Nostalgia as the name of the game
Nostalgia has been the name of the game for many in the world of TMT [technology, media, telecommunications] for a couple of years now, as TV series are rebooted and eras brought back to life (think Fox’s The X-Files and Netflix’s Stranger Things, FX’s The Americans respectively), movie franchises are retooled (think Kong: Skull Island, Beauty and the Beast) and books also drag people back to the 80s (think Entertainment Weekly’s number 1 book of 2016, The Nix).
Nostalgia is almost certainly an appealing emotion for many media executives today too. In entertainment, they may look back to fond days before PwC screwed up who won an Oscar and who hadn’t; in technology, vendors are leveraging “digital detox” trends as an excuse to remake old products and in publishing many are surely screaming for the days before digital, when staff at the likes of Conde Nast were still allowed to throw “hissy fits” (to quote British Vogue’s Lucinda Chambers from the recent BBC documentary on the magazine). The empire is having to fast come to grips with a world of declining print revenue shared by all in the industry, as comprehensively covered in a recent piece by the Financial Times.
The one outlier to this trend, fortunately for them, is Viacom, which recently decided that instead of seeking refuge in the past (and in sheer scale) by re-teaming with CBS after splitting over ten years ago, it would instead streamline its operations down to six “flagship brands”. Undoubtedly the wiser move (if only based on the above cheat sheet from The Hollywood Reporter).
This article will focus on those first two issues, last weekend’s Academy Awards and last week’s Mobile World Congress event in Barcelona.
Talk about your burning platform. Last night Zeitgeist sat down to watch Deepwater Horizon, last year’s film an avoidable disaster in an event involving a lot of due diligence, seemingly little of which was executed properly.
So it was – far less catastrophically – with the 89th Academy Awards last weekend. PwC were caught out for the first time, having overseen the awards ceremony’s handing out of winning envelopes, among other things, for 83 years. In their apology, the firm explicitly made reference to the fact that a) such an incident had been foreseen b) protocols had been prepared, in case of such a rare eventuality c) these were not followed through quickly enough on the night. As with many cases of significant error, the fault appears to be with an excess of comfort.
- Firstly, PwC as a firm, it could be argued, had become too comfortable in the role of auditor. In an interview before the ceremony with one of the two partners involved, it was revealed the opportunity to be auditor for the awards had never gone out to tender. This is poor due diligence on the part of the Academy.
- Secondly, Brian Cullinan, one of the PwC partners, seemed himself to have acquired too much comfort with his role. Whether this was tweeting (hastily deleted) pictures of Emma Stone at the moment he should have been concentrating on his work (see picture above), as Variety revealed, or – as the same publication also uncovered the other day – that he wanted to have an on-stage presence, involving a skit with the host, Jimmy Kimmel.
- Thirdly, we would also add that – having worked for Deloitte in a strategy role in days gone by – PwC should never have let these two individuals stand in the limelight. Any project, however glamorous (or not), should always have only one face, that of the company as a whole, not an individual.
The eventual winner, Moonlight, was praised by The Economist (among many others) for being a wonderful film, and one that deserved to win the coveted Best Picture award. Interestingly, it noted how it had been made for “a tenth” of the budget of films that had won in the past several years. This is a worrying trend, as these prior winners were already considered to be of a small budget; minnows that did not attract the attention of the studios, who increasingly find themselves in the comic-book franchise game, rather than the Oscar race. It bodes poorly in the medium-term for the release and backing of films that try to tell human stories about real life; art that may actually have an impact on others. It is these types of films that, with current political turmoil, are needed right now.
Innovation in mobile is becoming harder and harder to come by. If, as Forrester reported recently, smartphones are in the hands of 40% of the global population (even including those people hanging out with penguins in icy tundras and running away from lions on barren plains) then such a product is in need of something new to differentiate the market for consumers. At the annual Mobile World Congress, such things were in short supply. This week’s Economist quoted Ben Wood of CCS Insight summarising the event as a “sea of sameness”.
Indeed, ZTE (as above), had a gloriously twee “fairy garden” on display, which seemed very very similar to the one we saw at MWC in 2016. From a product point of view, Nokia (yes, Nokia) seemed to generate the most buzz for its revamped 3310, a resurrected product from a bygone mobile age. A feeling of sameness hung in the air from those reporting from the ground too; cynicism was prevailing.
Last year, Zeitgeist found that if you didn’t have Oculus at your stand (for any reason, no matter how inconsequential), you were a nobody. You also needed to be talking about 5G (no matter how vaguely). The same seemed to be the case this year, except more so. This, despite the fact that Oculus has squandered an eighteen-month lead in the market, now with a position of third in the VR marketplace by revenue. VR in general has yet to transfer to a mainstream pursuit, to the surprise of analysts. 5G, on the other hand, saw some glacial movement. While operators in Japan and South Korea had already begun investment and deployment of the networks before standardisation, the UN’s ITU body has now set those standards, laying the way for other markets to begin upgrading their networks. Their challenge is a formidable one, and to be honest they should not expect it to be anything other than a thankless task. Their main approach to this eventuality at the moment seems to be bigging the technology up beyond all recognition, which has started a backlash of sorts among the more experienced in the sector.
This post serves as a companion piece and extended update to our previous article on rethinking film industry strategy, which can be found here.
“For me, the business of tentpoles is about generating franchises. The more tentpoles that are being made, the more risky the first installment of a potential franchise is going to be. That’s why I think everybody needs to be asking hard questions about what is a real tentpole and what is a faux tentpole.”
– Jean-Luc De Fanti, managing partner at Hemisphere Media Capital
Since our last post a few weeks ago on the need to rethink film industry strategy, when Steven Spielberg publicly predicted an “implosion” in the industry, the subject remains in the zeitgeist. As we referenced in our last post, Mr. Spielberg has some familiarity with the industry’s modus operandi, having created the blockbuster phenomenon way back in the 70s with Jaws. Like a mutant in a film of that genre though, the nature of blockbusters has changed since then. Jaws, were it made today, would look very different (i.e. terrible). Despite Mr. Spielberg’s warnings, studios presumably took some comfort in an animated sequel – Despicable Me 2 – becoming, in the words of NBCUniversal chief Steve Burke, “the single most profitable film in the 100 year history of Universal Studios”, more than E.T., Jurassic Park, etc. Not only did it paint a picture of an industry continuing to grow (though presumably the figure did not take inflation into consideration), it must have also quietened any further calls for originality, safe in the knowledge that it was a pretty lowbrow sequel that had triumphed.
The caveat is a large one though, that any proponents of summer blockbusters need to pay close attention to. Despicable Me 2 has made £437 million so far, with a production budget of just £50 million. While on the surface then Despicable Me 2 seems to prove how successful and profitable summer movies can be, it actually provides a lesson in what commercial success can look like with a small-budgeted film. Instead, the rule of thumb during the summer is more likely to involve investing some $200m+ in a film that fails spectacularly – think The Lone Ranger. Though this Disney production is the most visible disappointment of the season, it is by no means alone. The New York Times count “six big-budget duds since May 1“. It is interesting to note that Now You See Me, “the kind of midrange film that studios have largely abandoned as they focus more on pictures that play globally — has taken in $200.4 million worldwide and is still playing”, after costing $75m to make.
Those responsible try to spread the blame. Johnny Depp and producer Jerry Bruckheimer absolved themselves of wrongdoing for their involvement in The Lone Ranger by blaming the critics. Said Depp, “They had expectations that it must be a blockbuster. I didn’t have any expectations of that”. Yet it is easy to see how one might assume the film – created at such expense, with ripe intellectual property to be exploited, with talent involved in the phenomenally successful Pirates of the Caribbean franchise – had all the appropriate ingredients to make it a blockbuster. Studios meanwhile harp on about Twitter, which lets people instantly share their thoughts on a film and is now considered a worrisome bellwether for box office potential. But this is a reaction to poor filmmaking, not a reason why a bad film exists in the first place. They also cite a tight calendar. As The New York Times elaborates, “One or more cinematic behemoths — those loaded with similar-looking computer-generated effects, films that cost $130 million to $225 million to make — have arrived almost weekly since May, fragmenting and fatiguing the audience”. Again, this is no one’s fault but that of the industry. The idea of launching films in a specific time window, when consumers now enjoy time-shifting and device-shifting with their content, is antiquated. It is just as irrelevant in winter, when back-to-back “prestige” films clutter cinemas, desperate for Oscar attention. It is overwhelming for audiences, reduces choice, and in the case of the winter season implies that the voting member of the Academy have no long-term memory.
The summer product is so derivative that evidently audiences are pushing back, showing indifference to the “clones” that feature so prominently at Comic-Con. Films are either direct sequels / reimaginings, or strongly resemble other recent projects. Again, The New York Times has an excellent article on this, elaborating,
“Studios showcased another Amazing Spider-Man, another Cloudy With a Chance of Meatballs, another Avengers, another Thor and another Captain America… In addition to Godzilla, remakes teased here in recent days included RoboCop… and Riddick,… Even many of the original movies introduced at Comic-Con this year had a been-there-done-that feeling to them, notably Legendary’s sword-and-sorcery picture Seventh Son, which co-stars Jeff Bridges, Julianne Moore and Ben Barnes. In thundering snippets of footage shown on Saturday, the movie at times resembled Clash of the Titans, Snow White and the Huntsman and The Chronicles of Narnia: Prince Caspian.”
Cheering news for Sony came last week when it announced a $35m profit in the last quarter, but turbulence lay beyond that. In our last post, we mentioned the imbroglio that Sony found itself in as investor Daniel Loeb – whose hedge fund owns roughly 7% of Sony – continued to urge Sony to spin off its entertainment assets. Last week, he wrote a third letter to Sony – the most aggressive yet, with the Financial Times calling it “blistering” – comparing the film division’s two recent duds After Earth and White House Down to Ishtar and Waterworld (two of the floppiest flops to ever flop). He wrote that the CEO, Kazuo Hirai was sitting by complacently while the film division remained “poorly managed, with a famously bloated corporate structure, generous perk packages, high salaries for underperforming executives and marketing budgets that do not seem to be in line with any sense of return on capital invested”. It was with some interest then that, this past Friday, Zeitgeist saw that none other than George Clooney had stepped into the fray, calling Loeb an “activist” who “knows nothing about our business”. He lambasted the hedge fund industry in general, saying “if you look at those guys, there is no conscience at work”.
Clooney added that the “climate of fear” Loeb was creating would lead to even more risk-averse productions. It is creative, rather than financial risk, that Hollywood is sorely in need of. Art doesn’t engage audiences when it is timid and derivative. It inspires people when it is innovative, daring and different. Usually such creative thoughts do not spring forth from the mind of a hedge fund manager. Such new thinking – involving a review of a market research firms say is suffering from “overcrowding” – will require a significant course correction, one that is not going to come anytime soon. The summer slate for 2015 currently includes a Terminator sequel, an Avengers sequel, a Smurfs sequel, Independence Day 2 and Pirates of the Caribbean 5.
It’s fair to say that in the past ten years, the pace of technology has evolved at an ever-increasing rate. The way in which devices have changed, and with it our use of them, was humourously summed up in the above cartoon from The New Yorker. Digital trends have affected the way we communicate, the way we consume media, and indeed the way we consume goods and services, i.e. shop.
So it is a little surprising to many – your humble correspondent included – that we still have to put up with a film being released in one country one day, and in another months later. That we still have to wait a certain number of months for a film to amble its way from the cinema screens to our home, whether on Blu-ray / DVD or on VOD. It’s interesting to note that vertical integration isn’t a key issue; Disney recently launched the second subscription video on demand (SVOD) service in Europe, with a library of constantly refreshed titles that can be viewed on platforms ranging from TVs to Xbox to iPads. Indeed, Disney’s CEO Bob Iger announced way back in 2005 in an interview with The Wall Street Journal that he foresaw a day of collapsed release windows, when a film came out the same day at the cinema as it was available to watch in the home:
We’d be better off as a company and an industry if we compressed that window. We could spend less money pushing the box office and get to the next window sooner where a movie has more perceived value to the consumer because it’s more fresh.
So there is money to be saved in such an exercise. Yet seven years later, such a situation is still mostly a fantasy for major films. Studios have undoubtedly dipped their toe in the water, and some moderate success has been seen on the indie scene, specifically with recent films like Margin Call, Melancholia and Arbitrage. The former film was released simultaneously in the cinema and on VOD (seemingly only in the US, however), eventually recording strong results, months after its initial release at Sundance Film Festival. Again, what is the justification for such a change in platform release timings? Not meeting consumer desires and addressing piracy, but simple cost savings. Variety reports:
“We’re a star-driven culture, and on a crowded (VOD) menu, what are you going to be drawn to?” posits WME Global head Graham Taylor, who adds that with marketing budgets skyrocketing, the ability to use a single campaign across closely spaced bows on multiple platforms is an important cost savings.
The whole situation is quite frustrating for any fan of film or television. It is a frustration shared by Frederic Filloux, co-author of the excellent blog Monday Note, which Zeitgeist strongly recommends to anyone with an interest in insightful thoughts and reasoning on media industry goings-on.
Their most recent post also happened to detail the author’s frustrations with such seemingly arbitrary release windows. One of the most pertinent charts displays the achingly slow rate of change in platform release changes, that is so at odds with the pace of change in other media (above). The content of the post has rational recommendations, which at first glance seem eminently appropriate and overdue for implementation. Some of the recommendations though fail to account for the fact that the film industry and its machinations are often governed by winds of irrationality.
To summarise, Filloux recommends a global day-and date, shorter, more flexible window of time between cinema and home release. There are a number of obstacles to these ideas though. Firstly, exhibitors must be placated. They hold such a sway over studios that they cannot easily be ignored. Bob Iger, in the interview mentioned earlier, mentions exhibitors as being a key obstacle. Think about it, why on earth would a cinema want their film to be available in the comfort of their audience’s home any sooner than it already is? It wants to enforce scarcity, so that when the film’s marketing machine is at its height, the cinema is the only place you can see it. As already mentioned, indie films have had some success with multi-platform releases, but even these have met with consternation from exhibitors, as a recent example in Canada shows. The consternation becomes outright war for larger films. Zetigeist reported when, in 2010, many exhibitors refused to show Tim Burton’s Alice in Wonderland when the studio, Disney, flirted with releasing the film to home release less than four months after its theatrical debut. After much back and forth, exhibitors eventually relented, and the film went on to gross over a billion dollars at the global box office. Exhibitors are not going to be convinced about flat release windows anytime soon. They are perhaps the largest roadblock to such a move, and the largest point of advocating a return to vertical integration of production, distribution and exhibition that was the case until the Paramount Decree in 1948.
Moreover, while the argument about having flexible, shifting window releases depending upon a film’s success is logical, it does not acknowledge the existence of sleeper hits, films which do not open to huge returns but gradually accrue it over months of release (as illustrated by Margin Call, mentioned earlier). It would also be hard to define when a movie “succeeds” or “bombs”. You could use box office as a figure, but would this be without context, as a ratio of the film’s budget, or against its current peers? Using box office fails to take awards – principally Oscar – coverage into consideration, which invariably adds its own box office bump to a movie when it is nominated or wins.
The recommendation for simultaneous worldwide release is also a valid point. Zeitgeist has written before on the ridiculous prices pirated films go for in markets that have no access to the official product. To their credit, studios are moving further toward a “day and date” system. However, doing so exclusively would be dangerous. Releasing some films market by market allows the studio to gauge audience reaction, and if necessary tinker with the marketing or the film itself. Staggering release dates is also necessary for cultural events, such as the World Cup, which may be more relevant to some countries than others.
It is the last point made in the article, that of making TV shows “universally available from the day when they are aired on TV” that Zeitgeist could not agree more with. Apart from audience frustration – and recent technological development such as DVR show how the opportunity can shape viewer habits – such a move would also surely divert people from resorting to illegal downloading.
To conclude, while there are caveats and significant roadbumps to be addressed, and some progress has been made over the years, the film industry has a long way to go in a short time if it wants to catch up with consumer habits. Flat release windows should be an inevitability, and a priority. Moreover, they should not be seen purely as cost-saving measure, but as an important way of keeping an increasingly technologically and globally savvy customer base happy.