The $11 Billion Year

by Anne Thompson

  Universal cochairman Adam Fogelson is only too happy to join in the chorus of how well Universal did in 2012. It was their biggest year domestically, internationally, and overall. He points out that they didn’t do this with one towering blockbuster; in fact, they survived a $150 million write-off on Battleship. Nonetheless, six films made the $100 million club, and eight passed $200 million globally. They did this with a diversity of films turning into events, and with a range of stories to tell.

  Ted was the largest-grossing R-rated comedy globally, and Mark Wahlberg’s biggest hit to date. Pitch Perfect was a sleeper hit musical aimed at the Glee set, the fourth-biggest digital download in 2012. At $441.8 million worldwide, Oscar winner Les Misérables was a global musical hit second only to Universal’s own musical Mamma Mia! on the all-time list.

  THE PESKY TIMETABLE

  Fogelson, forty-five, has been trying to convince exhibitors that changing the economic paradigm is in everyone’s best interest. Back in 2011 he tried to perform a premium video on demand (PVOD) experiment with the Brett Ratner comedy Tower Heist, starring Eddie Murphy and Ben Stiller, by making it available three weeks after the November 4 opening via high-priced video on demand—targeting moviegoers who crave earlier access to new releases. Exhibitors and filmmakers from James Cameron to Jon Favreau are fighting to keep the theatrical window at an average of ninety days, while several studios are pushing back, under pressure to move toward a shortened window of sixty to seventy-five days.

  Several theater chains, including Cinemark and Regal, refused to book Tower Heist, especially over the Thanksgiving holiday, which pushed Universal to abandon course. The studio could have gone straight to video and skipped theaters, but that was not the head-to-head collision it had in mind. Fogelson had hoped he had paved the way with exhibitors, all of whom were alerted to his plan in advance. But they balked instead.

  With equal politesse, Fithian praises Universal for caving into the exhibitors’ demands. “NATO would like to thank Universal for responding to various theater owners’ concerns and canceling the PVOD test it was contemplating. They have been engaged with individual exhibitors on this test, and while it was something that many theater owners could not ultimately support, the open and collaborative nature of the dialogue is appreciated. NATO recognizes that studios need to find new models and opportunities in the home market, and looks forward to distributors and exhibitors working together for their mutual benefit.”

  Both sides agree that the industry model needs changing; anxiety rides high as no one wants to break what does work—building future ancillary value and branding via reviews and word-of-mouth over a theater run—while experimenting with making movies accessible to audiences as soon as advertising reaches them. Many consumers want movies for free everywhere at the same time, which won’t make money for anyone.

  Indies such as Magnolia and IFC already push out features such as Lars von Trier’s Melancholia with a premium price tag months ahead of their theatrical release. Warner Bros., Universal, Fox, and Sony tried a shortened two-month window—amid a huge outcry from exhibitors—with DirectTV and a $29.99 price point that might have been a tad high. Fox’s Gianopulos points out that most movies last about three weeks in theaters; there’s a “dark zone” of three months when all those marketing millions go for naught. Why not go for VOD for a premium price point of twenty to twenty-five dollars?

  Amy Miles, CEO of Regal Entertainment Group, agrees that theaters nab about 95 to 97 percent of revenue in the first eight weeks, but asks, “What is the impact on our business if the consumer has the perception that films go to the home on an accelerated basis? It’s not just that we generate the revenue over a time period, but if the consumer understands that they have to wait to see a film in the home, we believe that helps our business.”

  Reducing a four-month window to two months would encourage consumers to wait to see a film at home, she insists, and various new-model experiments will not yield real results. “Success to me and success to my partner in the test may not be the same,” she says. “It’s hard to measure. What does that mean? Studios are a vertically integrated business, while we offer one piece of their business—theatrical. If they shift revenue from one entity to another, they’re still ahead.” Why not share those revenues? “In the home, a lot of people are renting content for four or five dollars. I don’t want to lose a dollar and be paid a dime.”

  Universal is investing billions of dollars in sending people to movie theaters, Fogelson says at a panel I moderate at CinemaCon in 2013: “I say it every year; I believe it. I think when exhibition believes it as strongly as I do, then there will be wiggle room, because the fear that people would rather stay home and watch a movie on television would start to go away enough to allow for experimentation.

  “The studios are losing billions of dollars a year in revenue because the DVD market has declined and has largely been replaced by much lower revenue-generating options. We are owned by public companies who demand responsible business practices. For us to continue to have enough money to make enough movies to stock all these theaters with great product, we need to be able to generate a proper return on investment, we need to claw back some of that revenue. I believe there are people who love going to the movie theaters. It is a fact that people who go to the most movies in movie theaters buy the most DVDs.”

  Viewing begets viewing and consumption begets more consumption, he says, citing NBC’s successful experiment showing the Olympics live on various platforms before the revenue-producing prime-time shows. Overall viewership actually went up in prime time, he says, “because the experience of watching the Olympics produced by a great network in prime time is different, the way it’s packaged, the way it’s sold—it’s different. I’ve been in the best private screening rooms on the planet. They are not what a movie theater is. I believe movie theaters are spectacular and special and cannot be replaced and won’t be replaced. I don’t know what the answer is, but I know if we don’t experiment we won’t find out. Everyone has a point of view. If both sides don’t take responsibility for opening their minds to experimenting to find a better way to do this we’re all going to suffer, large or small, some kinds of consequences.”

  “The biggest thing we struggle with as exhibitors,” David Passman of Carmike Cinemas responds, “is if you look at the revenue stream for a feature, exhibitors get one bite of the apple.” If just one patron chooses not to go because of a windows or day-and-date or an alternative method, he argues, “then the exhibitors and the studios are hurt.”

  Passman thinks the old windows model needs to be completely overhauled. “I think if we could sit the top ten exhibitors and seven studios down and have a two-day workshop, we actually would create a new model that would work for all our benefit.”

  Unfortunately, the studios and exhibitors can’t do this, Fithian reminds me afterward, because the lawyers would step in to prevent any accusations of restraint of trade. Thus Fox and Warner and others are talking to exhibitors in small groups, but not to each other.

  Clearly, it’s in the interest of the studios and exhibitors to get along. But this standoff is not going to be resolved easily. The overt hostilities have stopped. But the theaters are dependent on robust commercial product to survive, while the studios are struggling to figure out the best way to give consumers what they want. The digital wars are not over.

  SXSW

  One place that brings together two worlds that are usually far apart, Silicon Valley and Hollywood, is South by Southwest, the annual spring conference each March in Austin, Texas. A raucous collision of music and film festivals (audiences sampled 132 features and 138 shorts in 2012, selected from more than 5,300 submissions), as well as an interactive gathering of speakers and panels that functions as a Silicon Valley conference, SXSW pushes together disparate groups in the halls of Austin’s convention center and nearby hotels. They learn from each other, share new apps, tweet each other’s panels, and congregate at various waterin
g holes. And if they’re running short on time, they can order food at entrepreneur Tim League’s Alamo Drafthouse, which enforces a strict no-phone policy in their theaters.

  At SXSW I first discovered the notion of sharing locations via such apps as Foursquare and sharing what I was watching via GetGlue. It was also where I found out that both Internet Movie Database founder Col Needham and Rick Allen, CEO of Indiewire owner SnagFilms, had plans to provide free streaming content, and where I learned how social movie site Flixster was helping moviegoers choose what to see on their smartphones. (Kevin Tsujihara acquired Flixster and review aggregator Rotten Tomatoes for Warner Bros. while serving as the company’s digital chief, before he became head of the studio.)

  I heard Morgan Spurlock, whose documentary Super Size Me was a hit on SnagFilms, question the revenue potential for filmmakers on streaming platforms. At one indie film distribution seminar, a music business insider raised his hand and shared distribution tips that could apply to the film side. When I showed up at New York Times media correspondent David Carr’s tweeted meet-up at the Driskill Hotel, I met Yancey Strickler, one of the cofounders of burgeoning crowdsource funder Kickstarter, which has revolutionized how movies are funded, along with Indiegogo, Slated, and Seed&Spark. At SXSW 2012 I met Nicolas Gonda, cofounder of theatrical on demand platform Tugg, which is changing the way indies book theaters based on where audiences want to see their films.

  These companies, along with Netflix, Google, Apple, and Amazon, are among the digital forces that will pull Hollywood kicking and screaming into the future.

  CHAPTER 4

  MAY: THE CANNES INTERNATIONAL FILM FESTIVAL

  AMOUR, MOONRISE KINGDOM

  For new arrivals, hitting France not-so-fresh from a sleepless transatlantic flight from Los Angeles to the Côte d’Azur airport in Nice is always rough. (Ever since I heard the story of a prominent talent agent being carried off the plane still down for the count after taking too many Ambien, I’ve eschewed sleeping pills.) That’s one reason why so many festivalgoers stop in London or Paris en route to the granddaddy of film festivals, which is celebrating its sixty-fifth anniversary in 2012.

  This year, I’m sharing a tiny fifth-floor two-bedroom walk-up in Cannes with three Indiewire staffers; there are only two sets of keys, so we stow one in a flowerpot on the unlit landing. Luckily, my iPhone has a flashlight and the apartment location is ideal, just blocks from the wide palm-lined beachfront walkway in Cannes, Boulevard de la Croisette, and about halfway between two major meeting nexuses: the Grand Hotel, with its vast green lawn with white sofas and terrace café, and the poolside bar at the Majestic Hotel, where the festival officials and jurors stay. Harvey Weinstein stays there too, although for a period he moved out to the famed cash-only Hotel du Cap down the Riviera coast in Cap d’Antibes, where the stars and moguls hang, motoring to and from Cannes by boat. (My favorite Hotel du Cap story: a bored Charlie Sheen throwing ashtrays off the balcony onto the rocks below.) For decades, most of the major studios, including Sony, Universal, and Fox, have locked in suites at the billboard-festooned blue and white Carlton Hotel, which also reserves a tiny single for the critic of the New York Times.

  The Europeans and indies tend to congregate at the Grand Hotel, where I used to stay in the nineties when Bingham Ray bequeathed me his tiny studio apartment in the Residences. It was right out of a Pedro Almodóvar movie, complete with olive and orange décor, shag rug, and tropical plastic toilet seat. After long hours of meetings and screenings, industry folks, often in formal wear, drift in from their evening doings to the Grand bar and terrace for drinks and info sharing. “Your BlackBerry is archaic,” IMDb chief Col Needham told me sternly one year as I complained about data access in France. As soon as I got back to L.A., I upgraded to an iPhone.

  The roots of this classiest of international film festivals are anything but frivolous. The Cannes Film Festival was born out of the outrage felt by French filmmakers over a slight they suffered at the 1938 Venice Film Festival. To please the fascist regime, the Venice jury passed over Jean Renoir’s antiwar masterpiece La Grande Illusion, widely considered one of the finest films ever made. When the French government was approached to finance a French counterpart to Venice, they hemmed and hawed, concerned about alienating Italian dictator Mussolini.

  But the Education Ministry prevailed, the resort city agreed to bankroll much of the costs, and the first Cannes festival was scheduled to take place on the same day that Germany invaded Poland in 1939. Appropriately for the venue that veteran Los Angeles Times film critic Kenneth Turan calls “the quintessential place for film,” the inaugural Cannes festival president was none other than Louis Lumière, who, with his brother Auguste, patented the first apparatus for making and showing films to audiences. With the war at hand, the festival’s debut was postponed until September 1946, more than a year after the war ended. By then historian Georges Huisman was at the helm. From there on, Cannes went forward every year—except for 1948 and 1950—and from 1952 onward it has been held in mid-May.

  The festival itself admits that its early sessions were mainly social events from which almost all of the films went away with a major award, but in the 1950s, the presence of stars such as Sophia Loren, Cary Grant, Kirk Douglas, Grace Kelly, Brigitte Bardot, Romy Schneider, Robert Mitchum, Elizabeth Taylor, Simone Signoret, and Alain Delon on the red carpet signaled an event of international stature. And as the decades went on, the lure of that phalanx of journalists and photographers and the irresistibly photogenic backdrop of the French Riviera has remained irresistible to movie stars.

  Whether you get an engraved invite in your cassier to one of the nightly black-tie festival dinners, cough up the bucks for Harvey Weinstein’s star-studded annual amfAR Cinema Against AIDS benefit, or score access to Paul Allen’s yacht or Graydon Carter’s Vanity Fair party, there’s glamour to spare. I’ll never forget the night at Cannes in 1993 that I arrived at the bottom of the Palais red carpet right behind Sylvester Stallone, star of Renny Harlin’s Cliffhanger, as he climbed the stairs to meet another star at the top, one who stood in flowing white, clutching her little dog Snowy to her ample bosom: Elizabeth Taylor.

  Alongside the festival’s black-tie glamour and critical prestige is the world’s most robust film market, with global acquisitions executives from TV and film flocking to screenings of both finished films and rough footage. The studios use Cannes as a massive marketing opportunity to launch their pictures in the all-important global market, which has outstripped North America and now represents more than 50 percent of the film industry’s annual grosses. Much of the decline in quality of American pictures can be laid at the door of the studios’ push to please foreign markets with big explosions and simple formula plots.

  Every day the Cannes media get invites to cover press conferences and PR stunts, from Jerry Seinfeld jumping off the roof of the Carlton in a bee costume (the 2007 animated Bee Movie) to lifting aloft with giant colored balloons the house from Pixar’s Up to bare-bottomed Sacha Baron Cohen posing in a green thong with babes in bikinis, long before “Borat” was a household word.

  Buyers, sellers, and press are wined and dined at nightly dinners, with talent on hand. In 1991, the Weinsteins brought Madonna to Cannes for Truth or Dare and threw an afternoon yacht cocktail party; all the guests boarding the yacht had to remove their shoes—except for Madonna. At the red-carpet gala, Chicago critic Roger Ebert and I watched from an apartment terrace across from the Palais as Madonna climbed the steps and whipped open her dress coat to reveal a Jean Paul Gaultier cone bra, a photo op that went around the world. At the gala after party, Time critic Richard Corliss went down on his knees to talk to the star. Multiple beach parties line the Croisette every night, and in the wee hours, more than one woman has removed her high heels and walked home on bare feet.

  Each morning—no matter how late you got in the night before—the media make a dash up the red-carpet stairs of the bunkerlike Palais, to grab a red seat for the 8:30 a.m. p
ress screening of that night’s competition film at the Grand Theatre Lumière, which fills up early for anticipated titles. The seats are so plush that it’s easy to snooze through the pokier films. Movies like Jane Campion’s The Piano or Lars von Trier’s Dancer in the Dark yield a theater full of tough critics moved to tears. And at the screening’s end, what every filmmaker fears is the dreaded boos or, worse, the flapping of the seats in displeasure.

  On the morning of the first press screening of the 2012 Cannes Official Selection, I follow the director Wes Anderson and his entourage as they ascend the escalator to embark on the obligatory gauntlet of Cannes photo call, TV interview, and conférence de presse. Making a bid in the ramp-up to the Oscars, Universal’s specialty arm Focus Features is giving Anderson (Fantastic Mr. Fox) the Cannes treatment. Focus booked his latest—and, according to many critics, best—film, Moonrise Kingdom, as the festival’s opening night world premiere for several reasons: One, Anderson, forty-three, is a Cannes virgin. There’s nothing like a rousing walk up the Palais red carpet, flashbulbs exploding, to feed a filmmaker’s hungry ego. (And building your foreign profile improves box office around the world.)

  Focus chief James Schamus, an erudite Columbia film professor who wears bow ties and moonlights as Ang Lee’s producer-screenwriter, tells me he opted to follow the Sony Pictures Classics playbook for Woody Allen’s Midnight in Paris, which opened in Europe and America right after its Cannes debut in May 2011 and went on to win Allen his fourth Oscar. But more important, the movie was Allen’s career-highest domestic grosser ($56.8 million) and the most successful indie title of the year.