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The Roundup June 15 Tinseltown edition

Akbar Jodhaa wins six Indian Academy awards!
The Indian Academy Awards think Akbar is great. Snagged six awards yesterday including best picture.

I’ve been saying this was coming more than once right here in this blog . . .

A new, privately owned Hollywood studio launches on Monday with its founders promising to shake up the industry by focusing on cheaper films that cost no more than $10m to produce. . . .

“We feel that lower budget films have been left alone,” said Mary Dickinson, who together with Charlene Fisher is a founder of DFIS.

She pointed to recent commercial successes that were made cheaply, such as Juno and Little Miss Sunshine (produced by Fox Searchlight, part of News Corporation’s Fox studio), as the type of movie DFIS would make.

(“Cut-price film-maker rolls out in Hollywood,” Financial Times, June 15) What most people outside the industry don’t understand about filmmaking is that it’s run more like an investment portfolio business than, say, a movie studio. Individual films are the same as equity or debt investments — they have a lifecycle of financial returns. And the folks running the studios think like mutual fund investors; they’re building a library of financial investments (individual films and their licensable content) and trying to maximize the return on those investments. The only real (and substantial) difference between them and mutual fund investors is that a huge part of the investment value of their properties comes from creative folks, particularly stars, and so they, by necessity, have to make some financial decisions that are totally irrational simply to keep the creative talent happy — and working for them in the future. Case in point: the disaster film, Ali, a super-dumb financial decision (like investing in GM two weeks ago) but one made to keep Will Smith happy. From this perspective, the “Miramax formula” — which limits the downside (in its early years, Miramax would buy up films for hundreds of thousands of dollars rather than millions), with a handful of moderately profitable films and one or two breakaways making tens of millions or hundreds of millions of dollars — simply rains money down on the studio. The caveat: the folks at the top need a flawless, white hot instinct for what audiences will pay to see. To see just how important this is, buy a DVD copy of Cinema Paradiso with the original Italian version and the Miramax edited version, the one that Harvey Weinstein personally took an axe to and left miles of film on the cutting room floor. Compare the two versions and tell me which one is most likely to make tens of millions of dollars at the box office (hint: the original Italian version is a total bore and goes kookily and disappointingly off-base in the last half hour). The low-downside/unlimited upside is a winning formula that, if DFIS sticks to its guns and doesn’t succumb to the same temptation Miramax did (that is, invest tens of millions of dollars in films, i.e., Gangs of New York) and increase the downside, they’ll be a major player in the industry. The next secret for some hungry start-up to grab up if they want money to rain down on their studio: Spanish-language or Latino-centered family films. More bucks than you can count.


Recession physics: boxoffice up, home entertainment down.

The global video business lost more than $2.6bn in 2008 due to a combination of a fall in both DVD purchase and rentals by consumers. The figure, which equates to a downturn of 4.8 percent globally . . .

Internationally last year consumers spent $26.4bn on video software, with two thirds of that figure ($18.1bn) spent on buying DVD discs. The overall figure represents a 3.6% drop on 2007 spend and a 4.7% drop on disc sales alone. The sales figures are in line with the overall trend which saw consumer spending plateau between 2004 and 2007 and the North American market starting to decline in 2007 which signalled the start of a global downward trend.

The high definition Blu-ray format was heralded by the industry as the answer to the decline of DVD. However the format war with Toshiba’s HD DVD meant that the strong unified marketing that had worked so successfully for DVD’s launch a decade earlier was not replicated. This coupled with a worldwide recession in consumer spending and the easy availability of video via other means such as downloading, pirate, legal and illegal temporary ownership, ensured that despite strong sales of BD in 2008 of $482, they barely made a dent in the missing revenue.

(“Blu-ray unable to halt DVD sales slump. Despite four-fold increase in BD spend to $482m, and strong video sales in China, India and Russia, Screen Digest predicts only modest growth in 2010,” Screen Digest, June 15) High definition video discs were double killers. Because of the format wars, high definition discs did not sell well as people waited for the standard to establish itself (pity the poor folks with those HD video libraries). But high-definition also killed DVD sales. Why buy a DVD if you’re eventually going to buy the same film in high-definition, once the format war is over? Add a recession and a general slump in video disc film sales and, well, let’s just say a more than a few prospective financial sheets at the studios require major editing. (Except for He’s Just Not That Into You — Warner Brothers is busy revising their home entertainment prospectives upwards!) The only aspect of DVD/Blu-Ray retail keeping anyone in business are sales of TV series. People buying TV series that they have already paid for with their cable subscription. Go figure.


If you really, really, really want to go into the film business, I suggest boning up on Mandarin.

After notching up a record-breaking $630 million last year, Chinese B.O. is set to make $800 million this year, but the biz still needs to grow in sophistication, Yu Dong, head of the Polybona distribution group, said on Sunday. . . .

One of the main reasons why Chinese cinema is booming is improved distribution, and the forum featured presentations by two key cinema chain figures, Chen Guowei of Wanda Cinema Line and Wu Hehu of Shanghai United Line.

“After the financial crisis, the Chinese film business could become the engine of the world film business,” said Chen.

(“Chinese box office has far to grow,” Variety, June 14) Of course, $800 million is a rounding error in American boxoffice, but the Chinese boxoffice, like so much else, is set to grow faster than any boxoffice market in the world. I’m serious when I say that entrepreneurs serious about going into the film business consider thinking about growing and underserved markets. Spanish speakers in the United States. Chinese in China. Despite big budget showstoppers like The Promise, the mainland Chinese film industry is very, very unsophisticated. Hollywood won’t be calling soon because of highly restricted laws limiting access to Chinese markets and controlling repatriation of profits (one of the reasons that India has such a thriving film industry is that companies that import films, such as American studios, are not allowed to repatriate their profits — not even a dime). Oh, and on a completely different topic, why does every article in Variety read like it’s been run through a translation program from Mongolian or something?

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