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Ed Driscoll

Hollywood ‘Completely Broke.’ But That’s Good News, Right?

June 16th, 2013 - 2:11 pm

Big Hollywood links to an article by Lynda Obst, the producer of Contact, Sleepless in Seattle, and TV’s Hot in Cleveland (among many other projects) in Salon, setting up her quotes by first noting that “For consumers, the decline of the DVD market has meant switching over to both Blu-ray and, more recently, streaming options for their viewing pleasure.  The end of the DVD format’s dominance meant something much more, and far worse, for Hollywood.”

In Salon, Obst writes:

“The DVD business represented fifty percent of their profits,” [20th Century Fox executive Peter Chernin] went on. “Fifty percent. The decline of that business means their entire profit could come down between forty and fifty percent for new movies.”

For those of you like me who are not good at math, let me make Peter’s statement even simpler. If a studio’s margin of profit was only 10 percent in the Old Abnormal, now with the collapsing DVD market that profit margin was hovering around 6 percent. The loss of profit on those little silver discs had nearly halved our profit margin.

This was, literally, a Great Contraction. Something drastic had happened to our industry, and this was it. Surely there were other factors: Young males were disappearing into video games; there were hundreds of home entertainment choices available for nesting families; the Net. But slicing a huge chunk of reliable profits right out of the bottom line forever?

This was mind-boggling to me, and I’ve been in the business for thirty years. Peter continued as I absorbed the depths and roots of what I was starting to think of as the Great Contraction. “Which means if nothing else changed, they would all be losing money. That’s how serious the DVD downturn is. At best, it could cut their profit in half for new movies.”

* * * * *

“When did the collapse begin?”

“The bad news started in 2008,” he said. “Bad 2009. Bad 2010. Bad 2011.”

It was as if he were scolding those years. They were bad, very bad. I wouldn’t want to be those years.

“The international market will still grow,” he said, “but the DVD sell-through business is not coming back again. Consumers will buy their movies on Netflix, iTunes, Amazon et al. before they will purchase a DVD.” What had been our profit margin has gone the way of the old media.

But it was in 2010 that James Cameron told the Washington Post that DVDs were bad for the Gaia and other living things, and needed to be eliminated (while simultaneously having multiple versions of Avatar coming out that same year on DVD):

It’s a consumer product like any consumer product. I think ultimately we’re going to bypass a physical medium and go directly to a download model and then it’s just bits moving in the system. And then the only impact to the environment is the power it takes to run the computers, run the devices. I think that we’re not there yet, but we’re moving that direction. Twentieth Century Fox has made a commitment to be carbon neutral by the end of 2010. Because of some of these practices that can’t be changed, the only way to do that is to buy carbon offsets. You know, which again, these are interim solutions. But at least it shows that there’s a consciousness that we have to be dealing with carbon pollution and sustainability. …

And the following year, many in Hollywood went all-in with Occupy Wall Street, which was obsessed with the “obscene” profits made by gigantic multinational corporations. You know, like movie studios.

Presumably, losing the cushion of DVD sales is part of the reason why Steven Spielberg recently told a USC audience that, as the Hollywood Reporter paraphrased, “an ‘implosion’ in the film industry is inevitable, whereby a half dozen or so $250 million movies flop at the box office and alter the industry forever.”

But it’s not like Hollywood has much respect for the audience who pays the tickets to see those $250 million products during their initial run in theaters. Obst’s article on the collapse of her industry appears in Salon, which isn’t exactly sympathetic to Hollywood’s core audience in flyover country, when its editor at large has a new book titled, What’s the Matter with White People?: Finding Our Way in the Next America.

Similarly, in 2008, the late Nora Ephron, who in the previous decade had written and directed the Obst-produced Sleepless in Seattle, wrote in the Huffington Post, “This is an election about whether the people of Pennsylvania hate blacks more than they hate women. And when I say people, I don’t mean people, I mean white men.” Incidentally those people in Pennsylvania that Ephron was writing off as troglodytic racists were her fellow Democrats, who were about to decide between Obama and Hillary in the PA Democrat primary — the same primary voters that Obama wrote off at the time as bitter, gun and God-obsessed clingers.

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Top Rated Comments   
Personally I think BluRay (officially arrived in 2006) and the HD DVD (officially died in 2008) are a big factor in declining DVD sales. Hollywood got greedy and split the market hoping everyone would repurchase old titles to get features they'd watch only once while all they did was bash DVD quality and show that any media is transitionary.

At the same time Netflix and Redbox made renting very convenient so why buy media that will only be outdated in a few years.
1 year ago
1 year ago Link To Comment
Our modern elites are not any more meritocratic than the old ones. For one thing, the word meritocratic does not actually mean "gets better scores in college" as implied in this article. The definition of what is meritorious varies across time, place, and society, but the mark of the "elite", the mark of the "gentleman", has frequently been the possession of things like courage, honesty, integrity, loyalty and so on. The notion that these qualities are found in Congress or among Americam businessmen is farcical.

But even by the silly "merit = good college scores" standards our elite fall short. In our time elite = wealth, and wealth, by and large, is the product of having good connections, not of intellect.
1 year ago
1 year ago Link To Comment
Hollywood isn’t broke or in financial trouble. That’s all lies. The financial figures for movies—both gross and net—are fabrications.

Since all the financial figures are lies, Hollywood cannot plead poverty, lack of income, or any other fiscal trouble.

Hollywood cannot be believed because it never tells the truth.

I’ll believe Hollywood is broke when actors, producers, directors and the like make less an one million per year, which is still more than they’re worth.
1 year ago
1 year ago Link To Comment
All Comments   (26)
All Comments   (26)
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As for streaming, i can get a Blu Ray player for $75. what's a computer cost, you know, for the streaming? Or an IPad? Not $75. Plus, not everybody has broadband for 1020p. I live in the sticks and i'm posting this 1.8M a sec and that's as fast as i can go unless the telecom wants to rip out all the wire between my house and town. On top of that, if you buy a movie from Netflix or Amazon or ITunes, you don't really "own" it. This, though, [waves blue ray Capt America at the screen], this is MINE.
1 year ago
1 year ago Link To Comment
There's a very simple explanation for declining sales, and it's the same for CDs: the media doesn't wear out, so there's no need to replace it! Barring the occasional scratch or being stepped on, once you have a movie or an album on digital media, it's effectively yours for a generation. VHS tapes, cassettes, LPs, 45s, these all wore out over time as you played them, and they needed to be replaced eventually. CDs, DVDs and Blu-ray don't wear out. What happened when these new media carriers were introduced, people began replacing their volatile media carriers with non-volatile versions, and discovered that they didn't need to buy the White Album again. Hollywood is discovering the same phenomenon that caused the music industry to nearly collapse. I can't believe this wasn't obvious to anyone in those industries at the time they introduced the new technologies.
1 year ago
1 year ago Link To Comment
The best and the brightest are getting dumb and dumber.
1 year ago
1 year ago Link To Comment
The studios are rich, but the creatives so far are the ones really taking the hit. Reality TV has all but destroyed the scripted filmic drama, and adult movies are rare.

You have to admire the skill of the studio heads. They go from state to state, playing one off the other, for tax breaks. The reap half a billion in federal breaks from Obama. They pay workers minimum wage and offload them onto Unemployment between gigs. Yet they are "liberal" and despise the hands that feed them! The old moguls came from war torn countries and loved the freedom here, but this generation has forgotten all that.

Really, it's a mad kind of genius. And a profitable one.
1 year ago
1 year ago Link To Comment
Personally I think BluRay (officially arrived in 2006) and the HD DVD (officially died in 2008) are a big factor in declining DVD sales. Hollywood got greedy and split the market hoping everyone would repurchase old titles to get features they'd watch only once while all they did was bash DVD quality and show that any media is transitionary.

At the same time Netflix and Redbox made renting very convenient so why buy media that will only be outdated in a few years.
1 year ago
1 year ago Link To Comment
Meritocratic. Bwahhahahahaha.

That it is to laugh. Today the "merits" of the self selected elite are those that can recite the secular humanist elitist catechism the most accurately.

Original thinkers need not apply.
1 year ago
1 year ago Link To Comment
-- “Bad 2009. Bad 2010. Bad 2011.”--

Hope and change, baby. Hope and change.
1 year ago
1 year ago Link To Comment
Okay someone needs to slap the stupid out of Nora Ephron and David Brooks (probably not possible, but slap him anyhow!)
1 year ago
1 year ago Link To Comment
Someone needs to slap the stupid out of James Cameron
1 year ago
1 year ago Link To Comment
Yeah, Brooks is out of his mind and thirty years behind events when he talks of "meritocracy", that went out the window with affirmative action and political correctness of all sorts, every child gets a medal, don't keep score in sports, yada yada. It was over by 1980. Jeebus, how do you think we got the president we got, if there's meritocracy involved?
1 year ago
1 year ago Link To Comment
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