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5by5 | The Critical Path #28: False Profit

Horace interviews writer/producer Dan Abrams. Dan talks us through the budgets and cost structures of independent movies as well as the obstacles to innovation presented by the current industry structure. We talk about some of the new concepts that are emerging as means to overcome these obstacles. We also talk about new forms of distribution and financing that enable long-tail film and TV content. Dan also talks about his upcoming mockumentary about the Global Financial Crisis (www.falseprofitthemovie.com).

via 5by5 | The Critical Path #28: False Profit.

  • sigaba

    NB.

    * Above-the-line/Below-the-line also distinguishes cost commitments.  ATL costs are generally “sunk” the moment a project is green-lit, particularly when star actors are involved play-or-pay. BTL numbers are proportional to schedule, cost cutting, on-site production decisions, and can come in below, or way way above, the spec’d amount.  ATL costs are flexible when you’re developing project, but static once you start shooting.  BTL costs are static while you’re spitballing a script, but can start blowing out of control once you’re rolling.
    * Several television shows aren’t union.  Anything that shoots at the tax havens, er, lots in North Carolina (like Eastbound and Down) and New Mexico (Breaking Bad) is done “right-to-work.” Gah.

    * Pace Mr. Abrams, the person who keeps the schedule is a line producer or post-production supervisor, they’re not union.  Many times a supervisor will have worked their way up from a union job, but producers aren’t union by definition.

    * This notwithstanding, there is a complicated relationship and a lot of overlap between “union members,” “management,” and “producers.” 

    * I wouldn’t judge union work conditions by NABET camera ops in New York, LA people are much cooler :)  I’ve never seen anyone on a set do or not do something because of “the union,” aside from demand their overtime, and if anyone did pull that sort of crap they wouldn’t work too long.   I’ve noticed that studio TV people are quite different about this from feature or location TV people, and that attitudes change the further east you get.

    * Several reality shows are union, because they’re made directly by union signatories, like NBC.  Several networks have tried to get around this by hiring non-union companies as shells to produce reality TV.  Most contemporary labor actions are over organizing these reality shows.

    * The labor abuses that follow non-union reality show production are legion — it might sound like a hip way to get into the business, but logging tape for 80 hours a week, while only getting paid for 40 of those at $15 an hour has a way of dimming the hipness quotient.  Occasionally people will complain to the state about this, the producer will get a slap on the wrist and the complainer will get blackballed from every reality shop in town.  Only unions have demonstrated an ability to make recalcitrant producers keep their own word, let alone observe minimal work rules.

    I would say this is the basic point of the unions.  If the state were remotely competent at enforcing its own labor laws and providing health and retirement benefits, the unions would cease to have a modus vivendi.  Production is still a very small business though, and blackballing is a major problem for people who stick their heads up, and while the union doesn’t stop that, it gives labor a big enough stick to counter it.

    * I’m a union editor and I only go gig-to-gig, and I always have to find my next work.  None of the Hollywood guilds run guildhalls in the sense that a longshoreman would recognize.  There’s a list of people out of work but producers never use it; my understanding is producers only use guild available lists in desperation.  If a set needs a third AD, they’re going to ask the AD who he wants to hire before calling the union and getting the guy on the list.  And these lists, such as they are, are FIFO, and not by seniority.

    * You can go in and out of the union, but when you leave and come back you have to pay ALL the back dues you didn’t pay while you were on hiatus.  For me that’d be something like $70 a month.

    (This may seem like a lot but a non-union person doing my job makes at least $200/wk less with no retirement account, no profit sharing, and generally no health care).

    * A lot of BTL union people do non-union work and the union turns a blind eye, I do it as an editor and I know cameramen from 600 that don’t think twice about it if the project is important to them.  Actors and writers don’t have that option as often because their union’s enforcement is much more strict.

    * Even given this, independent films don’t have to pay studio union wages to do union work.  IATSE and the SAG/WGA/DGA have all created “Independent” tier production contracts that have very low scale rates, sometimes even half the “majors” rate, as long as the production has a low budget and meets certain criteria (like, isn’t being paid for by a major studio).

    * Cartoon Network is able to make non-union animation because they’re based in Georgia and Florida.

  • sigaba

    A problem with distributing a Kickstarter-funded project is that you’re selling a product that’s already depleted.  You’ll go to Studio Canal or ITV or Israeli theater chains and tell them “Yes, I have a movie you can show, but it’s already been sent to 20,000 people as a non-DRM’d quicktime movie and everyone has already seen it.”  It’s a terrible proposition for any distributor that’s secondary to the Kickstarter backers, because they’re competing with a free and ad-free movie on every BT tracker from here to Ulan Bator.

    • Me

      Totally agree, but that problem might also be viewed as an opportunity…you are no longer so dependent on theatrical sales. That said, kickstarter and the like have a long way to go before they can replace multimillion dollars movies.

      • sigaba

        I should say I was responding specifically to an argument implied in the podcast, that Kickstarter would give a filmmaker “flexibility” or time in working with distributors, putting a producer in a more favorable bargaining position, putatively because they weren’t dependent on their presale funding. The problem is that the typical Kickstarter delivery would slit the throat of a distributor/exhibitor’s model, and if they aren’t going to release “Tower Heist” day-in-day with a download, they sure aren’t going to cut such a deal with “Helvetica.”
        An alternate idea would be, instead of delivering movie files to Kickstarter backers, would be to give backers free tickets to a Wednesday/Thursday theatrical “premiere” event, delivered as a live event through NCM Fantom, or distributed by a vanity distributor like Freestyle Releasing.

      • Dan abrams

        I think the leverage with distributors that a kickstarter can bring comes from a few places:

        1) Not having to deal with investors. In my experience, it’s the desire to get investors their money back that leads producers to negotiate unfortunate distribution deals. I worked on a movie (a really great movie, IMO) that did very well at festivals, winning major prizes at some of the biggies, including Jury Prize at SXSW. But even with this success, and some big stars, the deal cut by the producers was terrible: 50/50 with a major indie distributor with no advance and a miniscule P&A budget. It played at Two Boots Pioneer and a Laemle theater for what seems like an hour then floundered on DVD, I don’t even think they made back delivery costs (which the producers paid out of pocket). 

        If the film is paid for with pre-bought copies, then you can afford to be more flexible and you just subtly start pushing yourself to think about things like road tours or aiming your distribution efforts at the internet (which is terrifying, I know).

        2) If you do a kickstarter campaign that does reach the viral proportions some have reached, you have a lot of leverage with US distributors, because you have a cultural phenomenon on your hands.

        Your concerns are very real and on our kickstarter page, we never say that the digital download will be DRM free. We also tried to skew rewards in exactly the manner you’re talking about, towards live events. To me, a self-distributed road tour is a fantastic way for a smaller movie to increase it’s profile and theatrical revenue. Another way is to simply target niche markets for theatrical release. I had a friend who made a $500k movie about the Jersey Shore a few years back. The movie pretty much only played in south Jersey, but they did great publicity (I grew up in NJ, but until then, I didn’t know there was a magazine called “New Jersey” and that millions of people read it) and there’s lots of people who just love the Jersey Shore and even without a traditional distribution.

        Sorry for the long rambling replies, but it is 6AM here. 

      • sigaba

        As to (1), I could see the Kickstarter model quickly spiraling out of control since, instead of 5 investors, you essentially have 25,000 fanboys who will parse every rumor about your film on AintItCool, and ransom filmmakers into making the most pandering tripe the backers demand.

        As to (2), cultural phenomenons are a lot like flattery, in that they don’t really relate to quality and can’t be taken to the bank.  I don’t know if Fox would have started re-airing Family Guy if Seth was releasing the episodes simultaneously to the web.

        “Cultural phenomenons,” as such are also built on novelty and clever marketing.  Youtube videos are cultural phenomena, memes are cultural phenomena.  Susan Boyle was a cultural phenomenon, that she was simply a merely good singer with no staying power was conveniently ignored in order to push some ugly duckling meta-narrative to sell ad time.

        You can’t sell two tickets to one sick elephant, and again I see sustainable, high-quality model of work being junked in favor of an insubstantial all-icing-and-no-cake approach to putting on a show, an approach that will gut the credibility of artists in society, in favor of the machinations of elite tastemakers and marketers.  Make the business more democratic, and the product will only get dumber, higher-concept, and more reliant on messaging and selling.

  • Dan Abrams

    I just want to clarify my view on unions (which is somewhat middle of the road):

    There’s no doubt that union members are prevented from being abused by employers.

    At the same time, they do protect the status quo in Hollywood and an make entrepreneurs slightly less flexible.

    That said, in the real world, the decreased flexibility, especially with Hollywood unions, is minimal.

    Also, I clearly know nothing about longshoremen.

    • sigaba

      “Also, I clearly know nothing about longshoremen.”

      Just remember, “On the Waterfront” was a long time ago, and Elia Kazan sorta had an axe to grind…

      • Dan Abrams

        I agree with most of what you say. And I should note most of my knowledge of longshoremen comes from the Wire.

        A few points though:

        A) That $2 million movie is exactly what I’m talking about, or rather the movies in the $500k-$2million range (maybe even less as technology continues to hammer away the price of decent looking content, we’ve budgeted our project at slightly less, but it’s a mockumentary, which makes it a little bit cheaper). As the Long Tail becomes increasingly important, this is going to become a more and more important budget range, not necessarily theatrically, but in other distribution venues. It’s like in the video game world: a few years ago, you would have said that break into that world required a game that cost a few million dollars, but now people are starting game studios for $30k in their garage. It won’t replace the super big blockbuster titles, but it will carve out a new market for content that’s not currently being served.

        B) The flexibility I’m talking about is shifting risk away from the producers and investors and onto everybody…As I understand it, at many silicon valley startups, it’s not uncommon to underpay employs, but provide them with stock options if the company’s a hit. The employees share in the risk. In the current theatrical distribution model, controlled by a handful of corporations, that is unworkable and unions do play an invaluable role in protecting the little guy. But in a movie making economy that looks more like the App Store economy, I believe that net points might no longer be called monkey points and might instead be real sources of income for cast and crew. Current union contracts, imo, do make it more difficult to share this risk while still following the rules. I also totally see how many people would find this a very scary proposition and their fears aren’t unfounded.

        C) In my experience, some union contracts do reduce flexibility for exhibition/distribution, locking into place the current business model. The current SAG Ultralow contract for instance, asks for no residuals on a theatrical release in an art theater, but charges producers gross residuals for movies exhibited at larger theaters, on DVD, and most damningly, for internet distribution. Now, the residuals are only 6%, but still, the union contract does incentivize playing at the art houses and deincentivize other forms of distribution. People are experimenting with internet stuff right now, myself included and these provisions make it much harder to experiment. It’s not totally tyrannically burdensome, but it does shift one’s thinking, I can tell you from experience.

        Also, I’ll note that in private conversations with Horace about disruption, he’s pushed me to think not just beyond current distribution schemes, but also past current ideas of just what a movie or a TV show is. Perhaps in the future someone will monetize 8 minute short films. I don’t see how, but I also couldn’t have seen 99 cent apps changing the world the way they did. Current union contracts tend to lock in current forms…there’s different contracts for feature films and for shorts, for instance…and who knows what’s going to happen. 

      • sigaba

        “The flexibility I’m talking about is shifting risk away from the producers and investors and onto everybody…As I understand it, at many silicon valley startups, it’s not uncommon to underpay employs, but provide them with stock options if the company’s a hit.”

        I’m on the record around here as an arch critic of the whole Silicon Valley model, and it’s a big subject but my problem with it boils down to one point:

        Very few people in a company are responsible for a company’s IPO stock price.  The few successes wind up massively overpaying people for their work, and the vast majority end up massively underpaying people for their work.

        The guys running cable in the server farm, the guys coding the back end database, they guy cleaning the restroom and the guy painting the murals on the side of the building all make valuable and indispensable contributions to the success of a firm.

        However, the idea that the guys who do it for Facebook should all make a hundred million dollars, and the guys who do it for Flooz should lose two years of their life to a low-paying “internship” that they’ll be embarrassed to put on their resumes, is despicable.  All people think about are the big successes, and a sort of lottery mentality seems to be the order of the day in Silicon Valley — consistency, quality, and sustainable business models are denigrated, in favor of quick-buck schemes with gold plated exit strategies, and a deeply insular celebrity culture that lives in total denial of its self-dealing, rent seeking and profiteering off of galley-slave programmers, sharecropping crowdsourced labor, a weltanschung that rationalizes and demands IP infringement as a “right” (as long as the IP in question is owned by Stupid Old Media), and VC OPM.

        I’ve done deferred deals, and gross deals and net deals, and they’re nice at the margin, but as a sound designer and editor, I recognize that the profitability of a film is basically out of my hands — and frankly I don’t want to think about the profitability of my creative decisions.  All I want is to help realize the director’s vision, and having to worry about how much money the director’s vision will make would ruin our relationship.  My contribution to a film is strictly ars gratia artis, I don’t want to be reliant on any damn gross points or net points, I don’t want any of the upside and I sure as hell don’t want any of the risk, and I don’t want to be constantly chasing down (and probably suing) producers I worked with 20 years ago for my mailbox money.  I don’t want to be a producer; it’s understandable why a producer, as you, would love what they do and generalize that everyone on the set would love the opportunity to “succeed” as you do, but it’s not so much the case, in my experience.

        Your proposal for “everyone” to share in the success or failure of a film isn’t a new one. Fifteen years ago I was painstakingly retyping a boilerplate collaborative feature agreement out of Rick Schmidt’s Feature Filmmaking at Used-Car Prices.  It’s an old idea and it has its place, but in the open market, very few people are willing to accept such a deal: contract enforcement is too onerous for individual tradespeople to do, and large companies have found cash on the barrelhead in exchange for services rendered simply more efficient for everyone involved.

        I specifically got into the film industry to not have to worry about profit, chasing profit is corrosive to art and entertainment, and I personally would consider it against my calling as a creative artist.  Entertainers who worry about profits end up making pornography and playing-card-based children’s cartoons.  I say, do what you love and if people want to give you $10 for your $1 worth of film, that’s amazing and take the money and run!  But if you make that $10 the difference between your success and failure, you’re not an entertainer anymore.

        “The current SAG Ultralow contract for instance, asks for no residuals on a theatrical release in an art theater, but charges producers gross residuals for movies exhibited at larger theaters, on DVD, and most damningly, for internet distribution. ”

        This would be more of an issue of the ultralow tier films booked theatrical engagements at all.  Saying that it incentivizes the old model is a bit disingenuous, when 99% of these shows simply don’t get theatrical aside from festivals and four-walling.  If that 6% gross spread is an “incentive” it sure isn’t working.

        “Also, I’ll note that in private conversations with Horace about disruption, he’s pushed me to think not just beyond current distribution schemes, but also past current ideas of just what a movie or a TV show is.”
        He’s pitched me this as well, and while I acknowledge the new mediums, I wouldn’t characterize them as “changing the world,” and I absolutely don’t think any of them are supplemental goods to a theatrical motion picture.  J. J. Abrams’s “Action Movie Effects” isn’t rivalrous with a ticket to “Star Trek 2.”

        I apologize for my rambling reply.

  • Dan Abrams

    Here’s me being a nervous Nelly clarifying more…I was never a producer at comedy central DVD. That was an internship when I was college where I got to work with two very talented producers who let me work in a very involved way. I shouldn’t have said “producer” on that one, I was just super nervous to be on a podcast I love.