On January 11, 1991, the then-head of Disney studios, Jeffrey Katzenberg, circulated an incredibly important memo about the state of the movie industry and the products they were making. It was called, “The World is Changing: Some Thoughts on Our Business,” and it had a simple purpose: to locate the root of a growing problem and to take steps to avoid falling victim to it.

Katzenberg began the memo by stating:

“As we begin the new year, I strongly believe we are entering a period of great danger and even greater uncertainty. Events are unfolding within and without the movie industry that are extremely threatening to our studio.”

As we begin a new year two decades after this memo was written, it’s critical to look back at the points Katzenberg made to see that his period of great danger is now our period of great danger, to note that the same events unfolding within and without the industry still threaten the entire studio system in 2012, and to predict our future based on the past.

There are definite similarities between 1991 and 2012. The country was in a recession then and finds itself crawling out of one now. We were dealing with an Iraq invasion then, and we’re dealing with the aftermath of another now. The country was losing economic power while maintaining cultural dominance then, and it’s the same story now. Disney was the #1 studio then, and although they weren’t last year, they still busted $1b while coming in at #4.

Studios are still judging box office success against Batman.

Now, with all this talk about money, it might seem like fans have no stake in this game, but we all do. Imagine the top six studios from last year (Paramount, Warners, Sony, Disney, Universal and Fox) as players at a poker table. When the chip stacks are high, they can all afford to test the pot with some wild hands. They can get creative with what they play. Unfortunately, the stacks aren’t high, which means they can’t get as loose, and while some attractive cards may come their way, they’re all trying to get dealt a full house.

That means the same hand being played for fans, and for those that like variety in their life, these are the salad days. But we’ll get to that later when we optimistically predict the future.

The Katzenberg Memo

For now, let’s live in the past with Mr. Katzenberg. At its core, his 1991 memo has three major statements to make about how movies are made:

  1. The Blockbuster Mentality – There is no middle ground anymore because massive resources are put into 1-3 movies per year that hold the fate of the studio hostage. Instead of making ten $30m movies, they make one $300m flick that has to succeed in record-breaking ways. To do that, all efforts must be focused on a giant opening weekend that will earn notoriety alongside a big chunk of the overall gross. Further, even if the film does well, it will be called a failure if it doesn’t make as much as Batman (1989). The result? Overspending on a dangerously difficult bar to clear while over projects go unfunded.
  2. The Movie Industry Isn’t Recession-Proof – As Katzenberg points out, the reason movies appear to be recession-proof is because people have historically run to escapist entertainment during hard times. The facts might partially support the theory, but Katzenberg shows the theory itself to be misguided – stating that, “When there is fear and uncertainty, the people have craved bargain entertainment. During previous downturns, the best escapist entertainment value was at the movie theaters. But no longer.”
  3. The Rise and Fall of the Movie Star – With the inflation of budgets and grosses, two things happened almost simultaneously. One, actors (and writers and directors and everyone) started (rightfully) demanding their fair share of the profits. Two, the concept of movie stars buckled. It’s unclear when “movie stars” stopped being as bankable as they once were, but actors demanded more money while they had less to do with financial success.

All of these points could be made today.

Coupled with other fads, studios are scrambling hard to make sure that their tentpoles are safe. That’s why Sony is rebooting with The Amazing Spider-Man. It’s why Warners needed The Green Lantern to be a mad success (and why they’re automatically planning on continuing with Batman movies post-Nolan). It’s why the seven highest grossing movies of 2011 were sequels (and why 17 of the highest 20 were either already part of a franchise or the planned beginning of one). Studios can no longer afford to create name recognition – it has to come built-in.

At the beginning of our most recent recession, analysts like The New Yorker’s James Surowiecki prematurely hailed movies for being recession-proof. Even as late as August of last year, Hollywood.com’s Paul Dergarabedian claimed erroneously that people only focus on price when they have a negative experience while citing it as part of the reason why summer ticket sales were up (further confusing the myth of movies in tough economic times). Of course, at the end of the year, the final numbers showed that ticket sales were about half-a-billion behind 2010 and attendance was at its lowest since 1995. There’s no point in believing a single year is proof of a trend, but it certainly injures the blind belief that movies always do well in times of trouble. They sure didn’t last year.

As for movie stars, the big names still exist, but there are fewer of them and they’ve lost the luster of being sure things. We’re too familiar with them for them to remain glamorous, studios have struggled to foist new unproven “stars” like Channing Tatum and Sam Worthington on the public, and as Landon Palmer wrote back in 2009, our definition of what makes a movie star has shifted irrevocably and in a way that isn’t nearly as obviously beneficial to the people banking their shots off names and faces.

All of this to show that reading Katzenberg’s memo is a bit jarring because of how accurately it predicts the environment of filmmaking in 2012. Beyond the aforementioned echoes, he comments on theaters being choked by sequels; he shuns the idea that children’s movies are just for kids (something Pixar picked up and ran with); and he alludes to a partnership with Jerry Bruckheimer that won’t necessarily have to be about blockbuster building (which, fair enough, turned out to be a bit wrong). Still, it’s creepy.

True Then, True Now

Considering the current resurgence, it’s fascinating to note that Katzenberg’s negativity toward the Blockbuster Mentality in 1991 is sparked by two comic book movies. The first is Batman and its unforeseeable effect on the way other big movies were judged. The second is Dick Tracy – Disney’s big budget blockbusting contender that year. In his own words, it was:

“…a film that did very well, a film we were rightly proud of, a film that was critically acclaimed… and a film that is still being savagely disparaged as ‘having failed to achieve Batman-like success at the box office.’

This is not a healthy situation. If every major studio release must aspire to repeat the 1989 success of Batman, then we will undoubtedly soon see the 1990’s equivalent of Cleopatra, a film that was made in the hope of repeating the 1959 success of Ben Hur.”

And so it goes.

Dick Tracy has a modern equivalent in The Green Lantern. Both are comic book-based and feature cocky heroes who fight crime while hanging out with bizarre-looking characters. Both are technically and visually interesting. Both should have been bigger hits based on the formula that existed. Both pulled in millions of dollars in ticket sales. However, they were both failures in their own ways. Katzenberg prophetically, of course, has an explanation for it. Here, he’s talking about Dick Tracy and The Rescuers Down Under‘s inability to grow the “legs” the studio wanted, but for our purposes, let’s pretend he’s talking about Dick Tracy and Green Lantern:

“In both movies, everything remained static for the main characters. At the end, nothing elemental had changed. To compensate for the lack of an emotionally driving core story, the two films showered the audience with dazzling and inventive ‘business.’ But much of this failed another test of storytelling — i.e., the movies would still have made sense had many of these scenes been cut. Just like songs in a musical, no matter how beautiful the melody, if they don’t move the plot along, they don’t belong.”

Spectacle is nice, but it can never compensate for a lack of engaging characters and a compelling story. This is precisely the reason why both of these movies failed to be bigger successes, and it’s the reason (coupled with high pricing) why 3D is fizzling after a year where studios could have sworn it would save them.

What will save them (and save fans)? Writers who can write story. Filmmakers and actors who can deliver great character. Oh, and spectacle-makers who can make magic. They have a place too.

Katzenberg knew this in 1991, but it seems to be a lesson studios haven’t quite learned yet here in 2012. However, with the budget for a tentpole like The Amazing Spider-Man getting trimmed down, maybe they’re on the verge. Maybe they can still change.

The Money Quote

It’s difficult to pin down a singular point from this invaluable piece of writing because it’s so broad in its scope. It covets a principle, a philosophy about film production that can’t be broken up piecemeal. Katzenberg highlights storytelling as their most important job, but the businessman in him shines through as well. So, then, this might be the core message:

“Any film can fail at the box office. And that’s o.k. It’s part of our business. No one can know for certain what the public will want to see. So the basic problem with the above movies [a list of flopped sequels] wasn’t that they were ill conceived or misguided or even bad entertainments. The problem was that they were just too expensive.”

It may seem simple. It may seem to let producers off the hook. It may seem craven, but it gets to the heart of the problem. The Blockbuster Mentality that Katzenberg so fervently fought against has taken over the studio system, including Disney, and threatens fans in a major way. The behemoth idea is anathema to risk-taking, it steals money from the coffers for other movies, and it drives a world of creativity toward toy sales and stagnancy. It’s odd that in a time of panic, people will grab for anything to save them from sinking except solid ground. Maybe the studios have been adrift for so long that they’ve forgotten how to find the shore, but the building blocks of story haven’t changed; the reason the past few years of studio offerings have been so underwhelming is that they’ve been wrapped up in plastic, unable to see what audiences still want.

The answer isn’t more explosions; it’s characters we care about running away from more explosions.

Although he fought hard against a raging sea of change, Katzenberg left Disney a few years after writing this memo to found DreamWorks with Steven Spielberg and David Geffen – a studio not without Blockbuster Mentality blame here in the future.

A Simple Prediction

What happened in the 1990s after Katzenberg expressed his fear at the laziness of studios? The independent industry grew to fill the void. Filmmakers like Kevin Smith, Ed Burns, Jim Sheridan, Spike Lee, Steven Soderbergh, and Quentin Tarantino led the Indie Movement to critical and commercial heights.

The same thing will happen in this decade. Now that the means to make a movie and the equally important tools to promote the thing are within arm’s reach, the Second Indie Movement that’s been talked about for half a decade is finally ripe for revolution. If quality is missing from studio pictures, audiences will seek it elsewhere (especially if they can find it on iTunes or on their own television screen for a smaller ticket price).

Of course, the studios bought out and co-opted the independent houses of the 90s, too. That will probably happen again as well, but for now, we’re on the cusp of a great change in power unless, and only unless, the studios can remove the rotten core of their production philosophy and replace it with an emphasis on fundamentals over flash. They must realize they’ve fallen victim to the very danger and uncertainty about which Katzenberg warned.

Fortunately, this is all reason to be optimistic for we fans who stand patiently in line at the box office hoping to be transported and transformed. The slump, either by indie takeover or big budget wake-up call, will be over soon.

Until the next one.


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