The costs of Hollywood spending

Who benefits when filmmakers raise the tentpole?
By PETER BART
James Cameron was quoted in the Wall Street Journal not long ago arguing that "when a studio goes crazy and spends a lot of money, it's the consumer who benefits."

Translated, that means that if Jim Cameron decides to reinvent the lexicon of filmmaking in a mind-bogglingly expensive movie like "Avatar," the filmgoer will enjoy the thrill ride -- and won't pay more for it. Much more, anyway.

With the world awaiting "Avatar's" release, we shall soon see if Cameron has performed that re-invention. In any case, having poured $300 million into the movie (or $400 million if you run the numbers differently), it's Fox that's waiting nervously to find out whether "the King of the world" again will earn all the ka-ching in the world.

Whatever the outcome, I would argue that the move to ever bigger and more extravagant movies will hurt the filmgoer long-term, not benefit him. Here's why:

Fueled by burgeoning foreign grosses, the studios are intent on making fewer movies at more grandiose budgets and at the same time diminishing their investment in "risky" low and mid-range dramas. The result: A numbing succession of tentpoles that may all but drive indie-style films out of the multiplexes.

Further, the era of the "big spend" will increasingly contaminate the few dramatic movies being made. "Lovely Bones," the Paramount-DreamWorks Christmas release from Peter Jackson, is an intimate film that cost almost $100 million to produce. Will the massive special effects improve or diminish the impact of the basic narrative? One key reason for the setbacks suffered by both Miramax and Paramount's Vantage division was the impulse to pump up spending both in production and marketing.

I remember the off-the-cuff commentary of Mike Nichols some years ago in describing the budget crunch on arguably his best picture, "The Graduate." When a young director finds his budget shrinking, recalled Nichols, he is compelled to not spend more, but invent more. The result often is a better movie.

In an economy where the big companies are under pressure to cut costs, filmmakers paradoxically feel the pressure to amp up their budgets. Audiences overseas want big-canvas action pictures that offer more effects and less dialogue. Simultaneous releases around the world may diminish piracy, but they expand marketing costs. The distributors demand instant gratification and are willing to pay for it.

I hope "Avatar" is a big hit and that the always modest and understated Cameron once again proves his techno-smarts. Even if that happens, however, the average filmgoer will still emerge the long-term loser.

Is Tom Cruise overpaid?

Like most people, I've always been intrigued by Forbes' lists of the "wealthiest" and "most powerful," but I've never figured out quite how they line up with their numbers.

Now, however, Forbes has a list I can relate to -- the most overpaid stars in Hollywood. The individual rankings, Forbes says, are based on a return-on-investment formula involving each star's compensation and each movie's gross. Forbes, of course, believes it has reliable data on star paydays, even though those numbers remain obscure to the rest of us.

The upshot: Will Ferrell, Eddie Murphy, Ewan McGregor and Tom Cruise are on the top of the "overpaid" list. Inclusion of Murphy and Ferrell is understandable, but Cruise apparently is vulnerable due to "Lions for Lambs." As for poor McGregor, he's apparently made too many classy movies like "Trainspotting" and thus represents a bad buy compared with, of all people, Shia LaBeouf, who by Forbes standard is the best buy for the buck among actors. Go figure.

Read the full article at:
http://www.variety.com/article/VR1118011863.html

Kavanaugh's hope: A pact overhaul

I love Ryan's model on individual films because of its simplicity and as he puts it at the end of this article it attempts to "align everybody's interest." That's just good business management regardless of the industry. You always want to align your key stakeholders incentives so they are all working in the same direction... the success of the project/division/company etc. or in this case, the film. Also the extremely important point that is never mentioned in this article is the creation of TRUST and the destruction of the "Hollywood Accounting" system. Ryan's model only works if the accounting is honest so the participants get their fare share and feel they can trust the system. That's the whole reason reps preferred gross deals. Gross deals protected them and their clients (notice the order)from B.S. accounting that never paid out.

Noting this, I'd be remiss if I didn't mention the slate deals between hedge funds and studios (Sony, Universal, Warner Bros.) such as Gun Hill I & II (Which Kavanaugh brokered), from which returns have so far failed to live up to expectations. Earlier this year when hedge funds were facing record redemptions, they were reportedly selling off chucks of these funds for 30 cents on the dollar. Though without the inside data it's impossible to know for sure, it appears that these failures often happen after a studio has kept its best (most probably profitable) franchises for itself. This puts the whole concept behind these film funds in jeopardy as they are based on assumptions regarding risk and return. If the studio keeps a Harry Potter or Spiderman out of the portfolio, then the assumptions of portfolio risk were too low and the assumptions about cash flow were too high. A recipe for disaster in any investment, and a further representation of the studios continuing inability to deal with their investing partners on an honest basis. That being said, I also have to place some of the blame at the feet of these hedge fund managers for negotiating poor deals and assuming they were taking a "Random Walk Down Hollywood Blvd."

Which brings me back to Ryan and the way he finances individual films. If Ryan's spreadsheets continue to tell the truth, I believe he'll continue to finance a lot of films this way.


Relativity shifts DVD share in its prolific slate
By MICHAEL FLEMING at DAILY VARIETY

When Ryan Kavanaugh accepted Producer of the Year honors at the Hollywood Film Festival on Oct. 26, attendees at the Beverly Hilton watching the baby-faced 34-year-old could be forgiven for wondering, "Who is this guy and how is he able to make so many films when others are in retreat mode?"

Via slate financing deals, Kavanaugh's Relativity Media is underwriting chunks of Universal and Columbia slates. His company's separate single picture business is also becoming a destination for talent with projects that have no studio deal because they are considered too offbeat, too risky, or too grownup.

Under Kavanaugh's business model, stars waive gross points, and work for severely discounted salaries. Once Relativity Media recoups, talent takes equity percentages in revenue streams that include 100% of DVD.

The concept is hardly new, and Relativity Media isn't the only one using it. Lionsgate, for instance, is aggressively pushing its own program, which has landed deals with Paul Haggis and Stephen Gaghan.

The biggest surprise is how prolific Relativity is with this program. In the past four years, he's used some form of this formula on 30 films.

Discussing the pay arrangement for the first time, Kavanaugh tells Variety that Relativity Media now uses variations of that risk-sharing formula in nearly all its films, and he predicts the concept will filter over to the slate financing.

Kavanaugh still makes some first-dollar gross deals, but nearly every pact now involves some give-back that has created an express lane to recoupment.

Though he had nothing to do with either film, Kavanaugh's sales pitch has been made easier because of the success of "Yes Man" and "The Hangover," both made with Warner Bros. By taking lower salaries (which helped lower their films' budgets), Jim Carrey and Todd Phillips have taken home checks, respectively, for $35 million and $45 million.

The principle, he says, is "treating talent as partners, not third-party hires."

Most of these deals are done under the radar, since reps don't want to advertise their clients are working for as low as $250,000. However, Steven Soderbergh didn't mind admitting that he'd waived his salary and gross for the espionage thriller "Knockout." That gives Kavanaugh a Soderbergh-directed action film for $20 million, and it gives Soderbergh an ownership stake somewhere above 25% but below 50% -- depending on whom you ask -- once Relativity recoups its budget, P&A and interest costs.

The discount system works best when the star or director can't get the picture made at full price. Warner Bros. would not have made "Yes Man" for $75 million and a 25% gross payment to Carrey, but the actor liked the project enough to take a risk. WB would only give Phillips $34 million to make "The Hangover" with an unproven cast, and the director had to kick in his fee to make the film his way.

Soderbergh wanted his "Knockout" star to be Gina Carano, viable in the mixed martial arts ring but not at the box office. Soderbergh's equity play gives him the latitude to entice the name actors he'll need to surround Carano.

Kavanaugh says Paramount balked at the budget for "The Fighter," but he made it for half that price because David O Russell, Mark Wahlberg, Christian Bale and Amy Adams are participants. He also claims "Brothers" is in profits before it is even released, because Tobey Maguire, Jim Sheridan, Jake Gyllenhaal and Natalie Portman are participants. He similarly brags about the profit potential of other films due to the participant scheme: "Magruber," The Nicholas Sparks adaptation "Dear John," (Channing Tatum, Lasse Hallstrom, Amanda Seyfried and Marty Bowen) "The Spy Next Door" (Jackie Chan, Brian Levant and Bob Simonds) and "Season of the Witch" (Chuck Roven, Nicolas Cage and Dominic Sena).

Observers skeptical of Kavanaugh's approach say only time will tell if his bets work, and they suspect he's more in love with making deals than in the quality of movies. Talent will only get rich if the films make money. And several dealmakers said that if given a choice between a risk-reward deal and a studio pact, they'll take the latter.

And, at a time when the Producers Guild is again repeating its mantra that the "producer" title is being given too freely, some wonder if the self-admitted money man should be recognized as a producer (much less Producer of the Year).

Kavanaugh disputes the notion that his deal is a consolation prize to studio pacts.

He says Relativity is already seeing better projects as the formula catches on.

"This was a difficult sell at the beginning, when reps couldn't grasp the models, but we've proven it works, and we can show talent how they can make more in upside," Kavanaugh says. He seeks out established filmmakers and doesn't tell them how to make movies, as studios do. When he or his lieutenant Tucker Tooley get involved, they are more apt to come armed with spreadsheets than script notes.

"We had one instance where a cut came in at two hours, 30 minutes, and the director told us, I can't cut anything more," Kavanaugh said. "We delivered a spreadsheet and said, 'here's how much less you will make at the box office, compared to what you would make if it was one hour, 50 minutes, which means one more show a day. Without further discussion, that film was delivered at under two hours.

"If you could convince a director that every penny being spent is half his penny, it does make an impact," Kavanaugh said. "Suddenly it's, 'Do I need to have this crane around for the entire shoot? Do I really need those 20 extras?'

Eric Gold, Carrey's co-manager who helped construct the "Yes Man" deal that became a template for "The Hangover" deal, predicts that these risk-sharing pacts are the future, because the old $20 million against 20% gross deals are hard to come by, and because the new deal paradigms give talent access to 100% of DVD revenues, worth a potential fortune even in a flattening DVD market.

"The DVD royalties that studios paid first-dollar gross stars was like Elvis getting a Cadillac from Col. Parker, but now there is real opportunity for those willing to take a little downside risk," Gold says. "Our deal led to 'The Hangover,' and it's now spreading. There is an inflection point in all these deals and into an artists' sweet spot. But God is in the details here. These deals are very complex and while people might be told they are getting the 'Yes Man' deal, quite often, they aren't."

Dealmakers said they have to negotiate to remove as many fees and obstacles as possible that can delay the trigger for talent paydays. Kavanaugh dismisses the skepticism that his and other deals contain fees that get between talent and their monies. He said his formula isn't that complicated. Talent earns after Relativity recoups budget, interest charges, P&A, sometimes a low distribution fee, and out of pocket costs. Kavanaugh said that because distribution goes through Relativity-owned Rogue or Lionsgate, those costs are contained.

These risk sharing deals with talent are constructed differently. Kavanaugh's deals are rather straightforward: The talent gets a percentage of the revenue after the picture breaks even. But in the case of Warner Bros.' deals with Carrey and Phillips, each of whom waived their upfront salaries, they took on something akin to the role of a financier. They were paid percentages

Kavanaugh expects his program to grow because the old system had to change.

Said Kavanaugh: "In what other business would the principal investors and shareholders be willing to lose a fortune on an investment, and then write the equivalent of bonus checks for tens of millions of dollars? Our structure is to align everybody's interest and properly reward them. We want our money back, and then you can own the movie with us.

What Should I Write?

Because of yesterday's article about studios possibly relying less on A-list actors, I'm re-posting this from earlier in the year as it directly applies. As an aside, I happened to bump into a development exec from DreamWorks Animation at Saturday's USC/Stanford game. He echoed many of these same sentiments regarding what they are looking for; original concepts, new worlds, timeless stories.
For those of you wondering why a picture of Magic Johnson accompanies this, it's because he's taking a layup. Not a 3 pointer, not half court. Writing a sellable script is tough enough. Let's not make it harder than it already is.


WHAT SHOULD I WRITE?
I hear this question often from young writers and the answer will always be the same.... I don't know. Nor does anybody else, but here are some tips. Sure, we can make a few phone calls and tell you "Disney is looking for a Christmas project" or "Columbia wants a thriller, but no noir, or 90's female in jeopardy, and comedies grounded in reality always help" blah, blah blah.
Sure, you could write a script to fill one of those niches, but by the time you finished it the studios’ needs would have changed and you'd still be asking the same inevitable question...What does the market want now?
So, let's get less specific and start thinking about the person who's buying your material (script, short story, novel, comic book whatever). So now you're the studio executive. What's your job? How do you move your career forward? What motivates you to buy something?
As a studio exec. your job is to develop and produce commercially successful films. What does "commercially successful" mean? Well last I checked, the average cost of a studio film (including prints and advertising, P&A) tips the scales at around $79 million. Now think about that and let it sink in. $79 million! So they are looking for projects that can make back MORE than that amount. And remember approximately half the money at the box office goes to the theater, not the studio, so they're looking to gross over $150 million. Are the studios looking for your movie?
So what is a studio exec. looking for when shopping for stories? Even though many of them may not realize it, they're looking for one word.......
MONOPOLIES, or as close to them as they can come.
Let me tell you why. What’s your competition? As a studio exec. what is your entertainment product competing with?
Let's make a list:
Broadcast TV
Cable TV
Video Rentals
Video Games
Internet
.......or hell, the consumer could actually get off their ass and go play basketball, or ride a bike or go check out a sunset – or read a book!
Now we know all these activities (even the sunset) have some form of cost, just as going to the movies does. However, in the mind of the consumer, there is a huge difference between these items and going to the local multiplex. From the consumer's perspective all of these items are relatively FREE and movies are not.
When a consumer comes home and flips on the TV he doesn't feel the cable company slipping its hand in his pocket to fish out a couple of bucks, he thinks, or rather he feels at that moment that it’s free. He won't feel the pinch of the cable company until the bill comes in the mail. The same relationship, to a greater or lesser degree, exists between the consumer and the other entertainment options as well.
This is not the case for movies. Movies are like a heavyweight fight; they're pay per view. When you go to see a movie you are going to feel the financial and non-financial pain/costs immediately.
Costs to the consumer related to seeing a film:
Financial: Ticket price, food & drink, and possibly the cost of parking. Let's call this around $15 per person.
Non-financial: You have to drive there and park, you are forced to accept their schedule, you can't hit pause, the seats are far smaller than your couch, you have to share the room with 500 people you don't know etc.......
Thus, every time consumers are faced with an entertainment decision, in order for them to choose a film over other activities, clearly they must feel that the likelihood exists that the movie they will see, the moviegoing experience they are going to have, is not only superior to all those other free alternatives, but so superior that they are willing to give up an extra $15/person, all the creature comforts of home and put up with the hassles of going to the theater.
This means that as a studio exec you have to produce and market a film that is so compelling that Joe Schmoe will put down his beer or soda, get his ass off the couch, drive the 4.2 miles to the AMC Theater 28, park, walk, and plunk down $15 per person to sit in a dark room with 300 people he doesn’t know, in small seats and you cant hit pause to take a piss. In order to get people to do that you need some really good stuff!
So back to that word MONOPOLY. In order to compel the consumer to see your product you want to create a monopoly. You need a product they can’t get anywhere else. If you ran reruns of old Hogan's Heroes episodes at your local theater would anyone go? Hell no! They can get that at home for free. So how do you create a monopoly? There are essentially three ways to do it.
1) Movie Stars. You want to see Julia Roberts, Denzel Washington, Brad Pitt, George Clooney, Vince Vaughn, Tom Cruise etc.? You gotta come see my movie. You can't see these stars in new material anywhere else except by paying to see the flick. But here's the drawback, they're really expensive, fickle, and not always available when you need them. It's not like going to the store and pulling a box of Wheaties off the shelf whenever you want. In this scenario the Wheaties can say "No," or "Only if Ron Howard is directing," or "Sure, but I'm not available until next year."
2) Cutting Edge Visuals. Incredible special effects can help fill seats, but are often expensive. Sometimes they are worth the money and sometimes they are not (the same can be said of stars). If you can deliver cutting edge visuals that no one has seen anywhere else before, once again you've created a monopoly. You want to see what it's like to be inside a Tornado? Well you can't get that on CBS, you have to come to my movie. You want to run with dinosaurs, you want to see the Titanic split in two? You gotta come to my movie!
3) Original Concepts and New Worlds. What's it like to be an angel, a fireman, immortal? That's the basis for three films right there. “The Prophecy”, “Backdraft”, “Highlander” all written by Greg Widen. What's it like to play in underground poker games? "Rounders." What's it like to be in the mob? "Godfather 1,2,3" What's it like to be a Jedi Knight? "Star Wars." What's it like to have been in the Special Forces in Somalia....? "Blackhawk Down." You want to experience these worlds? You gotta come see my movie.
Deliver a world or a setting that we've never seen before, or that we haven't seen in a while (remember approximately 50% of the movie going audience is between 14 & 24. If a concept was used 10+ years ago, odds are they haven't seen it). “War of the Worlds” = “Independence Day”="War of the Worlds". “Kelly's Heroes” = “Three Kings”. "Taming of the Shrew"="10 Things I Hate About You," “Disturbia” = “Rear Window.” Are these exact matches? No! But are they delivering, or repackaging if you will, concepts that the earlier films/plays successfully sold to the consumer. Yes!
Now which of these methods of creating a Monopoly is most efficient to you the writer? Absolutely, positively #3. If you can deliver a fresh exciting concept to the studio, then the studio can choose whether or not to spend money on stars or visuals.
Will Smith's market price before “ID4” was squat. The "big stars" were Jeff Goldblum, and Bill Pullman. Was anybody in “Titanic” expensive? No, Leo DiCaprio hadn’t made a big name for himself yet. The expense went into the cost of the production (the ship) and the visuals.
What about “Oceans 11, 12, 13”? Big visuals? No. Big Stars? Yes!
What about Horror films? Maybe visuals, almost never stars, and for some reason monsters only attack hot chicks in their underwear???????
Romantic Comedies starring women? Visuals... none. Stars? These are female marketed films, often if you can’t get one of the five or six hot girls du jour (Sandra, Cameron, Julia, Nicole, Drew, Charlize) forget it. Your project is going nowhere.
(exception)Romantic Comedies starring men? (40 year old virgin etc.) Visuals... none. Stars? Not really. These are driven by the COMEDY, the romance is absolutely secondary. Sometimes the relationship between our hero and his buddy is more important than the fact that the hero get’s the girl like in Superbad (Bromance). These are about laughing and marketed mostly to men, but women will follow if the story has heart, so make sure it does. It's more Com/rom than Rom/com. This gives the writer an advantage.
Theoretically the studio could make a film that is interesting enough, original enough to sell to the consumer and not have to pay the enormous expense of mega-stars or pricey effects. Examples: “American Pie”, “Fast and the Furious”, “Animal House”
So what's the perfect script? I don't know, but since you don't have any $20 million actors as your best friends, or own Skywalker Ranch forget #1 and #2. A great (let’s define that as salable) script is one that delivers a new/revisited and interesting world, with heroes we like and can empathize with and villains we fear, despise and understand. It's usually set present day, in the U.S. and has interesting set pieces. If it lends itself to cool visuals, great. If it offers the kind of challenging or fun roles actors will enjoy playing, fantastic. This is what your buyer, the studio exec., is often looking for. Something he or she can read and immediately see in their minds who's staring in it and what the poster looks like. Something that makes them sit up and say "Wow this is really interesting, this is cool, I can sell this, my boss will be stoked!"
News flash! It's not the 70's anymore. At most studios the head of production and the head of marketing have to agree to make a picture. Regardless of how great your script may be, if they cant' sell it they won't make it, and if they won't make it, they wont buy it.
Does following this prescription mean a Best Picture or Best Screenplay oscar? Probably not, but we can work on that later. What it does mean is having a much better shot at selling your script, which means, getting your foot in the Hollywood door, getting paid for your work and starting your career.
By the way – this applies, to one degree or another, not just to beginners, but to every writer in Hollywood – and every experienced writer knows it.

Videogame companies set-up studio pics

Videogame companies set-up studio pics

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Electronic Arts, Ubisoft, Eidos look to the big screen
By MARC GRASER
Where Marvel and Hasbro have led the charge for movies made from comicbooks and toys at the megaplex, Electronic Arts now hopes to do the same for films based on videogames.

A year after the second-largest gamemaker announced plans to use films as a way to grow its top franchises, it has set up six projects at studios around town or with high-profile producers, proving that despite a string of creative and financial blunders in the past, Hollywood still believes that a popular game franchise can turn into a successful series of tentpoles for studios.

One reason is the considerable coin the games biz rakes in: While overall sales are down 13% this year, videogames are still expected to generate approximately $20 billion in 2009.

EA already knows a thing or two about franchises, having produced over the years major moneymakers such as "The Sims," racer "Need for Speed" and the annual "Madden" football game.

Yet when the company realized it was focusing too much on sports games or pumping out sequels and expansion packs for aging franchises, and licensed games based on movies and TV shows, EA ponied up millions in development dollars to launch new titles to excite gamers, and possibly turn into new franchises -- titles including "Spore," "Dead Space," "Army of Two," "Mirror's Age," "Dragon's Age" and the upcoming "Dante's Inferno."

EA hopes those games don't just play on videogame consoles but also perform as lucrative sources of revenue from the sale of comicbooks and novels, toys, apparel and collectibles, as well as TV shows and movies.

For example, for last year's release of its sci-fi horror actioner "Dead Space," EA paired up with Image Comics to produce a comicbook whose plot served as a prequel to the storyline of "Dead Space: Downfall," an animated direct-to-DVD feature that ends where the game begins.

As part of a multipic deal, Starz Media's Film Roman produced the DVD toon, and aired the feature on its own cabler Encore. It's producing another animated feature that will bow around the release of "Dante's Inferno" early next year that has various Japanese and Korean anime artists conceiving their vision of the nine levels of hell.

EA shunned the idea of a multiplatform entertainment strategy in the past, thinking it distracted developers from making quality games.

But after leaving EA for three years, John Riccitiello changed that corporate decree when he returned to the company as CEO in 2007, pushing the idea that if a game can appeal to more than the hardcore gamer, it could sell more copies in the long run.

"Our goal is to get really good movies made that our discerning fan base will want to see, and reflect really well on EA and our titles to the millions of people who don't play our games," says Patrick O'Brien, VP of EA Entertainment, the division tasked with shepherding the game maker's nontraditional entertainment efforts. "We want to hit consumers where they are. They watch movies, spend a lot of time on the Internet, watch TV."

O'Brien has much bigger pictures in mind than DVD movies, however, eager to erase the stigma of bad videogame movies by placing its adaptations into the hands of notable screenwriters, directors and producers, through the help of United Talent Agency, which reps the gamemaker in Hollywood.

* This month, "Ice Age" creator Chris Wedge signed on to direct "Spore" as an animated creature feature for Fox that Greg Erb and Jason Oremland, who penned Disney's "The Princess and the Frog" and the Ben Stiller pic "The Return of King Doug" at Paramount, will script. EA and Fox are especially high on Wedge after "Ice Age" turned into a major franchise for the studio, generating $1.9 billion from three pics since 2002.

* EA and Fox are also developing a live action take on "The Sims" that John Davis is producing, while Film Roman is also developing an animated TV series based on the "MySims" games.

* "Bourne Ultimatum" scribe Scott Z. Burns is penning "Army of Two" at Universal; Peter Berg is attached to direct.

* Strike Entertainment ("Dawn of the Dead," "Children of Men") and U are behind a version of "Dante's Inferno" with Dan Harris ("Superman Returns," "X2: X-Men United") scripting.

* DJ Caruso is aboard to helm "Dead Space," with Marty Bowen and Wyck Godfrey producing through their Temple Hill ("Twilight") shingle. It's not yet at a studio.

* And Avi Arad, who helped Marvel launch "Spider-Man" and its other superhero film franchises, is now behind a number of videogame pics, including EA's alien invasion actioner "Mass Effect." The project, too, has no studio home yet.

EA isn't alone in its Hollywood aspirations.

Other publishers have recently sought out major movie deals, with Universal developing bigscreen versions of Take-Two's "BioShock" and Atari's "Asteroids," while Jerry Bruckheimer produced Ubisoft's potential "Prince of Persia" franchise at Disney. Eidos' "Tomb Raider" which already spawned two pics at Paramount with Angelina Jolie as the treasure-hunting adventurer, is getting a reboot over at Warner Bros. The studio also has a version of Capcom's "Lost Planet" in the works with Arad.

If it gets its way, EA wants to time the release of a film adaptation around the launch of a new game or vice versa.

But while it can take up to two years to produce a game, O'Brien has found it can take longer to deal with the studio development process in Hollywood.

"We've had to go through a huge educational process," he says. "It's a system that we'd like to move a lot faster than it does. We are a company with living, breathing franchises. The reason we are making movies is to support our core business. But things need to move on a snappy timeline for that to make sense."

That's why until those movies can be made, EA is producing its movies direct-to-DVD, which it will also distrib digitally through videogame consoles, or pursue other opportunities. A new deal with IDW Publishing will result in comicbooks for "Army of Two" and "Dragon Age" early next year. A series of novels based on "Warhammer Online: Age of Reckoning" already has been launched.

While it may not be able to control how quickly films can get made -- unless it decides to fund those projects, which it has yet to do -- EA hasn't lost all of its control over the creative process.

Rather than simply handing its games over to studios, EA remains hands-on as a producer in order to retain a say over the final film. It has a lot to lose, with a disappointing pic potentially hurting game sales. But it has a lot to gain should the film turn into a blockbuster.

For EA's adaptations, scribes have been given the freedom to run with their own ideas and not stick too strictly to the action or plots that play out in the games, because the thinking is that being too faithful to the games has resulted in lackluster films in the past.

"We explain what the world is about, what the missions are about, and then we leave the guy to do his job," Alain Tascan, VP and general manager of EA's Montreal studio, which produces "Army of Two," has said. "The way you tell a story in eight hours, 12 hours, and develop the characters, is completely different than two hours."

O'Brien believes the various spinoffs can deepen consumers' connection with a game.

"A good movie is seen by a couple hundred million people," O'Brien says. "Movies can introduce our titles to people who are not part of the two to six million people who play them every day," as well as introduce them to auds in other countries who may not be familiar with EA's franchises -- especially in Asia and South America, where EA is still growing.

The company hopes to eventually replicate much of the success Hasbro and Marvel have had in producing successful films that can in turn drive their core businesses.

"Those are companies I very much admire and watch closely in their evolution," O'Brien says.

It was only a matter of time before videogame publishers became more active in film.

"We've all been sleeping giants," O'Brien says. "We've had a great business and huge growth, but people haven't been as focused on ancillary stuff. When you look at what companies like Marvel have done, there's every reason to do it and no reason not to. It's just clear that if you can devote some resources to exploring and then pushing those kinds of productions, the payoff is significant."

Thanks Jason, Great Data on the Spec Market

I recommend Jason's Blog

Spec Market Scorecard: 2009 to Date (October 16)
by Jason Scoggins
October 21, 2009

This isn't exactly the return to form I'd been hoping for. The end of the Fall selling season fast approaches, and as you can see from the below numbers the spec market is as flat as it's been since the end of April. Which in retrospect is not that surprising given the past month's remarkable executive turnover (huge changes at the top of Disney and Universal, plus adjustment at Fox) and conflicting messages coming out of the studios.

On the one hand, the majors are saying they're out of money in the short term (Sony and Universal even made public statements regarding curtailed spending on new and existing development, respectively). On the other, a bunch of high profile pitches and other projects have sold since the end of the Summer, including at least a couple in the seven figures.

It's clear from the swings in the number of new scripts on the market week-to-week over the past month (from the last week of September: 4, 17 and 5, and just half a dozen so far this week) that the town is not quite sure what to make of the fact that specs continue not to sell. One would think more than 9% of new spec scripts would get set up coming out of the Summer break, but maybe this is the new normal.

A couple of things are certain, however:

Producers are the new black when it comes to setting up a script. All but one or two of the specs that sold in 2009 were bought by or for a significant if not major producer (and just a handful of this year's sales had big actors or directors attached). This underscores the efficacy of the newly announced development funds secured by Bruckheimer and Parkes/MacDonald. Hopefully we'll see more of these deals in the next several months and the formal emergence of a new class of buyer.

The only reason to take a naked spec out wide right now is to introduce a writer to the town on a wholesale basis (that is to say, there's no good reason to take out a naked spec right now). The dismal statistic continues unabated: Just 2 of the 140 scripts that have gone out wide since May 1 have sold. That's a ridiculously low percentage: 1.4%, not far off (statistically speaking) the percentage of scripts sold during the WGA strike.

Study: big budget, big profit

Study: big budget, big profit

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A new study offers reassurance for studio heads worried about runaway budgets.

Films boasting production pricetags of more than $100 million actually generate higher returns than mid-range pics, averaging $247 million in net profits per release, according to the study by SNL Kagan, which analyzed all films released on 1,000 or more screens from 2004-08.

Pics that cost $90 million-$100 million earned an average of $118 million.

When it comes to specific genres, animated films performed most strongly, averaging $221 million in net profits per toon. Sci-fi and fantasy films follow at $125 million.

The least profitable of the 10 genres listed in the study were horror pics, with an average domestic gross of $33 million and an average net profit of $17.9 million, and thrillers, with an average domestic gross of $40 million and an average net profit of $13.7 million.

The study, "Economics of Motion Pictures," analyzed 764 films. Net profits were based on a typical distribution fee scenario at major studios. SNL Kagan tallied 83 films with budgets of more than $100 million during the four-year period. (The study did not factor in marketing expenditures, however.)

The results support what many in Hollywood have long believed: That mid-range pics, with budgets of around $50 million, are riskier bets.

But the success of pricier pics is also due to the fact that studios have been more careful in choosing projects in which to invest considerable coin and launch expensive marketing campaigns around -- more recently, f/x-filled tentpoles have featured well-known superheroes or have been sequels to well-established franchises. Such projects have proved safer bets because they lure a large number of moviegoers and result in the minting of more coin from other areas like homevid and consumer products, as well.

The study also found that the box office has thrived during the recession.

Through August, admissions this year were up 5.1% to 938 million and total domestic gross rose 7.3% to $6.9 billion, SNL Kagan said.

But it warned that the DVD biz, Hollywood's "largest revenue source," is taking a hit, with sales down 6.8% last year to $14.8 billion. (Figures are Kagan's and may not agree with other industry sources.)

"Consumers are increasingly turning to Redbox's $1 kiosk rentals and Netflix's all-you-can-watch DVD and streaming services," said SNL Kagan analyst Wade Holden. "Going forward, we expect the sell-through industry will continue to decline despite growth in high definition. We estimate video sell-through revenue will drop 13% to $12.86 billion in 2009 as VOD technologies begin to erode market share."

WGA Reports Plunge in Earnings

By Dave McNary
Guild hit by recession, writer's strike

Hollywood scribes are feeling the double-whammy of the recession and pre-strike stockpiling.
The Writers Guild of America West, in its annual report to members, disclosed that earnings plunged nearly 18% to $801.4 million for the fiscal year ended March 31. Guild-covered earnings had set a record in the previous year at $976.3 million.
"This change from the prior year was attributable to the effects on our industry of the general economic slowdown and to the strike to achieve the 2008 minimum basic agreement, which had accelerated some feature film income into 2007 and reduced the length of the 2007-2008 television season," the guild noted in the report.
The report details that feature scribes have taken the biggest hit because of the ramp up that preceded the 2007 contract wrangling, which included the Nov. 5, 2007-Feb. 12, 2008 work stoppage. The drop in scribe earnings has also significantly hurt the guild's financial fortunes.
The report was sent to the 8,000 WGA West members earlier this summer and recently posted on the guild's website.
The WGA noted the number of writers reporting income declined 9.7% to 4,163. TV employment declined 11.2% to 2,929 slots while earnings for TV scribes declined 3.1% to $437.5 million. Feature film employment declined 14% to 1,716 slots. Film earnings, which had surged 19.5% in the prior fiscal year, declined a whopping 30.7% to $361 million.
The pronounced fall in film earnings wasn't a surprise since the WGA had warned last year that the jump in feature earnings wasn't going to last.
The report for fiscal 2008 confirmed that assessment.
"The pre-strike stockpiling by the studios was a major factor followed by cautious development and a decrease in theatrical film production by the major studios following the expiration of the SAG contract and the subsequent economic slowdown," it said.
On the TV side, where guild-covered earnings are down 4.6% from the record $469.2 million in 2006, the WGA offered a more mixed recap.
"Television declines in the first half of the year can be attributed to the six weeks of the strike which fell in 2008," it said. "For the second half of the year, we found that while WGA series rebounded, the companies responded to the economic downturn by reducing the size of TV series staffs."
The new report also included a sobering picture of the WGA West's financial condition, noting that the guild operated at a $5.1 million deficit including net investment losses of $1.9 million and the costs of staff layoffs. Revenues totaled of $20.9 million and expenses of $26 million.
"The current economic crisis has had a profound global impact, and the WGAW has not escaped it," the membership and finance committee said in its statement at the start of the report. "Despite formidable challenges, we are pleased to report that your Guild remains in excellent financial shape. The guild owns its headquarters with no debt and our investments stand at $12.8 million, including a total of $7.4 million in our Strike and Good & Welfare Funds."
It also noted that its revenues of $22.7 million in dues and fees declined 3.4%, noting "this relatively small decline was due mainly to improved collection of delinquent and underreported dues."
WGA West expenditures had surged 11% in the prior fiscal year to $26.3 million due to the 100-day strike then declined only slightly to $26 million.
"This relatively narrow margin reflected extraordinary expenses related to staff severance costs and maintaining a reserve for estimated uncollectible strike loans," the report said. "The difficult decision to lay off just under 10% of our employees was made in order to balance the fiscal year 2010 budget and to maintain adequate reserves for contract enforcement, jurisdiction expansion, and future negotiations."
The report also includes disclosure of $30.3 million in "funds held in trust for members" including foreign levies, client trust accounts, undeliverable funds and a residuals trust fund. That's up 23% from the $23.8 million figure in the prior year's report but the WGA did not disclose any reasons for the increase, nor did it break out the amount of foreign levies accrued under a system in which the guild collects funds paid under foreign laws to authors of copyrighted works.
The DGA, WGA and SAG have all been sued over their practice of collecting foreign levies for nonmembers, alleging they overstepped their authority by doing so. The DGA settled its action last year; the action against the WGA had been in settlement discussions that fell apart in the spring.
The foreign levies for U.S. creatives began to flow after the U.S. agreement in 1989 to terms of the Berne Convention, which establishes the right of authorship for individuals who create works of art. 


ARE THE BIG STUDIOS GOING TO STRIKE OUT WITH THE BLONDE?

Think of Nash and his Buddies as the Major Studios, the Bar they are in is this Summer. Who is the Blonde? And will any of the Studios go home with her? If so, was their investment worth the reward?