Hollywood ‘Completely Broke.’ But That’s Good News, Right?
Uh oh: DVDs accounted for 50% of profits...
June 17, 2013 - 1:00 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.