by Lynda Obst
One exception to this new model is Comic-Con, when the town empties for two days to promote its -Man movies and meet its fanboys. Comic-Con has evolved from what was once a nerdy comic-book gathering to a huge, multimedia, star-laden promotional juggernaut for the fans, studios and gaming industry, where the next year’s blockbusters are teased, promoted and fanned out to an ardent and important base of critical raving-mad word-of-mouth monsters who can make or break the industry’s products. Everyone except me is in San Diego for two days.
And then there’s the Soho House, a club perfectly located at Doheny and Sunset—which would be the center of town if there were one—where people show off their new clothes and prove they are still alive; but alas, to get in, you must be a member. Even at the Soho House, if guests are not (barely) eating or at the bar, they are on their computers or checking their iPhones.
While online, the exec can study multiplatform systems! And search for new chicks to cast on OkCupid or Match.com! Speaking of Match.com, so much of the business transpires over email, it’s like dating, or what’s left of it. You could stay in your bedroom in your sweats and go online and work—or pretend you’re dating.
RARE MOMENTS WHERE OLD ABNORMAL AND NEW ABNORMAL MERGE
There are rare moments these days when things are suddenly the same as they used to be in the Old Abnormal. Of course, getting a green light is the same, as is the first day of production. But those are personal. There are times when we are all one dysfunctional family. Our traditional holiday, when we dress up like it’s New Year’s Eve and kiss each other on both cheeks and everyone comes out of the woodwork for good or for bad, is Awards Season. Then, for about a month’s worth of parties, we see all our crazy uncles in the Academy whom we haven’t seen since last year, or fired execs we forgot to call, or old frenemies, or the great face-lift a mogul’s wife is displaying for the first time in public. These parties are supposed to gain our votes for the intended honoree by feeding us hors d’oeuvres as the nominees or intended nominees spread their fairy dust on us. This has been going on, with various Academy rule changes regarding who foots the bill, since … well, forever.
At these moments we can feel much of the distinction between the Old Abnormal and the New Abnormal twinkle away in the presence of the stars; our sense of community and our optimism are reborn with each new season. It is indeed our New Year. We make resolutions. We drink. We kiss people we don’t like; we decide we like them after all. We make lunch dates.
“FRIENDING” IN THE NEW ABNORMAL
Over the last six months, my girlfriend Meredith (a talent agent at ICM, a blazing redhead with a toddler) and I have been trying to meet for lunch. So far, our efforts have been fruitless. Our assistants have exchanged 145 calls and 63 emails. Last week, we were on for 3 p.m., but I had to push to 4:30. She canceled. She rescheduled today. And I canceled: network notes call. This is the new relationship. The path to hell, my mother used to say, is paved with good intentions. Meredith and I are the New Abnormal. Is this why making movies isn’t as much fun anymore? I can’t even figure out how to have lunch with a girlfriend whom I actually want to see.
With so many people out of the office these days, timing is an increasingly difficult factor. I can’t tell if people are sick, having manicures, working out of Starbucks, watching their kids at soccer games, hiding in home offices or just so rich they are on satellite on a boat somewhere, but I have never seen more people out of the office. This is because lunches are no longer necessary. They have become a vestigial courtesy. The young and networking, many of whom are off expense accounts, will work key lunches in when necessary. But many lunch hours are now spent checking calls while having a yogurt with gummy bears at Pinkberry. I only meet with writers, financiers, directors, actors (and friends). And yet, I really want to see my pal and her baby for lunch.
Phone calls have been replaced by emails, conversation has been replaced by chitchat and getting to know someone has been replaced by checking out their clothes and shoes. What about work? When you used to submit a script, you’d receive a thoughtful response. There was a possibility of persuading the executive with your charm or your relationship or even your well-articulated argument about how you would address the notes given in the response. There was a process.
Today, with some significant exceptions, one only gets an email pass that says, “This doesn’t fit into our slate,” or, “We have no slot for this.” Case closed. It is rarely worth fighting back. Besides, if the exec gave notes, he might get a rewrite, and then he’d have to read it again, and chances are good that his studio’s mandate will have stayed the same.
Why cultivate a relationship if it doesn’t amount to anything, if you can’t persuade somebody? If being funny and charming makes no difference, you might as well just send emails. So there are strikingly fewer meetings and strikingly less charm.
I once said to my manager son that his clients were all incredibly good-looking. Oly said, “Mom, we don’t have time for charm. You have to just make a great first impression. People would rather see attractive people.”
Truthfully, I don’t know whether he actually said that or I just accused him of it and he laughed. The fact is, first impressions are increasingly important when people stop taking the time to get to know people. We used to spend fifteen minutes in every pitch meeting talking about families, sports, music or politics over fancy water. People don’t have time to do that anymore unless it works into the pitch. This is mostly in TV, where during pitch season there is no time for more than three minutes of fast and funny chitchat.
Finally, few execs have the power to say yes anymore. They only have the power to move a movie up the chain in tiny, tiny increments. What fun is it for the exec to have a long meeting, after which they have to say no—an outcome they knew before the meeting even started? Better to email.
In the Old Abnormal, when there were more slots to fight for with more money available, the exec could team up with you and really make a case for a borderline movie, a “maybe,” a script that everyone loved but wasn’t a bull’s-eye. Now the producer with an original movie who is fighting for one of these rare studio “slots” has to package it with a star or a director and that person’s manager (in exchange for a producer’s credit) to get any traction at the studio. They better make sure the star or director has a track record of big international numbers. The best way may be to skip the studios altogether. Or go to your parents, or take a run on some credit cards.
How did this happen? How did it become easier for someone who knows no one to make a movie for $150,000 than for someone who knows everyone to make one for $20 million? Or for a guy who last made a movie for $100,000 to make his next movie a superhero tentpole for $100 million? Nothing makes any sense. Battleships are falling from Mars. Tentpoles are launching and falling. No one knows what to make. What went wrong?
*
1. Vanilla Sky, Texas Rangers, Domestic Disturbance, Zoolander, Hardball, Rat Race, Lara Croft: Tomb Raider, Along Came a Spider, Down to Earth.
2. Star Wars: Episode IV—A New Hope (1977), Star Wars: Episode V—The Empire Strikes Back (1980), Star Wars: Episode VI—Return of the Jedi (1983), Star Wars: Episode I—The Phantom Menace (1999), Star Wars: Episode II—Attack of the Clones (2002), Star Wars: Episode III—Revenge of the Sith (2005).
3. Starring Heath Ledger and Jake Gyllenhaal; the story of a forbidden and secretive relationship between two cowboys over the years.
SCENE TWO
THE GREAT CONTRACTION
I was driving west in a classically horrible L.A. morning commute on my way to Peter Chernin’s new office in Santa Monica, thinking about our regular lunches back when he ran the studio and I worked as a producer there in the nineties. Peter, who is now building his own media empire at Fox and had been president of News Corp. for over a decade, was clearly the perfect person to ask what had turned the Old Abnormal into the New Abnormal. First of all, he was incredibly smart about the business. But more importa
nt, I now realized that during those lunches, he was the first to warn me that the proverbial “light ahead” was an oncoming train. It was way before things turned obviously grim. Since I was reliably churning out pictures then, I didn’t take his gloomy talk about piracy seriously. I just went around saying, “The landlord has the blues,” and blithely fell into the future.
Peter wasn’t exactly having a hard time making the transition. Once he decided in 2009 to leave the number-two job overseeing the News Corp. media empire, he became the biggest producer at Fox (one of the biggest anywhere), with guaranteed pictures and huge potential profit participation. His first picture was the tentpole smash Rise of the Planet of the Apes, and he already had three television shows on the air. More recently, he released the smash Identity Thief, with Melissa McCarthy and Jason Bateman.
The long drive got me thinking about the contrast between the struggling Old Abnormal producers (and writers) and the soaring New ones like Peter. It was discussed at a fancy-pants dinner party I went to a week before.
“They’re completely broke,” said a studio head, when asked by me (of course) about how different things were these days. He spoke about famous players who regularly came to him begging for favors—a picture, a handout, anything.
“Why?” his very East Coast guest asked incredulously.
I recalled his exact words as I sat in bumper-to-bumper traffic. “They have extremely high overheads,” he said to his guest with me listening in. “They have multiple houses, wives, and families to support. They’ve made movies for years, they were on top of the world and had no reason to think it would end. And then suddenly it did. They’ve gone through whatever savings they had. They can’t sell their real estate. Their overhead is as astronomical as their fees used to be. They’ve taken out loans, so they’re highly leveraged. It’s a tragedy.”
His natty guest looked unsympathetic, so I tried to bridge the worlds between us. “Okay,” I said, “the Sudan is a tragedy. This is just sad.”
I understood that it was hard to sympathize with broke producers when so many families were being tossed onto their lawns by bailed-out banks that had bullied them into bullshit mortgages. Meanwhile, New Abnormal producers like Peter were thriving, easily finding supersized tentpoles with the “preawareness” that was so craved by the New Abnormal, like his hit film Rise of the Planet of the Apes.
That is because those films were so well suited to their sensibilities and ambitions. But Peter was more than just a successful model of a New Abnormal producer. He had green-lit the two biggest movies of all time when he was head of Fox during the Old Abnormal.
Peter had earned his top-down as well as bottom-up perspective on the business by working his way up through publishing, then TV, to eventually run both Fox Broadcasting Company and Twentieth Century Fox Film. He became Rupert Murdoch’s number two, overseeing the whole Fox empire, and shareholders clamored for the board to name him Murdoch’s successor. But this was a job designated by Murdoch to go to an actual heir,1 so Peter left to become a producer. He knew the business, as Joni Mitchell’s great old tune said it, “from both sides now.” More important, he was gifted with a brain both creative and financial in equal measure.
Peter’s offices are as close to the water as you can get without falling in. He came into the lobby to greet me, always personable, never grandiose, but still a bit larger than life. He is the humblest of moguls, but that doesn’t mean he doesn’t have a strong ego—just not a damaged one.
We sat in his Santa Monica office with huge plate-glass windows overlooking the Pacific, where he happily relayed that he rarely crossed the 405 East-West divide. When I asked for his help in getting to the bottom of all this, I was reminded of how tough-minded he is. Even though we are old friends (we went to high school together), he had no problem challenging my buried premises. Maybe they weren’t very buried.
“So how did we get here,” I asked, “where things are so different from when we started? What happened?”
I leaned back a little on Peter’s comfortable couch, and he sat forward to say, “People will look back and say that probably, from a financial point of view, 1995 through 2005 was the golden age of this generation of the movie business. You had big growth internationally, and you had big growth with DVDs.” He paused to allow a gallows laugh. “That golden age appears to be over.”
It was good we both could keep our sense of humor, the only way to survive the industry’s crazy carousel of wild ups and low downs. And this very carousel and its need for constant—bordering on psychotic—optimism to keep your projects going made it hard for a person like me to find a steady perch from which to see what was really going on. Peter, however, had one.
He seemed to be saying that the DVD market was critical to the life and death of the Old Abnormal. I knew the DVD profits were key, but it seemed to me like a classic case of the tail wagging the dog. “Why did those little silver discs go to the heart of the business?” I asked. “There have to be other key revenue streams.”
“Let me give you the simplest math,” he replied. “The simple, simple, simple math.”
Good, I thought. Because my friends and I are not so great at math. I can guesstimate the budget of a big movie to within a hundred thousand dollars by reading the script, but I can’t add the columns therein.
“The movie business,” Peter said, “the historical studio business, if you put all the studios together, runs at about a ten percent profit margin. For every billion dollars in revenue, they make a hundred million dollars in profits. That’s the business, right?”
I nodded, the good student, excited that someone was finally going to explain this to me.
“The DVD business represented fifty percent of their profits,” he went on. “Fifty percent. The decline of that business means their entire profit could come down between forty and fifty percent for new movies.”
For those of you like me who are not good at math, let me make Peter’s statement even simpler. If a studio’s margin of profit was only 10 percent in the Old Abnormal, now with the collapsing DVD market that profit margin was hovering around 6 percent. The loss of profit on those little silver discs had nearly halved our profit margin.
This was, literally, a Great Contraction. Something drastic had happened to our industry, and this was it. Surely there were other factors: Young males were disappearing into video games; there were hundreds of home entertainment choices available for nesting families; the Net. But slicing a huge chunk of reliable profits right out of the bottom line forever?
This was mind-boggling to me, and I’ve been in the business for thirty years. Peter continued as I absorbed the depths and roots of what I was starting to think of as the Great Contraction. “Which means if nothing else changed, they would all be losing money. That’s how serious the DVD downturn is. At best, it could cut their profit in half for new movies.”
I’d never heard it put so starkly; I’d only seen the bloody results of the starkness. The epic Writers Guild strike of 1988 was about the writers trying to get a piece of home viewing profits. It shut down the town for eight months, and estimates of what it cost the Los Angeles economy run between $500 million and $1 billion. They held out as long as they could, until all parties had bled out as if they’d been struck by Ebola. And still the writers got no piece of those golden discs. Then the writers struck again in 2007–8 for a piece of the Internet frontier, and won not much more than they did after the last awful strike, and we all watched its terrible and unintended aftermath play out during the recession and in the subsequent suspension of writers’ and producers’ deals.
“I think the two driving forces [of what you’re calling the Great Contraction] were the recession and the transition of the DVD market,” Peter said. “The 2008 writers’ strike added a little gasoline to the fire.” Well, at least my writer friends would be relieved to know that Peter didn’t think it was totally their fault, as some in town were fond of intimating.
He went on
to say, “It was partially driven by the recession, but I think it was more driven by technology.”
There it was. Technology had destroyed the DVD. When Peter referred to the “transition of the DVD market,” and technology destroying the DVD, he was talking about the implications of the fact that our movies were now proliferating for free—not just on the streets of Beijing and Hong Kong and Rio. And even legitimate users, as Peter pointed out, who would never pirate, were going for $3 or $4 video-on-demand (VOD) rentals instead of $15 DVD purchases.
“When did the collapse begin?”
“The bad news started in 2008,” he said. “Bad 2009. Bad 2010. Bad 2011.”
It was as if he were scolding those years. They were bad, very bad. I wouldn’t want to be those years.
“The international market will still grow,” he said, “but the DVD sell-through business is not coming back again. Consumers will buy their movies on Netflix, iTunes, Amazon et al. before they will purchase a DVD.” What had been our profit margin has gone the way of the old media.
It hit me like a rock in the face. The loss of DVDs for our business had created a desperate need for a new area of growth. This was why the international market has become so important a factor in creative decisions, like casting and what movies the studios make.
We sat in mournful silence for a second before I realized that Peter probably had to take a call from China and I should go home and take a Xanax.
But then Peter said the most amazing thing. A P&L, if you’re not a numbers person, is a profit-and-loss statement. Studios create P&Ls in order to explain to their financial boards, banks and investors how they are going to recoup their costs when they green-light films. It estimates how much money key domestic and international markets are expected to gross based on how “elements” (i.e., stars, director, title) have performed in the past in those markets, country by country. It also estimates how they will perform in various ancillary markets like DVD, TV, pay cable, Internet, airplane devices, VOD, handheld devices, etc., again based on past performance. If it all adds up to the amount of the budget or more, Go!