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19. SLOW RELEASES, OR: HOW HARVEY WEINSTEIN SAVES BIG BUCKS

In her Golden Globe acceptance speech, Silver Linings Playbook star Jennifer Lawrence thanked Harvey Weinstein for “killing whoever you had to kill to get me here”. I assume he didn’t literally kill anyone, but the creativity of The Weinstein Company’s business tactics have always rivaled the creativity of the films it so successfully distributes.

One of those tactics is Slow Releases, aka Platform Release, and the latest example of it was the surprisingly very-successful Silver Linings Playbook. When I looked at its cumulative grosses six weeks after its release many months ago, I thought “$23M gross for an $18M budget – good for them for breaking even, but it’s a shame they didn’t make more”. But somehow that was only the tip of the iceberg, as the movie went on to make over $130M domestically. That’s amazing, since the vast majority of movies make 80% of their total grosses within 3-4 weeks from their release.

Here is a typical normal release, or “fast release”:

Typical Fast Release - Weekly Domestic Box Office Grosses - Marvel's The Avengers

It gives everything it’s got in the first week or two and then crashes – making over 80% of its total grosses in the first three weeks. That was the model I was using in my head when I thought Playbook was at the end of its run after six weeks.

Now take a look at these seven Slow Release movies and their average weekly grosses and average cumulative grosses (the thick blue lines):

Slow Platform Release - Weekly Domestic Box Office Grosses

Slow Platform Release - Cumulative Domestic Box Office Grosses

This is a completely different model. First, their weekly grosses reach their maximum only after a few weeks, and not on the first weekend. Second, they reach 80% of their total grosses only after 12 weeks! (Of course, there’s a bit of a variance here, but you get the point).

So basically, Weinstein and all the other small-but-clever distributors are saying: “well, we can’t compete with the big studios’ marketing budgets so let’s use a kind of Bass model of brand diffusion [add link to wikipedia] and use indirect marketing (word of mouth, awards and general buzz) to gauge our distribution expenditures”.

Of course this will work better with good movies, since they can hit an inflection point after which they self-propel themselves to success (like “Playbook” the six other movies in the figure above). But testing the market before blowing millions on marketing can also be beneficial if you have a flop on your hands: if you see it’s not gaining traction in 200 screens you can either pull it off the circuit and cut your losses or decide to give it a little extra boost with a proper marketing budget.

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18. A FEW INSIGHTS ON FILM & VIDEO INDUSTRY JOBS – PART 2

Dear fresh college grads who are looking to break into the film industry,

I have some good news and some thought-provoking news. First, the good news: the film and video industry looks like it is becoming more favorable to entry-level employees:

Relative Employment in Film and Video Industry - Editors, Multimedia & Animators, Producers & Directors, Writers, Administrative Assistants

Relative Real Median Wages in Film and Video Industry - Editors, Multimedia & Animators, Producers & Directors, Writers, Administrative Assistants

The above figures (data from the Bureau of Labor Statistics) show that for occupations such as “Film & Video Editors”, “Multimedia Artists & Animators”, “Writers & Authors”, “Administrative Support”, and “Producers & Directors” – the number of employees is growing at a higher pace than the industry average, while the median real salary is eroding, compared to the industry average. This means that there is a shift towards entry-level jobs: more busy hands for less pay. That’s good if you are looking to break into the industry (and not so good if you are a replaceable seasoned professional).

And now for the thought-provoking news: take a look at this figure:

Relative Annual HR Expenditure in Film and Video Industry - Editors, Multimedia & Animators, Producers & Directors, Writers, Administrative Assistants

“Annual Expenditure” is basically the number of employees in each category multiplied by their mean annual wages. The red line is the industry average – across all occupations. You will notice that “Office & Administrative Support Occupations” are losing ground, while “Writers & Authors” and “Producers & Directors” are skyrocketing and “Film & Video Editors” are also beating the average.

This means that if you are looking to become some exec’s assistant as your first step in the industry (as so many fresh college grads do), you really have to bring some kind of added value – either creative insight or technical expertise. If your only advantage is in managing a call sheet, you are not in a very favorable competitive position: you will either be replaced by a computer or by someone with unique abilities. Even if you’re not a writer or officially in the “creative” department – you really must bring creative thinking to your work. As I mentioned in my previous post – the days in which sending more emails per minute or arriving early and staying late were the only differentiating factors are over. Hollywood has finally joined the 21st century and is looking for creative thinkers that bring unique added value.

The unionized nature of the film industry is probably the reason the industry average is not doing even worse, but the trend is clear. At its core, Hollywood is a creative industry after all – one that is harder for computer algorithms to replace entirely. But that actually incentivizes it even more to become efficient wherever it can – and that is wherever human creativity is not essential.

Please. Stay away from those jobs.

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17. A FEW INSIGHTS ON FILM & VIDEO INDUSTRY JOBS – PART 1

The coolest job on the official Bureau of Labor Statistics list of “Film and Video” industry occupation is definitely Motion Picture Projectionist. But since that is a fantasy job which requires mystical powers, I will focus this post on more viable options for my average readers.

Let’s start with Total Industry Jobs:

Total Employment and salary - Film and Video Industry

This has been a remarkably steady industry over the past decade in terms of number of employees (364,600 in 2003 vs. 358,190 in 2012). However, the median annual wages have risen by about 30% in real terms. Together, these two trends are different than most industries, where such increases in pay are coupled with a decrease in employment numbers, as technology makes the workplace more efficient, meaning higher wages for those who were not replaced. Many examples of such industries can be found in the popular blog written by Prof. Andy McAfee of MIT (whose research assistant I used to be). More on these larger scale trends in the next post. This post is about specific industry jobs.

So let’s start with the bad news. Here is a look at Office and Administrative Support Occupations, a popular option for fresh college graduates:

Employment and salary - Film and Video Industry - Office and Administrative Support

This is a more intuitive trend: 28% drop in number of employees, while wages remain steady, in real terms. This means that this segment is becoming more efficient, probably due to technology integration. So what are the occupations that are making up for this drop in total headcount?

Let’s see what’s up with more skilled occupations.

Film and Video Editors:

Employment and salary - Film and Video Industry - Editors

Over 30% increase in number of employees, with a slight increase in pay. This means a good editor is in increasing demand. Hurray for editors!

Multimedia Artists and Animators:

Employment and salary - Film and Video Industry - Multimedia Artists and Animators

Here we see a 50%+ increase (!) in employment with only a very slight drop in pay. That makes sense – Hollywood needs lots of After Effects experts. Good on ya! (but take a look at my next post for a little caveat).

Next, let’s take a look at the real stars of the last decade – Writers and Authors:

Employment and salary - Film and Video Industry - Writers and Authors

There still are not too many of those, but their number has more than doubled(!!) with a nice increase in salaries. Human creativity is key to survival in today’s world – not only in Hollywood. This is more in line with Prof. McAfee research, and is key to your survival in the workplace. Even if you’re not a writer or officially in the “creative” department – you really must bring creative thinking to your work.

Now, let’s look at another star segment: Producers and Directors:

Employment and salary - Film and Video Industry - Producers and Directors

Here we see a whopping 3x increase in employment, coupled with a small increase in real pay. This can have many explanations, but I believe it is key proof of the fact that Hollywood is increasingly emphasizing agile thinking over repetitive blind labor. There is an increasing need for “producer/director-types” – adaptable, creative leaders.

The conclusion is that Hollywood is becoming more intelligent. It is seeking creative, adaptable, quick, original thinkers, rather than repetitive key punchers. Menial tasks can be done by a computer or by the studio’s president’s son, because there is no better way to filter potential talent for those jobs. Don’t compete against them. Show you have irreplaceable added value. This is the new reality, and it is a good reality – an intelligent, meritocratic, human reality.

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16. LIONSGATE: CHRONOLOGY OF BECOMING A MAJOR STUDIO

This post has been republished here – with an incredibly improved infographic! You really want to see it. It’s amazing.

***

Original post:

Welcome to my ugliest post yet! Most of the feedback I get concerns the aesthetics of my charts and all I can say is that I’m working on improving that. But for now, I still have to produce at least one of these a week.

Anyway, this time I took a look at Lionsgate. Often called a “mini-major studio” or “the sixth of the Big Five”. How did this happen? How could a company that was founded in 1997 by a banker from Vancouver take on the film industry under its own terms and without the backing of a major media conglomerate like the other big ones? Many voices say they got lucky by hitting gold with The Hunger Games right after acquiring Summit and the rights to the Twilight Saga. But that’s just the tip of the iceberg, in what turns out to be a very deliberate, aggressive and strategic expansion effort over the past 15 years.

The company got to where it is primarily by making bold, brave, risky and sometimes stupid moves. Don’t get me wrong – they made some films that were utter nonsense, but they also took a risk on American Psycho after Disney got spooked by its uneasy premise. Or Lolita, which had a hard time finding a home in the late 90’s. Or Kevin Smith’s Dogma, which required some guts to believe in before it became a cult hit.

And then there are the strategic investments in streaming video as early as 2000(!) and its focus on the growing Latino film market.

At the core of all this are the strategic acquisitions that Lionsgate has been putting together like crazy over the past decade, focusing on expansion of its title library and distribution network – domestic and international, as well as its independent production capabilities, strategic partnerships and expansion into TV. Independent film production companies should study this if they want to break away from the pack.

Here is my attempt at creating the world’s ugliest infographic to show this unique company’s systematic growth (if any graphic designer wants to prettify this – hit me up in the contact form).

Lionsgate Domestic Box Office Chronology

Lionsgate Foreign Box Office Chronology

Lionsgate Worldwide Box Office Chronology

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15. CRITICS VS. HUMANS

In a previous post, I looked at the connection between a film’s Rotten Tomatoes score and its box office performance (reminder: there isn’t much of a connection). This time I wanted to see what kind of statistical relationship exists between what critics think of a movie and what the general public does. I used the top 100 grossing movies of 2012 as the dataset and looked at each of their Rotten Tomatoes scores – each has two scores: a critics’ score and a general website users’ score. Hence: “Critics vs. Humans”.

This is the initial result (wait for it – there’s more):

Film critics scores vs. general public scores

I was disappointed by this result, because the R^2 value of 0.51 is inconclusive: there is some kind of linear connection, but it’s not too strong. In addition, the fact that user scores are 42.8 points higher than critic scores is pretty amazing, but further weakens the connection between the two score sets.

So since that was not conclusive enough, I broke it down by box office performance – 1. over $100M and 2. $30M-$100M in domestic grosses. This was more conclusive:

Film critics scores vs. general public scores: over 100M box office

Film critics scores vs. general public scores: 30M-100M box office

 Now we see that the linear connection is much stronger for the big blockbusters (R^2 = 0.69) vs. the smaller movies (R^2 = 0.33). The average difference was still over 40 points, but for blockbusters we can at least say with a fair level of confidence that an increase of 1 point in critic scores is worth an extra 0.498 points in general-user scores.

What does this mean?

It means that the critics and the general public are much more aligned in their opinions of blockbusters. And that can mean one of two things: either critics are influenced by the higher visibility of blockbusters and skew their scores to match the general buzz about them (negative or positive); or blockbusters are much more formulaic and therefore are easier to assess in a consistent manner by using the blockbuster framework that is familiar to everyone – professionals and non-professionals.

I think both theories make sense.

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14. THE DIFFERENCE BETWEEN SUMMER AND CHRISTMAS BOX OFFICE

Summertime is here. And so are its blockbusters. It seems like not too long ago Christmas was here, with all of its blockbusters. It’s a bi-annual Deja-vu. But I always felt they are different. And this is why:

Average Monthly Industry Grosses and Average Monthly Movie Release Count

First, I plotted the average monthly grosses of all movies released in the decade between 2003 and 2012 that grossed more than $1M. But that was a pretty obvious graph (the blue one).

However, when you add the average number of monthly releases to the picture – things get more interesting: in the summer, the number of releases plunges, while total grosses soar, while in contrast – around Christmas the number of releases goes up together with the grosses. (Also notice that August, September and October are the season for a ton of releases that don’t fare too well at the box office – another interesting phenomenon). This is an anomaly that sheds a lot of light on the whole strategy behind different kinds of films and more importantly – different kinds of audiences.

If fewer movies mean more total grosses in the summer – then this means that the industry has determined that “network effects” draw revenue from people who would otherwise not go to the cinema at all. In other words: kids, who are the prime audience in the summer, either go to watch a blockbuster or they don’t go at all. That’s why no small movies dare to go up against the blockbuster – if you’re not confident you can hit the initial critical mass of viewers required to get traction – you shouldn’t enter the race at all.

In winter, however, more releases go together with higher total industry grosses. I believe that the explanation for this is that in the winter, especially around Christmas and New year’s, adults too have some time off and they are more inclined to go to a movie even if it is less hyped up, especially during Oscar season.

The bottom line is that in the winter – more movies battle for a pretty big cake, while in the summer, everyone is scared of the few bully-movies battling for an almost identical total cake. In winter you have a chance to get something even if you are not a heavyweight, but in the summer – you better stay out of the way of Iron Man and his buddies.

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13. 3D TO THE RESCUE? PLAYING WITH FIRE – PART 3: GROSSES PER CAPITA

The box-office segment of the film industry is relying more and more heavily on 3D screenings as its savior. This is how much:

Box Office Grosses Per Capita - 2D vs. 3D vs. Total

While total box office appears to be steady (the blue line – not growing, but also not declining since 2005), the situation for 2D box office is bad, as the annual per capita spending on them has dropped from over $40/year to under $30/year – more than a 25% drop over the past decade (the original raw data of total nominal grosses and nominal 3D grosses, is from this MPAA report).

Now, you might claim that this is fair, since this is probably similar, for example, to the pattern that analog cameras followed as they were replaced by digital cameras. But here’s the thing: it is still unclear whether 3D is a superior product in the eyes of the consumer, especially since it is not expected to drive down the prices of the cinematic experience – unlike digital cameras or any other truly disruptive technology did in its respective domain. The problem with this industry-experiment is that by performing it, the industry is playing with fire: if 3D doesn’t hit an inflection point soon, there will be no way back to the old paradigm, because most 3D viewers will not agree to go back to 2D for the same price as 3D. Since 3D did not succeed in increasing the total number of tickets sold since 3D was introduced in 2006 (see previous post), in effect what it did was transform 2D moviegoers into 3D moviegoers with higher expectations.

The common perception of cinema has changed: cinemas have conquered the domain of 3D blockbusters, but while doing that they also surrendered the domain of 2D movies to home entertainment. All the people who left the cinematic experience behind over the past decade – be it for other forms of entertainment or for good home cinema systems – are not coming back for 2D cinema. In other words – if 3D fails, this industry experiment will end up proving to cannibalize the industry.

That being said, this may not be all bad, since revenues from home entertainment end up going to the studios and production companies anyway, but my point is that the following equation: “straight to home video” = less prestige, will have to change into: “straight to home video” = 2D. Therefore, independent production companies (which tend to make only 2D films) that adopt this new paradigm, will realize that there is hope for them. Those that stick to the current definitions of prestige, will have to cope with a lot of bleak projections.

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