At CES, Barry Diller said “movie companies rarely make a lot of money.” So now what?
Barry Diller is a media entrepreneur who needs no introduction. But for the uninitiated, his list of credits include: serving as Chairman and CEO of Paramount Pictures Corporation from 1974 through 1984, creating the Fox Broadcasting Company and USA Broadcasting, owning QVC and Home Shopping Network, and currently serving as chairman and senior executive of IAC/InterActive Corp – which owns businesses such as Match.com, About.com, Tinder, The Daily Beast and Vimeo – and Expedia, Inc. He also famously lost a major bidding war for Paramount in 1994, after which he issued this quick zinger of a press release: “They won. We lost. Next.”
Diller made some choice statements about the movie industry during a keynote session at the 2017 CES trade show in Las Vegas last Thursday. Some things he said were bold but not untrue. And many things he said we’ve heard before. But let’s take a minute to break down some of his statements and see how they stack up against the current movie landscape.
Here’s the full video if you want to watch for yourself:
“Movie companies rarely make a lot of money… A standalone movie company today is hardly a great business proposition. Now because of these changes there are so many ways to get into the market that owning what would be called a “brand”… I think is meaningless and not a very good business proposition unless, right now, you’re Disney.”
At first glance, 2016 looks like a good year for the big six “brands,” which include Comcast-NBCUniversal, The Walt Disney Company, 21st Century Fox, Time Warner, CBS Corporation and Viacom. The movie divisions of these conglomerates helped pull in a record $11.4 billion in North American box office revenue. But taking a closer look at the top ten films of the year reveals a different story.
Disney produced six of the top ten highest grossing films, including the top three (with current total domestic grosses in parenthesis): Finding Dory ($486 million), Rogue One: A Star Wars Story ($477 million) and Captain America: Civil War ($408 million). The Mouse House hit the industry-first $7 billion mark at the global box office in mid-December, with each of the top ten films except for Doctor Strange nearing or surpassing the $1 billion mark. Some would say this is great for the industry – people are going to the movies! But this raises a lot of questions on the kinds of movies people are going to the theaters for.
“The movie business is no longer the movie business. The movie business is now a horrible thing called the tentpole business. The fact that we get any good movies is almost a miracle. And because the business formation is now huge blockbuster movies that have to do $500 million dollars to break even… I mean, that’s not a creative enterprise.”
Hate to be repetitive, but Disney is arguably the only studio turning a decent profit because they technically don’t produce movies – they produce brands. Like Coca-Cola and the iPhone, Disney is in the business of selling us brands that entertain us: Star Wars, Marvel, Disney.
In the movie business, a movie is called the loss leader. A studio makes its real dough on other revenue streams such as licensing, merchandising, home video, video on demand, and so forth. You can see how Disney can make a lot of money off this strategy. And if you’re Disney or Universal, you get to add theme parks into the mix.
So does this mean good old fashioned original stories are going to go extinct? Let’s just all stay home and watch the “Golden Age of Television” unfold? Not exactly.
“You’ve really got to invent inside the new system. You can’t colonize it because it wont work. So you do have, now, the ability to directly reach a consumer. The methods and ways to do actually enable you to be enormously creative in how you do that.”
The key here is finding ways to innovate and adapt to the disrupted industry and its various platforms. This takes time at an old-fashioned and gigantic movie studio, and, frankly, they’re not very good at it. (This was greenlit by someone and released in 2011. Why?) The act of watching moving pictures in a theater has been around since the first nickelodeons sprung up in 1905. Isn’t it about time we changed the system up?
Let’s take Diller’s past experiences in television as an example here. As head of prime time programming at ABC, he created the ABC Movie of the Week series in the 1960s. The series featured a new movie each week that was produced at a low budget and directed by oftentimes new filmmakers working with producers like Aaron Spelling and production companies like Bing Crosby Productions. The series was a success in helping to establish ABC as a legitimate network rival. It even launched the career of Steven Spielberg following the premiere of his first feature Duel (1971).
Imagine a world where Hollywood lets new, diverse directors, producers and other creators work together to different and interesting films. It sounds ridiculous but it’s actually happening right now in television – FX’s Atlanta, HBO’s Insecure and basically all the original content at Netflix and Amazon are prime examples.
This kind of thinking outside of the programming box can be likened to HBO bringing high quality original content to television viewers in the 1990s, and Netflix disrupting film and television distribution systems with streaming services. Thinking outside the box and actually bringing the customers – er, audience – what they really want helps. And giving them the choice to watch when and where they want is key too.
“It doesn’t take anybody more than a semi-imbecile to figure out that once you have that ability (to pick and choose channels) you’re gonna pick what you want. Either you will pick individually or people will make packages for you… Mostly I really do think you will curate yourself. You will decide, ‘I like Netflix, I like Amazon, I want ESPN, I want whatever.’ Why would you let anyone warehouse for you if you can individually choose?”
Diller says a la carte programming is the way to go. Give the people the choice to pick what they want rather than a package of 4,000 channels they don’t need. This concept of custom curation is something that can be applied to film consumption. Think about this past year’s critically lauded limited release films – The Handmaiden, Jackie, La La Land, Manchester by the Sea, Moonlight, and so forth. These films were given smaller releases compared to big budget tentpoles but they all received high critical acclaim and some even awards buzz. If great films like these could be released on streaming platforms the day they come out in theaters or even just a week or so after, one would argue that people would be down to subscribe to the platforms they’re released on.
There are so many movies to watch these days. It is hard for the average moviegoer to keep up with all the choices especially when they’re not always available at their local cineplex. But there’s a way for arthouse films and tentpoles to happily coexist if provided the right distribution platforms for the target audience.
Also, let’s face it – everyone is watching movies at home these days. This includes the critics that write about them to film industry folk that work on them and vote in all the fancy awards ceremonies. But many critics and industry members have the privileged opportunity of receiving screeners that they can watch in the comfort of their own home. It seems rather unfair that the movie industry still expects general audiences to buy movie tickets and get their butts in theater seats, when industry peeps are watching free movies at home. Amirite?
“It is not in the size of the audience… It is in the quality.”
Diller said that IAC’s news site The Daily Beast switched their usual strategy of chasing mass audiences about a year ago into attracting niche, quality audiences. Though they have yet to show that the strategy works for them, this isn’t unheard of for smaller blogs and brands. Quality content for specific, quality audiences is important as more and more choices enter the marketplace.
The same can be said for the movies. There is a lot of content out there. Films have to compete with online video, social networking apps and soon perhaps virtual and augmented reality for market attention. But rather than chasing the four quadrants, studios should double down on niche audiences.
Screen Gems does this very well in producing low-budget, niche, genre pictures like horror and faith-based. Take note: Heaven is for Real (budget: $12 million; domestic gross: $91 million), Don’t Breath (budget: $9.9 million; domestic gross: $89 million) and Think Like a Man (budget: $12 million; domestic gross: $92 million). Seeing a pattern here? It’s not rocket science. It’s matter of giving the people what they want and being creative about how you produce and market your product – er, movie.
I know what you’re thinking. Barry Diller doesn’t work in movies anymore. He’s just some old Hollywood exec. What does he know?
The guy’s had some big wins and even greater losses. But one can learn from someone who has been through the trenches, learned to adapt and innovate along the way, and sometimes is able to see what’s coming next. Take his words with a grain of salt. Video didn’t kill the radio star (hi, podcasters). And streaming won’t kill the theatrical movie experience. There will always be film lovers who will go see films in a theater. And there will be many more viewers up for seeing films through mobile or television screens and perhaps even VR headsets. Movies, especially those produced by Hollywood, are part of a business. And innovation and adaptation are necessary for a good business to thrive and survive.