The recent article by Pro Male/Anti-Feminist Tech on the “War on Science Fiction” at the Spearhead generated a lot of heat and discussion. Among them, are Science Fiction (and Fantasy) being feminized, and secondarily, if so are these bad things? The answer to both is an emphatic yes.
The reason for both of course, is that majority or near-majority female creators in any literary genre “crowd out” male concerns, themes, and characters, which women find tedious to offensive, and produce essentially a “gay-female ghetto” that men flee quickly. Making said genres alien and irrelevant to nearly half of the population.
Read the rest at my post at the Spearhead. You can comment there or here.
Monday, October 19, 2009
Friday, October 16, 2009
The New Mass Media: Ebooks and the End of the Brandon Tartikoff Strategy
Today's front page Wall Street Journal story details how Wal-Mart and Amazon are in a price battle for best-selling (printed) books. Matching the e-book price for best-sellers. Authors are divided. The best-selling authors Dean Koontz and James Paterson believe they will prosper under mass market discounts. Koontz cites now defunct Crown Books, as "exploding" the market for discount hardcover books.
What is clear is that the marketplace for all sorts of information and entertainment is radically changing. After a post-War period of affluence (and the rising social status of women and their incomes in particular) driving niche and fractured marketplaces of specialized entertainment, the mass culture is returning. Driven by technology that pushes revenues to very low margins, declining personal incomes, and the ability for consumers to get "free" or "near free" news, information, entertainment, and more.
This is changing our culture. Winners will be those, who can write or create for a broad audience, taking a populist tone, and generating the widest possible audience, readership, and following. In particular, nimble execution in reaction to changing circumstances and volatile environments (political, economic, and social) will reward those who can churn out content quickly, appealing to men and women, young and old alike. In many ways this resembles the 19th Century, and the serialization of writers as various as Arthur Conan Doyle, Dickens, and Jules Verne in newspapers and magazines, aimed at the broadest possible audience. At the least, the death of the Brandon Tartikoff strategy is at hand.
Pioneering NBC programmer Brandon Tartikoff was one of the first to see the enormous amounts of wealth accruing to the yuppie elite in law, management, "creative" fields, and the like, and how much advertisers would pay to reach a small but wealthy audience. Hence critically acclaimed but low rated shows like "St. Elsewhere" and "Hill Street Blues." Even later ratings winners "Friends" and "Seinfeld" had initially low ratings and were kept on the schedule by the favorable (rich yuppie) demographics. This was true for magazines (Vanity Fair, the New Yorker), newspapers, movies (premium ticket prices, and premium DVD prices/tv rights/foreign distribution rights), and music (expensive CDs instead of cheap vinyl singles). Technology and tremendous amounts of wealth amassed by middle-men in various fields favored specialized content that consumers would pay for directly, or indirectly (by advertisers paying premiums to reach a wealthy few).
Technology changed the playing field, radically, with the adoption of the internet and alternative content providers. Suddenly those unhappy with the Yuppie Wealthy Liberal viewpoint in newspapers could turn to the internet, and sites as diverse as Drudge Report, Hotair, Ace of Spades, or Daily Kos and the Huffington Post for news and information. Often, bloggers such as Mickey Kaus or Luke Ford broke stories the traditional news media refused to cover. Such as the Edwards affair or the LA Mayor Antonio Villaraigosa affair (with a Spanish language media reporter covering him).
Itunes and Napster changed the music world forever. Consumers could download music for "free" or nearly free, in the former conveniently and cheaply. Music revenues in 2009 are half of what they were in 1999. Sales are dominated by single tracks, not album sales. Newspapers are folding left and right, with the Seattle Post-Intelligencer going online only, and both the Tribune Company (parent of the LA Times) and Freedom Communications (parent of the Orange County Register) filing for Chapter 11 Bankruptcy. Craigslist taking lucrative classified advertising, and advertisers moving to the internet.
Clearly, those who can leverage the internet to create content cheaply, keep fans/followers connected, and appeal to the largest group will "win" when prices are a commodity. Those creating content for rich, mostly liberal/PC Yuppies will lose. TV in particular illustrates this trend, with a number of shows on NBC generating less ratings than USA network's "Burn Notice" and "Monk" and "Psych." A show like "NCIS" can be Number One according to Nielsen with 20 million viewers. Precisely by appealing to a broad audience. The difference is that shows like "Mad Men" with ratings less than 2 million viewers (less than 10% of what "NCIS" generates) can no longer depend on affluent yuppies generating advertising revenue. There simply are not enough rich yuppies with the permanent recession, and cable rates paid to channels like AMC are probably not sustainable.
Brian Roberts built Comcast Corp. into the world's largest cable company by being a visionary who has kept the company on the vanguard of phone, broadband and television technology.
But his strategies indicate he's still worried that the Internet could one day become one of the leading forms of television distribution. That is one reason why he is determined to buy more cable channels and other content -- a strategy that has moved him from his failed effort to take over Walt Disney Co. in 2004 to his current interest in buying a piece of General Electric Co.'s NBC Universal.
Traditional cable-TV subscriptions accounted for more than half of Comcast's $17.7 billion of revenue in the first half of this year. Satellite companies and, more recently, phone companies have chipped away in recent years at its subscriber base, which now totals 24 million households.
But the Internet in some ways poses an even bigger threat: free content. An increasing amount of programs, including shows like "The Office" and "The Daily Show with Jon Stewart," are being offered free of charge on Web sites owned by networks and cable channels.
While most households still pay for TV, the idea of millions of cable subscribers canceling their service, is chilling. Industry executives have described it as "the cable bypass."
Owning the programs and the channels is one way to block this from happening. Either the content can be kept off the Internet, forcing people to buy it if they want to see it, or it can go behind a subscription wall on the web. Cable companies, including Comcast, are experimenting with a plan to put cable programming on the web, but require viewers to prove that they subscribe to a pay-TV service through an online authentication process before they can access it.
Robert's Comcast strategy of course assumes that consumers won't simply substitute "free" content online (probably advertiser supported) in favor of pay-per-access Comcast generated content. Other content creators can compete by "free" access with ads, with more broad-based content. This is particularly true since Hollywood and many of the creative class has spent in some cases sixty years (this is particularly true in publishing) catering to a wealthy elite with vastly different cultural tastes than the average consumer. Hollywood's rush to defend Roman Polanski on child-rape charges are proof of that.
Meanwhile, the hottest country act is Taylor Swift, who the Wall Street Journal notes at the bottom of a story on Tim McGraw has leveraged MySpace, Twitter, and other social networks to generate cross-over attention and following, from both traditional country fans and rock fans. Swift's rise, outside the traditional Country apprenticeship in Nashville, shows how the internet allows creative people to bypass the traditional distribution channels and rewards those with a mass-market sensibility.
The lesson of our new mass-market age is that free or low cost beats expensive, and financial rewards accrue only to those able to make creative or informational content with a broad appeal. This is true even in publishing.
Already e-books are offering fast, and cheaper alternatives to printed books. Project Gutenberg has free, public domain HTML, audio/mp3, and "Plucker" e-books of classics such as Jules Verne's "Twenty Thousand Leagues Under the Sea" and Mark Twain's "Roughing It." Plucker which is software available for both Palm Pilots and Pocket PCs, and runs on Linux, Macintosh OS X, and Windows, can read e-books prepared in that format. [Currently the Plucker site is unavailable, Sourceforge.com has various project files available. I have personally tried this with a Palm Tungsten, while offering limited readability, the software and content are free. Iphone owners have the option of using free application "Stanza" to read public domain books.
It is very hard to beat free, particularly when classics like "Huckleberry Finn" or "Robinson Crusoe" are still so eminently readable. Clearly prices for publishing are moving downwards, and those who sell the most copies at lower prices win. From the Wall Street Journal article on the Amazon-Wal-Mart pricing fight:
Some big authors, however, are looking on the bright side. Dean Koontz, whose soon-to-be released novel "Breathless" is being discounted to $10 from $28, said that he thinks the discounting may prove a good thing for the authors involved.
"Any time people are fighting over your work it's a good thing, especially when you've worked all those years hoping it would be fought over," he said. "I don't think this is going to be a long-term thing. Rather, it sounds like a promotional strategy designed to call attention to Wal-Mart's decision to enter the digital marketplace more heartily than in the past."
Mr. Koontz said that Crown Books Corp., a now-defunct book chain that grew to 170 stores in only seven years after launching in 1977, paved the way for book discounting. "They're no longer with us, and perhaps that tells us something, but after they started to discount books hardcover sales simply exploded."
Mr. Koontz said he's more worried about the independent bookstores. Although most limit their stock of best-sellers, a price war on the most popular books may hurt.
James Patterson, whose coming novel, "I, Alex Cross," is being discounted from $27.99 to $10, said he was happy to be in Wal-Mart's top 10. However, he warned any industry that sets low price points may later have a difficult time re-establishing those prices. "Obviously e-books have gotten this thing going," said Mr. Patterson. "E-books are terrific and here to stay. But I think that people need to think through the repercussions....But I'm not taking sides....I'm not the endangered species here."
Given the move towards mass culture, what sort of content can we expect on various e-book formats? Popular content of course. Horror, comedy, thrillers, action-adventure books, that generate wide audiences are likely to be the winners. Efforts like Borders Ink, aimed at tween and teen girls with fantasy novels like "Lonely Werewolf Girl" or "Vampire Academy" are likely to be long-term losers. While "chic lit" books offering fantasies of shopping, "fabulous" gay friends, and hunky Alpha males have dominated hype and sales, the NYT Paperback best-seller lists are likely to be the dominant books of the future.
With one caveat. Anyone can write an e-book, potentially. If the story is compelling enough, people will read it. Now, even lone authors un-connected to publishing houses or agents can produce e-books, and use viral marketing on MySpace and other social networks the way Taylor Swift did to promote themselves. Much of this content will resemble fan-fiction: truly awful. But enough will be of high quality (America and the West in general possesses simply astonishing talent among its general populace). As one of my readers points out in a comment, much of the problems Agents and publishing houses have is the readers. Note how the comment link here points out the weak link:
Jim Baen formed Baen Books with the specific mandate to write science fiction books drawing on a more 'traditional' heroic motif.
This is why Baen Books dominates (owns really) the 15-55 year old male audience in SF.
The key is that Baen books has a tiny staff with no bureaucracy to protect value-subtracted idiots.
This is why Baen Books is successful.
Large organizations like Time-Warner, CBS, ABC & NBC all provide niches for value-subtracted idiots to hide in, and the bureaucracies to protect them.
The publishing industry case in point, according to the writers I know, is the following:
"...the vast majority of first readers and acquisition editors can not recognize a story that straight men and boys may like, because those readers and editors are for the most part twenty-something females.
They are female because entry-level editorial jobs at major American publishers pay just a wee bit better than a summer internship -- and the jobs require one to live within commuting distance of some of America's most expensive cities.
The pay sucks so badly because every year, teeming masses of young women graduate from college with degrees in fields that don't lead to any clear, immediate career path. Thousands of them decide to move to New York City and get a job in publishing because, after all, they majored in English Literature. They all apply for the same seven first-reader positions that happen to be open at the time. The delighted publishers then hire the ones who will work for the lowest salaries. When promotional opportunities open up, the publishers hire from within -- i.e., from the pool of people of who have demonstrated an eager desire to work for an unbelievably low salary.
Guys who've graduated from college (with the exception of those who want to work on Broadway or in commercials) don't move to NYC for $25,000 a year jobs. Chicks do. Because NYC is glamorous, as is publishing.
So we wind up with a situation in which a huge portion of America's literary output is being filtered by young women who don't have a clue as to what straight boys and men like to read. Not surprising that what comes out of the filters is stuff that straight girls and women like to read."
Author John Ringo is now Baen's primary profit generator.
Baen being so small was the key to their recognizing Ringo & pulling him out of the first rejection slush piles.
Ringo's first novel was rejected by a young woman who had followed that exact career path listed above.
Jim Baen overrode that decision (and fired said first reader) because he read Ringo's stuff on the Baen fan board. They had a fan fiction section there and the fanboys there were all talking about how good Ringo's stuff was.
Baen went there, read it, found out what happened and the rest, as they say, is history.
Baen used his bulletin board fans as his unpaid for first readers and simply followed those with the best track record to promising new talent.
I just don't see any of the major media incumbents being able to "Do a Baen" and get back into the male market.
Someone will offer first-time authors the ability to produce e-books and publish them on a marketplace, with the "winners" those with good content and social network promotion skills. This offers an end-around the first reader roadblock of publishers and agents, that filter out male-oriented (or really, broadly appealing content) in favor of what 22-23 year old single, English lit majors find appealing. Which is not likely to reflect the older, more conservative socially and culturally male and female audience.
Price points will keep dropping, "free" or nearly free content will guarantee that. Content creation, particularly for authors, will be far easier, as will distribution through e-books. Sooner or later, our mass culture will return, after being slowly phased out during the post-War boom. It will look different, not the least of which will be the democratization of content creation, and a lot of truly bad fiction and non-fiction no longer filtered out by gatekeepers. But overall, this change in culture is a good thing.
Mass middle brow culture creates a series of ties that bind ordinary people in shared values, something particularly important as religious belief and attendance declines. Society cannot operate without most people most of the time having values and moral behavior pounded into them. Like it or not, that means popular culture these days, as religion has faded into irrelevance across the West (save the neo-Calvinist "Global Warming" / Gaia / Green elect-damned elites and masses). The Polanski debacle clearly points out how the elites have become decadent and debased, and are no longer fit to be instructors of proper moral behavior, so society can function without a police officer on every corner and in every home.
While much of technology has been socially isolating and atomizing, the good news is that low prices for entertainment and news equals the return of the mass culture, particularly with new creators entering into the marketplace.
It's about time.
...Read more
Thursday, October 8, 2009
Hollywood's Financial Collapse
Hollywood's finances are collapsing, along with other parts of "legacy media" including newspapers, magazines, television (particularly network television) in addition to the falling revenues at movie studios. Part of this financial collapse among all legacy media is the influence of the internet, offering alternatives from piracy to original content, part of it due to the recession with tapped consumers closing stressed wallets, but much of the collapse is due to legacy media's content being pretty miserable. Magazines are nothing but elitist propaganda with little to say to huge segments of the potential readership, newspapers have done their best to alienate their core readers (older White men), television long ago chased away males and older viewers, and movies consist of a few, highly profitable, but hugely expensive action-adventure tales, with myriad unprofitable "art" movies aimed at winning Academy Awards or hit-or-miss "chick flicks."
Hollywood for decades assumed the good times would roll, and the speed in which it is collapsing is catching everyone by surprise. None of their moves seem to indicate any indication of the central problem: their content is not very attractive beyond a thin elite, and the failure of the "Brandon Tartikoff Strategy" has not penetrated Hollywood's or legacy media's management. Leaving ample opportunities for new players outside Hollywood, Los Angeles, and New York, to create broadly appealing content for relatively few dollars and sell it at a profit. In the process, changing American culture the way deeply assimilated Jews who founded Hollywood did from Charlie Chaplin movies to Casablanca and It's a Wonderful Life.
As the Australian notes, Walt Disney and Universal changed studio heads, with Universal being shopped to Comcast by parent GE. The LA Times notes that DVD sales have collapsed as much as 25% for some studios.
Without cash flows from DVD sales or foreign TV sales, Hollywood loses its main revenue model. Note how the influence of piracy killed Spanish language and South Korean DVD sales, in line with Eli Roth's observation that his movies were on sale in Mexico City for the equivalent of 25 cents. Hollywood for years simply assumed that DVD sales would continue, with at worst slower growth in revenue. Piracy, and simple disinterest in buying DVDs for such films as "Land of the Lost" or "Funny People" put that assumption to the test, where it failed.
Meanwhile, new capital has been almost unobtainable. Wall Street is not pouring billions into movies anymore, nor are the Germans (it was the closing of tax loopholes in Germany that helped kill "V.I.P." the syndicated Pamela Anderson television show) or Japanese. Hollywood had traditionally raised capital from outside sources, and now with rising production budgets faces severely reduced cash flows to finance their own continuing operations. Thus, built-in "sales hooks" of movies based on Baby Boomer to Generation X games and toys and comic books, from Viewmaster, Battleship, Monopoly, Transformers, to Spider-Man and Iron Man, with a smattering of tween girl and mother vampire movies and TV series (New Moon, Vampire Diaries), Harry Potter movies, and Da Vinci Code movies.
This comes as the Wall Street Journal reports that Wal Mart, the world's largest retailer, is scaling back DVD displays and inventory, in anticipation of a dismal Christmas retailing season. DVDs are not selling, according to Wal Mart execs (who have among the best inventory management software and reporting in the business) and are not driving traffic or sales. The article further states that:
This equates to a loss of $840 million of DVD sales for the first six months of 2009, as opposed to whatever fraction of revenues studios can obtain from DVD rental outfits. Business Week reports that studios receive around $16 for every DVD a retailer sells and only $12 for one Netflix buys, with 30-40% of each rental transaction (rental fees) from Netflix shared with certain studios, but only within the first six weeks of release. Older movies such as the Die Hard movies produce only the (lesser) DVD sale to Netflix. Redbox, offering DVD rentals for $1, is engaged in lawsuits with various studios over proposed terms, including blackouts and higher prices. Best Buy and Borders, decimated by DVD sales declines are clearing them off retail space.
While the Belmont Club at Pajamas Media has noted this financial collapse, and cited a PriceWaterhouseCoopers report on new media as evidence that the studios and legacy media face challenges primarily through the challenge of alternative content created and distributed cheaply through the internet, there is more than ample evidence to suggest an entirely different reason: value.
Or more specifically, loss of value to consumers by Hollywood and legacy media. Because consumers in hard times will not shell out $20 or more for "Land of the Lost" or "Funny People." They will rent the DVDs, for about $1, if it is convenient. Or buy pirated copies for about the same. None of this involves the internet, excepting the convenience of managing Netflix queues, or piracy, or video on demand, or downloads from Itunes or Amazon, or Hulu.com and its enormous library of old TV shows and movies. Hollywood's worst enemy is itself, and the mostly superior run of movies and television shows produced from say, 1939 through 1992 or so. Available cheaply, sometimes free, in a more convenient way than expensive purchases through retailers. People like to watch movies, together, on screens ranging from theaters to living room televisions. It took sustained, concerted effort by Hollywood to produce movies and television shows to wean people of this habit, but Hollywood's creative and executive ranks were fully equal to that task.
This is similar to the LA Times drop in circulation, from 1.1 million in 1989 to 739,000 in October 2008. As I noted in my post Failure of the Media Part Two: The Lingering Death of the LA Times this was due to the same factors that is hurting Hollywood now. Consumers were not willing to pay the price for a product they did not feel gave them value. The LAT changed from a middle of the road newspaper dedicated to serving its mostly White, Older, and Male readership to one dedicated to serving a thin veneer of wealthy, politically correct yuppies, the "Brandon Tartikoff strategy" that was also employed by NBC with the same trap. Which is the inability to create broadly appealing content to a mass audience.
Hollywood, newspapers, magazines, television, all fell into the same trap. Pursuing a highly educated, upscale demographic with lots of disposable income. Magazines such as Gourmet, Cookie, Modern Bride, and Elegant Bride are being closed by Conde Nast due to falling ad sales. The graphic below from the article shows the failure of targeting high income people when a recession hits.
[Click Image to Enlarge}
NBC has been unable to generate any audience for its shows, and is reduced to running low cost Jay Leno comedy-talk at the 10 pm hour. This is a problem shared, to varying degrees, by other networks.
What is clear is that the overall strategic advantages of legacy media, including Hollywood, has changed. Due to the recession and the difficulty of obtaining capital. Legacy media can no longer count on size being an advantage to raise capital from outside sources and "crush" through attrition various competitors. Low cost internet distribution and the personal computer revolution allowing content to be created cheaply means the legacy media, all of them, have huge cost structures that are disadvantages, while having cumbersome corporate and cultural layers that prevent agile and timely responses to economic and cultural conditions. Obama's approval ratings are at 50%, for example, meaning that there is little benefit from praising him as a living God, yet Magazines at the checkout counter and news channels and broadcasts (with the exception of ratings leader Fox News) present Obama as "bigger than Jesus." Complete with hagiographic coverage, and "debunking" of SNL skits that gingerly criticize the "savior." At least half their potential readership and audience does not approve of "the One" making this a dumb business move appropriate to a forced monopoly not a business scrapping for customers.
This sort of thing happens, not because the people in the legacy media, or Hollywood, are inherently bad, but because their system has rewarded orthodoxy and not had any immediate connection or feedback mechanisms for audience/readership responses. Newspaper and magazine writers and reporters don't get paid extra if their articles generate more reader responses, purchases of the newspaper or magazine on the newstand, and the like. Chris Matthews of "Hardball" does not get less money when his ratings go down and more money when they go up, from week to week. Instead, in a nepotistic, and often rife with casting couches, such as David Letterman's, getting ahead meant not performance related to the bottom line but adherence to group PC orthodoxy of the often inbred, second or third generation elites who comprised management of the legacy media. From the Harvard Mafia in the Simpsons and Conan O'Brien writing staff to the preponderance of the Ivy Leagues and second/third generation Hollywood among writer/producers, relationships not production has dominated legacy media, and left the media unable to adapt to the recession and permanent lower prices consumers will pay for information and entertainment.
With these permanent lower prices, be it Redbox rentals for $1 at convenient supermarkets, or piracy on the internet or street corners, or ad supported free Hulu.com views of say, "LA Dragnet" or "Married With Children" the ability to wring billions out of consumers wallets for specialized content is over. High prices for content means specialization, the upscale market pioneered by Brandon Tartikoff and spread throughout the media world, including magazines, newspapers, and Hollywood. The ability to supplement theatrical revenue for movies with foreign TV sales, DVD sales, and so on is simply gone. As is other people's money from Wall Street or foreign tax shelters.
Instead, new content creators, based outside of Hollywood, will have to create broadly appealing content because the amount of money they get from each sale or view will be small. The way to get rich in media is no longer being highly specialized, serving only segments of the market, like tween girls and moms, or upscale yuppies wanting an extra dose of PC from say, "Crash." It is by serving everyone, tween girls, their moms, young men, boys, adult men and women, married, single, divorced, middle aged or senior. Everyone. And in this case the future of media resembles the past: highly entrepreneurial men like Sam Goldwyn or Louis B. Mayer, who have a deep love for America and its people, and make entertainment aimed at getting the broadest possible audience. Since margins on each view or sale will be low. Probably, much of the content will be integrated, with content available on websites for free (ad supported) viewing, downloaded for free with embedded ads, downloaded for a modest cost with no ads but extras, and available for rent or purchase in DVD or Blu-Ray format for modest costs in mass retailers like supermarkets or online ala Amazon.
This is critical, because the sneering yuppie-ism, which at its worst contributes to an elitist, fractured culture that produces elitist, fractured politics, is no longer sustainable. The internet has accelerated this change, but fundamentally, the audience has simply concluded that paying $11 per ticket at the theater, or $22 for the DVD of "Land of the Lost" is simply not worth their money.
...Read more
Hollywood for decades assumed the good times would roll, and the speed in which it is collapsing is catching everyone by surprise. None of their moves seem to indicate any indication of the central problem: their content is not very attractive beyond a thin elite, and the failure of the "Brandon Tartikoff Strategy" has not penetrated Hollywood's or legacy media's management. Leaving ample opportunities for new players outside Hollywood, Los Angeles, and New York, to create broadly appealing content for relatively few dollars and sell it at a profit. In the process, changing American culture the way deeply assimilated Jews who founded Hollywood did from Charlie Chaplin movies to Casablanca and It's a Wonderful Life.
As the Australian notes, Walt Disney and Universal changed studio heads, with Universal being shopped to Comcast by parent GE. The LA Times notes that DVD sales have collapsed as much as 25% for some studios.
For years, DVD sales, coupled with the growth in international markets, compensated for box office losers. On a typical movie, DVD revenue accounts for about half of a film's income, with the remainder split evenly between theatrical receipts, both domestic and international, and television, both pay and free channels.
But as the global economy tanked, so did DVD income. According to Digital Entertainment Group, DVD sales fell 9% in 2008 and were off 13.5% in the first half of 2009. The DVD ledgers are equally bleak overseas; owing to widespread piracy, some studios essentially have closed DVD operations in the once-profitable Spanish and South Korean territories.
Though new businesses such as digital downloads and video-on-demand are growing fast, they have come nowhere close to making up for the decline in disc sales. At the same time, foreign monopolies in paid television have driven down the formerly generous license fees paid to American studios for cable and satellite reruns, while increasingly popular local language productions (movies in Japanese made for Japan, in other words) have cut into the international box-office returns for U.S. productions.
Paramount Pictures, the only movie studio to report its finances separately, has seen its profits fall consistently. While revenue was growing until this year, Paramount's operating income has fallen like a boulder, down 22% in 2007 and 75% in 2008 until it swung to a loss of $148 million in the first half of 2009.
Without cash flows from DVD sales or foreign TV sales, Hollywood loses its main revenue model. Note how the influence of piracy killed Spanish language and South Korean DVD sales, in line with Eli Roth's observation that his movies were on sale in Mexico City for the equivalent of 25 cents. Hollywood for years simply assumed that DVD sales would continue, with at worst slower growth in revenue. Piracy, and simple disinterest in buying DVDs for such films as "Land of the Lost" or "Funny People" put that assumption to the test, where it failed.
Meanwhile, new capital has been almost unobtainable. Wall Street is not pouring billions into movies anymore, nor are the Germans (it was the closing of tax loopholes in Germany that helped kill "V.I.P." the syndicated Pamela Anderson television show) or Japanese. Hollywood had traditionally raised capital from outside sources, and now with rising production budgets faces severely reduced cash flows to finance their own continuing operations. Thus, built-in "sales hooks" of movies based on Baby Boomer to Generation X games and toys and comic books, from Viewmaster, Battleship, Monopoly, Transformers, to Spider-Man and Iron Man, with a smattering of tween girl and mother vampire movies and TV series (New Moon, Vampire Diaries), Harry Potter movies, and Da Vinci Code movies.
This comes as the Wall Street Journal reports that Wal Mart, the world's largest retailer, is scaling back DVD displays and inventory, in anticipation of a dismal Christmas retailing season. DVDs are not selling, according to Wal Mart execs (who have among the best inventory management software and reporting in the business) and are not driving traffic or sales. The article further states that:
As for DVDs, the Digital Entertainment Group estimates that overall U.S. retail sales fell 13.5% to $5.4 billion during the first half of 2009. At the same time, DVD rentals rose by 8.3% to $3.4 billion. Digital sales and rentals from services like Amazon.com Inc. and Apple Inc.'s iTunes rose 21% to $968 million.
Video on-demand revenue from pay-TV service providers, like Comcast Corp., is also rising. Comcast spokeswoman Jennifer Khoury says the company served 368 million total views on its VOD platform in July, up 11% from last year.
Meanwhile, studios have cut deals with services like Netflix Inc., the mail-order DVD rental service.
Meanwhile, Wal-Mart and other major retailers, along with several fast-food chains, have been adding low-cost DVD rental kiosks near store entrances provided by Redbox Automated Retail LLC, a division of Coinstar Inc.
Redbox's prominent placement and its overnight rental price of $1 are viewed by film studio chiefs as a threat to sales. Three major studios -- News Corp.'s 20th Century Fox, Time Warner Inc.'s Warner Brothers and General Electric Co.'s Universal Pictures -- are locked in a legal battle with the company and refuse to make their new titles available to Redbox until 28 days after their release. News Corp. owns The Wall Street Journal.
Starting with just 12 kiosks in 2004, Redbox is now expected to have 22,000 machines across the country by year-end.
This equates to a loss of $840 million of DVD sales for the first six months of 2009, as opposed to whatever fraction of revenues studios can obtain from DVD rental outfits. Business Week reports that studios receive around $16 for every DVD a retailer sells and only $12 for one Netflix buys, with 30-40% of each rental transaction (rental fees) from Netflix shared with certain studios, but only within the first six weeks of release. Older movies such as the Die Hard movies produce only the (lesser) DVD sale to Netflix. Redbox, offering DVD rentals for $1, is engaged in lawsuits with various studios over proposed terms, including blackouts and higher prices. Best Buy and Borders, decimated by DVD sales declines are clearing them off retail space.
At Borders Group, stores in the second quarter that had been open at least a year saw DVD sales plunge 48% compared with the same period in 2008, the company disclosed in an earnings call with analysts last month. Music CDs were also down dramatically, continuing a long trend, and Borders Chief Financial Officer Mark Bierley proudly told analysts last month that both categories will be a less important part of the company's business in the years ahead.
"The good news is that we've made the right strategic moves in this category...and multimedia now represents just 8% of our sales compared to 2002 when the category was at its peak of over 23% of sales," Bierley said during a conference call.
Owned by Coinstar Inc. (CSTR), Redbox kiosks charge $1 a day for movie rentals at supermarkets, drugstores and other retail outlets with significant foot traffic. The company has 15,000 of the kiosks in place and plans to have 20,000 in operation by the end of 2009.
According to Nathanson, Redbox presents "the most extreme risk" to the studio business model. Bernstein estimates that Redbox generates about 15 rental transactions, or turns per disk, compared with nine to 10 turns for Netflix and 6.5 turns for Blockbuster Inc (BBI).
"It is impossible to measure the potential loss of sell-through from each Redbox rental," he wrote. "But, by any simple math, Redbox is the worst cannibalization outcome of the three rental options given its higher turns per disc."
This has spurred the studios to go after Redbox. So far, Time Warner Inc.'s (TWX) Warner Bros., News Corp.'s (NWSA) Twentieth Century Fox and General Electric Co.'s (GE) NBC Universal have gone on record as demanding that Redbox wait about 30 days after a DVD is released to the public before offering it for rental. (News Corp. also owns Dow Jones, publisher of this newswire.)
While the Belmont Club at Pajamas Media has noted this financial collapse, and cited a PriceWaterhouseCoopers report on new media as evidence that the studios and legacy media face challenges primarily through the challenge of alternative content created and distributed cheaply through the internet, there is more than ample evidence to suggest an entirely different reason: value.
Or more specifically, loss of value to consumers by Hollywood and legacy media. Because consumers in hard times will not shell out $20 or more for "Land of the Lost" or "Funny People." They will rent the DVDs, for about $1, if it is convenient. Or buy pirated copies for about the same. None of this involves the internet, excepting the convenience of managing Netflix queues, or piracy, or video on demand, or downloads from Itunes or Amazon, or Hulu.com and its enormous library of old TV shows and movies. Hollywood's worst enemy is itself, and the mostly superior run of movies and television shows produced from say, 1939 through 1992 or so. Available cheaply, sometimes free, in a more convenient way than expensive purchases through retailers. People like to watch movies, together, on screens ranging from theaters to living room televisions. It took sustained, concerted effort by Hollywood to produce movies and television shows to wean people of this habit, but Hollywood's creative and executive ranks were fully equal to that task.
This is similar to the LA Times drop in circulation, from 1.1 million in 1989 to 739,000 in October 2008. As I noted in my post Failure of the Media Part Two: The Lingering Death of the LA Times this was due to the same factors that is hurting Hollywood now. Consumers were not willing to pay the price for a product they did not feel gave them value. The LAT changed from a middle of the road newspaper dedicated to serving its mostly White, Older, and Male readership to one dedicated to serving a thin veneer of wealthy, politically correct yuppies, the "Brandon Tartikoff strategy" that was also employed by NBC with the same trap. Which is the inability to create broadly appealing content to a mass audience.
Hollywood, newspapers, magazines, television, all fell into the same trap. Pursuing a highly educated, upscale demographic with lots of disposable income. Magazines such as Gourmet, Cookie, Modern Bride, and Elegant Bride are being closed by Conde Nast due to falling ad sales. The graphic below from the article shows the failure of targeting high income people when a recession hits.
[Click Image to Enlarge}
NBC has been unable to generate any audience for its shows, and is reduced to running low cost Jay Leno comedy-talk at the 10 pm hour. This is a problem shared, to varying degrees, by other networks.
What is clear is that the overall strategic advantages of legacy media, including Hollywood, has changed. Due to the recession and the difficulty of obtaining capital. Legacy media can no longer count on size being an advantage to raise capital from outside sources and "crush" through attrition various competitors. Low cost internet distribution and the personal computer revolution allowing content to be created cheaply means the legacy media, all of them, have huge cost structures that are disadvantages, while having cumbersome corporate and cultural layers that prevent agile and timely responses to economic and cultural conditions. Obama's approval ratings are at 50%, for example, meaning that there is little benefit from praising him as a living God, yet Magazines at the checkout counter and news channels and broadcasts (with the exception of ratings leader Fox News) present Obama as "bigger than Jesus." Complete with hagiographic coverage, and "debunking" of SNL skits that gingerly criticize the "savior." At least half their potential readership and audience does not approve of "the One" making this a dumb business move appropriate to a forced monopoly not a business scrapping for customers.
This sort of thing happens, not because the people in the legacy media, or Hollywood, are inherently bad, but because their system has rewarded orthodoxy and not had any immediate connection or feedback mechanisms for audience/readership responses. Newspaper and magazine writers and reporters don't get paid extra if their articles generate more reader responses, purchases of the newspaper or magazine on the newstand, and the like. Chris Matthews of "Hardball" does not get less money when his ratings go down and more money when they go up, from week to week. Instead, in a nepotistic, and often rife with casting couches, such as David Letterman's, getting ahead meant not performance related to the bottom line but adherence to group PC orthodoxy of the often inbred, second or third generation elites who comprised management of the legacy media. From the Harvard Mafia in the Simpsons and Conan O'Brien writing staff to the preponderance of the Ivy Leagues and second/third generation Hollywood among writer/producers, relationships not production has dominated legacy media, and left the media unable to adapt to the recession and permanent lower prices consumers will pay for information and entertainment.
With these permanent lower prices, be it Redbox rentals for $1 at convenient supermarkets, or piracy on the internet or street corners, or ad supported free Hulu.com views of say, "LA Dragnet" or "Married With Children" the ability to wring billions out of consumers wallets for specialized content is over. High prices for content means specialization, the upscale market pioneered by Brandon Tartikoff and spread throughout the media world, including magazines, newspapers, and Hollywood. The ability to supplement theatrical revenue for movies with foreign TV sales, DVD sales, and so on is simply gone. As is other people's money from Wall Street or foreign tax shelters.
Instead, new content creators, based outside of Hollywood, will have to create broadly appealing content because the amount of money they get from each sale or view will be small. The way to get rich in media is no longer being highly specialized, serving only segments of the market, like tween girls and moms, or upscale yuppies wanting an extra dose of PC from say, "Crash." It is by serving everyone, tween girls, their moms, young men, boys, adult men and women, married, single, divorced, middle aged or senior. Everyone. And in this case the future of media resembles the past: highly entrepreneurial men like Sam Goldwyn or Louis B. Mayer, who have a deep love for America and its people, and make entertainment aimed at getting the broadest possible audience. Since margins on each view or sale will be low. Probably, much of the content will be integrated, with content available on websites for free (ad supported) viewing, downloaded for free with embedded ads, downloaded for a modest cost with no ads but extras, and available for rent or purchase in DVD or Blu-Ray format for modest costs in mass retailers like supermarkets or online ala Amazon.
This is critical, because the sneering yuppie-ism, which at its worst contributes to an elitist, fractured culture that produces elitist, fractured politics, is no longer sustainable. The internet has accelerated this change, but fundamentally, the audience has simply concluded that paying $11 per ticket at the theater, or $22 for the DVD of "Land of the Lost" is simply not worth their money.
...Read more
Thursday, October 1, 2009
Roman Polanski and Hollywood: Boycott Revenge
Roman Polanski's arrest in Switzerland as US authorities seek to extradite him back to California to serve his sentence on child rape charges has outraged Hollywood. Not at the rape of a thirteen year old girl. Or justice evaded and thus denied. No, the Hollywood Luminaries are outraged that "a man of Polanski's talent" is sitting in a jail cell. The full list, including Harrison Ford, Natalie Portman, Mike Nichols, Jeremy Irons, Neil Jordan, and others, is here. Harvey Weinstein notes that Hollywood has the best moral compass because of its compassion and fundraising efforts. As blogger Patterico (real name Patrick Frey, an LA Assistant District Attorney) notes, this claim has not gone unchallenged. This is par for the course, from polygamy friendly Big Love to excuses for Polanski's sexual relationship with then 15-year old Natassia Kinsky, Hollywood is a different place. One alien to most Americans, who don't think the rape and sodomy of a thirteen year old is acceptable, just because the perpetrator is "cool" and is believed talented by "important people in Hollywood."
But the audience has a choice. A boycott. Of notable names of the signers and just as importantly, their employers. Among them, Wes Anderson, who is one of the prominent signers of the "Free Roman Polanski" petition. Writer-Director Anderson, has a children's movie, The Fantastic Mr. Fox being released in November by Fox Animation Studios.
For those who find Hollywood's endorsement of child rape outrageous, from Whoopi Goldberg's "it's not rape-rape" comment on the View to the Huffington Post advocacy for Polanski to Hollywood Elsewhere's David Wells fawning advocacy for Polanski, there is a weapon at hand.
Boycott.
Specifically, a boycott of any movie, television show, or production involving the signers. Just as importantly, send a letter to the studios which financed and released the projects detailing just why you as a consumer will not patronize firms advocating or employing advocates for child rape. Studios not only need to know they won't be getting your money, they need to know why. Which is that they endorsed (by employing Anderson and Huston) child rape.
In this spirit, I strongly advocate that those outraged by this fawning advocacy for Polanski not see "The Fantastic Mr. Fox" and write to Twentieth Century Fox Film Corp at the following address detailing (politely) why you will not be seeing their film "The Fantastic Mr. Fox" given its director (and star Anjelica Huston) signed a petition advocating the release of a convicted child rapist. Even better, would be for those outraged to add their boycott of the company's future projects given its moral failings so outrageous that it shocks the conscience of all decent people. The full mailing address is below:
Twentieth Century Fox Film Corp
Mail: P.O. Box 900,
Beverly Hills, California 90213
Phone: 310-277-2211
Fax: 310-203-1558
The primary Press Contact is:
Chris Petrikin
SVP of Corporate Communications
Phone: 310-369-4781
Fax: 310-369-8825
Money is not rolling into Hollywood coffers anymore. Studios cannot afford to alienate customers. A boycott making "The Fantastic Mr. Fox" a gigantic bomb, and Wes Anderson box office poison, would at least put the fear of the audience into Hollywood. They've certainly lost the fear of anything else.
A later post will detail just why Hollywood's elite became so deranged, debauched, and debased, but at least the economic downturn gives the audience its revenge. Boycott.
...Read more
But the audience has a choice. A boycott. Of notable names of the signers and just as importantly, their employers. Among them, Wes Anderson, who is one of the prominent signers of the "Free Roman Polanski" petition. Writer-Director Anderson, has a children's movie, The Fantastic Mr. Fox being released in November by Fox Animation Studios.
For those who find Hollywood's endorsement of child rape outrageous, from Whoopi Goldberg's "it's not rape-rape" comment on the View to the Huffington Post advocacy for Polanski to Hollywood Elsewhere's David Wells fawning advocacy for Polanski, there is a weapon at hand.
Boycott.
Specifically, a boycott of any movie, television show, or production involving the signers. Just as importantly, send a letter to the studios which financed and released the projects detailing just why you as a consumer will not patronize firms advocating or employing advocates for child rape. Studios not only need to know they won't be getting your money, they need to know why. Which is that they endorsed (by employing Anderson and Huston) child rape.
In this spirit, I strongly advocate that those outraged by this fawning advocacy for Polanski not see "The Fantastic Mr. Fox" and write to Twentieth Century Fox Film Corp at the following address detailing (politely) why you will not be seeing their film "The Fantastic Mr. Fox" given its director (and star Anjelica Huston) signed a petition advocating the release of a convicted child rapist. Even better, would be for those outraged to add their boycott of the company's future projects given its moral failings so outrageous that it shocks the conscience of all decent people. The full mailing address is below:
Twentieth Century Fox Film Corp
Mail: P.O. Box 900,
Beverly Hills, California 90213
Phone: 310-277-2211
Fax: 310-203-1558
The primary Press Contact is:
Chris Petrikin
SVP of Corporate Communications
Phone: 310-369-4781
Fax: 310-369-8825
Money is not rolling into Hollywood coffers anymore. Studios cannot afford to alienate customers. A boycott making "The Fantastic Mr. Fox" a gigantic bomb, and Wes Anderson box office poison, would at least put the fear of the audience into Hollywood. They've certainly lost the fear of anything else.
A later post will detail just why Hollywood's elite became so deranged, debauched, and debased, but at least the economic downturn gives the audience its revenge. Boycott.
...Read more
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