Sorry about the hiatus. Summer hours, you know…
Just Warming Up
I saw Barbie (AMC Santa Monica) and Oppenheimer (the Village) and liked them both very much. Delighted, of course, to see two original and thoughtful films leading the market to a post-COVID future. I hope the strike doesn’t go on forever and put too much of a damper on this momentum (which is not taking sides, I just mean I hope it ends) but to me this reinforces my view that this is actually a good time to be in movies, which makes today’s topic timely.
With respect to the strike, there isn’t that much to say. I think you’re either “in the room” or you’re not and if you’re not, it’s like exchanging rumors about next month’s weather. Quite useless! One thing I will say — the big solutions for writers and actors aren’t really on the table. To regain anything like the upside that used to exist, the business has to be somewhat decentralized. That’s a bigger change. But both good and possible. We have touched on the idea before. Along these lines by the way, Steve Soderbergh just released a new series … on his own website. See it here. I paid my $7. I enjoyed it and there is more down this road!
Barbenheimer reminded me that with the possible exception of Manohla Darghis there are no reviewers now that I am very aware of. I think I mainly trust Bret Easton Ellis and the Ion Pack on their podcasts. Is there someone I’m missing?
Tally ho…
Rules For Starting a Studio
Do you want to do this?
A lot of people who know a lot about film are good for one or two projects a year (max) and have no interest in starting something more than a production company that basically services their own output and a few projects that are very closely in their sphere. Which is fine. They’d rather be thinking in detail about one project at a time than negotiating fifteen deals, recruiting for five open roles, closing a revolver loan, woo’ing a comedian who is blowing up on TikTok, and selling a pay two deal on a package of six movies. Totally understandable.
But let’s say that is where your interests lie. I mean. Someone has to organize the circus!
What’s the Idea?
Studios exist. So unless there is a specific, and different, idea, then it will not be additive to create something new.
A studio needs an idea, a vibe. Look at Disney. Or look at Neil Bogart and Casablanca Records. The Village People. Donna Summer. KISS. Parliament. Captain & Tennille. Casablanca Records was the 70s.
Similarly, Keystone Studios, Mack Sennett’s company, founded in 1912 — the Keystone Cops, Charlie Chaplin, Mabel Normand, Harold Lloyd and hundreds of slapstick comedies. That was a vibe. They had a reason for being.
In the music context, let’s not forget Death Row Records (Hip Hop) and SST Records (punk).
A24 had a distinctive perspective, sort of picking up the ball from Miramax. There was a gap in the market.
Pixar had a unique technological approach to producing animation and also had amazing creators.
The same concept works in fashion. When Yves St. Laurent left Dior, he had a new look to bring to the world. I approve.
Business plans that can’t explain why their output will be special — instead focusing on the generic returns in various subcategories of film, as if we’re going to the math Olympiad or selling wheat futures — are unconvincing to me. The rewards in showbiz concentrate at the top. If you’re going to make generic (or bad) films and you and the team aren’t particularly great at something or onto something new and special, then why will great things come of it?
And ideally that thing can’t be a very well served category. If you said “my thing is making $200MM superhero movies,” I’d say that category is pretty well-served already. You just want to get a job at WBD.
Its worth remembering that things change. Think 1975 vs. 1985 vs. 1995. Even though there are some timeless principles of storytelling, you can’t just keep doing the same thing, having the same vibe, and stay of the moment for that long.
There is at least one large gap in the market today. Your plan will be different and we discussed this a bit last time, but suffice to say I think that at the very least comedy is under-served and that people are in the mood for fun. I mean, just look at what’s working —
We aren’t here to copy but that’s the mood. There is an opportunity for American stories that have a little bit of a Coca-Cola/Ford F-150 blue jeans Smokey and the Bandit tonality and that have a sense of fun, with an emphasis on comedies. Obviously Yellowstone/Top Gun/South Park/Sicario/ Blazing Saddles/Stripes/The Hangover/Birdman are on brand but I’m not ruling out tones like Cormac McCarthy, Joyce Carol Oates, Harold & Maude, O Brother Where Art Thou?, A Place in the Sun, or Confederacy of Dunces on the edges. Even some of that down-to-earth let’s have fun on the road action —
With a soupçon of over the top meta-ness (well discussed here by Thomas Flight). It’s worth noting that one is not looking to be repetitive or nostalgic but you can only discuss movies in terms of movies that have existed.
Separately, there is a thriving based phonk-inflected anime re-edit community that I think is growing some interesting aesthetics that could yield some innovations down the street from Drive, The Crow, Tokyo Gore Police, and The Matrix. I think it’s worth seeing Gintama for the ironic and surreal use of live action walk around suits. That is super fun.
If all of this seemed entirely 100% correct to everyone, that would worry me. We’re predicting the future, not the present. And a lot will be filmmaker-driven of course. But it is good to have a theory of the case.
Know your edge. Have a reason for being.
What’s the Scope and Scale?
The movie business is like gambling in a casino where the odds favor the (talented) gambler. If you place many bets, you’re going to win. However, if you only place a few, randomness is a factor and you could lose big.
So you need scale. But two factors limit scale.
A given creative theme only scales to the size of that category.
Studios tend to experience a diseconomy of scale after about twelve movies per year. No one I’m aware of has been consistently successful much above that level in the modern era (including Netflix today).
There are companies around town that I would propose are too small. If you’re too small, it’s just risky. I’m assuming this is a studio that is financing the films and putting up P&A. In that case, three or four films per year is just … opening the door to pretty volatile returns. Some of these should merge with each other.
This can create a problem if you have a vision for one to three films per year. In that case, either you should (a) not be a studio and not pay for them yourself (so, like Killer Films), (b) just be at a megastudio (some sort of comprehensive deal like Blumhouse), or (c), in theory, you could combine four producer/creators and start a studio. You’d have to be very selective about what producers are brought in to the partnership. The complexity would be figuring out how movies get a greenlight. Trust becomes an issue.
There has to be a plan for the scale of the individual films. Are we doing comedies for $5MM to $30MM? See previous discussion, but this needs a plan so you aren’t making it up on the fly.
Output Deals
One of the reasons you are handling domestic distribution yourself is that you want to be able to greenlight movies. If before you can make a movie you have to get the approval of a domestic distributor who will put up P&A, and a foreign buyer who will take 50%, then you are in a consensus decision framework. The more consensus that is required, the more average your output will be. Game changers are rule breakers. They don’t get through committees. Everything Everywhere, Harold & Maude, — crazy sounding ideas!
So what you want ideally is a partner where you can put foreign rights to them so long as the film is within certain minimal specifications (in color, 90 to 140 minutes, budget of x…). Otherwise in the early days you’ll be doing a lot of selling and everything will be contingent on those sales.
Similarly, with respect to your pay one domestic deal, at first you’ll sell films individually. Good luck!
Saying No
What will happen is that you will want some exciting filmmakers. You have to land some deals. You have your parameters and goals and creative ideas. But then desired director Jordan X comes in with … a 160 page script that is a bit out of your zone and that is going to cost $90MM. (Assume your cap for an action movie is $50MM and for a comedy, $30MM.)
You really do have to say no. I realize that you think Jordan is so great and it would be a coup. It would put you in the bigs. And I realize that Barbie and Oppenheimer cost $100MM, Babylon $78MM, Once Upon a Time in Hollywood $90MM and Wolf of Wall Street $100MM and we could be freezing ourselves out of the very top end of already established filmmakers.
Yes, we are. Unless that is our plan, to own that top end — which is actually hyper competitive — then we have to stick to the plan. Just learn to say no. Remember, how much money other people make doesn’t matter. It’s not part of our business plan that “we make money AND NO ONE ELSE DOES.” All that matters are the pitches you swing at. There are no called strikes in showbiz.
What’s the Horizon Opportunity?
A business plan in 2023 should not look like a business plan in 1995. Every studio should be in touch with customers and should be a brand and a personality. Disney is a brand, but also A24 and Blumhouse are becoming brands.
The customer connection creates the opportunity not only to promote and open films, but down the road in the success case, it could open up the possibility of a subscription video business. This may sound daunting given the challenges many are having in SVOD, but you never know and I would suggest that the generic “entertainment” brands of entities like Paramount and Peacock hold them back whereas a focused brand could be embraced more readily by its aligned customers.
Whom to Hire
I presume that part of the business plan is that the new company will be different from mainstream Hollywood. Otherwise, why do it?
If you mostly hire people who are super aligned with mainstream Hollywood, how will you wind up different? It’s important to find people who have enough Hollywood experience that they know what they’re doing, but I’m skeptical about hiring the five most popular people in Hollywood. It could yield very non-contrarian (average) results.
Basically just hire the smartest people who are aligned with your creative vision. Do not hire anyone not aligned with the vision.
The Bottleneck Problem
Looking back on the Amazon Studios experience, I have decided that I don’t love relying on one “head of creative” even just in a specific zone. To be honest, people have good years and bad. They get distracted for various reasons. I’m very disinclined to be 100% reliant on one person. So instead of having one head of film or TV, I think I prefer Harry Cohn’s approach (Harry fired my grandfather once), which was to have several producers reporting to him. Traditionally, the criticism of this approach is that agents will play one against the other and try to use this to get better deals from the company. I think so long as you’re conscious of it, this can be managed.
What Else is Different?
If it’s going to have a brand, the company needs to be present for customers on socials, perhaps even in a Discord for the deep fans, and it should have a personality. Almost all entertainment brands are, ironically, quite dull online. For the brand to matter to customers, it should have some consistency. If there was a magazine of this brand, it should not be incoherent. I don’t mean that everyone at the company needs to get on TikTok and start making a day-in-the-life videos, but I do think there is a reason that so many venture capital firms now have prominent podcasts (venture firms being basically the movie studios of the finance world).
What’s it Called?
Well you can call your thing whatever you want.
I like the idea of giving a new company a fake backstory and then naming it after that. Like — there’s a karate dojo in Encino run by a couple. He’s a sometime stunt man who drives a Dodge Challenger and loves Chuck Norris. She’s a martial arts influencer. They are not very happy with the movies they’re seeing so they expand their business to also be a movie studio. But they don’t change the name. It’s still just:
Or just The Pool.
Roy Price was an executive at Amazon.com for 13 years, where he founded Amazon Video and Studios. He developed 16 patented technologies. His shows have won 14 Best Series Emmys and Globes. He was formerly at McKinsey & Co. and The Walt Disney Co. He graduated from Harvard College in 1989.
I love this! And it doesn’t have to be projects in the tens of millions. Think about the brand that Roger Corman created or perhaps the films of Ealing Film Studios where they had an entire crew on staff all year round making a new movie each month. Both Ealing and Corman knew their sandbox was that of breaking talent at lower budgets. The ability to capture direct to consumer relationships is massive but then the key is not only to serve them films. A small studio has to think about Lifetime Value and the MRR of each audience member in their inner circle. A24 are doing a great job at this with their own Merch. It’s the reason why Amazon and Apple have a future but Netflix can’t last (unless LTV is addressed in way that isn’t focused on passwords but rather on value offerings). I’m biased, my agency works with Hollywood celebs to build their brands online and we’ve built a large production campus in Oklahoma where we can experiment, at low budgets, with upcoming film talent making movies that have struggled to find a traditional home. Baby steps at the moment but I think you are absolutely right. If filmmakers want to become studios you have to produce enough content but become a brand. The best way to build a brand is to build it through partnerships with other large brands. But that doesn’t have to be film talent as there are plenty of partnerships to be had with non film focused brands for very little money if you bring content. Thank you for this article, it is great to read other people thinking in a similar way.
Wow. The nuts and bolts of how to remake Hollywood. Love it.