Is the movie industry dying? Its demise has often been predicted in the past, but this time round the threats may be more serious. A new book called The Big Picture, by Ben Fritz, examines the challenges.
In the past decade, the traditional economics of Hollywood have fallen apart. Each feature film was meant to be profitable on its own merits, through domestic theatrical release, DVD sales, television licensing and foreign distribution. Now many elements of this model are collapsing.
Cinema admissions in America have been in decline for some years, as consumers watch more TV at home or on devices such as smartphones. Younger people in particular are going to movie theatres less. The DVD business, which was a big moneyspinner for the studios, has almost disappeared and millions of viewers are forsaking the 90-minute visual story for the longer narrative of TV drama.
Meanwhile, the arrival of streaming players is transforming viewing behaviour and challenging incumbent movie studios, cable and satellite firms and TV broadcasters. Netflix is the most powerful, boasting a market value of more than $160bn (£121.8n), or 14 times its revenues. It plans to spend more than $13bn on commissioned content for its subscription service this year. Amazon is likely to spend more than $5bn this year on video content; its entertainment offering is subsidised by its overall ecommerce operation. Hulu has an annual programming budget of about $2.5bn, while Apple is developing a content business too.
It was a tragedy for Britain’s creative industries that in 2009, while I was chairman of Channel 4, the myopic regulators at the Competition Commission blocked our Kangaroo venture with the BBC and ITV. It would have been a pioneering video-on- demand service and a national champion to do battle with the likes of Netflix. Instead, it was shot down by small-minded bureaucrats who were heavily lobbied by our competitors.
Studios such as Disney, Sony, Universal, Warner, Fox and Paramount continue to focus ever more on blockbusters. This is part of the problem — owing to an increasing reliance on a few big franchises such as Marvel Super Heroes, Star Wars, X-Men and Fast & Furious, Hollywood is forgetting its creative roots and failing to renew itself. The prevalence of sequels, prequels, spin-offs and remakes means not enough original ideas make it to the screen. Instead, novel concepts are appearing on TV. I believe this must be bad for the long-term future of the movie genre.
Meanwhile, the majors are merging for protection, as the media sector becomes more competitive — so AT&T is buying Warner, and Fox looks set to be bought by Disney.
It might be that my perspective is tainted by my direct involvement in film. While I was at Channel 4, we were one of the main funders of the hit Slumdog Millionaire, but its profits were not as juicy as one would have expected. Most of the rest of Film4 Productions’ output in effect lost money. Later, I invested in a film business called Metrodome, but it proved a complete write-off. Individuals such as star performers or directors can get rich from films, but, generally, corporates do not make decent returns — at least on a sustainable basis.
There are positive trends. Micro-budget films continue to be produced. Technological improvements in all aspects of film making — including post-production — mean movies can cost much less to make than used to be the case. I helped back The Flaw, a low-budget documentary about the financial crisis, a few years ago. I lost my entire investment, but at least the experience was an education. The number of such sub-£500,000 films made each year in Britain has halved since 2010, but still about 75 are being made annually.
Niche cinema chains in the UK such as Picture House, Curzon and Everyman cater for a premium base of viewers, while event cinema is generating an expanding income stream. However, any growth in this specialist segment will not compensate for a deterioration in the mass market. Talent is probably more in demand than ever — be it writers, actors, directors or post-production specialists.
Facilities such as Pinewood Studios and special effects firms such as the Foundry and Framestore are world class. British broadcasters may be under pressure, but the better independent producers should be enjoying excellent conditions — especially those that can deliver content that appeals to a global audience.