When the Chips Are Down
By Rebecca Green
In looking at all of the things that have transpired in the last three months since I wrote a digest, the theme that surfaced the most is the question: Will they or won’t they? Will festivals gather in-person this year or remain virtual? Will audiences run back to theaters or remain seated at home? Will streamers take over the industry (I would argue they already have) or is indie film still alive? Most are waiting it out to see what happens, while others are wagering big bets against all odds.
FOCUSING ON THE FESTIVAL WORLD FIRST
In March of 2020, we experienced the abrupt shutdown of SXSW and the quick pivot to virtual festivals for the rest of the year. Every sector scrambled, from producers to sales agents and distributors. Now a full year later, in-person gatherings are still indefinitely on hold yet rather than lock in virtual festivals for 2021 so that filmmakers can strategize appropriately, festivals are shifting dates with the plan to resume in-person operations. While I appreciate the optimism and understand we all want to meet in-person, this wait-and-see approach is not in the best interest of filmmakers who need time to build a strategy for selling and/or launching their film. In my opinion, those who are betting on in-person events will most likely find themselves reliving 2020 and scrambling to pivot yet again.
Sundance came and went without a hitch and some would argue, without much fanfare. As an Industry Pass holder, I appreciated the easy to navigate website (unlike SXSW where the sensory overload of the platform made it difficult for me to chose anything to watch). I also appreciated the three hour window allotted to start a film and the on-demand option made it possible to see more films than I would have ever seen in-person. That said, I was, and still am, dismayed by the Copyright Disclaimer before every Sundance film, which read:
Why add that first sentence? Why not just point out that it is illegal to copy the film? For a festival that does not provide screening fees or share revenue with filmmakers, the first sentence baffled me. If Sundance truly believes filmmakers should make a living off of their work, why is the festival not an active participant in filmmaker sustainability? Sundance then when on to boast that virtual event brought the festival’s largest-ever audience with over half a million views, which to me, only makes this first sentence even more damning. If we’re placing our bet on virtual festivals being a component of Sundance in the future, then we need to talk about revenue share.
While Sundance paid out zero dollars to filmmakers, YouTube has paid more than $30 billion to creators, artists, and others over the last three years. Yes, BILLIONS. The number of new channels that joined the company’s Partner Program, which allows creators to earn advertising revenue, more than doubled in 2020. YouTube also “contributed approximately $16 billion to the U.S. GDP in 2019, supporting the equivalent of 345,000 full time jobs,” according to an Oxford Economics report. If only filmmaker’s weren’t placing all their money on the Sundance stamp of approval, maybe we could make that living…
Cassian Elwes declared indie film is still alive because Apple bought CODA for $25 million in a worldwide deal. However, French sales company Pathé (CODA is a remake of 2014 French film LA FAMILLE BÉLIER) pre-sold the film to much of the world before it ever hit Park City – around $6 million of the films reported $10 million budget – and many of these buyers were blindsided by the Apple deal. Because of this, international distributors are now worried sales companies could introduce mandatory ‘kill fees’ to force them to sell back hits which many believe would kill the “pre-sale” model of independent film financing and, ultimately, the independent industry as a whole.
WILL THEY OR WON’T THEY GO BACK TO THEATERS
To no one’s surprise, North American box office revenue plummeted 80% in 2020 due to the COVID pandemic while global revenue tumbled more than 70% to $2.3B Behind China’s $2.7B. The lowest showing in at least 40 years. That said, over the past month, HI MOM and DETECTIVE CHINATOWN 3 have set major box office records in China, outpacing even AVENGERS: ENDGAME and the boom may be a sign of things to come in the US.
While box office plummeted, Netflix reported adding 8.51 million paid streaming subscribers in 2020 Q4, about 2.5 million more than expected, to land at 203.7 million worldwide at the end of 2020. Most impressive was Netflix’s international subscriber growth. The company said 83% of 2020’s growth came from from outside the U.S. & Canada. By way of comparison, HBO and HBO Max combined had 41.5 million U.S. subscribers as of the end of 2020. And while Peacock and HBO Max are touting notable subscriber gains, they are also forecasting billions in investments to establish a streaming presence.
According to a new J.D. Power survey, Americans now subscribe to four streaming services on average, up from three at the start of the pandemic. Americans are spending 24% more on on-demand services: U.S. consumers spent an average of $47 per month in December 2020 on video subscription services, up from $38 in April 2020. With audiences now accustomed to getting all their movies at home, do we really believe people will be rushing back to the movies?
Some studios are counting on it. Much like festivals pushing dates, several studios are continuing to delay their tentpole releases, rather than sending titles to streaming platforms. However, the future of the speciality film business may not be as safe a bet. Paul Serwitz, Landmark Theatres president and COO, said, “I really believe the theater industry is going to rebound completely, but smaller and midsized movies will take more of the brunt of the longer-term impact, because they don’t provide that spectacle that drives the masses to theaters.” Perhaps Serwitz is right, which explains why Searchlight Pictures didn’t provide any box office numbers for NOMADLAND when the Oscar hopeful expanded nationwide over the Feb. 19-21 weekend.
Michael Barker, co-president of Sony Classics, is fully placing his bet on theatrical choosing not to engaged in the virtual or streaming experience saying, “The history of motion pictures as I know it has always been about adapting to new institutions. In each situation, and each upheaval, the theatrical experience has survived.” While Deadline refers to Barker as “sage” I would have perhaps described him as ‘behind-the-times.’ Case in point, in its biggest pandemic-related streaming move yet, Disney has opted to make BLACK WIDOW and CRUELLA available on Disney+ Premier Access at the same time it hits theaters. And in the UK, Warner Bros. and Cineworld have agreed to an exclusive theatrical window of 31 days prior to PVOD. Michael Barker can dig his heels in all he wants, but the theatrical experience for Sony Classics films cannot be sustained without the tentpole movies in theaters.
On the flips side of indie distributors, NEON and Bleecker Street have formed the joint home entertainment distribution company DECAL. The new collaboration will handle distribution deals on the home entertainment rights to both NEON and Bleecker Street titles and will also be in the market of acquiring third-party content, offering an option for independent filmmakers to optimize the transactional window. And maybe they’re on to something… Gerard Butler’s disaster movie GREENLAND proved that lots of people are willing to spend $19.99 on a VOD premiere and while VOD financials are difficult to assess, evidence suggests that STX has already net $60 – $80 million on the film’s $35 million budget.
But what is “home video” exactly? The term originates from the VHS/Betamax era, when the predominant medium was videotape, but has carried over to formats such as DVD and Blu-ray. In 2017, Bill Nye (the Science Guy) challenged Disney’s practice of keeping 80% of the revenue from older shows that it distributes to streaming platforms, leaving only 20% to stars and other profit participants. But last month a judge sided with Disney and ruled that Nye’s 1993 contract allows the studio to continue to classify streaming and download revenue as “home video,” and to continue to take the 80% royalty. If companies like NEON and Bleecker are going to start placing more money on “home video,” filmmakers need to demand a modernization of the definition to ensure that their work is not exploited without due compensation.
AMC Theaters is also holding its breath for the return to theaters. The company has raised more than $400 million to get through the pandemic, taking bankruptcy off the table. Meanwhile, AMC Entertainment CEO Adam Aron received a $3.75 million bonus at a time when many of the company’s employees have been laid off and several of its theaters are closed according to public filings. (However, Aron’s bonus can’t compare to Netflix Chairman and co-CEO Reed Hastings who is set to receive $34 million worth of stock options and a salary of $650k for 2021 and Co-CEO and chief content officer Ted Sarandos, will receive options worth $14 million and a $20 million annual salary.) Alamo Drafthouse filed for Chapter 11 and sold all of its assets to its senior leadership group. Alamo founder and executive chairman Tim League and other original investors are among the buyers.
While theaters are sinking hundreds of millions into save theaters, audiences seem more than happy watching at home and are also not as bothered by commercials as some may assume. Pluto TV is at the forefront of the “FAST” — free, ad-supported television — trend in streaming that also includes Comcast’s Xumo and Peacock. Pluto has gone from fewer than 20 channels at launch, with mostly third-party branded channels and digital shorts, to more than 250 channels. Available now in 24 countries, Pluto TV had 12 million monthly users when it was acquired by ViacomCBS in 2019 and by the end of 2020, Pluto TV is on track to reach more than 30 million in the US and 40 million globally.
In February, Amazon stopped placing bets on shorts and documentaries when making an abrupt decision to stop accepting both via Prime Video Direct, a service used by both established distributors and filmmakers selling their films direct to consumers. Also in February, Amazon Prime Video launched the Coda Collection, a new channel that focuses on concert films, music documentaries, and rare archival performances.
Of all things to place bets on, TheWrap counts eight different projects about GameStop and its Reddit investors, from fiction to non-scripted, Netflix, HBO and MGM are going all in. And Mark Wahlberg is the executive producer of a MoviePass documentary series, because that’s the story the world needs right now.
PLACING BETS ON TALENT
While a new survey revealed that Netflix outpaces most studios and networks when it comes to hiring female directors and creatives, the numbers are still far from ideal. On the film side, of the 130 directors examined, 76.9% were men and 23.1% were women. The study found that only 16.9% of film directors were from underrepresented racial/ethnic groups and on the television only 12.2 percent.
Yet management and consulting company McKinsey & Co. released a report detailing the experience of Black professionals working in entertainment and revealed that Hollywood is losing $10B in potential annual revenue from black inequity.
And I’m not going to even get into the hot mess that is the Hollywood Foreign Press.
The WGA West has launched the Writers Deal Hub to help members and their representatives “make the best deals possible” now that all the major talent agencies have signed the guild’s franchise agreement. Based on its analysis of more than 1,000 screenwriting deals, the guild found that $250,000 is the median pay for all one-step deals (in which a writer is hired to write a single draft of a screenplay) while the median pay for studio deals is $293,750, with $2 million being the maximum reported. For new writers working on one of their first jobs, the median for a first draft screenplay is $100,000, with the maximum reported one-step deal at $300,000.
Compare the WGA salaries to the salaries released in the Dear Producers Sustainability Survey which revealed in 2019, 41% of producers earned $25k or less from producing and in 2020, income from producing dropped significantly, with 56% of producers earning $25k or less.
And the second #PayUpHollywood survey report reveals that producers are making even less than the average assistant. Nearly 80 percent of Hollywood assistants and other support staffers made less than $50k in 2020 and over one-third made less than $30,000, a new survey reveals. Clearly, no one is placing their bet on producers.
THAT WAS ALL JUST FROM THE FIRST THREE MONTHS OF 2021!
When thinking of a title for this digest, my first idea was ‘Change is the Only Constant’ as I am overwhelmed by the continual rapid transformation happening in our industry. In Googling where that phrase comes from, I was led to the early Pre-Socratic philosopher, Heraclitus of Ephesus (l. c. 500 BCE), whose central claim is summed up in the phrase Panta Rhei (or ‘life is flux’) meaning everything or all things change. All things, he claimed, are brought into and pass out of existence through a clash of opposites which continually create and destroy. Heraclitus argued that while nature clearly shows us that change is the way of life, human beings resist change and try to cling to what is known and what is considered safe. Heracitus claimed that this `clinging’ is unnatural and is what causes people to suffer.
When it comes to the question of ‘will they or won’t they.’ I presume Heracitus would say we’re all wasting our precious time speculating about where the market will go, causing our industry to suffer, and that we should be fully embracing change. And I would agree with him.
The cards have been dealt.
Wager all your money on change.
Create and destroy.
Life is flux.
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