Category Archives: Digital Downloads

Yet Another Post On SOPA

[Ed. Note: Cross-posted in part from my tumblr blog. See the additional note at the bottom of this post.]

I generally don’t blog politics. It can be bad for business. However, the SOPA/PIPA legislation, which pitted new tech against old media, requires a response.

Piracy is a serious problem that may or may not need additional attention (we already have the DMCA to protect copyright interests). However, the legislation as drafted is bad law. While hardly scientific, most if not all of the entertainment lawyers I discussed the bills with agree – even the ones who work at the studios.

If these bills became law then it would be legal for the government to shut down sites without due process. In effect, fair use can be ignored and sites are guilty until proven innocent. Litigation can be costly and few would opt to fight in the face of substantial legal fees and an unprofitable victory.

The clip above is a parody using someone else’s copyrighted work. It’s likely that such works – notwithstanding what you think of this particular parody – could survive on the net.

That’s not how our country is supposed to work and that’s certainly not how this law should work. This legislation can be redrafted to stem piracy without sacrificing our core values.

If you haven’t already, I urge you to read the current drafts of SOPA and PIPA and tell me if you still support these bills.

[Ed. Note: Prior to posting here and on Tumblr, a music executive friend of mine and I debated the merits of the bills on Facebook. Much of what I wrote above was part of that debate. After I blogged about it, my friend posted a link on Facebook to a blog post in favor of the legislation. You can find that here. In essence, the post in support argued that those in opposition - even those that took the time to read the bills - were misinterpreting the language and intent of the legislation. However, the fact that the language may be open to misinterpretation or, as many believe, exposes the true intent of the legislation, proves my point. If this legislation is broad enough to be misinterpreted by so many people, including intellectual property/entertainment lawyers, law professors, media executives and politicians, then they certainly can be and will be used for unintended or nefarious purposes if they become law. As I write this, I am sure my friend is formulating a response. I will keep you posted.]

Quantum Mechanics

Pipe Wrench courtesy of Scott Arch

Despite all of the self-help books preaching the contrary, people have a hard time living outside the moment. So, it’s difficult for them, let alone a whole industry to shake the mindset that the current ecology of the business will continue to be bleak forever. But this sour economy is just a part of a normal business cycle which will pass.

Eventually.

If we’re willing to wait. And survive while we’re waiting.

Will the business be the same? I doubt it. It will be continue to evolve as it always has in the film business. A decade ago, insurance-backed financing was all the rage. Then came sale-lease back deals from the UK, investment from German film funds and most recently, private equity and hedge fund financing. Those were good times. Good times.

However, dramatic, paradigm shifting change – the kind of change required to modify an outmoded, global business model created decades ago and move entrenched players with special interests – requires what Nassim Taleb calls a Black Swan event. Like a rare black swan, nothing less than an impropable sequence of events like limited access to credit, labor unrest, rampant piracy, the rise of the Internet and the collapse of distribution windows and the pre-sales market can bring about meaningful change to this business.

Even so, the fundamentals of the film business remain. People like good movies, especially those with good stories and high production values. And there remain untapped distribution channels in emerging markets and emerging technologies. Where there’s a demand for something, there will always be a business.

Bill Mechanic, a key player in the studio world and now, the independent movie business put it best in his keynote at the IFTA’s annual Producer’s Conference back in September:

The independent world, which should be aiming to do things better and different from the studios, doesn’t have that as a mandate at all. If anything, the only thing that independent distributors and financiers look for is the same. Maybe costing a little less than the majors, but they want what the studios want, or in Fight Club-speak, they want copies of a copy.

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In that way, Hollywood in the broadest sense of the word is much like Detroit. It’s a manufacturer’s mentality that reigns, seemingly indifferent to the consumers it serves. Ignore whether the consumer likes our product as long as they buy it.

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The next 2-3 years will be even worse, not because of the flood of new releases, since that is already abating, but rather due to the effect the over saturation has had combined with the economic downturn. New money is going to be hard, if not impossible to find. Ad sales are down, so TV networks around the world, other than cable, aren’t buying. Add in a confused video market, and it’s going to be tough. To my mind, the next few years will be about survival.

* * * * * * * * * * * * *

. . . [A]lot of waste is going to be cleared from the marketplace. Excess product will go away, the people who don’t take the business seriously will go away. Hopefully those who make crummy movies will also go away, but that may just be a personal wish.

* * * * * * * * * * * * *

[The film business] is a game for winners. And those who win today will win to an even greater extent than at almost any point in the past. . . . Those who will win will be smart about what they make and how they sell their films. They will hopefully make good films but perhaps even more key they will make unique films that stand out, which means they will not have to compete against the bulk of the films for talent. They won’t look like all the other films so they won’t have to spend as much money marketing them.

It’s not that the buyers aren’t there. Consumers, TV outlets, retailers and, yes, even pirates want what works. Don’t believe me? Ask Summit about Twilight. Ask Searchlight about Slumdog Millionaire. Ask Screen Gems about District 9. Ask Focus about Coraline.

The takeaway? To get through this down period, be good, be different and as Tim Gunn says, make it work!

To read the complete transcript of Bill Mechanic’s keynote speech and some really informative reader comments click here to Nikki Finke’s blog.

Waiting For The Dough

"Commute, N Judah" courtesy of Heather

I decided not to attend the Cannes Film Festival back in May because of the dismal economy and what I expected to be a poor showing there. I learned things were even worse than expected when my colleagues in distribution reported from the near-empty beaches of the Cote d’Azur that the bottom had fallen out of the pre-sales market.

The Toronto Film Festival was supposed to be different. Four months after Cannes, with the banks flush with TARP funds and individual investors reportedly swapping oil and gas investments for classic cars, surely an uptick in motion picture finance had to be right around the corner.

I thought that Toronto would present a sea change in the degrading economics of the business; that the credit markets would thaw; and the cash equity of retired Silicon Valley and Wall Street insiders, the Chinese, the Indians and institutional investors would make the trek up to Canada in droves.

But Toronto felt like a bad dream about a big party that everyone attends but the host forgets to cater. People took meetings, did lunch, partied, went to screenings and generally did the things one does at a film market except buying, selling and investing in films. All of the elements for a successful market were there except cash. The money, it turned out, stayed at home.

Looking back at it now, I was overly optimisitic but hardly alone in my rosey outlook.

Yes, there were well-publicized exceptions to the lack of a market at the market. However, to the rank and file independent producer, the prospects remained bleak. Although the independent film business has been subject to business cycles in the past, many I spoke with in Toronto believe that business won’t bounce back to pre-recession levels.

The Internet is the double edged sword at play in any recovery. On the one hand, the Internet provides new sources of distribution revenues through streaming and digital downloads. On the other hand, the Internet’s ability to stream content is eroding traditional exploitation windows and risks shortening the profitability period for the typical commercial motion picture.

Still, the credit markets continue to thaw, albeit slower than many anticipated. New distribution models are rapidly evolving and with it, new deal points in the licensing of distribution rights.

And . . . the American Film Market is less than two months away. Maybe, just maybe then, producers will finally be able to get the money shot that they’ve been waiting for.