hollywood

Netflix, Independent Cinema, and Hollywood’s New Business Model

The other day The Ringer published a piece about Netflix and their original movie strategy. The piece, entitled Netflix and Shrill listed the original movies that Netflix has already released in 2018 and challenged readers to see how many they recognised. For most people, the most familiar title will have been The Cloverfield Paradox. This was an $XXm space horror film that became part of the Cloverfield franchise. However the studio that made it, Paramount, got cold feet and decided to sell the thing to Netflix lock, stock and barrel. They promptly gave it a surprise release right after the Super Bowl, during which of course, they promoted it.

But what about the rest of the titles in Sean Fennessey’s piece? Well only three others on the list actually resonate with me at all – Mute, Kodachrome and Mercury 13. The former because it’s a Duncan Jones film, and the latter two because I just added both to my Netflix List.

Netflix gets films in a few different ways. It sometimes licences big name studio films either directly from the studios or via third party rights packages. That’s the way most of those familiar titles end up on the service. However, those titles are probably only licenced for a specific period of time. That’s why you get lists of movies that are coming off the service.

Then there are those it acquires at film festivals. The model for smaller independent titles has often been to scrap together funding from wherever, then pitch up somewhere like the Sundance Festival and try to get a distributor to take on the picture, getting it into theatres and, importantly, marketing it. The latter is expensive, and it’s the reason why titles sometimes end up unseen even though funding had been found to actually make them. Netflix’s preferred model is to buy the global rights and buy out the film in perpetuity. But sometimes that’s not possible because different territory’s rights may have been given up as part of the funding model. Furthermore residual rights for home release like Blu Ray or iTunes may reside with someone else.

Finally, there are Netlfix original productions – those that are put together on paper and then shot specifically for Netflix. These are labelled “Netflix Originals,” although confusingly, so are those acquired at places like Sundance. When Netflix owns the film in totality, they get to release it globally and own it in perpetuity on every platform. They control whether you can ever even see the film somewhere like iTunes.

What all this means is that the list at the top of The Ringer article only completely applies to the US. That said, when I checked, all but one of the films was also available in the UK.

I recently read a really good new book called The Big Picture by Wall Steet Journal reporter Ben Fritz, who has long covered the entertainment beat. The book goes through deep into the current Hollywood business model, because it has changed fundamentally inside the last ten years. You only have to look at the table in The Ringer piece.

Fennessey notes that the six major Hollywood studios have released a total of 25 films in the first 16 weeks of 2018. During that same period, Netflix has also released 25 films!

But there’s a reason for that. Hollywood has just dropped out of the middle market – those $30-$80m or more production films that weren’t based on franchises, relying instead on audiences turning out to see stars. They included thrillers, romantic comedies and more serious fare. Fritz’s book takes a really good look at the model that yet used to hold up Hollywood, because some of those titles in the past might have lost money, but others would have made decent cash.

However in the scheme of things, Hollywood was only make 10% and now for a studio like Disney it’s closer to 30%. That’s because they don’t these days make films that aren’t based on franchises or other known intellectual property.

Most famously Disney has Marvel. But they’ve also got Star Wars, their own animated back catalogue now being remade in live action, Pixar (who are perhaps the only real originators of new stories at the moment, even if they themselves are relying more than ever on franchises. Did we really need another Toy Story, or did the trilogy end perfectly before?), and coming soon Indiana Jones.

Fritz’s book looks closely at the travails of Sony. In part because they were the studio that were considered the most talent friendly in the past. Amy Pascal who led the studio had great rapport with the talent and was as a result Sony was home to lots of those kinds of mid-budget films, while only really having Spiderman as a top tier franchise.

The other reason the books uses Sony as a case study is because of the massive email hack. All those communications ended up online and viewable to all. These caused Sony enormous damage at the time, not least when studio heads bad-mouthed people in some of those emails. But Fritz uses them to illustrate some of the inside thinking at Sony as they realised that they desperately needed franchises, and at the same time were struggling with their most valuable asset in Spiderman. As long as they kept making new Spiderman movies on a semi-regular basis, Marvel wasn’t able to grab back arguably their biggest property.

This is all important in light of The Ringer piece because it explains why the number of studio releases this year equals the number released by Netflix. If it wasn’t for Netflix, it’s not clear how those movies would get released at all!

I’m not saying that some of them wouldn’t make it to our screens. In the US, Alex Garland’s highly regarded recent release, Annihilation, based on the Jeff Vandermeer novel, got a theatrical release. But the studio who made it – Paramount again – got slightly cold feet and sold the rights for the rest of the world to Netflix. So a film that was visually spectacular ended up going no a screen no bigger than our televisions, and no doubt for many people, no bigger than their phones. However, that’s another discussion for another day.

Had Netflix not existed, then yes, I suspect some kind of theatrical release would have happened for Annihilation – certainly in the UK. But I can’t see studios like Paramount continuing with this kind of strategy for long. Nor can I see Netflix wandering around picking up and endless succession of studio releases that the studios have suddenly got concerned about. While Annihilation is excellent, the same can’t be said of The Cloverfield Paradox which is decidedly the weakest in the somewhat contrived franchise.

The risk is that Netflix is perceived as the dumping ground for movies that have tested badly with the distributors. Of course Paramount and their ilk manage to avoid having a flop on their hands, and come out cash neutral, or perhaps with a small upside.

Meanwhile, I completely understand that filmmakers must be frustrated. They made these films to be shown on the big screen – that’s how they’re conceived and shot. You frame things differently for television. On the other hand, it has long been the case that far larger audiences will see films on television than will the big screen.

More and more, then, it’s going to continue to be Netflix and Amazon that become the homes of these medium and smaller films. What they perhaps struggle to do is sufficiently market those films.

A lot is made of Netflix’s algorithms that surface films that viewers will want to see with incredible accuracy. I don’t agree. I’ve long felt that Netflix (and Amazon) are woefully bad at surfacing their own titles. They think they know me, but they really don’t.

When Netflix emails me to alert me to a new Adam Sandler release, Netflix being the exclusive home of new Sandler releases these days (Fritz’s book details this deal), then Netflix has failed to grasp even the most basic understanding of my interests. Of course they only know what they know. They don’t know that I enjoy Westworld on Sky Atlantic; The City and the City and Howard’s End on the BBC; Endeavour on ITV. They don’t know that I saw nearly all the Oscar Best Picture shortlist at the cinema this year.

Furthermore, when big releases like Annihilation or that recent flawed Duncan Jones title, Mute are released, I have to really go searching to find them. Did either Kodachrome or Mercury 13 show up on the Netflix home page? No – I had to do a search.

Now these are titles that I’m actively aware of. What about others that I suspect I’d like if they were marketed properly? Well those are the titles that are disappearing into the depth of the platform.

It still seems remarkable to me that neither Netflix nor Amazon are able to replicate what a good physical store is able to do in showing me new titles. If I visit a branch of Fopp (about the only significant retailer of physical discs in the UK right now), I might browse at a display of films from the Criterion Collection, the BFI or Second Sight. In some instances, I simply won’t have heard of some of the titles, but I’ll still pick up discs and browse at them. I may actually buy them. The same is true in a good bookshop where as well as the latest bestsellers, the bookseller has perhaps contrived to display some thematically interesting books together on a table somewhere.

A properly released mid- budget or indie film will have press ads, posters, bus sides, and importantly, reviews. The latter is an area that Netflix and others need to work hard at. Most of the broadsheets have full time film reviewers, but in the main they don’t review streaming titles very well. The release medium seems to dictate what gets reviewed. In the past studios would “game” this. A release that was really “direct to DVD” would get a brief cinema release over a weekend just so they got notability before you spotted the title in the DVD aisle of Sainsburys the following week.

Somehow a movie poster can tell me more about a film than a small box with barely even a one line description of the title. Netflix has some incredible algorithms to test multiple images to find just the right one to appeal to me. Am I a fan of a particular actor? Then I see that actor in the image on the platform. You see something different to illustrate the same title. But beyond that, they need to work harder. Choosing to start a stream is a much more proactive choice than flicking through the channels on a remote control before settling on something.

So that’s the real reason why those movies have disappeared without me aware of them. That said, if you gave me a list of everything released at the cinema in the first few months of this, many of them too would be unfamiliar. There are a lot of films craving for attention, and only so much attention that they can be given.

I’m not going to criticise Netflix for their release strategy – but they do need to work harder on marketing of titles. Otherwise, yes, it can feel as though these films didn’t exist at all. An unfamiliar movie title in a long list remains just that. A consumer gets more excited when they seen a known property than an unknown one.

The Ringer piece notes forthcoming films from Paul Greengrass and Alfonso Cuarón, both of which I’m excited to see. Netflix will also be bringing Andrew Niccol’s new SF film, Anon (It’ll air on Sky Cinema in the UK). I’m always keen to see a new film from the man who brought us Gattaca. As long as Netflix does enough to raise the profile of these films rather them just at best appearing as a meaningless title that tells us nothing, then I’m excited for their future.

The studios, however, I’m more worried about. Their strategy of shifting to fewer and bigger films runs all kinds of risks in the longer term. The words ‘eggs’ and ‘baskets’ spring to mind.

Marvel may be unassailable at the moment, but it only takes one or two duff movies, and that success can begin to slip. In his book Fritz notes that the reduced number of releases affords movie executives more time to spend on the titles that they are releasing. They can give them the time that they need, delaying releases if necessary. That’s great in theory, but even Marvel films have dates to meet, particularly if the outcome of one film leads into the next Avengers title or whatever.

The Marvel Cinematic Universe is, as he says, the world’s highest budget TV series. Audiences go and see the new Marvel films regardless of the hero, a bit like watching your favourite TV shows week in and week out. Marvel tries to structure the films a little like a TV a procedural. You can basically watch each as a standalone, but of course there’s a larger story arc underlying the series. But as we know, even the biggest TV series juggernaut, eventually falls from grace eventually.

And will audiences continue to actually go to cinemas? They’re fighting the battle by laying on bigger and better seats that can sometimes be more akin to a business class seat on a long distance flight. They’re offering in-chair food and drinks service, and we’re seeing new formats like IMAX 3D and 4DX. Yet cinema ticket prices continue to rise ahead of inflation, and they become ever more hostile environments when they don’t ensure that patrons keep their phones switched off for example.

Disney’s answer to this potential uncertainty is to get skin into the streaming game as well. With its Disney Life app in the UK, and the forthcoming bigger offering that is coming in the US, they get to do their version of Netflix. Star Wars and Disney titles will soon disappear from Netflix as a previous deal expires. Don’t expect to see further expansions of the Netflix Marvel TV series featuring the likes of Jessica Jones and Daredevil, although I suspect the existing titles will continue, with the former having just been renewed for a third season.

Disney is claiming back its catalogue, and will no doubt look towards making its own Marvel TV series, and almost certainly, a live action Star Wars universe series. Who would bet against a reboot of the Young Indy series in the future too?

Will audiences get bored of superheroes? Are there enough franchises out there? How often can the same series be “rebooted”?

Who knows. But Hollywood is betting big time on them not running out any time soon.

Scheduling Films

A regular moan, but it bears repeating. Do we have to have “awards season” films? What is the idiocy behind releasing every film Hollywood (and others) think is awards worthy over a 2-3 month period when there are so many barren times of the year?

Yes – I understand that winning an Oscar/BAFTA has a real impact on box office. But your film is probably not going to win one. It might get a nomination or two, but you’re probably going to be disappointed.

Because here’s the thing: I’m your target market. I appreciate good films. But if you release them all in a glut, then I can’t see them. I’m already backed up massively!

Here’s a list of “contenders” and their UK release dates:

26 December – Big Eyes, Unbroken
1 January – Birdman, Theory of Everything
9 January – Foxcatcher, Into The Woods
16 January – American Sniper, Whiplash, Wild
23 January – Ex Machina
30 January – Inherent Vice

(Note: I may not necessarily want to see every one of those films, but they’d all be in my consideration lists. And that’s excluding more popular fare like Kingsman)

Furthermore, films released around Christmas get a bit lost I find. Regular film review slots are disrupted, and in the UK particularly, many TV channels save lots of good stuff for the Christmas period. Why go out to the cinema when Judi Dench and Dustin Hoffman are on BBC One?

The other day, Deadline published a piece about the chance of Grand Budapest Hotel doing well considering it was released in the US way back in March last year. It does seem that once upon a time, awards voters could be relied upon to actually remember further back than what they saw last week.

All I’m saying is that I cannot possibly see that long list of films above over the next week. I consider myself an above average film goer, but in reality that’s probably a maximum of one film every two weeks. As it is, distributors are leaving money on the table as far as I’m concerned.

Blockbusters and Sleepless In Hollywood

If it feels to you, as it does to me, that there are an ever greater number of superhero and other franchise films clogging up cinemas, then you’d be right.

And these two books explain pretty well between them what’s happening in Hollywood and beyond. Indeed, it’s the “beyond” that is really driving this.

Blockbusters actually only starts with Hollywood. It also covers music (with Lady Gaga), football (with Real Madrid), the Met Opera, Major League Baseball, and many others. Anita Elberse is from Harvard Business School, and has obviously spent a certain amount of time around a great deal of entertainment industries examining what’s happening.

In summary, she argues that the “blockbuster” strategy is working for many in these fields. It’s easiest to examine in the film business where once upon a time, a studio would invest in variety of films at different scales. But Elberse argues that because the profits are so huge from the blockbuster sized films, that other parts of the business become almost irrelevant.

She acknowledges, in passing, that she’s not making any kind of qualitative judgement – she’s just giving you the facts. Blockbusters has plenty of charts to make the case strongly.

She also dismantles the “long tail” theory, examining several markets to show that investing big in big artists or movies returns that vast majority of profit.

Her case study is Warner Brothers, who she says first jumped on the blockbuster strategy before any other studio. With massively successful franchises like Harry Potter and the Dark Knight trilogy, they undoubtedly profited enormously.

But if there’s a fundamental flaw with the book, I don’t think that Elberse has properly examined what happens when everyone adopts that same approach. It’s one thing if only Warners are doing it, but it’s another completely if every studio is churning out $200m epics. We already see massive clogging up of screens around popular periods, with one massive film opening the week after another. There is saturation marketing around these massive gambles, and it becomes harder and harder to get cut through.

A few blockbusters – yes. But I’m not sure it scales up. At the moment Disney/Marvel can do no wrong. But that lucky streak is bound to come to an end.

And in some respects, the book is already out of date. Lady Gaga’s album releases are held up as great examples of the blockbuster strategy. Not only are enormously complex marketing plans put into action, but there are elaborate partnerships with other brands and retail outlets to ensure that everyone can buy a copy of her new album.

And yet what happens just before Christmas? Beyoncé – arguably even bigger than Gaga right now – releases her new album with no notice at all. No marketing. No partnerships (well new ones anyway – obviously she does have partnerships with Pepsi et al). Fans create the hype. Result: millions of albums are sold.

While the blockbuster strategy clearly still does have a place in the market, it doesn’t obviously explain how you build big stars. Yes there’s an acknowledgement that a certain proportion of superheroes are relative unknowns because you build them alongside the franchise, keeping costs down at the same time – unless your name is Robert Downey Jnr anyway. But how do you create the next Gaga if it’s all about blockbusters?

Lynda Obst is a Hollywood producer who’s largely worked putting together female focused romcoms. Nope – they’re not my favourite films. But they’ve historically found a niche and done well. In a breathless, gossipy way, she takes us through what she colds the “Old Abnormal” and the “New Abnormal” – the old and new rules that Hollywood plays by. “Abnormal” – because everything in Hollywood is.

She deftly explains the financing of these films, and you begin to learn a lot. Once upon a time, a studio might have put a balance sheet together when funding a film, and reckoned on 50% of revenues coming from DVD. That’s just fallen away enormously. Obst reports someone saying that today they’ve no idea what revenues that will get them. Think about it. You’re planning a big epic that will open in 2016 and be in homes when? Christmas 2016? Will we be buying shiny discs? Renting from iTunes? Expecting it to be in our £5.99 a month Netflix subscriptions? What?

So a massive chunk of revenue has dropped out of the market. But they’re still making $200m bets on superheroes and giant robots. That’s because upwards of 70% of revenues is now international. That is, non-US. And the big markets opening up are in places like China and Russia. They’re getting loads of 3D and IMAX screens, and they want to see big robots battling it out on those screens.

Well they may want to see those films in China and Russia, but I don’t. But I understand from both these books why the studios make them. What’s not clear to me is that why it has to be Hollywood that makes them. Obst says a couple of times that only Hollywood has the skills to do that, but I really don’t buy that. Sure – Hollywood has a head start. And most of the world still equates Hollywood with glamour. But the effects are actually created with standard software. FX houses are based all over the world, and it’s not at all unlikely that big Chinese language action films could be made locally and be far more successful. As Obst does say – China is fickle in how many films it lets enter the country, and what the revenue share is anyway. It’s even hard to choose when your film opens (they made Batman and Spiderman open against one other to both studios’ chagrin).

The book does jump around a bit. She names names, but they mostly lovely people. Well, she’s still working there, currently producing Helix for SyFy. And she paints herself as sometimes a little bit more out of the loop than she can possibly be. So we get lots of interviews-cum-guidance from players in the market, often at named LA restaurants.

And I don’t agree with all the conclusions that Obst makes.

She paints the 2007/8 writers’ strike as a critical time and something that fundamentally changed everything. I’m not sure that’s true. I think things were changing anyway.

And the same films get mentioned again and again as great. But sorry – successful does not equal good. The Hangover – I’m looking at you.

But this book is bang up to date, with only a few of the big 2013 summer failures missing. The importance of television is also covered. Partly one suspects, because Obst’s own career has switched from films to television, but also because that’s where the creativity is today.

And the really scary thing is that TV makes way more money for the studios than films do.

And the most soul-destroying thing she says in the book, aside from the rampant growth of dumb-films made to appeal to an unsophisticated Russian and Chinese audience? The fact that Hollywood considers there to be two age demographics: Under 25s, and 25+! No wonder TV is leaving them behind.

[Update] This piece from Forbes suggests that 27 “blockbusters” will be released in 2015. So a lot of films are going to fail then.