Wednesday, June 26, 2013

Hollywood Will Implode!!! Or Not

A week or so ago, George Lucas and Steven Spielberg both predicted that the film industry would “implode.” That drew a lot of attention, but honestly, I think they are mistaken.

What Spielberg said was this: it is inevitable that there will be a year where half a dozen $250 million movies will flop at the box office. Those losses will cause a “meltdown” which will change the industry forever by changing the way they handle films. In his view, the end result will be that the film industry will split into two parts. The first part will make only true blockbuster films, like the superhero films today, and those tickets will cost a bundle. He said they would likely cost $25 – George Lucas upped this to $150 and compared it to sporting events or concerts. The other films, like his Lincoln, would remain with $7 tickets or, more likely, would end up being made for HBO.

I don’t think so.

What Spielberg has said is simultaneously not at all shocking and simultaneously rather bizarrely doomsday-oriented. On the one hand, it’s not at all shocking that Hollywood would like to charge more for films if it thinks it can get it. So I would expect ticket prices to continue to rise. I also suspect $25 tickets are coming soon enough no matter what happens. Nor is it unlikely that theaters would discount less popular films. It’s also not shocking that a lot of films will drift to television. For one thing, television provides a lot of positive aspects that cinema doesn’t. It provides the chance to go well beyond two hours. It seems to be a lot cheaper too as audiences aren’t expecting huge CGI-extravaganzas. Not to mention that television has taken on a new level of sophistication and respectability. Even more importantly, older audiences have abandoned cinema for home theater, and that is the audience for things like Lincoln. So what Spielberg says makes sense and isn’t all the shocking.

What’s doomsdayish about this is the idea that he thinks it will take a near-bankruptcy level disaster to cause what is already happening (Lucas’s idea of a $150 ticket is similarly doomsdayish, but Lucas is a fool – no one will pay that for a movie). But let’s assume we do have such a summer. Assume that this summer half the films fall flat. What would be the likely response? Would it be an abandonment of the theaters for all but big tent pole films and massive ticket price increases for those? I doubt it because that doesn’t make sense – why repeat what just failed while trying to drive away your audience by pricing your product so far beyond the substitutes?

So what would Hollywood do instead? They would do what corporations always do: cut costs. First, I think studios would buy CGI firms and bringing them in-house so they could essentially get their work at cost. You would probably see a lot of film production moved to places like Romania and India. You would probably see a concerted effort to reduce what all but the top actors get paid. You might see films made in bunches so as to share the costs of sets, costumes, and extras.

There would be an outside chance you might also see more innovation, such as alternate endings to create country-specific films. For example, the Chinese character might win the day in the Chinese version, the Mexican character in the Mexican version, and the American in the American version. You might see more tie-ins to merchandise and games as well – “Defiance” tried this, but it sounds like they just didn’t do well with either the show or the videogame. You might even see things like season passes for movies to get people to pay for bad films as part of the season as the cost of seeing the good ones.

Sadly, you will also probably see more remakes and reboots, as those are the safest bets out there.

The one thing I think you won’t see is ticket prices increasing to $150.

Thoughts? What would you expect?

45 comments:

Tennessee Jed said...

$150 tickets can only be sold if there is a "must be there" marketing factor among those who can afford it. I don't see that happening. I like your move to t.v. It is a much better medium for films that are long on story and acting, and shed the big CGI blockbuster mentality.

AndrewPrice said...

Jed, The biggest problem with the $150 ticket is the competition. I can buy the film for $20 a few months later. I can also see older films or television for free at home at any time. Movies just aren't special occasions anymore, they are just one of many forms of entertainment and they need to remain competitive. And the teenagers who lack the impulse control to wait for the movie to come to television don't have the $150 to plunk down for films.

shawn said...

How's Hollywood going to make money in the future? Streaming pay per view movies. Bypass theaters all together. Quit making physical media such as DVDs and blu-ray, and make you rent a viewing via the cloud each time you watch it.

AndrewPrice said...

Shawn, I think that's the fantasy plan Hollywood has, but it will never work. As Microsoft just found out with the XBox, the public will not accept that model. And if they try it, you will see piracy soaring to new heights.

K said...

If the doomsday scenario occurs, Hollywood will do what they've always done. Go bankrupt and start over. Probably with smaller less expensive films. As an added assurance of profitability, perhaps they could try hiring stars who aren't interested in sharing their political views and alienating half the customers.

AndrewPrice said...

K, It wouldn't surprise me if bankruptcy would be part of this. But I actually get the feeling that Hollywood is a carefully created honeycomb of corporations to prevent one mistake from being able to do too much damage.

In terms of not alienating the audience, you're assuming they can learn from their mistakes. I doubt that very much. Hollywood seems like a "double-down on stupid" kind of place. That said, trying to appeal to middle America would definitely help... if they would realize that.

ScottDS said...

What Spielberg is forgetting is that, even if 5 or 6 huge blockbusters fail at the box-office, who's to say that 5 or 6 medium-sized movies couldn't be massive hits? It's not a zero-sum game and, as history shows, no one can predict this sort of thing.

We've talked about it before but there are some folks who think movie-going will become like opera - an expensive night out enjoyed by few, with the rest of us left to download movies at home from "the cloud." Of course, most opera houses are nicer than most movie theaters. :-)

As for politics, showbiz will always attract a certain kind of person and the cat is out of the bag on that one IMHO. (It might take a generation or two but it's possible that things will equalize. Hollywood won't become non-partisan; it will simply become bipartisan.)

And as for home video, there will always be collectors who enjoy physically owning media. The return of LPs is a good sign. Let the masses have their downloads while the rest of us pay a little more for collectables with all the bells and whistles.

tryanmax said...

The $25 movie is practically here already if one opts for 3D + D-Box. I can easily see the $50 movie around the corner.

Multi-tier pricing and value-adds are going to be a big part of the movie marketing strategy going forward. One possibility I've heard about is opening night/weekend packages that include a limited-edition swag bag full of commemorative crap to justify a higher ticket price. I think that could work. Similarly, there's talk of including an exclusive edition of the BluRay (to be delivered later) in the price of a theater ticket. This could easily be tiered to DVD and streaming packages, too.

Honestly, the theater that puts a $5-off coupon to TGIFriday's on the back of the ticket is going to get my money.

Mountain Man said...

Movie industry revenues have been trending down for a long time. There are a combination of factors, but the underlying reason is that it's a simple market-based reaction. People will buy what they view as a good value for their money, and movie theatre experiences are not that.

But the speculation that ticket prices will INCREASE due to lower demand is incorrect. The free market says that when demand goes down, the price goes down.

It wouldn't surprise me, though, if ticket prices did skyrocket, since these leftists will take their failed ideology to their financial grave before admitting they might be wrong.

AndrewPrice said...

Scott, The other thing Spielberg is forgetting about the money is that "Hollywood" is not an organization. No one player backs each movie. So even if 5-6 big films get wiped out, different groups will get hurt, but Hollywood will continue. Not to mention, these days you're guaranteed to make most of the money back once you factor in DVD, overseas, television. This isn't like you lose the whole thing, it just takes you longer to break even.

I don't buy the opera experience idea because they are simply different animals. You go to the opera because it's an event and it's an event that is best seen live. It's also something with a very limited number of showings, in select cities only, which guarantees you a sell out. By comparison, films are cheap entertainment meant to waste a night or afternoon. They are not an event. They are not rare. Not to mention, for opera fans, there is no substitute. For film fans, there are dozens of substitutes. The models just aren't similar.

I think streaming would work provided they don't start playing the digital rights games they want to play. That's what Microsoft just tried with X-Box and it blew up on them and they had to back down within a week.

AndrewPrice said...

tryanmax, Theaters are becoming very creative about pricing and product. They do things now like showing concerts or opera. They offer different prices at different times. They are busy trying to add merchandise to boost profits. That's how capitalism works. I think the ones who don't understand capitalism are the Spielbergs because he's in an industry that doesn't sell to consumers, but instead sells to distributors and they tend to have market power over the distributors because of over-strong agreements.

I agree about the $25 ticket. Tickets are cheap around here, but they still run you around $10 for non-Imax and 3D tickets. And they've been expanding well beyond inflation for years now.

Those are some good ideas, adding promotional stuff and peak period pricing. The BluRay tie in makes a lot of sense too. Why not hook someone before they even see the film and while they're still excited?

AndrewPrice said...

Mountain Man, People will buy what they view as a good value for their money, and movie theatre experiences are not that.

Bingo!

That is the problem. Films are not high quality at the moment. Moreover, the difference between your home theater and a theater theater is no longer that great, or is even more negative because of things like cell phones and the insane price of popcorn. And yet, ticket prices keep going up. That's a horrible business model. But Hollywood, like many failing monopolists, refuses to face consumer demands. They think they can simply tell you what you will want and you will be forced to respond. But they don't seem to grasp how many substitutes there are. Their obsession with piracy is another example of this. They seem to think that they are losing everyone to piracy. Not true. They are losing people to indifference.

And yeah, what a stupid idea to think that they can raise ticket prices in the face of falling demand.

PikeBishop said...

Andrew: YOu said: "You would probably see a concerted effort to reduce what all but the top actors get paid. You might see films made in bunches so as to share the costs of sets, costumes, and extras"

Oh yeah, I can just see the unions going along with that. :-)

AndrewPrice said...

PikeBishop, Hollywood would NEVER trample on their unions by doing things like filming in Canada or New Zealand. Nope, never. LOL!

PikeBishop said...

Now Andrew, Michael Moore had a big point to make, a film to get out, now if he just had to use non-union editing, it was worth it to prove what a criminal W was! Sheesh! :-)

AndrewPrice said...

LOL! Yes, yes he did. It's amazing how easily the left can justify making rules apply to the other guy only.

PikeBishop said...

John Kerry's yacht? John Edwards getting rich off of increasing people's health care costs, every star and Dem politico with their kids in private school? Stars and Media persons with armed security.............Yeah not like there is one standard here and another, completely different one over there.

AndrewPrice said...

Not to mention all the ones who don't pay taxes, who get rich on insider deals with companies they rail against, who exclude themselves from the laws they pass, who shower their family with taxpayer provided goodies. Yeah, leftists are real "man of the people."

ScottDS said...

Andrew (and Pike) -

I'm wondering if Hollywood will ever go back to anything resembling the studio system.

Right now, when you make a movie, it's like starting a business from scratch. If you're making a big FX movie, you accept bids from around town, etc. Back in the day, the studios had their own FX departments. They'd finish one movie on a Friday and start on the next one on Monday.

One wonders if anything resembling this could happen again.

AndrewPrice said...

Scott, My guess is that you will. The cost of CGI in particular is out of control and it makes sense to try to get it at cost.

I also think it makes sense for them to reuse sets and costumes and extras and equipment across films. So if costs keep spiraling upwards, look for those kinds of changes.

Tennessee Jed said...

When I first retired about 14 years ago, I would get a kick out of going to the local multiplex for a 10:00 a.m. Monday matinee, and sometimes be the only person in the theater. After moving to Tennessee and treating myself to a true in house theater, I stopped going to commercial theaters altogether. For one thing, it was 15 miles to the closest cineplex, and a commercial size screen and surround system didn't offer enough of an upgrade in the "experience." As a matter of fact, not getting ripped off for popcorn prices, being able to drink an alcoholic beverage, control volume, and pause the film for a potty break, (not to mention already being at home when the film ends) were actually big pluses. No cell phones or obnoxious assholes either. The ONLY thing I had to give up was "first run" capability. Well, there may have been a time when that was more important to me than it is now. What I have noted though is there are fewer and fewer theatrical releases I care about. My viewing is much more geared towards shows like Mad Men or Downton Abbey. I tell you this not because it tells anything about the future of Hollywood. I am, after all, 65 and no longer a target market for Hollywood. It is what it is. But maybe, just maybe, there is a lesson for them in there. I just don't know what it is.

Kit said...

"Hollywood seems like a "double-down on stupid" kind of place."

That's showbiz in general these days.
Look at Broadway: "What? Our latest big-budget, over-the-top, incredibly expensive, multi-million dollar costing musical couldn't make enough money from its $100+ tickets to cover the cost of production? Next time make it even MORE expensive and UP THE PRICES OF THOSE TICKETS!!!"

SNL did a funny sketch about this. I think this is it.
LINK

AndrewPrice said...

Jed, I don't think you're unique at all in that regard. I rarely go to the theater anymore for the same reason nor do most of the people I know. And from what I've seen statistically, the primary audience at theaters these days is teenagers.

AndrewPrice said...

Kit, That's the problem when people lose focus on their audience and instead decide they know better.

Patriot said...

Andrew et al......The whole first run experience seems to be a young person's event. I sure don't remember the hype and excitement for a new movie or sequel for gawd's sake back when I was in my teens and twenties. Many make it an "event" and its talked up for weeks, if not months, beforehand. Look at the whole Twilight saga. Team this...Team that..... While my generation liked movies, it was nowhere near what I've seen over the last twenty years. Granted, my girlfriend and I waited in line at Dupont Circle 30 some years ago when the first Star Wars come out...but that was it. Now it seems like there is one massive opening after another! Maybe older folks are just getting tired of all the hype and just want good entertainment without all the sideshows?

Anonymous said...

I don't see that many movies at the cinema anymore so doubling or tripling the price isn't going to get me back any quicker. And if it is going to cost me $150 then I'll never go back again no matter what the movie.

Make better movies, make people behave in the cinema and I might go more often. The best way to save money is to pay the 'stars' less, I have never seen a movie because of the star. I like some actors a lot but if they are in a movie that doesn't interest me I won't see it.

I'm also not a big fan of streaming, I want a book in my hand a DVD in my hand. If I pay for something I want the physical product in my hand not in some cloud where I cannot see it.

And X-box can go jump, I bought the first two of their consoles but not the next.

Scott.

As to Hollywood

Anthony said...

I watch movies in theaters about eight times a year, mostly animated movies with my family, but sometimes I catch action movies like The Avengers, Django and Dredd by myself (wife isn't a genre fan).

AndrewPrice said...

Patriot, I think they try to sell each movie as an event now, but I don't see a lot of takers for that. There have been a couple, things like Twilight and Harry Potter, but that just doesn't work for 99% of films.

AndrewPrice said...

Scott, Well said all around!

Interestingly, there are actors whose films I want to see, but none who can get me to the theater just on their name. Basically, the actors are like a plus, but they aren't enough alone and I first need to think that the movie looks good.

In terms of going without the stars, a lot of the best films out there cast people who weren't famous at the time. So there may not be the need they think for a star after all.

On having the item physically in hand, it hasn't bothered me all that much until now. The more I see of what they are trying with DRM, the more I am thinking that having the thing physically is becoming more important.

AndrewPrice said...

Anthony, I rarely go to the theater because I just like seeing films at home better. More comfortable, more control over the sound, the lighting, can pause if I like, less noise, etc.

If I had kids I would probably go to the theater.

goldvermilion87 said...

In re: the idea that going to the movies could become like going to the opera, I think it's interesting to note that there is now Met HD in movie theatres (not to mention National Theatre Live and other live event streaming). And as far as I know it's been VERY lucrative for the Metropolitan Opera House. Because poor opera fans like myself aren't able to pay the sometimes nearly 300 dollars that it would cost to see the opera.

tryanmax said...

Digital is very much changing and going to change the role and nature of movie theaters. Broadway, Opera, live sports and more are showing up in them. Virtually any form of entertainment that benefits from a larger-than-you-can-possibly-fit-in-your-home screen is giving it a shot. One of these day, I'm going to have to see a boxing match in the theater.

Obviously, movie theaters don't think they're going anywhere. In my neck of the woods, several have gone up lately and several more are making extensive renovations. The most notable new feature in all of them are bars serving alcoholic beverages that you can take into the showings. I'm thinking of getting ripped while watching Monsters U.

AndrewPrice said...

That sounds like a great idea! Make sure you bring bail money! :)

AndrewPrice said...

goldvermilion, I've heard the same thing, that it's very lucrative. I know my mother has gone to several with her friends and she says the place is packed. It's a great idea if you think about it too. At some point, I expect the NFL to get into the act and more rock concerts.

goldvermilion87 said...

The first year that they had Met in the movies I had to drive an hour to see an opera (which was still very very very much worth it.) Now I have to drive about five minutes.

Anonymous said...

I've read that the UFC has been played in cinemas before and I'd go watch it that way as long as it was cheaper than paying for the PPV.

And I really like the idea of alcohol at the cinema, I've drank plenty of times while watching movies but never legally. It would have to be adults only of course (won't somebody please think of the children!).

And yes directors/producers should look for future stars not pay millions for current stars. The idea of paying around 20% of the cost of a movie on one person is insane and not profitable long term. I always find that when a 'star' reaches a certain point in their fame their acting abilities go downhill.

Scott.

ScottDS said...

Partiot (and Andrew) -

Speaking of "event" movies, the big trend that I hate is movies with a dozen or more posters. Two, three... okay. But why do movies, including non-sequels where we have no attachment to anyone, need multiple posters?

Seriously, here's one for Lone Ranger. Who is this person and why should I care?!

tryanmax said...

Scott, I'm certain that Ruth Wilson's mother is just thrilled.

ScottDS said...

tryanmax -

That's true (mine would be, too!), but I believe my logic is sound. :-)

AndrewPrice said...

goldvermilion, I haven't been yet, but I used to go to the DC opera years ago. I hear it's worth it though.

AndrewPrice said...

Scott, I love this line: won't somebody please think of the children!

I agree about future stars. In my experience, actors are usually best either before they are famous and when they still need to win you over or after their prime when they are doing it for pride. I would rather pay for talent than celebrity.

I like the idea of booze at theaters.

I wonder how many sports have considered using cinemas?

AndrewPrice said...

Scott, I think it's just meant to create more merchandising. And, as tryanmax notes, to thrill Ruth Wilson's mother, who I'm told was a big sponsor of the film. ;P

tryanmax said...

Merchandizing and buzz. In the case of Lone Ranger they are using a real shotgun marketing approach. Theaters generally have certain on-site promotional obligations, in terms of square footage on display. A bank of posters is a good way to fulfill that obligation without consuming floorspace with a giant cardboard cutout. (Or when you already have fifty cardboard cutouts on the floor.) I'm sure the multiple different posters is in response to somebody wandering into a theater, seeing twenty of the same poster, and realizing that it looks like hell.

Kit said...

Ruth Wilson is a British actress who was awesome as the sociopathic killer in the BBC show Luther.

Commander Max said...

I just saw this article, that's what I get for working.
Lucas and Spielberg talking about Hollywood having an implosion? Perhaps their bloated egos will not accept a Hollywood without them being around. But I think they have a point. Just not as extreme as they are saying.
I think Hollywood will always be around, but it will no longer be the powerhouse it once was. Just like network TV, at one time they really commanded a market. Today I can't tell you the last time I saw any network television. I think Hollywood is looking at the same fate. For a number of reasons, the main one is the lack of new IP's(Intellectual Properties). It costs a lot of money to bring original material to audiences. It makes much better business sense to use an established IP. But it sucks for all us, sure you will have guys go nuts just because of the name. That's nothing new.
I think Hollywood will become a face in the crowd. The cost of making films today is so cheap it's hard to fathom. Some of the pros I know are doing work for such projects. Since the number of studio jobs is diminishing by the year. That's where anything new is going to come from(look up Voyage Trekkers). The studios will latch on to the good ones, then dumb them down.

As far as theaters go, the last time I was at my local theater it was a but run down, that can't be a good sign. Besides not being a comfortable place to go. $150 ticket prices? That's nuts, especially against the cost of a DVD or steaming. It sounds like a very ignorant thing to say. I think it's just those guys trying to stay in the public eye.

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