Saturday, January 7, 2012
Brands, Budgets, & Bankability Still Don’t Explain Why Studios Are In Crisis - Part 3
The strain on the feature business is evident at all the agencies including CAA. That agency ended the year with a flurry of exiting agents, with rumors that others may follow in the next few months. Once famous for finding jobs for long-timers, CAA now has a partner in TPG and a long roster of agents who have built up salaries in flush days that are not currently justified in an era of diminishing returns in the movie business and less money to go around.
Magnolia Pictures and Landmark Theater chain co-owner Todd Wagner suggested redrawing the revenue relationship with exhibitors and cutting them in on ancillary revenue streams or giving gross percentages. Which is why most of the deals at Toronto were day and date VOD-centric. The Weinstein Co launched a division dedicated to VOD releasing.
But Margin Call insiders said that paying $10 million in P&A would have made those higher grosses very expensive and the film less profitable for a film that was acquired for about $1 million. The split with cable companies brings back 60%-70% to the film, which is better than the 50/50 split with theaters with a much smaller P&A spend. “It all becomes about the P&A. We all know that unless you can spend $20 million or $30 million, why bother?” Wagner told me. But with VOD, “you reach the entire country, cable companies promote your product through running their own spots, there is a frictionless collections process, and most importantly, I don’t have to run a TV commercial. I believe there is a huge mass of movies this model makes sense for.”
Even though the reshaping of the independent sector is already underway with day and date theatrical and VOD releases, studios have yet to find common ground with exhibitors on feature films. Moguls want to believe people would pay extra to watch films premiere at home in a timely fashion. But at what price point?
This was as bold as when Disney shrank the window of Alice in Wonderland, but Disney knew what it was doing by trying with a film theaters had to have. Theaters decided they could live without Tower Heist (it turned out that many moviegoers felt the same way), and Fogelson had no choice but to scrap the test. Exhibitors were conciliatory in rejecting Universal (whose Comcast owners are clearly invested in fostering this business), but this will be a hard battle to win.