and the filmmakers couldn't afford it. I overestimated the appeal of the film and was wrong to assume Grateful Dead fans would be interested in watching other fans do their thing and talk about the band without actually seeing them or hearing their music. The music was the reason for the entire movement of deadheads and without the music, something was lacking at its core and the movie failed. But as a Grateful Dead fan myself, I was moved by passion as much as anything when I decided to get involved in distributing the film, but I learned that passion and hard work can take you only so far in the movie business. You need the right film at the right time for the right audience with the right campaign and the marketing dollars to back it all up. "Tie-Died" wasn't the right film and had too may limitations to succeed. Jerry Garcia dying a month before release didn't help the cause either.

That being said, "Taking Woodstock" won't be breaking any box office records this weekend but I don't think Focus Features is too worried about it. In its own way, "Taking Woodstock" is as much a passion project as "Tie-Died" was to its filmmakers and to myself. I'm happy this movie was made and I can't wait to see it and I'll be wearing one of my old tie-dyed t-shirts to the theatre. In a bottom line movie business where numbers are crunched every which way before any movies are approved, it's nice to be reminded that the passion to tell a story still means something, even when the numbers may not add up completely.
2009 Copyright David Sikich. Video clip used with permission by First Business LLC.

Showmanship Alive and Well on Movie Screens Big and Small

2009-08-20T17:33:00.000-07:00

Showmanship and movies go together like water and air, essential elements to the mix that have been alive within the movie industry for as long as celluloid has been run through the earliest projectors in the late 19th century. Friday, August 21st was supposed to be all about the opening of "Inglourious Basterds" until 20th Century Fox announced August 21 'Avatar Day' as they show 16 minutes of footage in Imax theatres around the world for a movie that won't even be opening for another four months. Perhaps that move won't have any effect on the performance of 'Basterds' this weekend, but I think it signifies trouble ahead and shifting times for two seminal figures in the motion picture industry.

Both Harvey Weinstein and Quenton Tarantino have been great showmen and talk big games but they haven't delivered in a while. They both need "Inglourious Basterds" to be a big hit, Tarantino for the sake of his career and Weinstein to help keep his company afloat as he stares at mounting debt and shrinking financial resources. The two have been in business together since 1994 when "Pulp Fiction" became the first independent film to gross over $100,000,000 but that somewhow seems like a century ago. Oh yea, it was last century, wasn't it? Fifteen years is a long time ago when we take in account where the American Independent Film Industry was in 1994 and where it is today in 2009. These two men were superstars in the go go 90's, Tarantino for his one monster hit and Weinstein for being the dominant independent distributor as head of Miramax Films. The decade of the 1990's was truly one of growth for the independent film business. Every year there were new directors being discovered and new distributon companies being formed. In 1992 alone, Tarantino and Robert Rodriguez each debuted with their first films, "Reservoir Dogs" and "El Mariachi." ( in a quirk in the release schedule, both directors open movies in 3100 theatres this weekend, Rodriguez with the family film "Shorts.") But this is 2009 and things are a lot different now. Looking back, Tarantino has never really been able to build on the success and quality of "Pulp Fiction," only directing five films since then, counting the current one. Weinstein is far from being the mogul he was while working under the Disney banner, running Weinstein Films along with his brother as the invisible man. He's released only four movies in 2009, all on very limited runs, and none since February. He's been a total non-factor in the marketplace garnering a pitiful half percent market share. The investors who put money into his company can't be too happy about that kind of performance.

That being said, Weinstein and Tarantino are showmen, fantastic self-promoters who have been very good for the film business and have done very well for themselves. They are both skilled at drawing attention to themselves and to their films. They understand themselves, they understand their roles in helping to sell their films and they're not afraid of the media, in fact they embrace the media. They know what buttons to push to create interest. Other directors who also have been effectve self-promoters like Kevin Smith, Michael Moore and Robert Rodriguez have often worked for Harvey Weinstein too. Whether it's a coincidence or it's the environment that encourages directors to create their own brands and legacies, this brand of filmmaking and promotion has gone a long way in generating buzz, box office hits and creating identities for countless number of independent films in the last two decades.

Which brings us back to "Inglourious Basterds." Can this movie be a game changer for both men? Can Weinstein Films use this strange hybrid of a war film as a springboard back to prominence and profitablity? I can't see that happening even though Tarantino still has a fan base among filmgoers (predominantly men) and critics and the movie will no doubt be on top of the boxoffice this week with an opening projected to be around 25 to 30 million. A gross in that area would still be about $10 million less than last week's "District 9," a movie with a first time director and unknown actors, which cost $40 million less than Tarantino's film. Another reason it will be difficult for 'Basterds' to have a huge impact for Weinstein is that they sold half the film to Universal so they will reap only half the profits the movie generates. Weinstein would have a whole more upside if they kept it themselves but their financial situation dictated otherwise. They needed the Universal money to help pay for their $35 million marketing campaign. I don't know if it's just me, but has anyone else fallen off the Tarantino bandwagon? Ever since I read about this movie being his next film with the title misspelled, I thought it was pretentious and dumb and had no interest in seeing it. I guess just because his movie was somewhat based on the 1978 Italian war film "The Inglorious Bastards," which no one saw in the first place, we were supposed to be impressed by his unmatched knowledge of long forgotten exploitation movies. Give me a break. Tarantino elevated "Pulp Fiction" to the realm of art, but in reality he is a self-proclaimed glorified exploitation director who writes smart dialogue, and his body of work is getting tiresome. He made so much money for Weinstein with "Pulp Fiction," Tarantino was even able to persuade Harvey to let him create his own offshoot company restoring and distributing old drive-in titles like "Switchblade Sisters." Since the only drive-ins around today play first run movies, the only place to play them were in art houses under 'Quenton Tarantino Presents.' Needless to say, this venture was an unmitigated disaster and after several $300.00 opening weekends, the plug was pulled on this division in no time. Whatever Quenton wanted, Harvey gave it to him, but what Harvey wanted most was another "Pulp Fiction" type success which never came.
From the 'Basterds' title, to the over the top southern accent of Brad Pitt to the main conceit of the fantasy of having Jewish soldiers hunting down Nazis, scalping them or cutting off their heads, it's all very unappealing to me. I'll go watch "The Great Escape" for about the 25th time instead. We will see how it plays out on the screen and how audiences react to it.

So what will happen to the Weinstein Company? Will it be able to survive or will it whither away like countless other film companies have done over the years? Other than the six major studios, all distribution companies eventually come to an end for one reason or another, the only question is will it be sooner rather than later? Harvey Weinstein is 57 years old and this is his fourth decade running film companies. The ego looks to be still there but what about the passion and drive and the hard work and attention to detail that was always been part of his DNA. When you battle and scratch for so many years, accomplish so much, and amass a personal fortune that will take care of him and his family for the rest of their lives, well, the passion and drive sometimes isn't quite there like it used to be. It's tough to run an independent film company today and operate between wide commercial and limited art house releases. Combine that with the recession, the general downturn in revenues, especially in the DVD market, and the fact that the company is only four years old and doesn't have much of a library of titles to generate income, it doesn't paint a pretty picture. His company has burned through a lot of money in four years and it will be much tougher to raise new financing in the current environment. Harvey Weinstein was the face of independent film for many years, now all his struggles seem to epitomize its many problems.

20th Century Fox has $240 million riding on James Cameron's "Avatar," which will be opening in theatres on December 18. Their marketing decision to show 16 minutes of footage on 100 Imax screens around the world on the evening of August 21 for two separate showings is an unprecedented and unusual type of sneak preview, especially for a movie that won't open for another four months. Tickets were free and so many people went to the movie's website for tickets it crashed the site on the first day tickets were made available. How big of a risk is Fox taking with this sneak preview? Well, much of the footage being shown was presented at the recent Comic-Con convention and it went over well so the risk would seem to be minimal, but the truth is, every decision along the way is risky when you have almost a quarter of a billion dollars on the line. The expectations are huge so Fox and Cameron have to be pretty certain their footage is going to wow audiences, the risk is negative word of mouth swirling around four months before the movie opens. I like what Greg Foster, the president of Imax Filmed Entertainment said "I think there's not enough understanding of what show business means. You can't have business without showmanship. And what this sneak preview is, is showmanship. We're calling August 21 "Avatar Day." That says it all. When you think you have the goods, when you know you have the goods, be fearless, go for it all and shout it out for the whole world to hear.
Copyright 2009 David Sikich. Video clip used with permission by first Business LLC.

"District 9": Thinking Small While Dreaming Big

2009-08-13T14:52:00.000-07:00

It happens every year around this time, as the summer starts winding down and schools start getting ready to open, more movies flood the screens in a mad dash to get a chunk out of the summer box office. Some distributors may have to live up to a contractural agreement stating a film has to open in the summer months, other movies may have been pushed back from earlier time periods to escape stronger competiton and still others are there because the distributor has had previous success in mid-August with a certain type of film and hopes lightening can strike again. Whatever the reason, five new movies are opening wide across the country this week, the most of any summer week by far, and generally speaking, that many movies are usually not a good thing. Think of it this way, these movies aren't the strongest on anyone's release schedule and the heightened competition only makes it tougher to get noticed and find an audience. It may not seem fair, but the biggest, most pre-sold movies have the least competition going against them; with weaker movies, it's the exact opposite. No one ever said the movie business was fair, did they? Looking at the five movies more closely, to their credit, they each have a marketing hook or two as they chase after their specific niche audiences:

1. Warner Brothers "The Time Traveler's Wife," a sweeping time travel romance for women based on the 2003 best selling book and starring two attractive leads, Eric Bana and Rachel McAdams.
2. Paramount's raunchy R-Rated comedy, "The Goods: Live Hard, Sell Hard" for the young male/college audience, starring Jeremy Piven and two actors from "The Hangover" and produced by Will Ferrel, who also makes a cameo appearance. Can the "Cash for Clunkers" program somehow help the weak used car salesmen storyline? That may be a reach.
3. Summit Entertainment's wholesome PG movie for young teens, "Bandslam," a battle of the bands movie starring the popular Vanessa Hudgens from "High School Musical 3". As an extra marketing ploy, Summit is showing exclusive new footage of "New Moon," the next film in the "Twilight" series before the feature.
4. Disney is releasing the Japanese animated movie, "Ponyo," in a dubbed version after the movie grossed $169 million overseas. Obviously, they're going after kids and families and hoping that the voices of Miley Cirus's younger sister and the youngest Jonas Brother will be a draw. This has the fewest runs of any of the new openers and is a far cry from usual Disney or Pixar film.
5. Sony's "District 9,' the under the radar sci-fi movie which isn't so under the radar anymore with this week's Entertainment Weekly's cover story calling it "The Must See Movie of the Summer." It tells the story of a group of aliens who landed in South Africa some years ago and have been confined to a specific area, segregated from the rest of the city's population.

Nothing against the other movies, but the most interesting movie of the entire bunch and the one with the most intrigue and upside is "District 9" and that's the movie I want to take a closer look at this week. In a week full of very wide releases, including that of "District 9," I want to go in the opposite direction and discuss the concept of starting small, being small, thinking small, while dreaming big, specifically in the areas of beginning filmmakers and viral marketing campaigns. The back story and business model for "District 9" are enlightening and perhaps shines a light on what it will take for filmmakers, producers, investors and distributors to work together in the future with the common goal of making good, profitable movies that all parties can share in and benefit from. Filmmakers make movies and need distributors to buy and distribute them. Distributors are always on the lookout for movies to pick up and distribute so why are people either saying there's too many movies being made or there's not enough movies available for distribution? The issue is never one of quantity, but one of quality. There are too many bad to mediocre feature length movies being made that will never have any real chance of finding viable distribution. In addition, we're in the middle of a period where there are fewer distributors. Too many filmmakers make the rash decision of making a feature length movie with little idea of their own talents and with no sense of the needs and wants of the marketplace. A much smarter strategy is to concentrate on making short films instead, which have the following benefits:
* Shorts are much cheaper to make than features
* There are plenty of outlets and festivals to showcase them in
* Filmmakers can hone their craft and prove their mettle
* Filmmakers can show their story-telling skills and style of filmmaking
* Short films become a part of a filmmaker's video portfolio

This was the path "District 9" took. "District 9" had its beginnings as a six minute short by director Neill Blomkamp. Blomkamp has an interesting backstory, growing up in Johannesburg, South Africa and then moving to Vancouver, Canada where he made a living shooting music videos and television commercials. In his spare time, he made short films, pouring in as much as 40% of his annual salary financing these films. One of these short films, the six minute "Alive in Joburg," caught the eye of both Universal and Peter Jackson when they were looking for a fresh, new director for the high budget "Halo" and he was selected to direct. When that project was eventually scrapped due to budgetary and profit participation concerns, Jackson wanted to continue to work with the director on something else and that something else became taking his short film, "Alive in Joberg" and expanding it into what would become "District 9."

Thinking small while dreaming big. Blomkamp didn't necessarily make this short for the sole purpose of someday turning it into a feature, but an experienced producer like Peter Jackson saw the potential in it. Making a compelling short film with a strong story that can be expanded out is not the easiest thing to pull off, but it's certainly a way for filmmakers to test themeselves and see what kind of talent is actually there. If the talent isn't there, a person can always choose a different career. I've been advocating taking this path for years to the film students who take my classes and there have been enough success stories to validate that short films can be an entry into the film industry. One of the more high profile films in recent years that began as a short film was "Napoleon Dynamite." The short was a very low budget film shot in black and white and was selected to premiere at the Slamdance Film Festival where it was seen by an investor who eventually gave the filmmakers $400,000 to make it into a feature. There were some different actors in supporting roles but star Jon Heder was showcased and the sly deadpan humor of the film came through loud and clear enough to convince someone with money to take a gamble on some young filmmakers. This short can be found on the two-disk "Napoleon Dynamite" DVD and it's fun to see the genesis of this iconic high school movie. A term was coined some years ago that referred to short films as 'calling cards' for bigger and better things to come. That can still be true but there is a right way and a wrong way to go about it. The wrong way is to spoof a popular movie and put it up on You Tube waiting to be discovered. There are countless number of spoofs on this site and they all start running together. The right way is the way Neil Blomkamp went about it, crafting a story based on his life experiences and layering it with substance and allegory. Blomkamp grew up with apartheid in South Africa and used the aliens to comment on this social, economic and cultural problem. Being able to infuse that into a six minute short is pure talent and harkens back to sci-fi movies of the 50's such as "Invasion of the Body Snatchers" which used the genre to comment on the political news of the day such as the rise of McCarthism in America.

The old adage is that talent will rise to the top and eventually get recognized and that is still the case today. There is too much mediocrity around for that not to be the case. It certainly doesn't hurt when a filmmaker has a mentor like Peter Jackson to help pave the way. There have been numerous cases in the past couple of decades where famous directors like Martin Scorsese, Quentin Tarantino, Spike Lee, Steven Spielberg and others have lent their names and support to independent filmmakers with varying degrees of success. 'Spike Lee Presents' or 'Quentin Tarantino Presents' on the top of a poster or trailer doesn't automatically turn something into a huge success on its own all the time but that kind of support is always welcome. However, Peter Jackson Presents "District 9" is the real deal and its impact has been tremendous even before the first ticket has been sold at the box office. Jackson's handprint is all over "District 9" as he spent $500,000 of his own money on its development, hand picked the director, produced the movie, used his own effects house to create the special effects and arranged for the $30 million in financing. He jumped at the opportunity to make a true independent film and control its own destiny far away from the Hollywood studio system and it sure looks like he and Neill Blomkamp pulled it off.

Even the most talented of filmmakers and the most powerful of producers like Peter Jackson still need the power and expertise of a studio to release a movie throughout the world. After Sony Pictures bought the distribution rights for North America, all other English-language territories and Korea, Italy, Russia and Portugal, they have been at the center of creating and managing a very effective multi-faceted marketing campaign for "District 9." Sony is doing what studios do best, utilizing their extensive marketing and distribution organizations to full advantage. When all is said and done, their marketing expenditures will no doubt exceed the $30 million dollar production cost of the movie itself, but that's a non-factor in the equation. They are doing what they have to do to get the word out and insure that their investment in the movie is maximized to the fullest. Controlling all media rights in multiple territories could turn into a very lucrative venture for the studio if the apparent upside is reached.

To reach that upside, Sony also embraced the concept of small by starting their marketing by creating a viral campaign on the internet, the place where these campaigns usually spring up from. A viral campaign is very organic, spreading word of mouth over a period of time from person to person. It allows interest to build at its own pace and the longer the lead time, the better. Sony was smart to take their cue from the movie itself and the mystery surrounding the title, the production and the plot. In the sci-fi genre, there have been two hugely successful movies which have gone this route, "The Blair Witch Project" and "Cloverfield." I'm a big believer in high concept movie titles, even in smaller art films, that can help define or describe what a specific movie is about. Usually ambiguous or overly arty titles work against a film rather than help it. But in the case of sci-fi films, that's really not the case at all. "The Blair Witch Project," "Cloverfield,"
"District 9." All three titles are a bit open ended and vague, a bit mysterious and not revealing much of anything about the films themselves. So that becomes almost a prerequisite with these type of films and their campaigns. Leave people guessing. Don't reveal too much. Create multiple websites, links, problem solving puzzles which include secret codes to decipher, have some dark secrets and a hidden agenda, create some ficticous organizations and do it all in a cinema verite, documentary like fashion. This is what Sony has done which became the template for everthing to follow. Remember when "Snakes on a Plane" came out a few summers ago? When I heard about it, I said wow, this epitomizes high concept, you can hold the story in your hand. Well, that became its strength as well as its weakness. There was nothing left to the imagination. There was initial excitement on the internet but instead of that interest building, it slowly diminished and by the time the movie was released, the fans were busy mocking the title and creating their own home made spoofs.

It takes time, patience and professional expertise to forge an internet campaign and allow it to percolate at its own pace. But that's only the start of a movie campaign. On May 1, the teaser trailer was officially released online and also attached to "X-Men Origins: Wolverine" on thousands of movie screens and the full length trailer was released to the internet on July 8 and alongside the film "Bruno." Starting in June, signs on bus benches, bus shelters and on the side of buses themselves began appearing in major cities reading "Bus Benches for Humans Only" and "This Bus is for Humans Only" which provoked more mystery and conversation. In the last few weeks, Sony has sealed the deal with an agressive
television campaign and in the past week, publicity stories have popped up in various newspapers and magazines right in time for the opening. All the work has been done and the movie is set to open in about 2700 theatres. I haven't seen any projections for the film. Will it be number one at the box office? All indications point to "District 9" being successful but like I've often said, a movie has to open and prove itself. In a summer of pre-sold commodities, loads of prequels and sequels, movies about old television shows and toys, "District 9" has the look and feel of something original, something intelligent, something new and fresh that audiences are ready for. This is one to keep an eye on and see if it emerges as a bonafide late summer sleeper.
2009 Copyright David Sikich. Video clip used with permission by First Business LLC.

Battle Lines are Drawn at a Theatre and Kiosk Near You

2009-08-06T17:03:00.000-07:00

There are two interesting battles raging this weekend. The first one is inside the nation's movie theatres, where it's really not much of a contest but more about the adult audience, specifically women in this case, showing some box office mettle against those omnipotent fanboys. The other one is a behind the scenes power struggle within the home entertainment industry where studios are fighting to maintain value for its films and a sequential order to its distribution. It's easy to fixate on the week to week theatrical business, but it's also instructive to explore the happenings in the DVD, television or international markets from time to time to see how everthing is connected. Whenever one revenue source is impacted in any way, the results are felt throughout the industry in the number and type of movies that are made, distributed and seen by the public.

At the theatres this weekend, Columbia's "Julie and Julia" opens against Paramount's "GI Joe: The Rise of Cobra" and even though "GI Joe" is in no danger of not finishing number one at the box office, I feel it's important for the adult audience to make a strong showing for the latest Meryl Streep summer counter programmer. It's amazing to think that at the age of 60, Streep is now considered one of the most bankable actresses in Hollywood and the sole reason "Julie and Julia" was made in the first place. In two of the last three summers, she has had big $100 million dollar plus hits with "The Devil Wears Prada" and "Mama Mia" which has transformed this Oscar winning actress into more of a box office draw than she has ever been in her 30 year career. The importance of a good showing stems from the fact that there have been so few wide releases geared for the adult audience this summer that the industry needs to be reminded that there is still a pulse in the over 35 audience. We are in the 4th month of the summer movie season and outside of a few romantic comedies, there have been only three other movies that could be considered made for older audiences, "Angels and Demons, "Taking of Pelham 123" and "Public Enemies." That's a pretty sad statement.

With the national box office being down for four weeks in a row, the combination of women and fanboys flocking to see their particular movies this weekend should prove to be a winning tonic. Hollywood always seems to be shocked when a female driven movie opens strong and it will be no different Monday morning when "Julie and Julia's" weekend gross comes in higher than what was projected. Women make up a gigantic audience but they get very little respect in the male dominated run industry. With Meryl Streep playing Julia Child, it got me thinking about cooking and food themed movies which have always seemed to do well in the independent film arena. Numerous movies such as "Big Night,' "Like Water for Chocolate," "Eat Drink Man Woman," Tortilla Soup, "Babette's Feast" and "Waitress" have all proven to be popular with audiences. The ace in the hole for cooking movies is that every newspaper has a food editor and a weekly food section so getting publicity stories for these movies and reaching the intended audience is much easier to accomplish than with your average independent release. And for independent films, publicity reigns supreme. But I was surprised to notice that very few studio wide releases have dealt specifically with cooking. In the modern era, Warners "No Reservations," a remake of the foreign hit "Mostly Martha," is the highest live action grosser with $43 million. Disney/Pixar's "Ratatouille," with a gross of $206 million leads the field. It won't take long for "Julie and Julia" to surpass "No Reservations" and become the highest grossing live action cooking movie of all time. In regards to "GI Joe," it's the last big summer action movie and even with some questionable buzz, the fanboys will be compelled to see it opening weekend and should gross $50 million with no problem. With a $175 million dollar budget, Paramount better hope it does at least that amount. I'm not the least interested in seeing toys turned into movies but I understand the thinking behind it. But after reading that Hasbro announced movie deals for the Oujia Board and board games Battleship, Candyland and Monopoly, a strange sense of gloom came over me.

Theatrical continues to set the awareness and value for movies, but the profits still kick in with the DVD release and there have been fewer profits this year. It can't be overstated how important DVD revenues are to a film's bottom line. Before a studio puts a movie into production, they first have to project how that movie will perform throughout its various stages of distribution. If they have to adjust downward their DVD projections, they try to either find ways to lower the budget or scrap the film altogether. Taking a look at the performance of home entertainment's performance for the first half of 2009 is schizophrenic to say the least:

First Half of 2009
Total U.S. home entertainment - down 3.9%
DVD and Blu-Ray rentals - up 8.3%
DVD sales - down 17%
Digital sales and rentals - up 21%
source: The Digital Entertainment Group

Home entertainment is going through a transitional phase with new formats such as high-def, digital downloads and streaming and transitional periods can tend to drag revenues down as they transition to new ways of generating income. That's exactly what's happening with the current DVD market. The new formats are showing growth but they pale in comparison to the studios' core DVD sales business which is falling for the second year in a row. Nothing can make up for the 17% drop in DVD sales in the first half of the year. From the time DVDs entered the market in 1997, it was a license to print money for the studios as the business changed from a predominantly rental market to a sales market with consumers gobbling up $19.99 DVDs and more than willing to build their own personal film libraries. DVDs became the fastest rising home technology in history and for over ten years in a row showed incredible growth each year. Sales of DVDs brought in more revenue and profits than rentals did and the money flowed into the distributors more quickly. Everyone was happy but things never stay the same. With consumers looking to save money in this recession and realizing they may own more DVDs than they can ever watch, the business is shifting back to more of a rental business which is not something the studios like but have to deal with nontheless. Not all categories of movies are showing the effect of the recession and changing consumer habits. Studios report that R-rated comedies, action-adventure films and cult fan titles have been holding up the best. It's interesting to note that family and kid movies were not mentioned so parents must also be deciding they have enough titles on hand to keep the kids happy.

With Blockbuster and other brick and mortar video stores either forced to close in recent years or battling to turn around their businesses, the growth in rental is mainly coming from Netflix (up 22% in revenues in the 2nd quarter) and Redbox, the company with those red kiosks in front of grocery and drug stores throughout the country. Redbox is the dominant player in the $1.00 a night rental kiosk business and has shown incredible growth from being in 600 locations four years ago to over 17,000 locations today with a projection of 22,000 by the end of 2009. So this is where the real growth is coming from so why aren't the studios jumping for joy with this growing revenue source? It comes down to the pricing pure and simple. The dollar a night rentals does not thrill the studios which have been living off selling DVDs at $17.00 a pop wholesale and pocketing over twelve dollars profit on each DVD sold. Redbox is doing better for itself than it is for any distributor. For studios, they have a multiple of concerns, starting with the precedent of the low price, less profits, more low priced used DVDs flooding the market which can affect higher priced DVDs for sale, and the all important perception of maintaining value for their product. For independent distributors, forget it. Each Redbox kiosk has slots for 600 disks, but the average number of titles is just 200, so they carry only the most popular movies. So most independent films will not even have a crack at being placed in the kiosks and when they do, the distributors are being lowballed with offers to pay only a couple of bucks or so wholesale which is a slap in the face and not worth their time or trouble.

The studios are all on their own in figuring out how to deal with the Redbox issue.
Some are fighting it while others are making deals with the company. It's a tough situation for the studios. It's hard to avoid selling to companies that sell product for such a low price, especially when a company such as Redbox is growing so rapidly and one in which the public is embracing. But a few crucial questions arise. How far can the studios risk in devaluing their product in the home market? How could it affect long term industry growth? Legally, do the studios have to service all retail outlets at the same time, regardless of the price they charge. These are all tricky questions and different studios are responding in different ways. The two studios at the extreme ends of the spectrum are Universal, which is currently being sued by Redbox, and Columbia, which has just announced a five year distribution deal with the company.

Let's take Universal first. Several months ago, Universal made the decision to withold their first run films from Redbox for 45 days which has led to Redbox filing an anti-trust lawsuit against the studio. What Universal was saying is that they'll sell their films to Redbox but not on availability. They will have to wait their turn. The precedent is in the theatrical marketplace where historically there has been a pecking order of a sequential release pattern servicing a wide range of theatres with various operational and pricing policies. Even though the majority of the 40,000 screens in the United States have first run policies,there are still a range of theatres with the following policies:

1st Run theatres
Large format theatres
Drive-in theatres
Art theatres
Calendar theatres
Repertory theatres
Intermediate theatres
Discount run theatres
Drafthouse/restaurant cinemas

Now I don't know if that precedent will be applicable in the DVD market but bargain priced theatres have never been able to play movies at the same time as first run theatres. They have had to wait their turn and play a couple months later. Redbox has filed an anti-trust suit against Universal but the studio's attorneys understand what they can and can't do and are guided by the general anti-trust rules that have been in place for 60 years. Studios understand that they have a lot of latitude when selling their movies to customers. They don't have to sell to everyone who requests a film; they can sell to those who they believe will return the most revenue back to them and they are entitled to release a picture on an exclusive or selected number of runs. There have been many cases where distributors have made DVD deals with specific retailers like Blockbuster or Best Buy for an exclusive period before the other retailers could get their hands on it. That still doesn't guarantee that Universal will win the lawsuit but those are the things they weighed before they instituted their 45 day policy. 20th Century Fox Home Entertainment also announced this week that they are seeking to impose a 30-day delay on the availabilty of its DVD titles for all $1-per-night rental kiosks.

Fox said in a statement that the studio "supports the vending machine business in a 30-day window following our initial home video street date. The basis of this position is to continue to provide the consumer with broad title choice and access to Fox movies while maintaining the quality image and value perception of Fox movies...Our desire is to maintain for Fox movies a thriving network of distribution serving all types of consumer preferences, on reasonable business terms for Fox as well as our distribution partners."

Other studios are choosing to make deals with Redbox rather than confront them on the price issue, even though that may hurt the industry in the long term. In effect, they are looking for short term growth for their own companies. The most high profile deal was announced by Columbia after they signed a five year deal worth a reported $460 million dollars. Columbia will receive preferential treatment and increase their depth of copies with Redbox from 14% to 20% and made Redbox agree that they would send back the used DVDs instead of releasing them into the general marketplace to be sold at drastically discount prices. So they made a good deal for themselves. It goes to show again that studios can not and will not work in unison when it comes to how their movies are sold. Which way is the best way?

Well, the only constant in the Motion Picture Industry has always been change and there's plenty of that for all the industry managers to deal with. What's different about the situation with Redbox is that this is one instance where the internet is not in the middle of the equation when it comes to changing or smaller revenue returns. This time the battle is with the old fashioned, very physical, vending machine. That doesn't make it any less stressful, it just points to the fact that business conflicts come in all shapes, sizes and formats. And one way or another, with millions of dollars at stake, they have to be dealt with while considering the past, present and future. Did Universal or Columbia make the right decision with Redbox? Stay tuned.

Questions for Discussion:
1. Why has the DVD business been shifting back to more of a rental market? Which of the two markets produce more revenue for distributors?
2. How far can the studios, or any distributor, risk in devaluing their product in the home market? What's at stake?
3. From a legal standpoint, do the studios have to service all retail outlets at the same time, regardless of the price they charge? How are different studios dealing with the Redbox issue?

2009 Copyright David Sikich. Video clip used with permission by First Business LLC.

The Not So Funny Business Of Taking Risks

2009-07-30T04:31:00.000-07:00

Judd Apatow's "Funny People" is opening this weekend and there really isn't anything funny about what's at stake for Universal and its co-heads Marc Shumer and David Linde. They need a hit movie, preferably a big hit movie, and they need it sooner rather than later. It's been a bad year and they're last in market share among the six studios and they're starting to feel the heat from their bosses at General Electric. Universal has been taking more risks than the other studios this year with adult driven films like "Duplicity," "State of Play" and "Public Enemies" and GE wants to start seeing some of these risks turn into profits.

Will "Funny People" be funny enough to become that elusive hit Universal has been looking for? So far Apatow has been good for the studio with "40 Year Old Virgin" and "Knocked Up" grossing $260 million domestic between them. It would seem another comedy from the director couldn't be coming at a more opportune time but Universal can't seem to catch a break because Apatow is breaking away from his usual winning formula, adding some serious issues of illness and mortality to the comedy mix and saddling it with a long running time of 146 minutes. Inserting Adam Sandler as the star should help but with him in the cast the budget sits at $70 million, double the cost of his previous films. Put it all together and Universal is staring at another risky investment on its hands.

Taking risks in today's Hollywood is not something the studios like doing, especially with DVD sales down double digits for the second year in a row. Their profit machine has slowed down and that is making the decision making process on what movies to greenlight even more conservative than it was before. When the numbers are crunched and they don't add up, studio heads are paid to walk away from the deal rather than throw their money in on a wing and a prayer. That's what happened recently when Sony walked away from Steven Soderbergh's "Moneyball" script with Brad Pitt attached after they had previously approved the project. Sony felt Soderbergh made changes in the script that would have made the film more risky so they walked. If Universal's risks continue to not pay off, one of two things will happen, GE will make a change at the top and move in another direction or the current chiefs will be forced to make fewer ambitious films and more cookie cutter ones that will start looking like everyone else's release schedules. Either way, it would be bad news for moviegoers. When people complain about the overall quality of studio movies they have a point. The studio output leaves a lot to be desired for the discerning moviegoer, but movies have come to cost so much to produce and market and profit margins are so slight, what are they supposed to do? When you are making a majority of your movies for a global audience, it's not the easiest question to answer.

I've always been fascinated with the concept of risk/reward and how movie distributors and exhibitors have dealt with it over the years. It's always been a very expensive business to operate in and when push comes to shove, when one side or another gets squeezed, when someone gets desperate and looks to get the upper hand or when greed sets in, it usually comes down to people looking to maintain or wanting more money, power and control. Sometimes the ploys they have used have been legal, other times illegal.

Two historic court cases involving litigaton between distributors and exhibitors have helped define and govern the movie industry when one side, then the other side, have attempted to lower their risk and improve their odds for reward through illegal practices, The Paramount Consent Decrees in 1948 and the Product Splitting case of 1981. The Golden Age of Hollywood between 1930 to 1950 produced many great screen classics but those years were not golden for everyone in the industry. The studios had an iron grip control over both distribution and exhibition, as they owned and operated many of the most important theatres in the country in addition to producing and distributing their own movies. They controlled the entire shooting match of all three facets of the business and sold their movies to their own theatres, actively working to keep competition out and denying independent theatres access to their top films. Not surprisingly, this led to a class action lawsuit against the studios which evolved into a government anti-trust case which took ten years to work its way through the federal courts and finally up to the Supreme Court. The major producers-distributors-exhibitors were eventually found guilty of restraint of trade, conspiracy, price-fixing and depriving independent theatre owners of top 1st run movies and were forced to sell their theatres and adhere to a set of new sales procedures that are in still in place to this day. It came to be known as the Parmount Consent Decrees and it did more to influence the structure of the contemporary film industry than any other occurrence in the industry's first 50 years.

In 1981, it was the exhibitors' turn to face the music in a government court case and it directly was tied to a dubious sales practice utilized by distributors in the 1970's called blind bidding. After the Consent Decrees, the studios were forced to bid out their movies and make them available to all theatres, giving them an opportunity to send in a written bid if they were interested in playing a specific movie. As the 1970's proceeded, the studios began asking for bids on more and more movies before the movies were actually finished, putting the exhibitors at a disadvantage by having to commit to films based on star power, glossy brochures or ten minute product reels because the movies were still in production and the studios wanted to firm up the theatres as early as possible. As more and more movies failed to pan out and losses mounted for exhibitors who guessed wrong in this bidding process, exhibitors became angrier and angrier. This led the exhibitors down two roads, one legal and the other which proved to be illegal, The legal method was pushing for anti-blind bidding laws in individual states which would prevent distributors from asking for offers on movies before they were completely finished. After all was said and done, about 30 states eventually passed laws against the blind biddng process. The other method was theatre owners calling each other up in various markets and agreeing within the group not to bid against each other. What they did was meet in secret and worked out a system of dividing up all the movies among themselves each quarter and supplying the booking dates to distributors while bypassing the blind bidding process. It was an early form of a fantasy sports league, but instead of multiple rounds of picking ball players they were picking movies, in effect becoming both the distributor and exhibitor. The practice was called Product Splitting and this time the government was on the side of distributors when the anti-trust case was staged against exhibitors in 1981. The ruling was a per se victory for distributors which made product splitting an illegal criminal act anywhere in the country. With the bidding process long since abandoned, there has been no need for exhibitors to even think about engaging in this activity for many years, but it was a major ruling in its day.

What these two cases have in common and is a guideline for any business in an openly competitive marketplace to avoid, is the simple word and concept of collusion. When it comes to trying to eliminate risk and getting an edge, no like-minded businesses can ever conspire together to make group decisions that would give unfair advantage to themselves at the expense of others. Collusion is blatantly illegal. Each company has to compete on their own, making their own decisions, deciding on their own path and staying away from getting too close to competitors in discussing speciific business practices and competitive situations.

One of the perfectly legal ways studios use to eliminate some risk is to cut costs, re-adjust their budgets and lower their expenses. It makes sense that they would look closely at their marketing budgets to see what they could trim. Newspaper advertising has been an area where cost reductions have been made across the board by all the film companies. It pains me to look at Friday movie sections to see how small the ads have become and how quickly ads are dropped in the second, third or fourth weeks of a run, no matter how successful the movie is. Is this another example of studios getting together and agreeing to all run smaller ads and hoping to drive down ad rates? No, it isn't. It's companies coming to the same conclusion that fewer moviegoers are reading newspapers and that they're getting more of their information from the internet. They are working independent of each other and don't have an ulterior motive other than trying to trim dollars wherever they can. I know for a fact that newspapers are more than willing to cut deals with distributors to either run larger ads or to continue running ads in later weeks, but say thanks but no thanks, they just don't have any money left in their budget. That's why Universal has stopped running newspaper ads for "Public Enemies" and "Bruno." Nothing illegal about that, perhaps somewhat shortsighted, because there are still a good number of people who are reading newspapers and newspaper ads can still be an effective reminder, especially on an adult driven movie like "Public Enemies" which continues to do business in large cities like Chicago.

Another example of studios going their own way and making their own decisions is in the area of DVD's and what to do with Redbox, the company which is becoming more popular by renting DVD's overnight for $1.00. Each studio is grappling with a fundamental choice of how this business model will affect long term growth measured against short term gain and how their risk factor will play out. Every day, every week, every month, every year, decisions like this have to be made. Much more on this topic in next week's segment and blog.

Questions for Discussion:
1. Why are studios so risk adverse in today's corporate climate? With Universal taking multiple risks in 2009, what became of the fate of co-heads Marc Schumer and David Linde?
2. Describe what the Paramount Consent Decrees and The Product Splitting legal cases were and which one had more of an impact on the structure of the Film Industry. In what way did it provide an opening for new companies to enter the industry?
3. What is the main distinction between hard nosed fair competition and collusion?

2009 Copyright David Sikich. Video clip used with permission by First Business, LLC.

"The Geeks Have Inherited the Earth and That's Good News for Us"

2009-07-24T02:42:00.000-07:00

As the summer movie season rolls into the final third of the season and starts winding down with "Harry Potter and the Half-Blood Prince" being the last of the traditional blockbusters scheduled to open during the season, it's a good time to look into the phenomenon of the opening weekend which drives the entire blockbuster industry. Friday. Saturday. Sunday. The three most important days of the week for distributors, producers, investors and exhibitors. But what about audiences, the moviegoers who either show up at the theatres on opening weekend or decide to stay away, without them, it can't happen. There is an undeniable aura, mystery and yes, terror, to opening a movie and when people show up in good numbers on opening day it's a little bit of magic, but when the opposite happens and a movie fails to deliver that audience, it is pure heartbreak for all those involved. That's the movie business, where for better or for worse, no matter the size or budget, studio or independent, a movie can be judged either a success or failure based on one weekend.

It's fitting that this weekend in San Diego the annual Comic-Con convention is being held and at the heart of this pop culture event is the recognition and the celebration of the passionate, devoted fans who are the ones who buy the tickets on opening weekend and make the blockbusters possible for the studios. What started out as a small gathering of comic book fans buying and trading rare comic books has evolved into a huge event for Hollywood where studios introduce and promote their upcoming sci-fi, fantasy and comic book movies, the genre of movies that dominate the blockbuster landscape. 125,000 fans gobble up the tickets, 300 media representatives attend. The annual event has become a marketing goldmine because the studios realize this is where the buzz starts, that these diehard fans are the buzz generators who start the advanced word in blogs, internet chat rooms and social networking sites. The studios make these people feel important because they are important, they can make or break a movie, and that's why a director like James Cameron has chosen to show 20 minutes of his highly anticipated Christmas film "Avatar" to these fans immediately after he showed it to 200 top theatre owners last week. Jon Favreau, the director of "Iron Man" and Iron Man II," which is being promoted at this year's convention, put it this way, "The geeks have inherited the Earth, and that's good news for us."

Comic-Con also happens at the perfect time for the studios because all their summer blockbusters have opened and it's time to look ahead, plan and promote the next wave of tentpoles that will be opening in the coming year. If you think of the studios as manufacturing plants and the movie theatres as retail outlets, it's no different for movies than it is for a new clothing line or next year's car models. Obviously, the studios need to know that these loyal and passionate fans are on board for their upcoming expensive and important franchise movies, but I also want to get into the importance of the opening weekend for all movies and some of the strategies smaller films have utilized in the past attempting to get their audience to show up that first weekend. But before that, I want to look back at the summer so far and see how the various opening weekends have played out.

The twelve weekends since May 1st have yielded 22 wide release movies, an average of less than two movies a week. That is an indication that the biggest, most pre-sold movies open against very light competition, which just adds to their dominance and huge opening numbers. Starting with the July 24th weekend, when for the first time this summer three wide releases will be opening, ( "G-Force," "The Ugly Truth" and "Orphan") there will more releases each week leading up to Labor Day trying to take advantage of a more level playing field full of more regular type movies instead of the established franchise movies.

The first list of opening weekend grosses will include ten movies, eight established franchise movies plus Disney/Pixar's "UP" and Universal's "Bruno," movies that enjoyed established fan bases:

Transformers - $109 million (Wed. opening, 5 day gross of 200 million)
X-Men Origins: Wolverine - $85 million
Harry Potter - $77 million (Wed. opening, 5 day gross of 158 million)
Star Trek - $75 million
UP - $68 million
Night at the Museum - $54 million (Thur. opening, 4 day gross of 70 million)
Angels and Demons - $46 million
Terminator Salvation - $42 million (Wed. opening, 5 day gross of 65 million)
Ice Age - $42 million (Wed. opening, 5 day gross of $66 million)
Bruno - $30 million

For the most part, all of the above established franchises delivered strong opening numbers and that's all marketing departments can do, make sure the movies open big and the expected audience comes out, after that, word of mouth will determine their staying power. The twelve other movies that have opened wide are listed below:

The Hangover - $45 million
The Proposal - $33 million
Public Enemies - $25 million ( Wed. opening, 5 day gross of $40 milion)
The Taking of Pelham 1 2 3 - $23 million
Year One - $19.6 million
Land of the Lost - $18.8 million
Drag Me to Hell - $15.8 million
Ghosts of Girlfriends Past - $15.4 million
My Sister's Keeper - $12 million
Imagine That - $5.5 million
I Love You, Beth Cooper - $4.9 million
Next Day Air - $4 million

There's definitely more misses than hits among this group and generating big opening weekend audiences proved elusive, even in the summer when there were only at the most two movies a week opening. There were a few exceptions starting with the amazing "The Hangover," which has past the $235 million mark and has become a blockbuster in its own right. (with a sequel to follow) Sandra Bullock's "The Proposal" has also past the $100 million gross and "Public Enemies" could reach that figure in the next few weeks. Other than that, the rest of this group has been pretty disappointing and points to the reason why it's difficult to open a lesser movie in the summer and why there are so few of them, it's too easy to become a sacrifical lamb and road kill left in the shadows of the big blockbusters.

Unfortunately, most movies are not helped by the buzz at the Comic-Con convention but the need and wish for a solid opening exists for all movies. Let's start off with a few questions. Should all filmmakers be concerned about who the audience will be that will show up for their films on opening weekend? Do all films necessarily have an audience? What are some ways that have been used to strengthen the odds of pulling in an opening audience? Well, filmmakers dismiss the audience at their own peril. If they don't worry about who would be most likely to see their film, who will? A distributor? Distributors reject the vast majority of films for that very reason; they don't see an audience for them. Filmmakers who think they would be sacrificing their art if they even considered the end audience, in my opinion, are misguided, arrogant or uninformed on how the marketplace operates. There is nothing wrong about considering the audience in advance and doing so can actually improve the film itself by tweaking the concept, story line, plot developments or casting choices that would appeal more to an intended audience. Sometimes all a filmmaker needs to do is research a subject matter more thoroughly and make smarter decisions in the pre-production stage.

To answer the second question about whether all films have an audience to begin with is a thorny one. Maybe I should ask whether they have the potential for a commercial audience or not? The problem with so many low budget movies, whether they are art films or genre movies, is that there is not much of an audience for most of them due to their size and modest means. Other limitations can be poor production values, dirivative story line, obscure or downbeat subject matter, unknown cast and often, they just are not good enough. But that doesn't stop filmmakers from trying to reach an audience which leads us to the third question in regards to ways that have been used to improve the odds of reaching and motivating a specific audience to attend a movie on opening weekend. Here are three paths that have been utilized successfully:

1. Film Festivals
2. First Weekend Clubs
3. Advance Ticket Sales

For any arty, character driven film, getting selected to play in film festivals is the first step in creating interest and buzz. It's the closest comparison to what happens at Comic-Con, even though it happens on a totally different scale. it's all about reaching an intended audience and media (film critics in this case) interested in quality, art films. With fewer acquistions occuring at festivals, filmmakers are becoming more savvy and having DVD's of their films for sale right at the fests or taking advantage of the local communities they play in to forge plans for a theatrical release at a later date employing volunteers who are fans of the film to help in the effort.

First Weekend Clubs have been around for more than a decade that involve volunteer e-mail organizations that let their members know when and where a niche film is opening, and then remind them not only to get out the first weekend but to keep going and bring friends along with them. There are clubs for African Americans, Gay and Lesbians, Latino, and Asian-American groups. The motivation behind these groups is to show Hollywood that there is enough support for those films and that more should be made. The organizers involved in forming the groups recognized that movies are judged on their opening weekend grosses so one of their top missions is to continuosly remind and encourage their members not to wait for the second or third week and go out the first day or two, because if they don't, it will be taken off the screen before they get a chance to see it. These clubs have helped movies in the past like "Barbershop," "Better Luck Tomorrow," "Bend It Like Beckham" and "Blair Witch Project." The concept is a sound economic strategy.

Advance Ticket Sales don't immediately come to mind when thinking of independent films but it is something to consider when opening a movie on an exclusive run, especially in a city one lives in. I was involved in this strategy myself when ISA Releasing launched "Lana's Rain" in Chicago several years ago. Years earlier, when we distributed "Tie-Died: Rock n' Roll's Most Deadicated Fans,' I felt the sting of a terrible opening weekend on a multiple city release which basically sealed its fate from the first night on. Yes, it can all be over that quickly. I've had filmmakers I've worked with wonder if the audience was waiting for Saturday to see the film and whether business could improve substantially the next night. It would be nice to say that could happen but the movie business doesn't work that way. A disappointing Friday gross establishes the level of business for the rest of the weekend. So the motivation to sell advance tickets for "Lana's Rain" opening weekend came from not wanting to go through the excruciating pain of wondering if anyone would show up opening night. Anyone who has ever tried to open a film or even a theatre owner who is taking a chance on an unproven film, understands how nervous one can get counting heads between 5:00 and 8:00 p.m. on Friday night praying for people to show up at the theatre. But before we could even think about pre-selling tickets, I had to change the traditional 90/10 percentage deal that was made with the Music Box Theatre that kept the selling of all tickets in their control. What I wanted was the flexibility of selling tickets outside the theatre boxoffice and its website at a price we chose rather than what the theatre mandated.

There is only one financial deal that allows distributors and filmmakers to have control over how tickets are sold in advance for their movie, and that is the four-wall deal. In this deal, the theatre is in effect purchased for the week for a flat price that is paid in advance to the theatre, and then every single dollar taken in at the box office goes to the distributor or filmmaker who made the deal. The wrinkle is, along with more control and potential upside, comes some very real risk. In a standard percentage deal, the box office is split between the two parties and most of the time no money changes hands before the movie opens. When we switched to a four-wall deal we negotiated a price of $7500 which had to be paid to the theatre before the movie opened. This was not in the budget and made my partner angry because there is always the possibility of burying yourself deeper and losing additional money. I just felt strongly that this was the way to go and the pressure was squarely on my shoulders to deliver positive results and sell enough tickets to cover this additional expense. There have been numerous occasions when someone who was self-distributing a movie got burned by taking in much less at the box office than what was paid out as a rental price. But sometimes you have to take a calculated risk and back it up with a solid strategy and action plan to make it work.

This goes back to understanding who your target audiences are and how to reach them. Without that knowledge, there is little chance for success. We targeted the following audience groups; friends and family, the independent art audience, Columbia College students, faculty and alumni ( the filmmakers were alumni), women's groups and the Chicago area Eastern European communities. The plan was to utilize as many people we could get who were involved with the film to help sell tickets starting three weeks before the opening date. The tickets we were selling were only for the Friday, Saturday and Sunday of the opening weekend with special events and appearances by the stars and director creating an extra added value. The goal was to sell a minimum $7500 worth of tickets to cover the rental price which would in effect remove the angst of the possibility of a disappointing turnout. This would also put us in a good position of keeping every additional ticket sale for ouselves. By opening day, we exceeded our goal by selling $8500 worth of tickets and then went on to sell an additional $9,000 at the box office to finish the first full week with an excellent gross of over $17,500.

This strategy is definitely a possibility for anyone who is self-distributing a film and is confident of being able to reach an audience. A theatre would always be interested in making a four wall deal with an independent distributor or filmmaker because it takes away the risk of playing an unproven movie and gives them cash in advance. These deals generally work better with a local independent exhibitor who can be more agreeable in working out a fair rental price than what you would be able to get with a more corporate chain theatre. The whole idea is to get people to come out the first weekend, whatever it takes.

Questions for Discussion:
1. If you think of the studios as manufacturing plants and movie theatres as retail outlets, who dictates the price of purchase for the product and the price the public will pay for it? Does the four-wall deal change that dynamic? If yes, in what way.
2. What are the pros and cons of a distributor having a four-wall deal instead of a percentage deal with a movie theatre?
3. On "Lana's Rain," ISA Releasing changed the deal from a 90/10 deal to a four-wall deal. The following are the specifics of each deal:
First Deal:
90/10 over $10,000 (750 seats)
Weekly gross under $10,000 will net 40% film rental
Weekly gross bwtween $10,000 and $16,999 will net 50% film rental
Weekly gross over $17,000 will net 60% film rental
Weekly gross over $30,000 will be governed by the 90/10
New Deal:
$7500 Four Wall Rental to be paid in full seven days before opening date. Distributor will retain 100% of box office to be paid within 7 days of completion of 1st week.
The first week gross on "Lana's Rain" was $17,738. Please compute both deals and arrive at what the film rental paid to ISA would be in each case. Do you think ISA was right to change the deal before the film opened? Then consider whether the box office gross would have been the same regardless of how the financial deal was written. Give your reasons for your answer.

2009 Copyright David Sikich. Video Clip used with permission by First Business LLC.

The Two Extremes of the Marketplace Come Together in July

2009-07-16T14:56:00.000-07:00

The pull between mainstream Hollywood movies and challenging independent films has been a fascinating component of the industry for some time now. They may be two separate industries and work under different business models but they are interconnected in many ways. The two businesses co-exist, compete and sometimes crossover in their attempts for money, stars, distribution deals, movie screens and audience approval. Up until last year, all six studios had independent art divisions but Warner Brothers and Paramount have since ambandoned this end of the business and the independent sector has been a on a downward trajectory. When once all kinds of money was chasing after independent films, now it's the exact opposite; money is running away from it as quick as possible. The demand has fallen with investors, distributors, exhibitors, audiences, DVD companies, you name it, the shine is off. With the 2009 box office on a record breaking pace, someone forgot to invite the independents to the party, it's been all about studio movies this year and summer has driven that point home with a vengenance; it's one of the weakest in years at the box office for specialized product.

With this dynamic in place, mid-July has brought two movies into the spotlight from the extreme ends of the marketplace, Warners "Harry Potter and the Half Blood Prince" and Summit Entertainments's "The Hurt Locker." Not that they're converging and competing against each other, one is on 4200 screens and the other is on 69 screens, but it's what they signify; the powerhouse studio franchise that is stronger than ever and the acclaimed, serious independent feature set during the Iraq war looking for commercial success in a crowded, light hearted marketplace. It's interesting how both these movies landed up on movie screens in July. "Harry Potter" was scheduled to be released last November but Warners moved it to July because the studio had more of a need for a big blockbuster in mid-2009 than they did in 2008 because "The Dark Knight" had already grossed over $500 million for them last year. When they saw that no other movie was booked into the July 17th week and it just happened to be the same exact week "Dark Knight" opened on, it was a move they felt they had to make. After opening to a record $22 million on their opening night midnight shows, beating "The Dark Knight's" previous record of $18.5 million, Warners is poised to make more on Potter's 6th installment than they did on any of the others. It's a move that is immediately paying off. Summer is better playing time and the delay just heightened the demand for the film. There is no single bigger decision a distributor has to make than deciding the release dates for their movies. Millions and millions of dollars ride on these decisions.

I've said before that when one company makes a release date change, it can put other changes in motion that can alter the fates of any number of movies and companies. Summit Entertainment was helped a great deal when "Harry Potter" was moved out of November because it provided an opening in the marketplace and less competition for their own "Twilight," a would be franchise with a similar audience of young female fans that went on to become a smash hit and now, the start of a lucrative series of movies for the new distributor which is soon to become a franchise. It's funny how things happen and how the big success of "Twilight" perhaps helped pave the way for Summit's acquisition of "The Hurt Locker." When money flies into the coffers of a company, those funds can provide a financial cushion to stretch into other areas and take a risk or two along the way. When "The Hurt Locker" started drawing attention at film festivals last fall, Summit decided to buy the distribution rights and plunge into the prestige business. The film was financed by foreign investors and though the acqusition price hasn't been revealed, I wouldn't think Summit paid more than one or two million for the rights so their risk in this film isn't too high. On the other end of the spectrum, the same could be also said about Warner's $250 million investment in the latest "Harry Potter." The risk is minimized by the historical success of the franchise and the almost guranteed results and profits that will follow.

Whatever the business model and money that is at risk for a distributor, making the right call on when to release a film is the same for the biggest studio and the smaller independents alike. The pressure is the same to guess right. Whereas Warner's strategy to open Potter in July has already been discussed and validated, will Summit's decision to release "The Hurt Locker" in mid-summer rather than later in the year, which would have been a more traditional, safer bet, prove to be as smart of a move. This is where things get tricky and much harder to forecast. Regardless of what release date they chose, Summit must have realized all the hurdles they confronted when they chose to distribute the latest movie set during the Iraq war. Every single Iraq movie that has been released in the last couple of years has either been a disappointment or an all out disaster at the box office. It has been proven over and over again that audiences have not been interested or willing to see these movies while the war is still going on. It's interesting to note the comparison between six Iraq movies and six Vietnam movies and how they performed at the boxoffice. The Vietnam war was as unpopular at the time as the Iraq war is today but the big difference between the two is that all the following Vietnam movies were made well after the war ended in 1975.

Iraq Movies:
Lions for Lambs - $15,000,000
Stop-Loss - $10,900,000
Rendition - $9,700,00
In the Valley of Elah - $6,700,000
Redacted - $65,385
Grace is Gone - $50,899
Home of the Brave - $4,874

Vietnam Movies:
Coming Home: 1978 - $32,000,000
Deer Hunter: 1979 - $49,000,000
Apocalypse Now: 1979 - $83,000,000
Platoon: 1986 - $137,000,000
Full Metal Jacket: 1987 - $46,000,000
Born on the 4th of July: - $70,000,000

Looking at those Vietnam titles, I shake my head in awe. The majority of them are all-time classics that are some of the best films of its day. It didn't hurt to have directors like Oliver Stone, Francis Ford Coppola, Stanley Kubrick, Hal Ashby and Michael Cimino at the helm of these movies. The list of Iraq movies pales in comparison. Maybe Summit Entertainment saw the same thing and figured "The Hurt Locker" could be the exception to the rule. Fighting history and past precedent is never easy but distributors sometimes like to think they can be the one to buck a trend and be the first one to accomplish something that no other distributor has yet to do. What Summit has going for them are the best reviews of the year for any picture other than "UP" and no doubt the best reviews for any Iraq movie up to this point. Yes, reviews are crucial for this type of film, but it's still only one factor in the strategic launch of a film. The easy move would have been to nestle it in at the of the year to take advantage of the top ten lists and any Golden Globe and Oscar nominations. But that's what every specialized distributor does and the competition is fierce for both awards and attention. However, audiences are ready and primed for serious films then, unlike in the summer months when lighter fare rules the day. So Summit is not only fighting an anti-Iraq bias but the summer mindset as well, coupled with the fact that it's awfully difficult to expand outside the art houses in the summer when the studios control the suburban screens with their big movies.

So why did they choose to go out with such an acclaimed film in the middle of the summer? It's another attempt at summer counter-programming but in this case they run the risk of killing the film off very quickly in the unforgiving summer marketplace. Summit's decision now is whether to let the movie sit in the art theatres and hope that great word of mouth can slowly expand the audience base and not attempt to move into the suburbs too quickly. That's what I would have figured they would do but in the Chicago market the distributor is increasing its run from three theatres to ten theatres in the second week so they are wasting no time and being very aggressive. To run a successful platform release is a delicate work of business that requires patience, experience and impeccable timing to pull off. Going out in the heat of the summer was risky to begin with; increasing the theatres too quickly heightens that risk. There is no going back. The next two weekends brings five or six new wide releases. If "The Hurt Locker" doesn't perform immediately in the new runs, it will be pulled off the screen in one or two weeks. Game over.

Summit is doing all they can to convince people to go see the movie, stressing that's it's action packed and suspense filled and not a preachy message movie full of political ideology. In addition, they are promoting the movie as the first Iraq film since the American troops have pulled out of Bagdad. I find that a questionable strength because people know the war is still going on and from the people I've talked to, they're either not interested in seeing the movie or not quite ready yet. It's still too soon. Summit is trying to make the movie sound as mainstream as possible despite the subject matter and the fact that the title of the movie is ambiguous and art house sounding. What is a hurt locker? Like I've said, they are working hard to make the movie work, but changing a specific mind set can prove to be an impossible task and choosing to launch it in the summer and moving too quickly with it only makes it more difficult to pull off. If the movie fails, its distribution strategy will be questioned and pointed to as one of the main culprits, even though no one will be able to know for sure if an end of the year release would have produced different results.

Returning to Warner Brothers and Harry Potter, it's pretty impressive on how they have handled this franchise. There is a total of seven books in the series and "Harry Potter and the Half Blood Prince" is the sixth movie. The seventh book is being filmed now and it's being split into two final movies; Warners has already set the release dates for them, one on November 19, 2010 and the final movie on July 15, 2011. After it's wrapped, it will be a nice eight movie, eleven year, seven billion dollar franchise that will keep generating money for Warners for years to come. Not all blockbusters become franchises, think Will Smith's "Hancock," which was one and done, and not all franchises become phenomenons, think "Terminator," "Rambo," "Pink Panther" and many others. Only movies that evolve into cultural touchtones like "Star Wars," "James Bond," and perhaps a few others have achieved that kind of status. The "Harry Potter" series can certainly be added to that short list.

Questions for Discussion:
1. There is no single bigger decision a distributor has to make than deciding the release date for their movies. Go through what the decision making process is and how the actual release dates are chosen by distributors.
2. Is the decision of when to release a movie the same for independent distributors as it is for the studios? Name at least two similarities and two differences.
3. What is the term used when a distributor goes against common practice when picking a film's release date? What is the risk factor involved? Can you think of an example in another industry which utilizes a similar strategy?

2009 Copyright David Sikich. Video clip used with permission by First Business LLC.

A Shadow Company and the Iron-Clad Consent Form

2009-07-09T15:15:00.000-07:00

The marketplace is in the middle of what is referred to as a bridge week between the Fourth of July weekend and the opening of the new Harry Potter movie on Wednesday, July 15th. Everyone knows that movie is going to be huge and competing studios have to figure out how to play this week with a narrow five day window before 'Potter' storms into theatres. Universal and Fox have turned to the comedies "Bruno" and "I Love You Beth Cooper" to carve out some niche business but only "Bruno" has a chance to break through and as it so happens, this is the movie with the interesting backstory to really get into and discuss. Universal has had a tough year up to this point but perhaps with the back to back releases of "Public Enemies" and "Bruno," they may be starting to turn things around. No two movies could be more different from each other and for that reason Universal put them on back to back weeks as they could each find their audience without stepping on each other's toes. The studio's gamble in deciding to release "Public Enemies" before the 4th of July paid off with a $40,000,000 five day gross and it's now in good position to have a lengthy run with nothing remotely like it opening against it anytime soon.

Now Universal's attention turns to making Sacha Baron Cohen's "Bruno" into a hit. It's been three years since "Borat" was a sensation for 20th Century Fox and three years since Universal won a bidding war for the rights to distribute "Bruno." At about the same time "Borat" opened, the Endeavor talent agency, the agency that represents Cohen, struck when the buzz was at its peak and put the rights to "Bruno" up for auction and Universal won with a $42.5 million guaranteed offer. That's a huge number for a film not even made yet but it just goes to show how hot the property was at the time. How the deal went down was somewhat controversial. Endeavor created a separate financing entity called Media Rights Capitol that it ran the deal through and which ultimately financed the movie. This raised eyebrows because it's been illegal for talent agencies to produce movies and television shows ever since the government cracked down on Lew Wasserman and MCA more than four decades ago when they dominated the industry by doing that very same thing. Endeavor insists MRC is a separate entity but not all studios see it that way and people are keeping a close eye on the situation as MRC attempts to funnel and finance other movies through this company. What exactly did Universal get for their $42 million? Distribution rights in all English speaking countries for 15 years with no ownership stake in the movie. That's not the type of deal Universal or any studio likes to make but when a creative artist like Cohen creates his own fictional characters that become very popular, the artist and his representatives basically can call all the shots and control the deal. With the $42.5 million price tag and the limited term deal, Universal carries some real risk and has to hope for the same kind of success for "Bruno" that "Borat" achieved. You may think that it's still a slamdunk deal for Universal, but Bruno is a different type of character than Borat, more divisive and less likable, an over the top gay fashion show presenter who already has parts of the gay community upset with the film because of perceived gay sterotypes. There is no guarantee that a massive straight audience will warm up to the character either. The person who got the best deal out of it all is Sacha Baron Cohen, the creator and star. He received a $15,000,000 salary for the film, the lion's share of the profits, total creative control and in the end, he gets to own the negative. That's a type of deal that makes studios shudder because they live off their library titles and "Bruno" won't be one for Universal. But Universal also realizes Cohen is their secret weapon and the movie's biggest selling point, who may, after all is said and done, still turn the movie into a nice moneymaker for the studio. The man is simply one of the greatest self promoters in the industry and the master of the publicty stunt who stops at nothing when promoting his movies. This promotion is part of the entire package which adds to his value and allows Universal to contain their marketing costs because Cohen is doing all the heavy lifting, constantly creating awareness and increasing interest and want to see in the movie. After detailing the rich deal he has for himself, you can see where his motivation comes from in working to make "Bruno" into the biggest success possible for himself and, to a lesser extent, for Universal.

On another front, movies like "Borat" and "Bruno" are not your average movies and carry a lot of baggage, hassles and legal concerns with them. This of course stems from the very nature of the movies themselves, using ordinary people who are put into embarrassing situations and then making fools out of them. This isn't a new concept that was invented by Sacha Baron Cohen. It's been a staple in television for years going back to Candid Camera and continuing with shows like Punked. But it is still a bit of a dicey way to make a movie and carries a lot of liability when it comes to getting people angry about how they are ultimately portrayed on screen. It's always prudent for the companies involved with movies like this to put additional funds aside for legal defense. Even though Universal is acting only as the distributor, they are on the front lines of any lawsuit because the distributor is always the first one any unhappy party goes after. That's just the nature of the beast; the distributor is in the high profile position and collects the money from exhibition first so they're perceived to have the bucks to settle. Universal has already been served papers on one lawsuit before the movie even opened and no doubt there will be others to follow. But is there anyone more at fault in these cases, either the production company gathering unwitting people to particpate in the filming, or the people themselves who agree to participate? There are definitely issues on both sides of the debate. Regular people are being used with their own permission, no one is being forced to particpate. Perhaps it touches on human nature, in this era of American Idol and all the other reality shows where ordinary folks get their fifteen minutes of fame, people can be enticed to get in front of a camera and figure they can control what they say and enjoy seeing themselves on screen. On the flip side, production personnel have been accused of not being totally honest with these people and misleading them into thinking it's a smaller production than it actually is. On "Borat," some particpants were told the movie wouldn't even be shown in the United States. That's when people become upset and feel they were deceived and when a movie atttains success, let the litigation begin. A curious thing happened on the way to the courthouse. I believe 20th Century Fox won every single case brought against them on "Borat" and what it comes down to is always the signed consent form. When a person signs a standard consent agreement allowing producers to use their real identities on screen, they also sign away their right to complain about it. If people feel they were publicly humiliated, it's still not, from a legal standpoint, sufficient grounds for a lawsuit. What was proven with some of the unhappy people who came forward on "Borat," they didn't even bother reading what they signed, they just signed it and said they didn't know it was going to be a blockbuster. Either these people are naive, foolish or very trusting individuals. In these type of negotiations, a signed document always trumps an oral understanding and movie industry consent forms are considered iron-clad defenses. No one remembers any case in which a consent form was deemed invalid. Studios never lose.

Generalized terminology stengthens these agreements and the wording I've come across over the years while working in distribution goes something like this in a nutshell:

BLANK PRODUCTION COMPANY SHALL BE EXCLUSIVELY ENTITLED TO USE OR LICENSE RECORDED MATERIAL THAT INCLUDES THE PARTICIPANT "WITHOUT RESTRICTION IN THE MEDIA THROUGHOUT THE UNIVERSE IN PERPETUITY AND WILL SUPERCEDE ANY OTHER PRIOR OR IMPLIED AGREEMENT BETWEEN THE PARTIES.

In layman's terms, it says:
We can use your image worldwide.
We can use it forever.
We can use it in every known media format that exists or is yet to exist including theatrical, DVD, television, internet streaming, video on demand etc.
This is a legal document that states the contract supercedes the oral representation relayed.
As long as a participant agrees to a consent form and signs it, it doesn't matter whether that person has a copy of it or not in their possession.

Like I said, the movie industry consent form is iron-clad. That doesn't mean film companies need to be arrogant and misleading when working with average people off the street. An expert on the deception-as-entertainment model, Eric Nelson, whose company produced various television shows such as "Busted on the Job: Caught on Tape," talked to The Hollywood Reporter after "Borat" was in the news and had some interesting things to say about how he conducted business. "Even if people sign a release, they can still claim after the fact that they didn't know what they were getting into. That's why when you do this kind of entertainment, you have to go one step further - bring back the 'marks' to screen the final product. I believed we needed to get a final sign-off where they saw how dubious we made them look. Without exception, Nelson adds, every single one of our victims signed off on a second release despite our having revealed some serious character flaw about them. As cynical as Cohen and company were at the venality of Americans, they weren't cynical enough. I believe everyone in the film would have signed off on their pre-release appearnace no matter how ridiculous they came off, because they always think they look good. Nelson submits that those behind "Borat" had a responsibility to reveal the truth to those who had been duped once filming was completed and should have offered each a cash payout, an invite to watch a cut of the film with a chortling audience - and presented a second release to sign. Not only would they have gotten every airtight release they needed, they also could have slept better at night."

It sounds to me like some pretty good advice on how to conduct business. Any person who gets involved in a production of this kind should be smarter about reading everything thoroughly before signing it. Likewise, any production personell involved in gathering unsuspecting people to film should be more forthright and honest with them, realizing that past precedent shows that they will get what they need anyway. The final outcome may not change, but it would certainly help to diffuse even any thought of litigation and save a lot of time, worry and expense along the way. And remember, you can never underestimate the value of a good night's sleep.

Questions for Discussion:
1. What did Universal get for their $42.5 million purchase of "Bruno?" Do you think it was a good deal? Who acted as the producer in this deal?
2. Why is the movie industry consent-form considered an iron-clad agreement? Even so, where does the gray area exist for a producer when dealing with getting clearances from people that can lead to conflicts and litigation?
3. As a producer, what is a good rule of thumb in trying to diffuse any chance of litigation down the road?

2009 Copyright David Sikich. Video clip used with permission by First Business, LLC.

At the Halfway Point of the Year, Universal Takes a Calculated Risk

2009-07-02T04:02:00.000-07:00

As July begins, the 2009 box office has been nothing short of spectacularly consistent. It started out strong and for the first 26 weeks of the year, it has stayed strong. Despite the deep recession, moviegoers continue to flock to their local theatres week after week. After "Transformers: Revenge of the Fallen" grossed $200,000,000 in its first five days to close out June, the year to date gross stands at $5.16 billion, a sturdy 10.7% increase over 2008 according to industry tracker Exhibitor Relations. The 4th of July holiday is always a benchmark for the industry as it falls right in the center of both the year itself and the summer movie season and it's always been considered one of the top moviegoing holidays of the year. For that reason, studios have generally placed their most expensive, big budget tentpoles here to take full advantage of the playtime. Recent July 4th releases have been "Spiderman II," "War of the Worlds," "Pirates of the Caribbean," "Transformers" and last year's "Hancock," starring Will Smith, an actor who has become synonymous with the holiday with prior hits "Independence Day" and "Men in Black."

This year the 4th of July provides an extra challenge and a new wrinkle. The challenge is the holiday falls on Saturday, already the biggest moviegoing day of the week and with fireworks celebrations and family activities, the question is always on how that will effect business. The wrinkle is Universal's decision to buck conventional wisdom by opening "Public Enemies," a depression era gangster movie, on this all important holiday. Since it's not a prequel, sequel or franchise, certainly there's risk involved because it's not a pre-sold brand name or your typical light popcorn fare usuually found on the 4th. I love Universal's decision to go out on the 4th with "Public Enemies." It's good to see a studio go against the grain and gamble a bit. Yes, it's risky, but it's a totally calculated risk that was deliberately planned and carefully considered. Universal announced the July 1st release date well back in 2008, knowing full well they would be in the middle of fighting robots and flying wizards but feeling they would be able to stand out more in the midst of all the youth oriented product. Adults want to go to the movies too in the summer and that makes perfect sense on paper, but as I've said before, what's on paper doesn't always prove true at the box office and therein lies the risk. It's not that Universal hasn't been down this road before and felt the sting of a failed counter programming decision. Just four years ago in the summer of 2005, Universal opened the depression era boxing drama, "Cinderella Man," starring Russell Crowe and Renee Zelleger, and it blew up in their face with an underperforming gross and a higly publicized war of words with producer Brain Grazer and director Ron Howard over the early summer date. A couple of things that were different with that film was the June 3rd release date, probably too early in the summer to try a serious film and the fact it was a boxing movie coming close on the heels of "Million Dollar Baby's Oscar Best Picture win which played well into May that year. Even though there is a new distribution team in place at Universal, it takes nerve for the company to attempt to go down the same road twice in the span of five years. What they realize is that there are a set of new dynamics with each film and what happened in the past shouldn't automatically dictate what you do in the future. Sometimes it pays to be bold and fearless; success isn't always with the tried and true. Sure audiences often want to embrace the familiar but other times they look for something different and wish to be taken out of their element a little.

"Public Enemies" should prove to be a much easier sell and a better gamble for Universal than "Cinderalla Man" was. It never hurts to have Johnny Depp as the star as the three Pirates movies have made him into a global sensation. With that kind of success comes the extra pressure of delivering a big audience. Depp is being asked to carry "Public Enemies" on his back, in a year and in a summer where many stars have underperformed at the box office. The entire campaign is built around him and him alone, not even a mention of co-star Christain Bale, Batman himself. Universal is keeping it simple, high concept simple. One single image, Depp as Dillinger wearing a fedora and brandishing a tommy gun. It's everywhere, posters, lobbie standees, bus shelters, on top of taxi cabs, newspaper ads, magazine articles; no tag line, no clutter. Smart, when you have a stud, ride him all the way to the finish line. But almost just as important is the director, Michael Mann, raised on the north side of Chicago who has always felt he was the man to make this movie. He's been a top movie director for close to 20 years and has directed some true classics like "Heat," "Last of the Mohicans," "Collateral," "Ali," and "Insider," worked with some of the biggest actors in the world but somehow has yet to produce a real blockbuster at the box office. Universal is hoping this could be the one and quite frankly, "Public Enemies" has a chance to becoming his most successful film, beating out the $100 million that "Collateral" grossed.

Even though the marketing campaign is built around Depp, Michael Mann is also playing a crucial role in the selling of "Public Enemies." Last week was all about movie promotions with "Transformers," this week is all about the power of publicity. Even though Depp appeared on David Letterman and did a few other shows, the publicity campaign has revolved around Michael Mann and well as it should be, because the director is always the main spokesman for a film. The media wants to talk to the director, hear about his vision, talk about the message he wants to get across, provide the context and spin the story in a way only a director can do it. Good old fashioned publicity articles have been the backbone for serious movies being able to connect with their audiences for decades, but with the decline of newspapers and shrinking readership, this important component of the marketing process has taken a big hit, especially with the smaller art films. "Public Enemies" had no such problem getting the press. Taking advantage of the lighter summer competition, Universal and its field publicists had interviews and articles with Mann talking about his movie in seemingly every newspaper in the country over the last week and he's done an outstanding job talking about the long journey he had in making the movie, the reason he chose to shoot the film in hi-def digital instead of film and especially his passion for historical accuracy and his use of the actual locations Dillinger encountered 75 years ago. The message he delivered was one of authenticity, wanting to make moviegoers feel not just like they were watching a movie set in 1933, but feel like how it was like to be alive in 1933. Only a director can deliver a message like that and Michael Mann has delivered it masterfully. That's the power of publicity, firing up readers' imaginations, positioning the film in the most compelling way in peoples' minds, making them want to see the movie and going to the theatre to buy the tickets.

With the advertising campaign built around Johnny Depp and the publicity campaign built around Michael Mann, Universal has as strong a one-two punch as any movie this summer. I see Universal's calculated gamble paying off and Mann achieving the highest boxoffice gross of his career. I'm going to be seeing the movie on Friday so look for an update over the weekend for my reaction and whether it lived up to my expectations.

July 4th update:
I'm writing this on the morning of the 4th and all I can say to you is skip the fireworks and go see "Public Enemies" instead. This instant classic will provide all the fireworks you need. At a packed early matinee at Marcus's Orland Park, IL theatre, I'm happy to say all my expectations were met. It was just a great moviegoing experience, riveting and exciting from start to finish, it takes you on a ride and puts you right in the middle of all the action, just like Michael Mann said he wanted to do. And what can I say about Johnny Depp, he delivers another one of his iconic performances and indeed succeeds in carrying the movie on his back. He's at the top of his game, never trying to do too much with the role while playing a man who wanted it all as fast as he could get it, damn the future and the consequences. Even though there has been a lot of solid reviews, critics seem to be trying to make a big deal about Mann's decision to shoot the movie in high-def digital rather than 35mm film, saying it hurts the overall film. I disagree and think the movie looks superb. Mann has said he ran tests using both formats and digital supplied him with the 'more immediate feel' that he wanted to achieve. That's good enough for me, he's the director, it's his vision and story. I would venture to guess that this will be a non-factor for most people seeing the film and will have zero effect in how the movie performs at the box office. With the Oscar competition for Best Film being expanded to ten candidates, I can't see how there will be ten better movies this year and expect "Public Enemies" to be nominated for Best Picture of the Year. I can't wait to see it again.
Copyright 2009 David Sikich. Video clip used with permission by First Business LLC.

Big Robots, Big Money and Big Promotions

2009-06-25T16:55:00.000-07:00

Wednesday, June 24, 2009 turned out to be a memorable day for Hollywood. On the same day that "Transformers: Revenge of the Fallen" opened and grossed $60,000,000 to set a new box office record for a Wednesday opening day, the Motion Picture Academy announced that the Best Picture category will double from five nominated films to ten films starting with this year's crop of movies. I'm surprised as everyone else with the announcement from the Academy because there was no hint that it was coming, but I applaud them for it and it will be great fun to speculate on all the possibilities it presents for a wider range of films the rest of the year. But more on the Oscar change at a later date, it's "Transformers" and summer movie promotions that I want to explore today. A movie like this can easily become the poster child of everything that is wrong with movies becoming a mere commodity and one big commercial, but every movie in essence becomes a product to be marketed and sold if it wishes to be seen by the public. "Transformers" is at the extreme end of that equation but speaking from personal experience, seeking out promotional partners and commercial tie-ins is not something to be derided and dismissed so easily. Any experienced producer or distributor would agree that finding promotional partners to help create awareness for any sized film is a good thing, not a bad thing. It's just that size matters and the most effective movie promotions generally have a lot of money backing them and no one can match the size and deep pockets of the Hollywood studios.

"Transformers" is not about Oscar nominations, it's about big robots, big money and big promotions. The first one surprised the hell out of me when it grossed $700 million worldwide in 2007, so I guess I shouldn't be too shocked when the sequel does $60 million on its first day. But I am. That's crazy money. Only when we approach it more as a marketing event than a mere movie, a combination of advertising, promotions and products that it starts making more sense. This is the state of today's Hollywood summer blockbuster. You can almost say "Transformers"
is the best and worst the studios have to offer. The best being from an economic standpoint, Hollywood's ability to gross hundreds and hundreds of millions of dollars simultaneously throughout the world in a short period of time, and the worst being that it epitomizes ear splitting mindless entertainment at its most excruciating level (at least when it comes to critics and most adults.)

To call a movie 'branded entertainment' should not be perceived as a negative on its own because marketing is part of the essential DNA of every movie, from the smallest art film to the most expensive blockbuster and branding is just another term for giving a movie a specific identity. And all movies need an identity. It always comes down to a film's quality and needs. A delicate art film may be able to get by with publicty and strong critcs' reviews but when a movie costs over $200 million like "Transformers: Revenge of the Fallen," a studio needs to look for promotional partners and product placement opportunities to help offset the huge production costs. That's exactly what Paramount did. The latest "Transformers" is certainly one of the biggest promotional movies of the summer and whatever the movie achieves has a lot to do with the multitude of cross promotions the studio has lined up for its new tentpole.

You may think that after the first "Transformers" became a monster hit, Paramount could ease up and not have to worry as much about outside promotionial partners, but the exact opposite is true. When you have it, you flaunt it. When you are a success, you want to become a bigger success. When you have about $350,000,000 riding on production and worldwide marketing and distribution expenses, a distributor needs to have as many promotions and additional marketing support they can get to insure they get their investment back and secure the highest profits possible. And when a movie has already established itself in the marketplace more companies become interested in getting involved with it. Helping to connect studios and advertisers are more than 40 companies in the Los Angeles area that specialize in setting up promotions and product placement opportunities. Companies have long relied on movies to help promote their products and there are several different ways deals are structured:
* Companies that pay studios for the right to show their products on screen. Ford has had a multi-million, multi-picture deal for exclusive vehicle placement rights in all James Bond movies.
* Companies that have their brands appear in films with no money exchanging hands and no product placement fee involved. This is the deal that General Motors has with Paramount on the Transformers movies as they showcase five new vehicles in "Revenge of the Fallen." Their only expense is in the manufacturing costs of the cars themselves. Money doesn't change hands but the products and services are showcased which can save the production company money in the long run. Most of the time in these deals, the companies also agree to spend marketing dollars to help promote the film's release. A bankruptcy filing forced GM not to spend money on an expensive advertisng campaign this time around as they did for the 2007 movie, so they are getting the benefit of exposure without any additional expense.
* Tradeoff Deals. In "Quantum of Solace," Ocean Sky, a British private jet company, lent the production five of its jets which are valued at $100 million each which were used to fly the cast and crew out to Panama for a week's worth of filming. They usually charge $5,000 an hour and the total cost of the deal was $600,000, but instead of a cash exhange, Ocean Sky was featured five times in the movie.
* Cross promotional tie-ins where companies may not be featured in the movie but get involved with marketing their products and associating themselves with Hollywood tentpoles. This is a very common type of deal for blockbusters where companies agree to spend millions of dollars in advertising support by becoming official marketing partners on a specific movie. For "Revenge of the Fallen," Paramount's partners include Burger King, Mars Candies, Kmart, Verizon Wireless and Hasbro. These companies in return generally spend between $10 and $20 million to promote the movie with their own advertising campaigns on television, in print and on the internet. Michael Bay, the movie's director, directed many of the television commercials for the abvove companies incorporating scenes from the movie with the individual brands. Often, companies use these opportunities to introduce new products or limited edition items as is the case with Mars introducing M&M's Strawberried Peanut Butter Chocolate Candies and Snickers Nougabot as part of the movie promotion.
* Straight merchandising deals with apparel, toys and games, household products and other categories where a percentage split and guaranteed minimums are negotiated between the two parties.
* Stunts and gimmicks: Perhaps my favorite gimmick of the last several years was when 20th Century Fox turned a limited number of 7-Eleven convenience stores into Kwick-E-Mart stores for "The Simpsons Movie." This was an ingenious move which recieved tons of publicty and everyone had a lot of fun with it. I remember visiting one of these converted stores in a Chicago suburb where there was a big line just to get in. It was just a great promotion.

So the latest Transformers movie has been aided greatly by all the additional marketing dollars being spent on its behalf, but what if a filmmaker has an independent movie with no stars and a limited budget to work with. Are setting up promotions possible? Always. They will be on a much more modest scale but opportunities are out there. Promotions are all about making deals with 3rd party partners and one can be as creative as possible thinking of cross promotions and trade-offs. Promotions can involve screening passes, two for one ads in local newspapers, a restaurant tie-in, radio station screenings with free mentions on the air, t-shirt giveaways, a promotional stunt which leads to media coverage, opening night parties, the list goes on and on. Promotions are fun but they can also cost money to pull off so the proper strategy along with realistic expectations are recommendend. I've been personally involved with a couple of independent movies where the expectation and attempt of a promotional campaign didn't live up to the reality of the situation. In both cases, it came down to lack of money, the restraints of limited distribution and lack of awareness by the public. As a producers rep for "Hoop Dreams," my partner John Iltis and I held back merchandising rights for the producers when we made the distribution deal with Fine Line Features. With a great brand name and the basketball theme, we thought this could be a lucrative angle to pursue. What we discovered was the difficulty all specialized films encounter when there are a limited number of prints and cities playing a film; not enough awareness and money being spent on the release to interest merchandisers to get involved. We actually found a Florida apparel company willing to produce a variety of Hoop Dreams t-shirts and procured a modest advance. The company actually came out with a line of compelling designs and made a deal with J.C. Penney. There were a couple of problems. For about 10 days, the shirts were displayed in selected stores and it was exciting to see but the company we made a deal with basically had no money for advertising so the public didn't know about it and the shirts were sent back when they didn't sell. It was a noble attempt but it was a fruitless effort that failed to produce any merchandising profits for the filmmakers.
The other stab at a big promotional push involved our distribution of the movie "Tie-Died: Rock n' Roll's Most Deadicated Fans," the documentary about Grateful Dead fans. I knew it was a very promotable movie where we could create colorful tye-dyed t-shirts, work with classical rock radio stations, do promotional tie-ins with head shops and funky bars and have a lot of fun along the way. We were also able to tie-in with the publisher of the book "Dictionary for Deadheads" and received complimentary copies of the book to hand out at radio screenings and even made a deal with Ben & Jerries for free coupons for their peace pops. We had fun alright and did a lot of good things but were again hindered by both a limited budget and a limited release. We thought we were creating enough awareness for the film but an old friend of mine working for a studio in Los Angeles told me one of the most brutally honest things anyone ever said to me, "Dave, awareness is a national televison campaign and a 1,000 print theatre release."

Indeed. "Transformers" and "Tie-Died" are on the extreme different ends of the movie industry. The only thing they share was the attempt to turn over every rock and pursue every promotional opportunity humanly possible to make their movie into the biggest success it could be. One was successful, one wasn't. But if you don't try, you don't get. As independent films face a very struggling time, hope for the future will come from that kind of concerted effort, pushing, prodding, over turning those rocks, making smart decisions and never giving up. Who said success in the movie industry would ever be easy.
Copyright 2009 David Sikich. Video clip used with permission by First Business LLC.

Sneak Previews, Strong Legs and the Lure of Summer

2009-06-18T14:37:00.000-07:00

For some time now, the summer movie season has evolved into a predictable revolving door of new number one movies every week. Come to think of it, most of the year is like that too. That's a testament to the studios doing a good job of having just about every week covered with an attractive new release to go along with saturation marketing that hooks moviegoers to show up on opening weekend. So what happened last weekend was a rare occurrence when two holdover films, "The Hangover" and "UP" sat on top of the box office, in mid-June no less. There are two ways to look at this. It's refreshing to see two movies at the same time with tremendous staying power and great word of mouth do so well and buck the trend of summer movies opening big and falling fast. On the other hand, what made that possible were weaker than expected new movies which has led to the overall box office falling behind last year for the third week in a row. No two years are ever the same in terms of releases, economic conditions and other unpredictable factors so seasonal fluctuations in the box office are to be expected. However, when it happens in June it catches everybody's attention and people start to wonder if this is the start of a downward cycle that will play out for the rest of the summer. There are some bigger movies just around the corner set to open and it remains to be seen how they will perform and stack up to last year's hits. But what makes a tough business even tougher is the fact that economic numbers are published and reported on every week of the year and the pressure to produce is right out in the open for everyone to see. There is no other industry in America that endures that kind of scrutiny and analysis. To keep matters in perspective, year to date revenues are still running 9% higher than last year so things are still looking pretty good for Hollywood. Is this an official June swoon? I'll call it a market correction instead and wait to see how the rest of the month plays out.

Is there anything to point to for why June is so weak this year? Two things pop into my my mind. The labor strike from last year and the threat of additional ones disrupted production and June may be feeling that now with fewer movies. In addition, the economy comes into play with its credit crunch. Six studios are the main suppliers for 40,000 screens in the summer. When they have fewer movies, the impact is felt because the industry is getting no help from movies from outside distributors. There are no Dreamworks movies, no MGM, no Weinstein, no Summit, no Picturehouse, no Lionsgate, no Warner Independent. These companies are either restructuring their financing, sitting on the sidelines or out of business altogether and this is the sector that produced past summer hits like "Farenheit 9/11" and "March of the Penguins" which were able to provide a lift to the overall box office. The competition is fierce and it's getting harder to find any non-studio movies trying to carve out some business for themselves by going after a commercial audience in the summer. The way summer movies have evolved, movies have to have either a certain size, scope or air of importance to get noticed and find success. A good example of a recent movie that tried and failed is "My Life in Ruins." It didn't get good reviews, it seemed a bit inconsequential and Fox Searchlight went a little light on the marketing. Those three factors are always a recipe for disaster. The way blockbusters dominate the landscape, some companies are smart to avoid the summer and wait it out to fall. When I worked for Orion Pictures in the 1980's, the thinking back then was that in order to get the full respect and support from exhibitors, a distributor had to be a supplier of films 12 months of the year and that's what we did. So each summer we scheduled one June movie, one July movie and one August movie. At times it worked out fine when we had a "Bull Durham" or "Robocop" but often the company was left with substantial losses from movies that weren't strong enough or good enough to compete with the big boys. Looking back in my files, I came across the summer of 1989 which was particularily devastating and what proved to be the beginning of the end for Orion as it filed for bankruptcy only two years later. This was the summer of "Batman," "Indiana Jones the Last Crusade," "Ghostbusters II," "Lethal Weapon II" and "Honey I Shrunk the Kids." Orion's three summer movies that year were "Great Balls of Fire," "UHF" and "Rude Awakening," starring either Cheech or Chong and a smoking fish. That trio of movies grossed a total of $22,000,000 between them and has to be considered one of the weakest summer slates of all time. That's too bad because Orion was a much better company than that and their strength was in upscale films better suited for the fall and winter. But that's what the lure of summer can do to a lot of companies, leave them for road kill on the side of the road.

It's been proven time and again that the two minute movie trailer is the centerpiece of every marketing campaign and if a distributor has a strong one, a movie has a chance for breakout success. That was the case for "The Hangover" and it looks like it may be the case for Disney's "The Proposal" which is opening this weekend. The trailer has a lot of energy to it, it's funny, sexy, Sandra Bullock looks great and the movie has a real screwball comedy feel to it. The success of that trailer and the positive response to it by audiences led Disney to decide to conduct an old fashioned sneak preview at 1100 of the highest grossing theatres in the U.S. last Saturday night. This is not an easy decision for distribution execs to make and they have to consider the following before setting it in place:
* Are they absolutely confident that people will love the film and spread positive word of mouth to their friends? No studio would risk conducting a national sneak if they thought audience reaction could work against the film. Sneaks should only be held for certified crowd pleasers so there is pressure to make the right call.
* All studios look at research tracking numbers which indicate the level of awareness and want to see for upcoming movies as they approach their opening dates. If a studio sees the level of awareness is lacking for a movie they feel will have a lot of playability, sneaking a movie in advance is a viable method that can be used to increase awareness, buzz and water cooler talk during the entire week before the movie opens.
* Are there extra marketing dollars to add to the budget? To properly conduct a national sneak preview, a distributor has to spend an additional $2,000,000 to $4,000,000 on newspaper ads Friday and Saturday and increase the frequency of television advertising to make sure audiences know it's happening.
* Finally, the decision has to made which movie to show it with on Saturday night. The thing with sneak previews is that the box office revenue taken in for the sneak goes to the current movie that's playing and being replaced, not to the movie that is sneaking. Even though the prime motive for a sneak is to create extra awareness and buzz, distributors would prefer to pair it with one of their own movies so the company can keep the boxoffice generated by the sneak and have it applied to their other movie. If a distributor doesn't have either an appropriate movie to pair it with or no movie in the marketplace at the time, they have no other choice but to try to match up with another company's films and get their permission to do so. Disney's only movie in the marketplace was "UP," which would be entering its third week of playtime. They made the decision to go with "UP" with all their sneaks so all the box office collected for "The Proposal" stayed in house. What made the decision easier for Disney were the multiple screens "UP" was playing on in these theatres so taking away a single 7:00 or 7:30 p.m. showtime still left early evening shows for families who were not inclined to see the sexy comedy.
On Monday morning, Disney reported the sneaks were filled to 88% capacity and audiences loved the movie. That prompted the distributor to add additonal screens for the opening and date more small towns which were not included in the original release strategy. So far, their decision to go with the sneak preview has worked to perfection. The only thing left for them to do now is to stand back, see how the weekend plays out and hope all their work pays off with a strong opening weekend gross.

One of the reasons the June box office is down is because studios continue to bankroll Eddie Murphy movies and believe he still has enough appeal to carry a summer movie. For the second summer in a row, Murphy failed to produce even a $6,000,000 opening weekend gross; last year it was "Meet Dave" and last weekend it was "Imagine That." I wanted to think that his salary had fallen in recent years to coincide with his box office failures, but then I looked at the latest Forbes Hollywood's highest earners list. In 4th place, tied with Nicolas Cage, was good old Eddie who earned $39 million for two movies in the last 12 months. Do the math. The man is still pulling in $20 million a picture. The studios talk about how they need to reign in star salaries, but as long as fallen stars like Eddie Murphy continue to rake in that kind of coin, it just remains a lot of empty talk.
2009 Copyright David Sikich. Video clip used with permission by First Business, LLC.

Dividing Up the Box Office: The Shifting Sands of Supply and Demand

2009-06-11T17:29:00.000-07:00

As the summer movie season continues to kick in with more and more new films entering the marketplace, the battle to open on as many screens as possible for the biggest movies will only heat up. The majority of the most promising wide releases generally open in between 3,000 to 4,000 theatres but that only tells half the story. To produce those giant opening weekend grosses, the studios need to be on as many additional screens as possible and often the blockbusters are on 7,000 to 8,000 total screens. That's why it's not unusual when you see your local 14 plex showing only six or seven movies playing on multiple screens. The key to record breaking grosses are having as many showtimes as possible to make moviegoing as convenient as possible for people on the go. What isn't widely known is how a shift to a more streamlined way distributors and exhibitors split up the box office has made it easier for both parties to add as many additional screens as a movie demands and theatres can absorb right up to opening day. This is what happened with "The Hangover," when Warners decided to add extra screens on the Monday before release when their tracking showed that interest for their movie was rising and that the positive buzz demanded more seats. They proved to be right when "The Hangover" became the surprise number one hit in the country grossing $45 million.

The late A.D. Murphy, the legendary financial reporter for Variety, once wrote "The realization that an exhibitor's overall film costs are composed of various percentage splits of the box office with the distributors on thousands of different runs of hundreds of different films is the beginning of wisdom in understanding the film business." To put it more simply, he was saying to understand how the movie business works you have to first understand all the various ways the box office is divided up and who keeps what and who gets what. The box office gross is the sexy number that gets reported by the media but the more important figure for the distributors has always been the film rental they collect from theatres, also known as the distributor gross. This figure is the starting point in the entire revenue stream a movie generates that goes toward paying production costs, star salaries and investors. On the other side of the table sits the exhibitor, who fights to retain as much of the box office as he can. One advantage the exhibitor has wielded over the years is the fact that theatres have control of the money first and like to keep as much of it as they can. There is an old adage that has a lot of truth to it, "Money sticks to whoever has it at the time." Sometimes the only way to get yours is through persistence, pressure, leverage and pure doggedness. That's the way the movie business works, fighting for every dollar.

Like A.D. Murphy said this is where the action is, in the trenches, dividing up those box office dollars and understanding the process in how and why the economics are what they are. This is the world I come from and where I came to learn the basic fundamentals of how the movie industry works. The various financial deals had names like 90/10's, four-walling, split percentages, minimum floors, firm bids, percentage with review, sliding scales and flat prices. When I started in the business in the early 1970's, the theatrical marketplace towered in importance because pay television was in its infancy and video was still years away. Getting every last dollar out of theatrical was of prime importance and film salesmen, branch managers and film buyers were paid by their ability to do just that. All the above financial deals came into play at one point or another because movies played in theatres for a much longer time and there were many creative ways to keep them going on the screens through double features, sub-runs, re-issues, drive-in second features and whatever other way we could squeeze extra revenue for the distributors or theatre circuits we worked for. It was fun and this is where I learned that there was an art and creativity to the film business that I found invigorating and challenging.

Time marches on and things are much different today. The theatrical market is a much shortened window and the philosophy for most movies now is to get the money as fast you can before handing it over to DVD. Don't get me wrong, splitting up the theatrical pie is just as important and each side still fights for the best deal but the negotiation process is a lot less exotic and complex than it used to be. And like many things in the world of business transactions, it comes down to the basic economic principle of supply and demand. Simply put, the studios have the supply and the theatres represent the demand and the power and leverage has shifted between distributors and exhibitors over the years depending on the number of movies in circulation and the number of available screens able to play them. With studios releasing only about three movies a week on the average and with close to 40,000 screens needing to play all the top product, distribution has held the upper hand in the last decade when leasing their movies to exhibitors. But when it comes down to the biggest, most expensive studio movies, supply and demand has a curious way of switching sides and balancing out the equation. Since the studios need to get their biggest movies on the largest number of screens, they in essence become the demand while the theatres with all their screens become the supply.

This reality has led to a new type of deal brought on by the needs and wants of both distributors and exhibitors. For about 40 years starting in 1965, the primary financial deal between distributors and exhibitors was the 90/10 deal, built on a computation of weekly box office grosses based on a theatre's house allowance and sliding minimum floor percentages starting at 70%. This deal worked fine for both sides for many years until a couple of factors forced change in the basic way a movie is sold. On the distribution side, the focus was to streamline the process and move away from having to compute the film rental on a weekly basis because the number of sales offices and staff had greatly shrunk and settling film rental in the old way was too labor intensive. In addition, the studios settled many engagements following the run and they wanted to set a firm price before the movie opened rather than wait until after it played. On the exhibition front, theatre owners also wanted to move away from 90/10 deals because film grosses had become too front loaded with movies opening big and falling off fast which led to exhibitors paying inordinantly high percentages in the first couple of weeks which left them with high bills when most movies failed to have much staying power. Theatres just couldn't make up the difference in the later weeks anymore. This brings us back to the summer blockbusters and the new type of deal that has emerged from all of this is what is referred to as the aggregate deal.

The aggregate deal is a deal which assigns a specific percentage to cover the entire engagement of a film's run rather than negotiating percentages on a weekly basis. The aggregate deal has become the new primary way movies are sold today and it has made it much easier for distributors to add as many screens as they can get for their blockbusters while eliminating the exhibitor's concern that they will be paying higher film rental in the early weeks by supplying those additional screens. Before the aggregate deal became the new norm, some theatres would gross so much on the old 90/10 deal, they would be forced to pay as high as 80% of the box office in the first week and by the 3rd or 4th week the movie would be dead. This was not acceptable and exhibitors pushed for change and got it. The majority of aggregate deals average around 55% which is paid each week of the run regardless of the weekly gross. Some of the biggest films get higher aggregates and some of the weaker films get lower ones. Other variations can include aggregates that can rise based on the eventual domestic gross of a film and companies that offer a choice between an aggregate deal and a terms deal. The aggregate deal has even creeped into some smaller independent film deals but the 90/10 can still be the primary deal with a number of other films. With the independent film business struggling as much as it is, the deals exhibitors are paying for these films are much less than they pay for studio films, more in the area of 45% and lower. For drive-ins which play two first run movies, special considerations are made. The top feature playing in its first week may pay a straight 50% and the second feature which may be in its third week of release may accept as little as 10%. 10% may seem like a paltry percentage but with those additional prints already being shipped back to the distributors after two weeks of playtime, it's worthwhile for distributors to earn additional revenue before a print starts collecting dust in a warehouse.

The financial deals are not as complex as in years past, but the aggregate deal is much more functional for this day and age based on the needs and demands of the marketplace. Without those extra screens added at the last minute on "The Hangover," it no doubt would have had trouble beating out "UP" as the top grossing movie of the weekend. Most veterans of the business lament that it just isn't as fun as it used to be when you could wheel and deal more freely and that the industry culture has become much more corporate and stifling. That may be the case but what hasn't changed is A.D. Murphy's belief that the beginning of wisdom in understanding the film business lies in the different ways the box office is split. What was true back then is still true now. Behind every deal is a cause and effect which reverberates and reflects the current state of where the movie business is at any given time.

Questions for Discussion:
1. When a studio releases one of their big movies, there is a distinction between the number of prints, locations and screens utilized. Explain what each of the three items are, where the expense lies and which one usually gets announced to the media and public.
2. What role does supply and demand play in the way the box office gets divided up? In what ways do supply and demand shift between exhibitors and distributors and how does that affect negotiations on the price of any individual movie?
3. What is a 90/10 deal and why has it been replaced by the Aggregate deal as the most widely used negotiation between exhibitors and distributors? Figure out the below deal using the same weekly box office grosses and compute the film rental, first using the 90/10 model and then the aggregate model of 55% each week:

1st Model: 90/10 over $8500 vs. 70%, 60%, 50%, 40%
1st week: $34,350
2nd week $16,000
3rd week $8542
4th week $3850

2nd Model: Compute at straight 55% each week
What would be the film rental returned to the distributor on each deal?

2009 Copyright David Sikich. Video clip used with permission by First Business LLC.

A Gift from the Gods or a Burden of Expectations?

2009-06-04T04:14:00.000-07:00

Movies that become true phenomenons are few and far between. They can't be predicted, explained or duplicated but when they happen, it can seem like a gift from the Gods for the director or star involved that can soon turn into a burden of expectations. Orson Welles was only 25 years old when he directed "Citizen Kane" in 1941. The film is still hailed as the Best American Film ever made and Welles was never able to match that achievement and carried the burden of unfulfilled promise for the rest of his life. Quentin Tarantino's "Pulp Fiction" took the world by storm in 1994, winning both tremendous critical acclaim and huge commercial success and going on to become the first independent film to gross over $100,000,000. For years after that, Tarantino struggled with the burden of that huge burst of glory, directed only a couple of films for the rest of the decade and never has come close to matching "Pulp Fiction's" magic. James Cameron has taken 11 years since "Titantic" became the world's biggest grossing film and winning the Oscar for Best Picture to attempt another feature and finally has his new movie "Avatar" scheduled to open at Christmas. "Blair Witch Project" became the phenomenon of the summer of 1999 when that ultra low budget feature became the first sensation for the internet generation but the filmmakers behind it haven't been heard from since. I wouldn't be surprised if Christopher Nolan doesn't attempt to direct another Batman after the phenomenonal $530,000,000 gross of "The Dark Knight." What would he be able to do to top it?

My thoughts have turned to phenomenons with the release this week of "My Life in Ruins," starring Nia Vardalos. You may ask who is Nia Vardalos? Well, she was the writer and star of "My Big Fat Greek Wedding" which, make no mistake about it, became a bonafide phenomenon in 2002. It was a classic case of a movie coming out of nowhere, a movie no distributor wanted to distribute and a movie that was written off as a film not having enough quality to play as an art film and not being commercial enough to go mainstream. So much for the experts. The $5,000,000 feature opened in 108 theatres in April of 2002 and played in theatres for the next 10 months, grossing a staggering $241,000,000 while never being number one at the box office. Even though it was expertly distributed by Bob Berney, there is no real explanation of how and why it was able to do what it did, playing through the summer and fall and still be on first run screens at Christmas. That just doesn't happen in today's world and it hasn't come close to happening again and it probably never will. It wasn't a great film, it didn't break any new ground and many critics dismissed it as a glorified sitcom. No matter. With all things considered, "My Big Fat Greek Wedding" could very well be the most surprising movie phenomenon of all time.

So getting back to Nia Vardalos, what has she been up to in the last seven years and is it possible that "My Big Fat Greek Wedding" could still have any carry over impact on "My Life in Ruins," especially since it is another Greek themed movie? She is facing several hurdles and it won't be easy. The thing about Nia Vardalos is she may have become famous with her one iconic role but she never became a star. She is not Meryl Streep, she is not Sara Jessica Parker, she's not even Sandra Bullock who is opening her own romantic comedy "The Proposal" in two weeks. Her only other starring movie was "Connie and Carla" in 2004 which landed up bombing at the box office. She has been writing scripts and has had a few guest spots on television shows but her career momentum has long been stalled. So I'm very curious to see how her new film opens and how much of her earlier fan base (including the Greek audience) will be there for her. Since she has already been in a movie that defied all odds, it's possible for her to surprise again but the distributor, Fox Searchlight, will have more to say about how the movie performs than Vardalos herself. Fox Searchlight is one of the best in the business in guiding small to mid-sized films to success but I'm scratching my head in trying to figure out what they are doing with this film. Choosing to open in June in over 1100 theatres leaves no margin for error so the movie needs strong support right out of the gate for it to have any chance at all and to be able to hold on to its screens for more than two weeks. I don't know if Searchlight has been screening the movie in advance extensively, creating awareness and building the audience but we'll find out soon enough with the weekend numbers. I'm rooting for the film to do well because so few movies around the edges of the marketplace have been able to emerge this year and it's always more satisfying to recognize success rather than talk about why the latest film failed. I would also like to see Nia Vardalos have a second act and be able to get her career back on track. At this point in time, no one expects anything close to another "My Big Fat Greek Wedding" so having lower expectations may be the best thing going for it.

Another thing "My Life in Ruins" will have going for it is that it will have little competition for the female audience this weekend. Whereas Warner's "The Hangover" is poised to become a sleeper summer hit on a modest $30,000,000 budget, grabbing men from 18 to 40 as its core audience, Universal's "Land of the Lost" just seems lost. With a budget close to $100,000,000, it has a blockbuster cost without the blockbuster status. It looks like it could be the first real money loser of the summer. Universal's head honchos have to be worried they may have another "Evan Almighty" on their hands, a big budget, special effects comedy made for a wide general audience that failed to have a core niche audience to build from. When a movie is made for everyone it runs the risk of being for nobody. When filmmakers try to throw in a little something for many different age groups, they're not completely satisfying anybody. The PG 13 movie's main marketing hook seems to be Will Ferrell being chased by a bunch of dinosaurs which would seem to appeal to families and young teenage boys. The early reviews indicate the movie contains a rather large amount of crude, bathroom humor which will not go over too well with parents so that may leave young teenage boys as its only audience. It's ironic that the director of "The Hangover" directed "Old School," one of Will Ferrell's most popular films with the same male audience that will be going out in droves to see "The Hangover" on opening weekend. There seems to be a disconnect here with the two movies opening on the same weekend. Is Will Ferrell in the wrong film?

Getting back to "The Hangover," where is all that positive buzz comng from? Warners is doing a great job generating buzz from two separate fronts. With an R-rated comedy, cutting a very funny, raunchy trailer is one of the first steps a distributor can take in getting the young male audience to take notice and start spreading the word, and with "Hangover" they certainly have a funny one out there. Since R-rated red band trailers have disappeared for the most part from being shown in theatres, internet sites like You-Tube have been a god-send for studios and have become the 24/7 go-to-destination for movie fans to sample upcoming movies. This is where the buzz started, but for buzz to really kick in you have to start showing your finished movie to audiences. That's exactly what Warners has done. Going after that young male audience, screenings were scheduled on college campuses in 80 cities and on multiple military bases to go along with the traditional radio promotion screenings in all major cities. That is one of the first rules in marketing movies, when a distributor loves a movie and feels it has the goods, get it out there in front of your primary target audience as much as possible. There is an expense involved in renting theatres, shipping prints, promotional costs and giveaway items, but the financial return on a movie that clicks makes it all worthwhile. It's the cost of doing business.

The studios hope to survive the month of June with a lot fewer blockbusters then they had in May. The fact is there are a finite number of blockbusters so there are not enough of them to fill every week of the summer. It's strange that June will feel a bit barren of big movies and the industy runs the risk of not being able to keep up with last June when hits like "Kung Fu Panda," "Wanted," "Get Smart" and "Wall-e" opened to huge grosses. Some weeks may be down but the thing to keep in mind is that all those May blockbusters are still playing so the overall numbers may even out. The marketplace is catching its breath a little but the blockbusters will return in late June and July starting with "Transformers" on June 24th, which is tracking like it could be the biggest movie of the summer.

Getting back to movie phenomenons, the five year period between 1999 and 2004 was an incredible period for breakthrough independent films. Take a look at the following three movies and their final domestic grosses:
1999: Blair Witch Project $140,000,000
2002: My Big Fat Greek Wedding $241,000,000
2004: Passion of the Christ $370,000,000
Each of these films set benchmarks as the all time highest grossing independent film at the time and they couldn't be more different from each other. It showed the vibrancy of the marketplace where such diverse movies could capture large, specific segments of the population and ride them to phenomenal heights. Young high school and college students, middle aged women and the Christian/religious audience were the demographics that drove the train for these immense hits. After "My Big Fat Greek Wedding" demolished the "Blair Witch" record, I thought it would stand alone for many years with that $241,000,000 figure. Then Mel Gibson came along two years later and rewrote the record books again, this time probably for all time. Considering the current struggles of independent films, those numbers seem unfathomable and unreachable. But the marketplace always has its peaks and valleys and surprises can strike at any time from any source. Perhaps there is another gift from the Gods being planned for some filmmaker out there who will deliver the right film at the right time for the right audience that will become the next phenomenon. We're due for another one and the marketplace will be ready and willing to embrace it when it arrives.
2009 Copyright David Sikich. Video clip used with permission by First Business LLC.

Up, Up and Away; The Value of Quality

2009-05-29T04:02:00.000-07:00

In tough economic times, does the actual quality of a Hollywood blockbuster matter more for the consumer than ever before? That question is reverberating throughout the movie industry and there are some interesting findings emerging that are causing headaches for studio executives. Even though the month of May has seen the launch of five successful franchise films, there are troubling signs ahead for those big movies that have been disappointing audiences and not quite delivering on their promise. However, one company that doesn't have to worry about the issue of quality is Pixar because they have set the gold standard in delivering the highest form of entertainmnet to audiences year after year. Today, Pixar's 10th film, "UP," opens in 3800 theatres and it's fitting that they will be able to cap an historic month at the box office with their special brand of quality motion picture, unmatched in the industry.

Pixar continues to stretch themselves and to create the most unconventional stories anyone could imagine. "UP" has a 78 year old man as its star, in today's youth obsessed culture and merchandising dominated summer landscape, that would be the kiss of death in anyone else's hands. Who would even attempt to make it? With the Pixar team, it's business as usual, that's what they do, create movies that no one would touch or even dream of doing, delivering original stories and grade A quality to the masses. It's a business plan that keeps paying off for them. All of their previous nine movies have been huge hits with both the critics and public. They are batting 1,000 which should be imposssible to do. How do they keep doing it? How do they avoid the occasional clunker? Are they smarter than the rest of Hollywood? Are their filmmakers the best directors? Is there a formula to follow? Is there a secret to achieving the quality that their films have and seem to enjoy so effortlessly?

If only there was a secret formula or magic pixie dust that could be spread over all the blockbusters that get put into production. Producers all over Hollywood would take that dust and hope that the Pixar magic would rub off on their own films. Just think if all the summer blockbusters were also great movies. That's a nice thought, if only it was that easy, but it doesn't work that way. The reality is that many blockbusters are mediocre, living off their brand names, star power and massive marketing campaigns. For years, that's been enough for big profits, both in the theatres and in the all important DVD market. Only half that equation is working now and it's causing panic throughout the studios. The business continues to be booming at the theatres, but in the last six months or so, many of the big movies are selling a lot fewer DVDs and that's where the ultimate profits are found. This is where the panic sets in. What's happening? What's the deal? Is it the economy? Do people already own too many DVDs? Is it affecting all movies? Is there a common denominator? A recent article in the L.A. Times shed some light on the situation and it was very revealing. Consumers are becoming more quality conscious and much more discriminating in their DVD purchases. 'Quality' has taken on a whole new value in Hollywood. Movies that were disappointing, didn't deliver what the marketing promised and had poor word of mouth have been selling a lot fewer DVDs, even if they grossed $200 or $300 million at the box office. Movies like the last "Indiana Jones," "Hancock," "Quantum of Solace," "Yes Man" and "Seven Pounds" fall into this category; whereas movies with more quality and better word of mouth like "Iron Man," "Dark Knight" "Wall-E and "Twilight" have held up well in the DVD market. Continuing that line of reasoning with the current May releases, the eventual DVD performance could see "Star Trek," "UP" and perhaps "Night at the Museum" on the plus side and "Wolverine," "Terminator Salvation" and "Angels and Demons on the negative side based on the perceived quality of the productions and the current word of mouth hitting the streets.

Blockbusters have long been marketing driven rather than critic or character driven and they have been able to thrive. But the tide is changing. Fool people once at the box office but not twice at the video store. The reliable DVD numbers aren't so reliable anymore. Studio executives can react to this development in one of two ways. Some are saying that they will have to be more cautious in what they greenlight but how much more cautious can they be? They are greenlighting movies based on comic books, video games, toys and even board games and continue to churn out prequels and sequels by the dozen. The other way is the complete opposite, the Pixar way. Dream big and create movies people haven't seen before and above all else, strive for the highest form of quality in each and every film. Why can't Hollywood movies be better? No one goes out and tries to make just an average movie or give people something they won't like. Right? But it happens. Too many times. The script had problems or was never finished. The story was weak or made no sense. The director was a hack. The production was rushed to meet a release date. Too many cooks in the kitchen. Bad decisions. Star vanity projects. Retread material. Not enough control over creative decisions. So on and so on. There are countless ways movies can fall off the track. Sometimes there isn't enough top talent to go around. Regardless of the reasons, studios should take a good hard look at what's happening and realize moviegoers are demanding more from their blockbusters and are becoming more quality conscious when it comes to purchasing DVDs of the very same movies they saw four or five months earlier in a theatre. At least they are still showing up at the theatres opening weekend. What if that starts to erode too if people get tired of being disappointed? If there's panic now, what would happen then? If the studios can find a way to make more of their blockbusters into better films, the sky's the limit in the profits they would be able to achieve. Marketing and familiar franchises get them in the door but it's the quality that keeps them coming back for more, whether it's repeat viewings at the theatres, paying for Video On Demand or buying the DVD when it comes out.

I saw "Star Trek" and "Terminator Salvation" in the last week and the differences in the two franchise films and my reaction to them couldn't be more different. "Star Trek" received strong reviews and was getting tremendous word of mouth before I went to see it and it lived up to its laurels. While I was watching all the characters being introduced and the story being established, I was thinking to myself this is a character driven film above else. J.J. Abrams got it right. The movie had it all. Exciting action sequences, a story you could follow, snappy dialogue, some humor and most importantly, characters you got to know and care about. Bingo. Quality through and through. During the movie I was even thinking I'd like to see it again when the DVD comes out. On the other hand, "Terminator Salvation" was everything that is going wrong with today's blockbusters. I saw it in a state of the art theatre with a massive screen and tremendous sound system and I felt I was beaten up in the process and left with a headache. Overly loud. Full of explosions. Plenty of carnage. Non-stop action. No time to think. Little or no character development. Not much of a story. These two movies should be studied for what to do right and what to avoid when making a blockbuster. Maybe some of the studios have taken audiences too much for granted with their franchise films. Falling DVD numbers for mediocre summer spectaculars may actually prove to be a good thing for audiences down the road if studios start concentrating more on character and story and less on explosions and special effects. It doesn't have to be a choice between one or the other, but more balance between the two, less noise and more substance.

Studios may not have a choice in the matter if they want to continue making these $150 to $200 million dollar blockbusters and wish to keep their profit margins up at the levels they have come to expect. They need to look no further than Pixar to see how a business model built on originality and Grade A quality can lead to such consistent success. Look up to the sky, watch those balloons float away and those can be profits rising along with them. Up, up and away.

Questions for Discussion:
1. Why do you think a large percentage of Hollywood movies end up being mediocre at best? Is it a studio problem, a producer problem or a screenwriter problem? Discuss.
2. What do you think separates Pixar's successful business model from other companies? What has been the key to Pixar's success? Do you think it's possible for another production company to duplicate Pixar's perfect record of high quality and big box office?
3. What can film producers do to insure better finished movies?

Copyright 2009 David Sikich. Video clip used with permission by First Business LLC.

Memorial Day Weekend and the Cannes Film Festival

2009-05-22T06:49:00.000-07:00

As the Memorial Day weekend gets under way with two more big studio movies hitting the screens in America, the Cannes Film Festival and Cannes Film Market in the south of France begin to wind down their 10 day runs. The dynamics, cultures and business models of the three events could not be more different. Yet when you take a closer look at them and see what is happening, basic truths and realities spring forward that says a lot about where the movie business is today and points to where its headed toward in the future. Three different types of films are on display which represent the full sprectrum of budgets, styles and expectations; the big budget studio franchise movie, the character driven high end art film and the cheaply made genre "B" movie. At this particular point in time, only one of the three is on firm ground and that of course is the studio franchise movie. What the studios are selling in these tough times is familiar larger than life entertainment that is resonating throughout the world. The safest of safe bets for both the studios and audiences alike. If audiences are going to pluck down their nine or ten bucks, they want to know what they are getting in return for their hard earned money. So we get another "Terminator" and another "Night at the Museum" because an important holiday weekend like Memorial Day demands big movies with a proven track record that can deliver. How the studios are selling these two movies says everything you need to know about the selling of summer blockbusters. Warners is touting "Terminator Salvation" as 'The Summer's Biggest Thrill Ride' before summer has actually begun, and Fox is calling "Night at the Museum: Battle of the Smithsonian" 'The Biggest Comedy in History Starts Friday.' Hollywood knows all too well that subtlety has no place in the summer. What's a bit surpising to see are two large tentpole movies opening on the same weekend though the thinking behind it makes perfect business sense; the audiences for the two movies are completely different and shouldn't interfere with each other. The male action sci-fi audience for one and the PG family friendly audience for the other. On paper, there should be room for both movies to potentially gross between $70 and $90 million over the long weekend and if they can accomplish that, it will be five out of five for the May blockbusters with one more to go on May 29th, Disney's/Pixar's "UP." For the most part, these pre-sold blockbusters take film critics out of the equation and deem their one and two star reviews fairly meaningless. I'm sure the fact that their opinions mean so little one way or another when it comes to the industry's most commercial and popular movies riles them at times but that's just the way it is. Famed critic Pauline Kael used to take the summer off for that very reason. I've already seen a lot of two star reviews for "Night at the Museum: Battle of the Smithsonian" but for me not much negative can be said about a franchise that presents such a positive message about how fun and exciting museums can be. It may be silly, but people from the ages of 8 to 80 love these movies and what's so wrong about that. We can all probably use a little more silly in our lives.

The critics are more at home at the Cannes Film Festival where their views on the latest art films carry much more weight, though not as much as they used to. The business for high end art films continues to be challenged by a variety of factors that when taken together presents a frightening landscape:
1. The credit crunch brought on by the worldwide recession is squeezing margins for the financiers, distributors and exhibitors alike, where margins were small to begin with.
2. Studios like Warners and Paramount retreating from the art film market. The studios' deep pockets in the past helped independent movies crossover into the mainstream, led by Miramax using Disney's money so well in the 90's when they made a movie like "The Crying Game" into a $60,000,000 hit. We're not seeing that kind of support now.
3. Critics themselves being on the endangered list with newspapers continuing to struggle to stay alive. Critical support has always been a vital component in the success of art films but a number of important critics have lost their jobs and fewer people are reading newspapers, so a backbone of this market is getting shakier every day.
4. Theatrical distribution is getting harder to come by with fewer viable distributors, coupled with the decline in the DVD market which has taken away an all important safety net. The money doesn't add up anymore.

There continues to be more of a shift to watching art movies at home rather than in a theatre and Video On Demand is at the forefront of the movement. More and more business models are being rolled out but it's still in the transitionary stage so the jury is still out on how lucrative this business can be for both distributors and filmmakers. Any distribution is better than no distribution but will the dollars add up? Looking back at the last four decades of the modern day independent art film, specifically American independent films, my view follows the classic arc of a business cycle:
1970's - the birth of the independent movement
1980's - the growth, fueled by demand and home video
1990's - the maturity,when it peaked with the the help from studios
2000's - the decline for reasons stated above
Business cycles have peaks and valleys and some businesses bounce back while others whither away. I think the art film business can bounce back but it may take some time and it is sure to look different than it does now.

While the traditional art films at Cannes are hoping to find viable distribution, another kind of movie is screening at the Market portion of the event. These are the so called "B" movies and there are 1500 completed genre movies being shown to buyers representing all the major territories in the world. Horror, crime, action movies, erotic thrillers, zombies, serial killers, basically the bottom feeders that constitute the lowest barrier of entry into the movie business. Movies with titles like "Stripped Naked," "House of the Devil," "Vigilante" and "The Invisible Woman" to name just a few. In the past, there has been a business model for these movies consisting of DVD and international television sales but those avenues have dried up considerably with the worldwide recession and changing buyers' preferences. The DVD business has slowed everywhere with some countries hurt more than others due to film piracy and television money has seen a downturn with falling ad sales which has led to fewer film acquistions. Everyone is looking for higher budgeted product with a little star power now. In any business, the lowest barrier of entry tends to be the most competitive and the movie business is no different. There is a tremendous over supply of cheaply made genre movies in every corner of the globe with nowhere to go and no one to sell to. I don't see this situation changing anytime soon. Why is this fact important and who should care about this? Well, for starters, how about anyone with a camera, whether coming out of film school or not, with a dream of making that $100,000 horror or crime thriller and selling it for big bucks. Going low brow has never been more risky regardless of the cost. There are just too many of them already and they are a dime a dozen. And if you think someone is out there to finance them, think again, the smart money knows how the market is behaving. There will always be filmmakers who will need to make their movies to fulfill their artistic ambitions and to express themselves without any concern to the commercial realities. I can respect that but having a sense of where the marketplace is never hurts. Maybe the smartest thing to do right now is to sit back, relax, enjoy some summer blockbusters and allow the market to correct itself. A $10.00 ticket is a lot cheaper than that $100,000 movie.

Questions for Discussion:
1. How do business cycles affect specific industries and affect overall economic activity? Why is it important for filmmakers and managers alike to understand at what point in the cycle the independent film industry is currently at?
2. Discuss the differences between the Cannes Film Festival and the Cannes Film Market. What type of activities occur at the two events?
3. Explain the terms 'bottom feeders' and low barrier to entry' as it applies to film markets. Is this a good business to be in and how has the world of genre movies changed?

Copyright 2009 David Sikich. Video clip used with permission by First Business, LLC.

Looking for Position and Finding It

2009-05-14T13:10:00.000-07:00

In the game of poker the smart players always play for position, when it comes their way they know how to take advantage of the situation, whether they were laying in the weeds, bluffing or taking that final raise. You can think of the motion picture marketplace as a giant poker game and distributors have to decide when to hold them, when to fold them and when to go all in. It's an expensive game, especially in the summer, with hundreds of millions of dollars in the pot. You need nerves of steel and deep pockets to sit at the table and that's why there's only six chairs at the big table, one each for the six major studios.

Position is one of those key concepts in the movie business that can't be overstated. It's the deciding factor between success and failure, whether it's choosing the correct release date or marketing a movie in a specific way to either a mass or niche audience. The executives who make those decisions get paid a lot of money to make the right calls. It certainly looks like Paramount made all the right calls with "Star Trek" after it grossed $79 million in its first four days and made believers out of a lot of people, both fans and non-fans alike. More importantly, they find themselves in great position. Putting the movie between "Wolverine" and "Angels and Demons" took guts and they won the bet by wrestling away the position "Wolverine" enjoyed by being the first summer movie out of the blocks. With "Wolverine" losing 70% of its audience, "Star Trek" stripped it of all of its mojo, basically making it a non-factor in the weeks to come. By guessing that "Wolverine" would not be as formidable of a foe with its story focus on only one of the X-Men's characters and knowing that "Angels and Demons" was going after an older, adult audience, putting "Star Trek" on May 8th proved to be a great move and now it's poised to build on its opening numbers. That is, at least for another week or until the sequels of "Night at the Museum" and "Terminator" open on back to back days. It's never easy but if "Star Trek" can go into their 3rd weekend with a head of steam, they have a chance to hold their own and eventually blast past $200 million at the box office.

Sony's "Angels and Demons" isn't in too bad of a position themselves. No one is opening a wide national release against them which is the ultimate compliment from rival distributors. The movie also stands out as the only one of the big May releases geared to an adult audience and with Tom Hanks heading the cast, has the most star power of the bunch. From all indications, it's a much better film than "The Da Vinci Code," which pretty much got critically panned and left audiences somewhat cold but still grossed a staggering $758 million in worldwide grosses. Sony is positioning "Angels and Demons" as an action-packed conspiracy thriller and not going out of their way to market it to the Christian audience which is a smart move. And why not? It's a mass appeal film with a ready made world audience and the studio really doesn't have to do much niche marketing to find its audience. Sony knows a lot of Catholic moviegoers are going to see it anyway, despite some mild protests from the Catholic church. It's a piece of fiction. It's entertainment and a little controversy never hurts. After "The Da Vinci Code" brought in $540 million in overseas grosses, "Angels and Demons" is in position to do it again and be the movie to beat in the international marketplace this year.

Just as studios depend on international revenues to support their business model, movie theaters look for additional revenue streams to support their businesses. It's expensive to open your doors 365 days a year and any additional revenue helps to keep those doors open. That's why you see ads on the big screen before the movies begin. I've never been a big fan of them myself but I've come to tolerate them in the context of today's economic realities. For theater owners, it's not a primary source of revenue but it has become a vital side revenue and if it wasn't there, it would be missed, especially with concession income taking a hit during the recession. There are about 40,000 screens in the country and 80% of them show ads before movies. Pre-show advertising has become more than a $500 million industry and one of North America's fastest growing advertising media. It seems that moviegoers more or less accept it as standard practice now with fewer complaints and protests. There were even a couple of nuisance law suits a few years ago by moviegoers suing individual theaters for displaying incorrect movie show times and being forced to sit through ads before they got to the feature. They wanted the price of the ticket as well as their time wasted back. Well at least they got some publicity for their efforts. But for that very reason, having a captured audience in a darkened theater watching a huge screen, has made screen advertising such a lucrative business for the companies selling the advertising and for the theaters themselves. Since the national advertising is sold based on the eyeballs viewing the ads, the biggest grossing theaters with the most screens generate the most ad revenues and can earn up to $250,000 a year in extra income. Pre-show advertising is here to stay because of those simple economics. The money is too easy to pass up and it's vital to the bottom line. Sure, the theaters can be a fantastic cash generating business but just as a few studios found out in the 1980's and 90's when government policies eased anti-trust policies to allow studios to once again own movie theaters, they can become a cash drain in a hurry when business slows down. It didn't take too long for studios such as Sony and Universal to want to cash in their chips and leave exhibition to the exhibitors. They wanted to concentrate on only one game of poker at a time, the one they knew best with the market power to go all in whenever they saw fit.
2009 Copyright David Sikich. Video clip used with permission by First Business LLC.

Live Long and Prosper

2009-05-08T06:39:00.000-07:00

"Wolverine" opened the summer movie season with an $85 million gross and even though it was $13 million less than last year's "Iron Man," it's still a very respectable figure and a strong start for Hollywood considering some of the obstacles the movie was facing; the piracy issue of the leaked print, the flu scare, mediocre reviews and the year's first beautiful weather weekend in the Mid-West and other parts of the country. It's always hard to quantify the immediate effect on the box office from any individual outside factor, but when there are several in play there can be a cumulative effect that can take its toll. That being said, it was a good showing and industry insiders are optimistic that the summer will keep pumping out consistently strong numbers. There is never a total guarantee that the movie that launches the season will be an unqualified blockbuster. You only have to look back to 2006 when "Mission Impossible III" opened to only $47 million which led to the messy departure of Tom Cruise from his Paramount contract.

Speaking of Paramount, they're the next studio on the bubble as they have the $130 million challenge of trying to revive their "Star Trek" franchise, all but left for dead after 10 movies and countless television spin-offs. Will it live long and prosper? Well, they would like to make a new series of "Star Trek" features but they have to make this one work first and that's where the pressure lies. There is some definite overlap with "Wolverine's audience and placing it only one week later is a gutsy move which provides no buffer zone of comfort. Will the market absorb both films fine or will they take a bite out of each other's gross? That will be the pivotal question each week as more and more big films muscle their way into the marketplace and the summer gets more and more crowded. Wherever the studios place their event movies they believe they have the goods and they're not afraid of the competition. Often they're right, other times they guess wrong and have to pay the price. With "Star Trek" they might actually be right and their secret weapon looks to be the quality of the movie itself. The advanced word and early reviews have been terrific and Newsweek even had it as its cover story, though I found it a stretch comparing Spock to President Obama as both being interracial, as if that could somehow have an effect on its box office. To be honest, a lot of summer blockbusters do huge business without being very good while getting blasted by the critics, so aren't these popcorn movies supposed to be critic proof? For the most part they are, but it never hurts to get strong reviews and those reviews can expand the audience and help convince people on the fence to check it out. Especially when a movie like "Star Trek" has a bunch of young, unknown actors in the cast. Do you think "Iron Man," a lesser comic book character, could have grossed over $300 million without those great reviews and positive buzz? No way. One last word on "Star Trek." Paramount is using the same strategy that helped turn around the James Bond and Batman franchises by re-booting everything, starting from scratch and reinventing the series by telling an origin story. It's proven to be a smart way to go, but where those earlier movies went dark and edgy to find their success, "Star Trek" stays true to its roots by being lighter, more optimistic and fun. In these times, that's not a bad commoditity to sell. Live long and prosper indeed.

With all the attention the blockbusters receive, it only seems like they are the only movies that open in the summer, when in fact there are just as many, if not more, regular type movies from both the studios and independents that will be released throughout the next four months. The problem with the smaller films lies in creating enough noise to get noticed and being able to hook a particular target audience to show up at the theatres. With the media attention focused on big budget spectaculars and the theatres giving multiple screens to them, it's a challenge to gain traction, both in getting the press and proper number of screens and then being able to hold on to them. The popular term that is used in the summer when distributors choose to open their films against the pre-sold franchises is counter-programming. Offering up alternative choices to moviegoers who have different tastes and preferences. Probably the most common counter-programming in the summer are films geared toward women but other demos include the art audience, African Americans, small kids and families and older males. In the past, independent films like "Little Miss Sunshine," "Blair Witch Project," "March of the Penguins" and "Napolean Dynamite" have become big summer hits but there have been fewer of them able to break through in the last couple years. It's funny to think of Meryl Streep as the queen of summer counter-programming but that's what she has become with "The Devil Wears Prada," "Mamma Mia" and this summer's "Julia & Julia" (August 7th) where she plays Julia Child. She has become a summer force and has a big following of fans. But counter-programming not only happens in the summer. It goes on 52 weeks of the year where distributors are constantly sizing up the competition and placing their movies on weeks where they are going after different audiences than their rivals. It's become standard industry practice and plain old good business strategy.

It's amazing to think how powerhouse of a month May has become because the circumstances that made distributors avoid the month in the past still exist. I mentioned the great weather last weekend for the mid-section of the country and that still comes into play with people wanting to be outdoors after six months of being stuck inside. The old thinking went something like this. In early May the adults are working on their lawns and gardens, high school kids are in the middle of prom season
and college students are finishing up their semesters buried deep with their final projects and exams. That all still happens yet the boxoffice delivers the big numbers in spite of these seasonal activities. It's a testament to the power of movies and the draw of the silver screen. Movies matter to people. They are an escape and people continue to find a way to fit them into their busy lives.
2009 Copyright David Sikich. Video clip supplied by First Business LLC.

"We're Going To Need A Bigger Boat"

2009-05-01T02:45:00.000-07:00

When Roy Scheider's character in "Jaws" uttered "we're going to need a bigger boat," he could have in fact also been saying "we're going to need a bigger summer." The date was June 20, 1975. The day Steven Spielberg's "Jaws" opened in 409 theatres across the United States. The day summer changed forever for both Hollywood and its audience. As another summer movie season gets under way with X-Men Origins: Wolverine opening in 4,000 theatres, it's fun to look back at the summer of 1975 when 409 theatres was considered a very wide release and when the term summer blockbuster was as foreign as hot chocolate on the 4th of July. The phrase hadn't been invented yet. Not until "Jaws" came along. Before that, summer was an odd combination of well, just regular movies, westerns, comedies, exploitation, drive-in fare, foreign films from Fellini and Bergman, a little bit of everything. "Jaws" ushered in the modern era of the summer blockbuster and it had that summer of 1975 all to itself. It was number one at the boxoffice for 14 weeks in a row as it went on to gross $260 million with an average ticket price under $2.00. When I think of it, even 34 years later, has there ever been a more perfect summer movie? It didn't take long for the other studios to catch on. "Star Wars" followed two years later, then came "Alien," "Return of the "Jedi," "ET," "Raiders of the Lost Ark" and countless summer hits too many to count and remember. Maybe because Spielberg and George Lukas are still such seminal figures, it doesn't seem that long ago when one movie was able to transform the entire industry in so many different ways from television saturation campaigns to national release patterns, to merchandising, to cross promotions, to the reliance on summer movies to pull in 40% of the year's annual take. Some detractors over the years have actually blamed Spielberg and Lukas for ruining the movies with this blockbuster mentality at the expense of quality cinema but they missed the point. In fact, when the studios started shifting their business model to these bigger movies, it supplied an opening in the marketplace for independent film to emerge and that's exactly what happened starting in the late 70's and early 80's. There are some points in history that are just ready for change to occur and the movie business was more than ready to be kick started into a new era in the summer of 1975.

It took a lot of years for Hollywood to perfect the blockbuster release and learn how to take full advantage of the summer calendar. The business has gone from one blockbuster in an entire summer to six potential blockbusters in one month as we are seeing this May. It presents a compelling scenario. Cramming so many big movies into a single month poses real risks. One of two things can happen. Either the marketplace can expand and all these movies will find their audience and succeed or they will step on each other's toes and there will be some casualties and it won't be pretty. The studios do a great job of spreading out their big movies but there will be no breathing room in May. There's going to be a lot of nervous executives with their fingers crossed watching the numbers come in. I suspect at least a couple of them won't like what they see.

I've been discussing how summer has evolved but it got me thinking about how Hollywood has also come to master the full 12 month calendar with their releases. What they've done is to break down the year into four parts; four months of summer from May to August, two months of holiday releases in November and December, the January to April period and finally, September/October. So six months of the year is blockbuster season with the thinking if they can hold their own during the other times, they're sitting pretty. With a record setting first four months of the year, they have done more than hold their own and how they've accomplished this is to start scattering summer type movies into these months like "Monsters vs. Aliens," "The Watchmen" and "Fast and Furious." But what's good for the studios and movie theatres is not necessarily good for everyone else. There has been some collateral damage and it's being felt the most with mainstream adult dramas and basically a good portion of the independent films that have been coming out. The marketplace works best when it has balance and too many blockbusters drown out the smaller fish in the pond. Can "State of Play" be considered small with a $60 million dollar budget with star power to boot? After a solid opening, the second week collapsed with a 51% drop which was disturbing to see. This is a good movie and I thought it had a chance to hang in a lot stronger than that but I wonder, did Universal drop the ball with their marketing after the first weekend? Every Monday morning there are tough decisions distributors have to make regarding how they will continue to support each of their films. In the case of "State of Play," it would seem the decision was to pull back and not really keep pouring money into the campaign to keep the title fresh in people's minds. That's a shame but it's the reality of the times. With falling DVD numbers, no studio can afford to overspend on marketing, especially on a drama, when the ancillary revenues are not dependable as they used to be. Still, I would have liked to have seen a better effort from Universal on this one. Even a bigger casualty was "The Soloist." Jamie Foxx came out and blasted Paramount for moving the film from an end of the year release to the last week in April and I think he has a point. Why open the film a week before the summer movie season begins when there are already three other new wide movies fighting for attention the same week. Coming in fourth is never a good thing which is what happened to "The Soloist." Paramount had all of March and April to play with so I don't understand their thinking. How much attention can they focus on it now with "Star Trek" set to open next week? The answer couldn't be more clear to see. Not very much.

Speaking of falling DVD numbers, The Digital Entertainment Group, a trade association of home entertainment companies, reported that sell-through DVDs to consumers fell 14% in the first quarter of 2009. I've always said you can learn a lot about the movie business by going out and keeping your eyes open when you visit a movie theatre, walk into a video store or flip through your cable guide. The proof is in what you see. So when I walked into my neighborhood Best Buy this week and noticed the DVD section has been relocated farther back in the store, that spoke volumes about the changing consumer buying habits the industry is facing in this economic downturn.

One last note. I see where Fox has announced they are going to make a sequel to the 1988 "Wall Street" with Michael Douglas returning as Gordon Gekko. For years Oliver Stone was on record saying he wasn't interested in doing another Wall Street but after seeing the latest script he has signed on to direct. I'm a fan of "Wall Street" and the movie perfectly mirrored the slick go go 80's with the mantra of 'greed is good' so I am very intrigued what kind of tone Stone will strike with this one. Will he go for all out satire or will he do a scathing social commentary on the self proclaimed masters of the universe who helped lead the country into such a deep recession? Either way, it will be a much needed film for these times because audiences deserve more than a steady diet of blockbusters.

Questions for Discussion:
1. What is the biggest change "Jaws" brought to the movie industry that still resonates today? What statistic is tied to its release which is almost impossible to duplicate today?
2. How do the studios break down their 12 month release schedules? Are all the weeks pretty equal or are there strong and weak points during the year?
3. When does the summer movie season begin for the studios and how has that evolved?
4. Was there a danger of having six potential blockbusters open in the same month as they did in May, 2009? What was the result of placing so many big movies in one month? Analyze the actual opening weekend and final grosses for these movies. Do you think any of them suffered from too much competion?

2009 Copyright David Sikich. Video clip used with permission by first Business, LLC.

Film Piracy: No Longer a Victimless Crime

2009-04-24T08:12:00.000-07:00

I'm going to come out and say it and not mince any words. I think anyone who participates in any kind of film piracy whether it's illegal downloading of movies on the internet, buying pirated copies of DVDs on the street, even accepting pirated copies from friends or co-workers while they're still playing in theatres, should be ashamed of themselves. Even if they believe they aren't doing anything wrong, they are, because they are participating in an illegal and immoral activity that has larger repercussions in today's world and economy than ever before. As a film industry lifer and teacher, I'm hard-nosed about this issue and give no quarter to anyone who tries to rationalize his or her position on why they are doing whatever they are doing. There is right and there is wrong. Film piracy is dead wrong.

When I refer to film piracy as no longer being a victimless crime, I need to clarify that statement because I don't want to imply there haven't been victims in the past because there have been. It's just now there is a new face to film piracy. The stakes have risen to unprecedented heights and the new victims lie far outside the movie industry and impact many unsuspecting, innocent people around the globe which could someday even include you or someone you know. When people have used the rationalization that the big fat cat Hollywood studios are making enough money so who cares, they're using a misguided, uninformed judgment because the collateral damage runs deep as piracy has led to:
1. The stealing of intellectual property.
2. The denigration of the director's creative process through unauthorized, often inferior copies of his creation. Even if it's a good copy, the artist's work is being stolen and isn't being compensated for.
3. Loss of revenues to the studios.
4. The drop in revenues leads to job loss within the industry when studios cut back spending and are forced to contain costs and make fewer movies.
5. Job loss to all the ancillary businesses that feed off the movie industry when less production takes place, having an impact on many regular working class people.
6. The reduction of independent movies being able to be financed through foreign pre-sales due to the rise of global copyright piracy.

So yes, there have been victims, but the recently released study from the RAND Corporation titled "Film Piracy: Organized Crime and Terrorism" takes it to an entirely new level. The findings in the report are stunning as 14 case studies connect the dots and follow the money to show how organized crime is increasingly playing a more active role in film piracy by controlling the entire supply chain from manufacture to street sales of pirated movies. The report also profiles three cases that even link terrorists to piracy profits. I'm surprised how little discussion this extensive report has received in the press, including the movie trade publications. There were some initial stories immediately following the release of the report in March without much fanfare, commentary or reaction and I haven't seen much of anything since then. In some quarters, the content of the report seemed to be dismissed either as a bit far fetched or too partisan because the MPAA supplied a grant for the study. That's weak reasoning and discounts the body of work and reputation the RAND Corporation has established for itself over the last 60 years as the leading, nonpartisan research company in the United States. The high caliber of their researchers is well known throughout the corporate and political worlds with many former Nobel Laureates having worked for RAND either as employees, consultants or in an advisory capacity. Their initial mission statement in 1948 simply said: "To further and promote scientific, educational, and charitable purposes, all for the public welfare and security of the United States of America." By the 1960's, RAND was bringing its trademark method of experienced, independent analysis to the study of many vital domestic social and economic problems such as the health care system, affordable housing, national defense, space systems and digital computing. RAND's research agenda has always been shaped by the priorities of the nation so its research into worldwide film piracy should not be taken lightly. The research is based on 2,000 pages of documents and interviews with more than 120 law enforcement and intelligence agents from more than 20 countries. Their data and analysis should be taken seriously based on its decades worth of invaluable research work which has benefited countless American institutions. RAND stands for quality and integrity and their reputation is unmatched. The full report is available at www.rand.org.

Just as the film industry is a global business, film piracy is a global problem. As well as documenting cases in North America and Europe, the report outlines the involvement of organized crime with film piracy in South America, Russia and many parts of Asia. In one instance, a simple arrest at a UPS store for shipping illegal DVDs led to the exposure of a large scale human trafficking ring. In New York City, Yi Ging, a gang based in Chinatown, terrorized local merchants through their activities. They would receive DVDs manufactured in China and smuggled into New York and their strong arm tactics extended into cities like Columbus, Ohio and Detroit. Another case involved the tri-border area of Brazil, Argentina and Paraguay that has emerged as the most important financing center for Islamic terrosism outside the Middle East, channeling $20 million annually to Hezbollah. At least one transfer of $3.5 million was made to Hezbollah by known DVD pirate Assad Ahmad Barakat, who was labeled a "specially designated global terrorist" by the U.S. government in 2004.
Greg Treverton, the RAND report's lead author and director of the Center for Global Risk and Security said "if you buy pirated DVDs, there is a good chance that at least part of the money will go to organized crime and those proceeds fund more dangerous criminal activities, possibly terrorism."

The internet leak of the unfinished print of "Wolverine" at the beginning of April underscores the difficulty of controlling and keeping up with technology, even when it happens so close to Hollywood with an alleged vendor or post production house being the suspected source. It will continue to be an ongoing battle that will probably never be completely won. As much as it is a technology problem, however, it's an attitude and perception problem inherent in a lot of people. A global study a couple of years ago showed 94% of those surveyed believed that stealing a CD from a store is wrong in all instances whereas only 36% felt that taking intellectual property online is wrong in all instances. I believe the challenge and at least part of the solution is through delivering the right message to school age kids (grade school through college)through speaker platforms and educational programs. If the connection between film piracy and organized crime and even terrorism can become more known with all of its potential danger that it presents to society, maybe that could make a difference in young people's minds that will stay with them for the rest of their lives. Changing human behavior can turn technology into the studios' ally instead of enemy.

In terms of confronting the issue of demand, the studios are doing what they can to accomodate consumers by adding free digital copies of movies to the regular DVD packaging, offering people more ways to utilize technology legally rather than downloading illegally. They are also showcasing more of their films online through sites like Hulu and that area will continue to show growth. Still, some say, why not release movies and DVD's at the same time, that will solve the problem. That's not going to happen. The studios aren't going to allow thieves to dictate a change in the fundamental way the movie business operates. It not only would kill off 40,000 theatre screens but that shortsighted thinking fails to grasp that not all movies have instantaneous awareness and demand, interest has to be allowed to build over time and that's why the current system of staggered release windows has worked so well over the last 30 years. It's too bad that some people feel it's their right to get anything they want whenever they want it, as with movies, whether legal or not. They'll find out in time, many things in life don't work that way and for every action taken, there are consequences, both known and unknown.
Copyright 2009 David Sikich. Video clip used with permission by First Business LLC.

The Clock is Ticking

2009-04-17T07:48:00.000-07:00

With only two weeks to go before the summer movie season begins, my mind wanders about what is to come and about some missed opportunities along the way. With big blockbusters scheduled to open each week in May, screens across the country are going to get awful crowded as movies like "Wolverine," "Star Trek," and "Angels and Demons" open on multiple screens and smaller, lower grossing titles either get pushed out or find they have no place to grow. That's why I'm surprised that there were so few attempts by distributors in March and April to open more independent films that had the potential to have an impact and crossover to play in the better, more upscale suburban theatres. Now that window is closing fast. I have to confess I live in the suburbs and don't frequent the art theatres in Chicago as often as I once did, so I've been depending more and more on theatres closer to home for my art house fix. Unfortunately, only one film in this period has been able to widen out to the suburbs, Overture's "Sunshine Cleaning," which originally opened in 4 theatres a couple of months ago and is currently playing in about 600 theatres across the country. With a $7,000,000 gross, it's a small blip in the marketplace but it's still considered a success because it's been the only specialty film to emerge. Is there room for more independents to play in commercial theatres? Of course, but it's not an easy proposition to pull off. Getting the screens is not the main problem, making the movies work and keeping them on the screens is the real battle. Movies have to have the right commercial hook either with concept, story or a little star power to have the capability to escape what is referred to as 'the art house ghetto.' Just as important, a distributor is needed with the marketing muscle and moxie to support the release over an extended period of time with increased print and ad buys. There have been plenty of good art films like "Two Lovers," "Sin Nombre," "Gomorrah" and "Tokyo Sonata" playing on an exclusive basis in big city art houses, but those movies are too small and specialized to even be considered for wider play. However, there are two reasons for some optimism, one in the immediate future and one down the road.

While looking over the release schedule for the next couple of months, there are a number of notable specialty films listed to open as counter programming to the blockbusters, hoping to break through and find an audience beyond the art house. Hope is in the air with these films:

April 25: "The Soloist" with Jamie Foxx and Robert Downey Jr.
May 1st: "The Limits of Control," directed by Jim Jarmush, starring Bill Murray
May 15: ""The Brothers Bloom" with Adrian Brody and Mark Ruffalo
May 22: "My Girlfriend Experience," directed by Steven Soderbergh
June 12: "Moon" starring Sam Rockwell
June 19: "Whatever Works," Wooody Allen's new movie with Larry David
June 26: "Cheri" starring Michelle Pfeiffer
June 26: "The Hurt Locker", directed by Kathryn Bigelow with Guy Pearce

There are some good directors and actors involved with these films so they all have a fighting chance to succeed. Whether they do or not depends, as always, on a combination of critics' reviews, smart marketing, competition, good word of mouth and the fickleness of public taste and timing. If four of the eight films find their footing along with an audience, that would be a welcome sight for lovers of off beat quality cinema who happen to live outside the big cities.

One of the reasons for fewer breakthrough indies is fewer well financed distributors to handle them. Help is on the way as Bob Berney, one of the most successful and respected marketing and distribution executives in the business, is poised to announce soon a new distribution company he will be heading. You may not have heard of him but you've heard of the movies he's marketed and distributed: "Memento," "My Big Fat Greek Wedding," "Pan's Labyrinth," "Whale Rider, "Y Tu Mama Tambien" and "Passion of Christ," among many others. Berney has been out of action ever since Warner Brothers axed Picturhouse last year. He's been a master at making hits out of unlikely films and in today's marketplace, a man like him is needed back in distribution. There's an old adage that every film has an audience. That's debatable, but if there is an audience to find, Bob Berney is the man to find it.

On the opposite end of the spectrum, the teen market is doing just fine with Warners opening "17 Again" this weekend following last week's success of "Hannah Montana" from Disney. It's really apples and oranges with these two genres. We're talking about one of the safest genres, teen movies, and comparing it to one of the most riskiest and fragile, the festival driven independent film. Teen films have a big audience base to draw from, the last two "Hannah Montana" movies have opened to over $30 million each and with Zac Efron from 'High School Musical' fame starring in "17 Again," the teen market should enjoy another number one hit this weekend. Studios love them for their low production costs, the absence of any gross participants, the ability to open on 3,000 screens and the potential of high profits. Miramax, a traditional art distributor, attempted to combine a little quality with a younger audience with "Adventureland" a couple weeks ago but it failed to catch on. There have been some successes in the past which married independent film to the teen film, "Napolean Dynamite" and "Juno" spring to mind, and when that happens it's a little bit of magic but it's a tricky thing to find the right balance to satisfy both audiences.

The clock is also ticking for Lionsgate, the industry's largest independent distributor, which is in a battle with billionaire corporate raider Carl Icahn for control of the company. Anyone who has worked in the movie business or has followed it closely over the years, knows there is as much intrigue and action off the screen as there is on it. When you look at it, it's not surprising to see Lionsgate in play. The mini-major is the largest stand-alone independent studio and has been a solid company for a number of years which also happens to have a vast library of 12,000 movies and television shows. That key asset is the company's crown jewel which Icahn has his eye on. Looking at the Studio Market Share Rankings for 2009, Lionsgate is having a strong year and is even ahead of Disney (7.7% to 7%) but that's misleading because the violent action movie "Crank" could be their last movie until Labor Day. Lionsgate generally stays out of the summer competition of studio blockbusters and instead concentrates on building their market share in off times. Over the last five years, their annual market share is between 3.5% and 4.5% Is that kind of a market share good enough for the largest independent in the industry? Can it or should it be better? Their business plan of going after singles and doubles is smart on paper as it protects its downside, Lionsgate has never lost more than $10 million on any movie. But whenever someone protects their downside, the upside is equally affected and for Lionsgate that means not having the capability of earning hundreds of millions in profits that the studios are able to do on their biggest blockbusters. No one knows Icahn's ultimate intentions in wanting control of Lionsgate. There has been speculation that Icahn may even include Yahoo, a company he has a big stake in, pushing Yahoo to buy Lionsgate and leveraging all those titles into a viable online distribution system.

This is a big story and I'm interested in seeing what happens but it's hard for me to get too worked up about it one way or another. I have no rooting interest in either side. Lionsgate specializes in releasing hard edged genre movies and introduced 'torture porn' to the masses with their "Saw" and "Hostel" franchises. They used to distribute some art films but left that end of the business to concentrate on exploitation of all kinds. There has always been a place in the marketplace for exploitation movies and right now they happen to be the best at it. But what comes around goes around. A couple of years ago, Lionsgate was in the role of the corporate raider trying to wrest control over DVD distributor Image Entertainment but was rebuked and lost that battle. The big swallows the small and the bigger swallows the big. On the other hand, I have no sympathy or support for Carl Icahn, the billionaire bully who relishes stiking fear and chaos in companies with the hope of moving the stock price and making even more billions. No, I don't care who wins this battle. Lionsgate will continue to operate no matter who runs the studio and the only other sure thing is that another "Saw" will open at Halloween.

Switching to Universal, the studio is releasing "State of Play" this weekend which is a counter punch to their own "Fast and Furious," going from mindless entertainment to a smart film for smart audiences. With summer movies opening soon, it's an opportune time to take advantage of a good quality film opening in over 2700 theatres. "State of Play" cost $60 million and is without a doubt the most challenging type of movie studios greenlight, the $50 to $70 million dollar adult drama that depends on audiences to think a little and for adults to come out and support it on its opening weekend. The film has an all star cast led by two former Oscar winners in Russel Crowe and Helen Mirren but that doesn't guarantee a big weekend gross. What's becoming more apparent with each passing year is that any movie that isn't high concept in today's marketplace is a risk, pure and simple, and "State of Play's" story of a congressman and a news reporter and some seemingly unrelated murders in Washington D.C. certainly wouldn't qualify as high concept. But it doesn't hurt an adult drama to have thriller, suspense and murder mystery elements thrown into the mix to make the drama more appealing to audiences. In 2009, that's protecting the bottom line.

Monday, April 20 re-cap:
It was no surprise that another teen movie "17 Again" won the box office battle this weekend, but it was good to see Universal's "State of Play" finish 2nd with a strong $14,200.000 gross. I saw it opening night and sat in a pretty full theatre and really enjoyed the film. Great acting, strong story, some offbeat use of Washington D.C. locations and good twists along the way. The predictions were wrong again. Several analysts had "Crank" outgrossing it but that movie only did $6,000,000. There was a demand in the marketplace for a good adult film so the timing was right. I recommend "State of Play" and feel it has a good chance of getting the word of mouth that will keep it on the screens well into May.

Questions for Discussion:
1. Who was the parent company for Overture Films? Supply a little history of the company and some of the movies they released. In July, 2010 the company was sold. Research the details of the transaction, who it was sold to and the reasons it was sold.
2. Where does Lionsgate fit in the hierarchy of film companies? Why has billionaire Carl Icahn been stalking the distributor for the last year? What is the difference between a distributor of specialty films and a distributor of exploitation movies and can one company partake in both types of films?

Copyright 2009 David Sikich. Video clip used with permission by First Business LLC.

Cause and Effect

2009-04-10T05:51:00.000-07:00

Audiences continue to flock to the movies, even though some people may feel there is really nothing for them to see. Isn't that always the case? Different strokes for different folks. Many divergent demographics make up the vast audience pool and that is the beauty and strength of the motion picture marketplace which keeps chugging along as other industries continue to feel the sting of the recession. After a record breaking 1st quarter, the question was, what would April bring, another notoriously slow month, which acts as the final bridge to the start of the big summer movie season? Well, how about a $71,000,000 weekend gross for the 4th installment of "Fast and Furious?" Now it's easy to scoff and criticize pictures like "Fast and Furious" and I have no interest in seeing it myself, but I've found that it's always more instructive to look at the bigger picture and see what that kind of runaway success means for the studio involved, the audience and the industry at large. Plus, I have to respect it when a movie exceeds the previous one in the franchise by $45,000,000 and out grosses the all time previous April opening by $29,000,000. (Anger Management) In a year of very successful movies, those are crazy numbers. That's not easy to do, a lot of things have to go right for that to happen and it always comes down to the people who make the decisions and map the strategy along the way which makes it possible to have that kind of success.

Universal is the studio behind "Fast and Furious" and they did a great job on all fronts, from bringing back the original cast to staging a very strong marketing campaign and moving the release date from June to April to take advantage of the weaker competition. Obviously, Universal will benefit the most with huge profits but audiences do too because profits from genre movies are channeled into financing more ambitious, quality films like "Duplicity" and next week's upscale thriller "State of Play," starring Russel Crowe and Helen Mirren. It takes all kinds of movies to make an annual release schedule and sometimes bad movies make good movies possible. With a built in audience, sequels are just so much easier to market than original films, where the pressure to perform often comes down to the first three days. Studios have to make these movies in order to stay alive. Universal highlighted the power and simplicity of high concept with "Fast and Furious" by successfully narrowing its marketing message down to only four words "NEW MODEL ORIGINAL PARTS." It's much more challenging to market a film like "Duplictiy" and Universal stumbled on this one. Even so, it's certainly possible to go high concept with a star like Julia Roberts. Maybe they could have gone with its own four word sell JULIA ROBERTS IS BACK!

On the other hand, the release schedule is a giant chess match between competing studios, all looking for that perfect date to open, trying to take advantage of any sign of weakness and playing to the strengths of the movie itself and the calendar. It's only conjecture now, but the perception is that when Universal moved "Fast and Furious" out of its original June 12th date, it may have left the important month of June lacking in big pictures. Each move in the marketplace has a cause and effect and with fewer movies in the pipeline this year, filling each week in the summer with a proven hit gets more difficult. The month of May has heavy hitters every week with "X-Men: Wolverine," "Star Trek," "Angels and Demons" with Tom Hanks, "Terminator Salvation," the "Night At the Museum" sequel and Pixar's "UP." Wow, that's an impressive lineup. July has Johnny Depp and Christian Bale in "Public Enemy" and the new "Harry Potter" to anchor the month. Even though June has a number of movies on tap, only "Transformers: Revenge of the Fallen" is a guaranteed certified blockbuster. There seems to be an abundance of mid-range romantic comedies and the month could still be o'kay, especially if some of the May movies show strong legs to carry over in to June. But June is too important of a month to just be "okay." Is there another move still to be made or is it too late for that? More on this as we get closer.

Speaking of release schedules, where does Easter rank with the rest of the year's holidays in terms of importance and box office performance? All you have to do is look at the the three wide movies that are opening this weekend to get the answer: "Hannah Montana," "Observe and Protect" and the martial arts "Dragonball: Evolution." Some potential niche hits but not too awe-inspiring. Easter has never been one of the stronger holidays for movies for several reasons. It always falls on a different week each year; it's a very religious weekend which starts off with the solemn Good Friday and ends with Easter Day family gatherings; spring break school vacations are scattered around the country on different weeks so national releases can't take advantage of everybody being off at the same time and the studios are holding off on opening their bigger movies until May.

The DVD market remains much more challenging than the theatrical market, even when considering the 3D issue which looms very large. The various studios have different opinions on whether the recent downturn in DVD sales is more cyclical or a fundamental shift in consumer behavior so they are playing around with different ways to release their product and also looking at the rental market with fresh eyes to see if they can lean on that side of the business for any good news. Well, one out of two isn't bad. Tuesday has been the traditional day of release used by distributors to release their DVD titles but they have decided to mix it up and start using other days of the week to launch movies. Summit had a huge success with choosing Saturday night to come out with "Twilight," creating a lot of buzz and excitement with midnight screening parties and sold three million copies the first week. Disney is releasing "Bedtime Stories" on a Friday and other studios are experimenting with their own titles. Will this have any long lasting positive effect on sales? So far this year, DVD revenues have shown a little improvement over the fourth quarter losses but it's still too early to call. Whether the studios can depend on rental income more, I have my doubts because there are some basic problems with rental that are hard to overlook. Looking at the business models of Blockbuster, Netflix and the fast charging Redbox point to three different sets of problems for the studios to deal with. Blockbuster, the old brick and mortar power house, is hanging on for dear life with a stock price under $1.00 and no guarantee they will be able to survive. They've cut back on their DVD orders to preserve cash and that's not a good thing. Netflix has been wildly successful and continues to grow and their stock price has gone up nearly 50% this year. That has to be good news for the studios, right? What's great for Netflix isn't necessarily great for the studios. Netflix has been tremendous in coming up with new ways to add value to their subscribers, offering them things like streaming capabilites for no addtional charge but that extra value doesn't aid the studios. Studios make the most money on individual transactions while Netflix makes theirs on a huge subscription base. Studios may have to raise their upfront prices to squeeze more money out of Netflix but for the time being Netflix has a great business model, they are making money and they have a tremendous CEO in Reed Hastings who is always thinking of innovative ways to grow the company. Another growth area is with the discount rental business and Redbox is leading the way with $1.00 vending machine kiosks in front of grocery stores and drug stores. This business was actually started by McDonalds and is growing fast with 13,000 kiosks in the U.S. The studios aren't too thrilled with this business model either because it undermines their long time economics that have propped up the movie industry for decades. The studios' fear is that the cheap price is giving the movies away and will give consumers another reason not to buy DVD's , which of course is the real moneymaker. Universal has already battled with Redbox by refusing to offer them their biggest titles on the day of release and Redbox has filed suit against them for restraint of trade. Three different rental businesses, three different sets of problems.

Yet another bit of news on the Universal front. Their July release, "Bruno," Sacha Baron Cohen's followup to "Borat," has been rated NC17 by the MPAA Ratings Board. Right now they are taking advantage of the publicty and showing a racy trailer on the internet. No way will this movie stay NC17. It will be re-edited and re-submitted and will come out with an R rating. Universal has invested too much money in the Borat franchise to limit their audience with the deadly NC17. Take that to the bank.

Questions for Discussion:
1. Describe the business models and prospects of Blockbuster, Netflix and Redbox. If you are a renter of movies, which of the three businesses do you prefer? Give your reasons why.
2. Why is Netflix a better business for themselves than it is for distributors?
3. What is the traditional day of the week DVD's are released? Why are some film companies choosing other days to release specific movies?
Copyright 2009 David Sikich. Video clip used with permission by First Business LLC.

A Love-Hate Relationship Through the Years

2009-04-03T08:52:00.000-07:00

Going back to the earliest days of the movie business, distributors and movie theatre owners have often had an adversarial relationship. The movie business has always been a rough and tumble business with the two sides seemingly always at odds with each other over one thing or another. Threats, accusations, shouting matches and lawsuits litter the history books and the memories of long time industry veterans. That's just the way it was and to a lesser extent, the way it still is. Even though they may be on better working terms than perhaps at any other time in history, that doesn't mean there still aren't problems and conflicts they have to deal with. They know they need each other and at times have even been referred to as 'partners,' but the fact of the matter is they operate different businesses with different business models and that leads to conflicts. Other than how to split up the box office pie which will always be a tug of war match, two of the most hotly contested issues that distributors and exhibitors don't see eye to eye on are the timetable for converting more screens to digital 3D and the ever shrinking DVD window. The studios feel theatre owners are dragging their feet and not moving fast enough to convert their screens to 3D, while theatres feel distributors are moving too quickly at shortening the time frame when DVD's are released.

Both of these issues are here to stay. The studios have put a whole lot of 3D movies into either production or the planning stages despite the fact there are only 2,500 of the 40,000 screens in the U.S. capable of playing them. The theatres don't work for the studios and don't really like to be bullied into rushing into something that costs so much money and has very questionable return to their bottom lines. It's a tough economy and no distributor, not even Jeffrey Katzenberg, can guarantee that digital 3D will have lasting power for years to come. So why rush into it too quickly? The two sides are looking at the risk/reward factor in different ways. The studios would like to see all the screens convert to digital so they can eliminate making film prints altogether, but the exhibitors are the ones who have to fork over the dough to convert perfectly fine 2D screens which are producing steady revenues for them now. 3D adds an extra middle man to the mix in the form of the 3D supplier who gets a cut of the action and the biggest piece of the higher admission price charged to the public goes back to the distributor. When in doubt, follow the money. On top of that, 20th Century Fox has been telling exhibitors this week not to expect any financial support for costs associated with the use of special glasses when its 3-D pictures play in digital. The lines are being drawn. Stay tuned.

With DVD's, the average time from the theatrical launch to the shelves at Walmart is four months and thirteen days but often it is closer to three months. What skews the figures are when the early summer movies are held back to take advantage of the end of the year holiday season. The rest of the year tells a different story. With many Christmas Day releases out already, the window between theatrical and DVD continues to narrow and that is a big concern for exhibition. It doesn't matter if the theatres aren't playing a movie anymore, it's more about the perception the public has that the time they have to wait is getting shorter and shorter. What's the breaking point? Two and a half months? Two months?
Theatres are very good at protecting their turf and flexing their muscles and love to remind the studios that the movie theatres are still the ones driving the revenue train. They have to be vocal about protecting their businesses because if they don't, who will? "Slumdog Millionaire" came out on DVD this week when it was still playing on 2,000 screens the week before and most theatre circuits pulled the picture
because they don't want to set the precedent of playing day and date with DVD. As with digital 3D, the shrinking DVD window will remain a thorny issue between the two sides.

ShoWest Convention
There was an interesting announcement from ShoWest, the annual gathering of theatre owners that took place in Las Vegas this past week. Industry statistics from the previous year are always presented by the the head of the Motion Picture Association of America but this year one set of statistics was left out. The MPAA has decided to discontinue announcing the average annual production and marketing costs for all the movies from the studios and their independent divisions. They said it is getting harder and harder to obtain reliable data and they didn't want to put out any misleading information. I always wondered about the accuracy of the figures and I was especially suspicious last year when I saw the numbers. Here were the stats from the 2007 movies:

Studio Releases
$70.8 million - average production cost
$35.9 million - average marketing cost
For a total of $106.60 miillion per picture

Independent Releases
$49.2 million - average production cost
$25.7 million - Average marketing cost
For a total of $74.8 million per picture
I didn't question the studio costs, but I remember being stunned at those independent film figures. Almost $50 million to make the average indie and another $25 million to market it. Those numbers seemed way too high and I wondered if they took into account the films that were acquired at film festivals at costs ranging from $1 million to $10 million. When someone else produces and finances a movie and sells it to a distributor, the acquisition cost becomes in effect the substitute cost of production for the studio and is much less than an in house production. Also, Sony Classics is an example of a studio division which distributes traditional art films and their costs are in no way near the above averages. So I'm not surprised they've stopped trying to figure out these costs because somebody must have started to question the validity of them and perhaps even the repercussions of giving out uncertain information. I have to wonder if Warners and Paramount looked at those figures and were reminded of how expensive the independent business was becoming when they decided to eliminate their own divisions last year. I hope that wasn't the case but perception has a way of becoming reality.

With 2009's first quarter numbers in the history books, the industry set a blistering pace for the rest of the year to keep up with. Ten of the twelve weeks were stronger than last year, $2.4 billion was taken in at the box-office and there was a double digit increase in paid admissions. And it was done with fewer movies. The first quarter saw 36 movies open in wide release which was down 16% from the 43 movies released over the same period in 2008. Less has definitely meant more. It not only gives movies more breathing room but it allows marketing departments more time to concentrate on each feature. Dreamworks took this to the extreme with "Monsters vs. Aliens" being the company's only 2009 release. They put everything they had into this movie and couldn't afford to fail. That's why they chose the end of March as their release date because there would be very little to compete against for the family audience. With a $59.3 million weekend, Dreamworks delivered for themselves and for the exhibitors.

Obviously after a huge weekend, there is an even bigger push on the exhibition community for more 3-D screns. Only 30% of the screens were 3-D yet those screens produced 58% of the business with reports of many sellouts and people being turned away. Actually that's not too surprising because all the marketing is geared for 3-D which creates a demand at the expense of the screens playing it in regular theatres. You can say the message to the other theatres is get on board or continue to fall behind. But on another front, the real profit for theatres has always been at the concession counter and even though audiences continue to line up at the ticket windows, they're spending less on snacks and drinks to save some money. In reponse to somewhat lower demand, more and more theatre chains are starting to roll out value menus, dropping their popcorn and soda prices, especially during mid-week. Since there is already a big profit margin on these items, theatres have wiggle room to offer more enticing deals at the concession counter without touching their admission prices.

Except for the 3-D screens of course. In most major markets, there is a three tier pricing structure in place. In Chicago for example, Imax 3-D was charging $15.00, digital 3-D screens $13.00 and regular theatres $10.00. What are the economics for the theatres that install digital 3-D? After speaking to a high ranking theatre executive, the numbers aren't adding up too well. Per screen installations run between $75,000 to $110,000 depending on servers, booth alterations and silver screens. Other expenses include film rental payment to the distributor on the upcharge, either a royalty payment to the 3-D supplier or glasses purchased, and the labor costs to handle and clean the glasses. Costs add up in a hurry and there isn't much left at the end of the run. The exec said it will take hundreds of thousands of 3-D admissions per screen to cover the total conversion cost. At this point, it's a better deal for the studios than it is for the exhibitors.

"Slumdog Millionaire" is hitting the DVD market only five weeks after the Academy Awards whereas years ago Best Picture winners would play into the summer. There is no real surprise there since today's industry has a more concentrated business model. Just last week, 2,000 theatres were still playing 'Slumdog' and doing o'kay but 1200 screens pulled it off their screens last Thursday with more taking it out on Sunday, refusing to play a movie while it's on DVD. The larger circuits are all about not wanting to set a precedent of playing day and date with home video though smaller, independent theatres will continue playing the award winner. Fox Searchlight may be leaving some money on the floor but since they've grossed $140 million on a $15 million production cost, the distributor is moving to the next revenue stream with no regrets.

This weekend sees two new wide releases and a national expansion of the first independent hit of the year. Universal will be opening the latest version of their "Fast and Furious" franchise and Miramax has the teen comedy "Adventureland," from the director of "Superbad, as this specialty distributor continues to veer toward low budget to mid-range mainstream movies and away from art films. Is this a new beginning for Miramax or the beginning of the end for the iconic company made famous by the Weinstein brothers? Speaking of specialty films, Overture's "Sunshine Cleaning" expands to 500 screens and will continue to try to take advantage of a rather barren landscape for commercially viable independent films.

Questions for Discussion:
1. Distributors and exhibitors both need each other to conduct their businessess, but there has been much conflict between the two parties over the years. What are some of the issues that has caused this conflict in the past and what are two of the biggest current problems that exist between them?
2. What is the main concern theatre owners have with how the studios are handling their DVD releases of feature movies? Has the length of time between a movie's release and the DVD street date ever influence your movie going habits?
3. Why is the 3-D conversion of screens better for the studios than it is for movie theatres?

2009 Copyright David Sikich. Video clip used with permission by First Business LLC.

Can 3-D Save Weak Plots Much Less The Entire Movie Industry?

2009-03-27T06:59:00.000-07:00

This is a watershed moment for Hollywood. Even though the box office has been red hot this year, the country's economic crisis has led to cutbacks, layoffs and a fair share of fear among those left with jobs in the motion picture industry. Everyone knows a lot more change is coming but it's always good to recall what screenwriter William Goldman said years ago about Hollywood, "Nobody knows anything in the movie business." He was referring to the fact that no one can predict popular taste or what the future will bring and because he hit on such a basic truth, that quote will live on as long as movies do.

What I find intriguing is that in the midst of this fear and uncertainty, Hollywood is rolling the dice and placing its bet squarely on the back of Digital 3D as its savior of all things, something that will transform movies in the same way as when silent movies converted to sound and when black and white switched to color. Those heady proclamations come from Jeffrey Katzenberg, CEO of Dreamworks Animation, who through his position in the industry and his sheer will and passion, has become the leading advocate and spokesman for the entire 3D movement. This is show business and Katzenberg is a great showman but at this point in time, he's dealing in as much hype as he is in reality. There is nothing wrong with that since the movie business is built on large degrees of hype in the first place, but it's instructive to take a closer look at the situation and try to make a little more sense out of it.

Can 3D save weak plots much less the entire movie industry? That's only one question but it's not a bad place to start the discussion. Personally, I still think of 3D as a gimmick and regardless of how far the technology has come, you still have to wear those annoying glasses and pay three extra dollars for the priviledge to do so. From time to time that could be o'kay, but the thought of the industry flooding the screens with 45 3D titles in the next two and a half years is both astonishing and depressing to me. History has shown us with 3D that the technology seems to always take precedent and the actual story and characters are sacrificed for flying objects thrown at your face. That can get old fast and with so many of these movies coming down the pike, how soon will audiences begin to tire of the experience as they did in past decades?

No one would disagree that the quality of 3-D today is vastly superior to what was playing on the screens in the 50's and 60's during the format's first cycle before it eventually lost favor with both filmmakers and audiences. Another reality is that 3-D is a hot commodity right now in a variety of entertainment platforms including gaming systems, webcams and television so it's not surprising to see a big push in the movie industry as well. Hollywood is right about looking into the future and tying to grow the business by differentiating the theatrical experience after many flat years at the boxoffice. The fact is Digital 3-D increases revenues. 3-D theatres can outgross regular theatres playing the same movie 4-1 while distributors collect more film rental from theatres through higher ticket prices. But on the other hand, claiming 3-D is going to be the be all and end all and the one thing that will be both the savior and future of the industry to solve all of its problems is a bit of a reach at this time. Some problems such as falling DVD revenues will require more than a quick fix to solve it various complexities. The fact of the matter is that growth in 3-D screens has been much slower than expected. Katzenberg said there would be 4,000 3-D screens for "Monster vs. Aliens" but there are only 2,000 available, 5% of the total U.S. screens. Even though Dreamworks Animation has announced that all their future movies will be in 3-D, 'Monsters' is their only release in 2009 with their next film being "Shrek 4" in May, 2010. That's a big gap.

A lot of theatre owners are being cautious in converting more screens to digital 3-D because it's an expensive ordeal, costing up to $75,000 per screen. With the country still in a recession, the credit crunch with the banks is not helping matters any either. Katzenberg was also trying to convince exhibitors to charge $5.00 more a ticket for their 3-D screens but all he could do was suggest a price. No distributor can force a theatre to charge a certain amount, that would be considered price fixing which is illegal. Theatres decide what admission prices to charge and since they have concerns of raising prices during these tough times, the average increase has been in the $3.00 range.

One studio executive recently posed the question, "What comes first, the content or the screens?" That's a great question so let's look at the breakdown of screens and theatres that are playing "Monsters vs. Aliens."

7,000 Total Screens (counting multiple screens in each theatre playing movie)
4,104 Locations (actual theatres playing movie)
1,550 3-D Sites (number of individual theatres playing movie in digital 3-D)
2,000 3-D Screens (counting multiple screens in each theatre playing movie in 3D)
5,000 2-D Screens (number of regular screens playing movie)

To answer the above question, the content has arrived before the screens. Only 29% of the total screens playing Monsters are in 3D, not quite what Katzenberg had expected. Distributors would like to see at least three 3D screens in each theatre but many have only one so that's going to pose a big problem as more 3D movies are released. Even though its trending upward in terms of more and more theatres converting some screens to digital 3D, many theatre owners are being cautious and not buying into all the hype just yet. That's a rational way of sizing up the situation because unless movies other than animation and teen flicks show they can attract other audience segments, it's not worth the cost and hassle. How can this technology be the future of the industry if it's catering to only kids and teens? A survey taken after Dreamworks ran the first ever 3D commercial for "Monsters" during the Super Bowl, revealed that the largest segment of voters (41%) never bothered to pick up the glasses to begin with. There's a lot of work to be done. One other thing, I wonder if any exhibitors took offense at the comment Katzenberg made that theatres have not done anything to change the theatrical experience in many years. That dismisses the hundreds of millions of dollars theatre circuits have spent in the last decade building new deluxe cinemas with better seating, larger screens and more amenities which have made moviegoing a much more comfortable experiece for audiences. I hope someone called him on that because it was a thoughtless and misguided remark to make. There's plenty of other ways to improve the theatre experience other than having to put funny glasses on.

Will Digital 3D be a fad or the wave of the future? It's way too early to say but the rest of 2009 will tell us a lot. Starting with "Monsters vs. Aliens, there will be ten 3D movies released, which comes out to about one a month. Surprisingly, none of those will be a Dreamworks film as they won't have another new release until May, 2010 when "Shrek 4" opens. The two I'm looking forward to seeing are Pixar's first 3D movie "UP," which has just been selected to open the Cannes Film Festival and James Cameron's "Avatar," which will close out the year at Christmas. "UP" being selected as the first animated film to ever be selected to open Cannes is a pretty impressive feat and well deserved for Disney/Pixar. What has separated Pixar from other animated films is their great storytelling and I'm excited to see how they combine the special effects with the story. "Avatar" is on a different level altogether and could prove to be a game changer for the industry. James Cameron hasn't made a feature film for 12 years, ever since he was the self proclaimed King of the World with "Titantic." What does a director do after he wins Best Picture of the Year and his movie grosses $600,00,000. What he didn't do was rush into his next project. The expectation and buzz for this film will be off the charts. The production cost has been reported at $300,00,000 with over 1,000 people working on it at one time or another. It is a futuristic sci-fi spectacle and will be in live action digital 3D. If the film delivers on its potential and early hype, it has the potential to gross in "The Dark Knight" and "Titantic" range and give a tremendous boost to the new 3D technology. As I said, we will know a lot more after the entire year plays out.

On a marketing side note, Dreamworks has signed up Bank of America to run a promotional ad for "Monsters vs. Aliens" to run on 18,000 ATM machines at more than 6,000 branches. The bank will give away free ticket upgrades online to anyone who wants to see it in 3D at the regular 2D prices. After receiving $45 billion in government aid, Bank of America has decided to pass on some savings to their customers and figures the promotion will cost them $175,000. What a great country we live in. Now if they can only start reworking more of those mortgages.

Questions for Discussion:
1. What is your feeling about the studios putting their money on 3-D technology as the key to Hollywood's future?
2. Why were theatre owners still being cautious in 2009 about converting more of their screens into digital 3-D?
3. How many 3-D movies have you seen in theatres? Describe your experience in terms of enjoyment and value. If you have seen any movies in 3-D, is your interest starting to wane or are you a big supporter of the technology? What do you think of the prospect of 3-D in the home?

2009 Copyright David Sikich. Video clip used with permission by First Business, LLC.