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Laremy Legel

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Member of the BFCA and OFCS, writer of criticism, noted interviewer, box office oracle, walker of dog named Bugsy, Qui audet adipiscitur.

Why Steven Spielberg Is Wrong About the Future of the Film Industry

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Recently, Steven Spielberg and George Lucas had some candid words about the direction in which they see the world of movies going. It was honest and interesting, and it came from two directors who have long since passed the point where their careers could be hurt by not playing politics. As such, we thought it a good idea to consider their take, and throw in our opinion about what they nailed, and what they were a bit off on.

Spielberg: 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.

VERDICT: CORRECT and INCORRECT.

An “implosion” is definitely coming, but it’s not going to happen because of the $250 million dollar flops, it’s going to happen because of the mid-level flops, which, in the aggregate, are much more devastating to a studio’s bottom line. At this point, it’s instructive to look at a few numbers, and as “John Carter” was considered one of the “big flops” of 2012, we’ll take a look at Disney’s year, domestically first (we’ll get into the profound effect of international monies in a moment).

“Marvel’s The Avengers”: $623 million in ticket sales, $220 million dollar production budget
“Brave”: $237 million in sales, $185 million budget
“Wreck-It Ralph”: $189 million in sales, $165 million budget
“Lincoln”: $182 million in sales, $65 million budget
“John Carter”: $73 million in sales, $250 million budget
“The Odd Life of Timothy Green”: $51 million in sales, $40 million budget (estimated)
“Beauty and the Beast (3D)”: $47 million in sales, $1 million post conversion to 3D
“Finding Nemo (3D)”: $41 million in sales, $1 million post conversion to 3D
“Frankenweenie”: $35 million in sales, $39 million budget
“Monsters Inc.”: $34 million in sales, $1 million post conversion to 3D
“Chimpanzee”: $28 million in sales, $12 million budget
“Secret World of Arrietty”: $19 million in sales, $37 million budget
“People Like Us”: $12 million in sales, $16 million budget

All of these films were released under Buena Vista distribution, the Mouse House’s theatrical wing. The first thing to consider when looking at these numbers is an equation even the smart people in our business occasionally get wrong, and that’s this rule of thumb: A film needs to make around 2.5x production budget in theaters to break even due to 1) Theaters getting anywhere from 30 – 70 percent of ticket sales, depending on title and date AND 2) Massive marketing budgets, which are not considered in the production budget. Now, for certain movies the number is 2.2x, and for others its 3x, so we just use 2.5x as an attempt to get close to the number.

So let’s break that down, using real numbers. “The Avengers” production budget ($220 million) times 2.5 = $550 million. Here in the U.S., the film earned $623 million, so we can say there was around $73 million in profit there. This doesn’t include international (which was a huge haul). So, factoring in those numbers, here are the totals for each film, separated by winners from losers:

“Finding Nemo (3D)” / “Beauty and the Beast (3D)” / “Monsters Inc. (3D)” = $100 million profit total
“Marvel’s The Avengers”: $73 million in “profit”
“Lincoln”: $20 million in profit

“Chimpanzee”: Broke even

“John Carter”: $552 million loss, domestically
“Brave”: $225 million loss, domestically
“Wreck-It Ralph”: $223 million loss, domestically
“Secret World of Arrietty”: $74 million loss, domestically
“Frankenweenie”: $62 million loss, domestically
“The Odd Life of Timothy Green”: $49 million loss, domestically
“People Like Us”: $28 million loss, domestically

So, out of Disney’s thirteen major releases, a whopping seven actually lost money in theaters, not counting toys, residuals, or international dollars. The total of all this math? Negative one billion dollars. Sooo, Disney is insolvent, right? Let’s all attend the “going out of business sale”, can I buy the castle? No, of course not, because once you add in all those delicious international dollars the grand total is:

PLUS $900 million dollars.

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What?! Yep, that’s right, Disney managed to earn around $2 billion in international dollars, which leads to a stunning conclusion: Disney is no longer making films for domestic audiences, because the world is much bigger than the United States.

Why, even the massive “failure” of “John Carter” led to a $210 million overseas number, still a loss, but nothing nearing the half a billion dollar catastrophe that was reported. In fact, if you factor all the numbers in, it becomes apparent that the big films are not an issue, because for every “John Carter” there’s “Brave” “The Secret World of Arrietty” and “The Avengers” waaaaay more than making up for the loss. Big movies are worth attempting, because the reward is higher than the risk.

The real losers in this global reach? The smaller budget films. Why make “Frankenweenie” when it won’t play well overseas? Why bother with “The Odd Life of Timothy Green” when it has no pull internationally, because ol’ Tim’s oddity is a largely a domestic phenomenon?

So while Spielberg’s contention of an “implosion” coming is correct, he’s dead wrong on what will disappear. There’s still two billion dollars out there for Disney when they release huge films (or simply go back to the well with 3D conversions). Smaller dramas? Not worth the time anymore, a very scary trend indeed.

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George Lucas agreed that massive changes are afoot, including film exhibition morphing somewhat into a Broadway play model, whereby fewer movies are released, they stay in theaters for a year and ticket prices are much higher. His prediction prompted Spielberg to recall that his 1982 film “E.T. the Extra-Terrestrial” stayed in theaters for a year and four months.

VERDICT: INCORRECT.

This is hilariously wrong. It’s like saying, “Man, back in the day, everyone used ships to cross the Atlantic. I can see that coming back!” No, no, no, a thousand times no. The actual thing that’s going down is movies are getting more and more frontloaded, I.E. everyone sees them opening weekend, moreso with each passing year. “Avatar” is one of the few recent examples of a movie that had decent longevity, but “The Avengers” made one-third of its total box office in the first three days. This isn’t an outlier, it’s the way things are going. If anything, home video windows will shrink, and you’ll see huge movies stay in theaters less than a week.

The other compelling reason for the “speeding up” of box office? Well, studios make more money up front on bigger films, they sometimes are able to negotiate 70 percent of the dollars on the opening weekend, and then they drop their take to 30 to 50 percent for the proceeding weekends. If AMC wants the movie bad enough, they cave. Studios are basically doing their level best to run the big theater chains out of business, and all in the name of quarterly profits. People often forget this, but studios and theaters are not in the same business. At all.

One caveat: Studios haven’t been able to own theaters since 1948 (United States v. Paramount Pictures, Inc.). If this (far outdated) law is struck down, Disney could very well open an “Avengers” film for months, and tie in toys and park admissions with the ticket sales. Honestly, this would be a great thing for audiences and studios, though of course the theaters (as per normal) would take it on the chin.

Upstream Color

Some ideas from young filmmakers “are too fringe-y for the movies,” Spielberg said.

VERDICT: CORRECT.

Spielberg pointed this out as a dangerous thing, the major studio systems now have a playbook they execute each time out. Sure, they tinker around the edges, but true innovation is routinely watered down with focus groups or preferably avoided altogether. If it’s not going to play overseas, to a generally “English as a second language” crowd, then it has got to go.

A look at how the ecosystem has changed is easy to see when you look at the “smaller” titles that ended up gaining cultural prominence, along with their box office draws domestically:

Upstream Color: $437,242 (88 percent on RottenTomatoes)
Bellflower: $168,226 (73 percent on RottenTomatoes)
Shame: $3,909,002 (76 percent on RottenTomatoes)
We Need to Talk About Kevin: $1,738,692 (80 percent on RottenTomatoes)

Now, I’m not claiming each of these films are universally beloved, but I am contending that each of them 1) did something radically different and 2) was thus un-marketable from a large studio perspective.

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“We’re talking Lincoln and Red Tails — we barely got them into theaters.”

VERDICT: NEITHER CORRECT or INCORRECT.

“Red Tails” shouldn’t have been in theaters to begin with.

“The pathway to get into theaters is really getting smaller and smaller.” 

VERDICT: CORRECT and INCORRECT.

The types of films being released are all the same, but there are more of them. So if you’re willing to put out movies for a certain demo, not rock the boat, and get behind an occasionally flat-out misleading marketing campaign, the world is your oyster. More films than ever are being theatrically released each and every year.

Here’s a look at the top ten films released in 2012:
“The Avengers: Superhero, big summer movie, male dominated, young person focused.
“Dark Knight Rises”: Superhero, big summer movie, male dominated, young person focused.
“Hunger Games”: Tween adaptation, young person focused.
“Skyfall”: Beloved franchise, but with a new, darker twist.
“The Hobbit”: Beloved franchise, but with a new, more commercial twist.
“Twilight Saga Part Two”: Tween adaptation, young person focused.
“Amazing Spider-Man”: Superhero, big summer movie, male dominated, young person focused.
“Brave: Animation, Young person family focused.
“Ted: Young adults focused.
“Madagascar 3″: Young person family focused.

Now then, some of these movies are actually good, but it doesn’t excuse the fact that none of them are 1) Non-action dramas or 2) meant to appeal to adults. Twenty years ago, this change was already underway, but films like “Schindler’s List” and “Indecent Proposal” still made the top ten, as did more adult dramas in the vein of “The Firm,” “The Fugitive,” and “In the Line of Fire”.

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Lucas and Spielberg also spoke of vast differences between filmmaking and video games because the latter hasn’t been able to tell stories and make consumers care about the characters.

VERDICT: INCORRECT.

This is a silly “get off my lawn” take. Major game studios now have budgets that rival Hollywood films, and they have profit margins that are envied by the major film studios. So what are they doing? Taking Hollywood script writers and putting them to work, expanding their worlds, diving into online play, and generally wreaking havoc on the storytelling ecosystem. If anything, movies and games are becoming far more similar, and both show the tendency to not tell a story, only games push the envelope far more often.

Lucas lamented the high cost of marketing movies and the urge to make them for the masses while ignoring niche audiences. He called cable television “much more adventurous” than film nowadays.

CORRECT.

Georgie is right on the money here, but perhaps not for the right reasons. Marketing costs more because eyeballs are harder to find, and more people skip commercials and use ad-blockers than ever before. Cable television is “more adventurous” because it is a subscription based model – meaning if you have HBO, you’re likely to have it because you actually want it. No one wants ads with their sitcoms, they just want the laughs. The ads were always an inefficient way to defer the costs of broadcasting. Now that 1) Movies are marketed to young people only 2) You can’t reach young people due to technological breakthroughs, marketing is a nightmare.

What’s not a nightmare? A lesson that has been around since society formed – people will pay for what they want. “Game of Thrones,” “Homeland,” and “True Blood”? People want them, and thus are fine with adding the $19.99 onto their bill. Studios would do well to learn this lesson. Instead of relying on marketing and chicanery to “trick” youngsters into buying a ticket, rely on good content and a built-in subscriber base. When people find value in the product, they are willing to pay. When they don’t, and when studios continue to put out disposable content on a regular basis, you’ll find your audience slowly, but consistently, drying up (source).

So yeah, the “implosion” is just around the corner, but those flames aren’t going to look anything like what the icons of the industry think they will.


Categories: Features

Tags: Box office, George lucas, John Carter, Laremy legel, Steven spielberg, The sky is falling