GO PRIVATE.
There will never – ever – be enough growth and margin improvement to satisfy Wall Street.
Maybe short-term the studios will get a bump by telling investors they are going to make 100 comic book movies over the next 5 years – but after that flattens out – there’s nothing left to grow on top of that.
And it’s all Wall Street’s fault. You can’t blame studio executives. They have to appease Wall Street or they’re out.
I mean, my company, Manka Bros. just announced a trilogy of films based on the board game CHECKERS!
Wall Street’s insistence for high margin growth in such a mature business is destroying creativity (again, note all the sequels and re-makes and re-hashes and re-dos) and in it, ruining any realist opportunity for growth.
To grow the way Wall Street would like, 21st Century Fox (for instance) would need to have an “Avatar” one year (and double the amount of TV production); two “Avatars” the next year (and double again the doubled amount of TV shows); four “Avatars” the following year – and so on and so on. And they would all have to preform as good or better than the first!
And the market is saturated already.
There are too many choices and studios don’t have the monopoly on content creation that they once did.
And the moguls long for those days.
Sorry, fellas, they are not coming back.
It won’t be cheap to go private – billions and billions – but there is plenty of private equity out there that would love an asset that consistently pumps out up to $1 billion in pure profit.
Without the need to top profits year after year, the content produced can be more experimental, and thus, much more interesting and exciting for the consumer.
It would even allow for the occasional down year when things just didn’t work out. Hollywood IS a cyclical business, after all.
Hollywood Studios are sacred treasures in this country (and around the world) and should not be allowed to just fade away because Wall Street wasn’t happy with the growth prospects.
We must do what we can to save these institutions and going private is the best way.
Jill Kennedy – OnMedea
I can only hope they listen to you, but I doubt they will, as long as the creativity of a project is not the main determiner of success, as measured by money and ROI.
I see the same problem in the publishing industry. Not only do they insist on projects that can be described, they want them described a certain way. I believe this skews the industry toward producing only certain types of stories, and the rest are never produced. Or worse, they are produced, but have to make such a scene to even get noticed that any potential audience is driven away.
The need to keep the new stories under the same umbrella as the old stories, so the metrics will work, is killing the field. How can you judge the possibilities of werewolves on a haunted lunar colony when there are no (other) stories like that? Just read Connie Willis’ book Remake to see where this is going.
Look at the business model of insurance companies.
Everybody knows everything and understands nothing.
Possibility of a co-op, whereby funds are deposited by filmakers to fund exploration of new ideas and formats. Proceeds of experiments plowed back into co-op.
The existing model has been a non starter for start-ups for years. Why participate in a losing (broken) system/game skewed towards those in positions of power
The problem and even wallstreet doesn’t know this….their are two sides of the coin….films if properly financed will not make a ‘profit’….cashflow yes…..profit no. So the fact that wallstreet is looking for ROI means they are getting shafted by the astute studios who are keeping all the accounting ‘losses'(unamortized cost) to themselves. Budgets typically have some built-in gravy..20%? …its not and never has been about creativity….its math…the budget is x…solve for x from recoupables with the goal being x…if you are close…gap fund the film…and roll the dice…that being said….what or how money goes into the film is a different thing….everyone knows you need ‘show money’, POF etc…but few if any today know that you never…EVER…spend that money…EVER…that’s what keeps you in business….that’s what allow you to secure talent, access your recoupables,let the distributors know you can make more films…cover P&A etc….be smart….raise production capital for your company…..not ‘a’ film….find out how to cashflow your POF and use that money for production. No one knows how the film will do…but everyone should know what their recoupables are…and if you have ‘projected’ your revenues properly(think lawsuits for Forest Gump, Coming to America etc)…you ALWAYS will have losses….that is what you can offer wallstreet. Goodluck!
A dose of reality
Jill Kennedy is right but she is a decade late. She should talk to Zelan Bonn who invented the superconvergence studio concept to save Hollywood. I came across him on Linked In when he was chatting up his project. Guys a genius but nobody seems to be interested in saving Hollywood but him, and now Jill–at least we have two of them now. Check out these links–super cool stuff!
http://www.epicintre.com
“EpiCintre™ – Igniting The Second Golden Age Of Hollywood”
http://imajilan.weebly.com/blog/epicintretm-igniting-the-second-golden-age-of-hollywood
Great article! Jill is right but there is a lot more to it!
If I could find 11 more Jills, I would have a dozen people who understand why I’ve been working for a decade now, trying to save Hollywood with my superconvergence studio invention. Old Hollywood is dying and the Silicon Valley model of the future is even worse with respect to where it wants to take the content market–consumers are the losers. There is a third way, a far more creative, cost cutting, and lucrative way. I call it superconvergence and the prototype is called EpiCintre Studios (www.epicintre.com).
I hope Jill reads about it because I could use some industry understanding and support—the legacy-centric crowd still think like “closed shop” dinosaurs and I’m a bit tired of it, to tell you the truth. A China group want my invention if they get it, Hollywood is toast—I have too many friends in the industry to let that happen on my watch!
Well, it *is* a business. As long as they are putting up the money for it, they can demand whatever terms they want. If I were looking for funds, I’d look at China, Mars – whoever’s got better terms.
As a kid, I was a futurist. I was part of an organization that always looked forward and radio made me focus on each consumer as a person and not a group. By combining my technology background with entertainment, I was using terms like “technotainment” and carrying the brand across all aspects creative/creator. Not this sanitized version that RED BULL is doing either. I was called a creatologist back in the day. Mark Victor Hansen was someone I was told to talk to directly. Madison & Vine was one of my favorite reads. I understood Mark Burnett before he came to America. The same with Simon Fuller before he partners with one of my partners at the Pantomime theater in the UK to create what was POP IDOL in the late 90s. I almost started a social network when Friendster was not getting it. AOL Talent was nanoseconds from becoming a reality with casting globally. You see, this is not about how great I am. It just means that if you are forward thinking and always focus on the end user or consumer, you never get left behind. I left Radio, the Labels, and Studios behind. Not the reverse. I love Hollywood and some aspects of the institutions that gave me my start at 15 years old. However someone’s “black box” is not a solution. Neither is everyone hoping on the “mobile” bandwagon. If you wanted to do that, you should have been there before they were talking about digital distribution to movie theaters from China in the late 90s. Speaking of China, it is crazy to do business with them. Brokers seem to be the only ones with traction there outside of the Chinese government who will make sure you never make a profitt, lol. Terms at any cost? Hmmm … not sure about that. Know your end user and you will have 90% of the formula. The distribution aspect is the easy part. Oh yeah getting money. Stay away from financial instruments and you will be just fine. And as for broker. Only those with DIRECT connections on a daily basis are worth using. Zelan, I like what you are saying being that I think forward too. However, getting the funding has been my focus and will remain my focus since none of these brilliant ideas will even allow the creative or content to exist without it. When RED BULL is the Music Industry (and it IS today), something is wrong with the model. They were only smart enough to pick up the pieces while everyone was focused on creative and forgot the end user.
This topic is actually top notch and genuine for discussing. nice topic Thanks much
Wallstreat does not care about content quality; they care about people spending more money on content. Sure: there are limits, but why is it bad to strive for major audiences and more return. Why is “quality” such an important measure? There is plenty of content to go around, with or without quality. Maybe we should simply watch less and do something more productive and creative with out time. And with regards to overvaluation: the market will correct itself.
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