IFH 391

IFH 391: The Future of Hollywood Distribution Post COVID-19 with Stephen Follows


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A good friend and returning champion Stephen Follows wrote an amazing article discussing the future of Hollywood distribution. I asked him to jump back on the show to discuss. Here’s a bit of the article:

Change in the film industry is often an extremely gradual process. The views of those involved tend to be entrenched and hard to shift. Therefore, how the film industry will operate one year can reasonably be expected to be very close to that of the year before.

Not so in 2020. The current COVID-19 pandemic has forced a number of huge changes upon the sector over a matter of days. Cinemas are shut, productions are on hiatus and almost everyone is at home watching TV and VOD content.

In order to take the industry’s temperature at these uncertain times, I teamed up with Screendollars to interview 363 film professionals. We focused on the domestic market (i.e. the USA and Canada) and asked a range of questions about their views on the current changes and what they think a post-lockdown future may bring.

We split respondents into five groups, based on their area of professional work:

  • Filmmakers, covering development, production, and post-production.
  • Sales & Distribution, including sales agents, distributors, and marketers.
  • Exhibition (Distribution), cinema owners, and operators.
  • Home Ent, TV & VOD, including physical and digital sales, all forms of VOD and films on television.
  • Other, including those in education, government bodies, festivals, journalism, cinema suppliers, and more.

We have a very eye-opening discussion about the future of Hollywood distribution, movie theaters, VOD, Trolls 2, and more. Enjoy!

Alex Ferrari 2:51
Now guys, today we have a special episode we're bringing back returning champion, Steven Follows you may remember him from our last episode where we discussed how Die Hard is the greatest Christmas movie ever made. But on a serious note, Stephen is the film data guy. He crunches numbers for the film industry like nobody else and really has amazing insights on to how this business works in general. And he just released an article the other day, where he took a survey of over 400 industry insiders to find out what Hollywood really thinks the future is for exhibition. And I thought it was extremely important to get this message out there because so many tribe members are asking me constantly Alex, what's the future? What are we going to do is is our theaters dead is is VOD going to take over. And I wanted to get them on the show to discuss all the findings he had in his article. So we sit down and talk about the future about where we're going, what we think is going to happen but more importantly, what the industry themselves think is going to happen. And it's broken up into a very distinct group of people. filmmakers, sales and distribution people exhibition people, which are cinema owners and operators, Home Entertainment TV and all flavors of VOD, including physical and digital sales of all forms, as well. And then there's others which are like education, government bodies, festivals, journalism, lawyers, cinema suppliers and so on. It is truly a fascinating story on where the industry is going to be where the injuries he thinks the industry is going to be post COVID-19 so without any further ado, please enjoy my conversation with Steven follows. I'd like to welcome back to the show returning champion, Steven Follows How you doing my friend?

Stephen Follows 4:42
A very good Thank you. You say that every time and I I do worry. I'm going to I'm going to be challenged. What is going to take

Alex Ferrari 4:51
Well, you are one of the returning champions. I mean, Rb Bado is the ultimate champion has been on the show, I think 11 times in the course of the the entire history of the show. So you've been on that. I think three or four times,

Stephen Follows 5:02
You know I want to challenge Rb is a nice guy, but he is rich.

Alex Ferrari 5:06
He does work out

Stephen Follows 5:07
If your listening Rb, you're fine. You're fine.

Alex Ferrari 5:10
I think last time you were on the show we discussed why Die Hard is the greatest Christmas movie of all time. Yeah, with numbers and stats, you know, not that we need them. But yeah, it doesn't hurt. It was it was one of the more enjoyable episodes I'd done quite some time. And the tribe was really happy about that episode. Some people were like, you spent an hour talking about diehard and like, Yes, Yes, I did. It was the Christmas present to the people who want to I don't know how we cut it down to an hour, if I'm honest. Yeah, it was, it was we could have kept talking. We could have easily been talking about that. This year, we'll do Lethal Weapon and why that's a Christmas movie. So. So it's this is so I wanted to have you back on the show. Cuz you wrote this insane article, which, when I anytime I refer to you, it's always insane is somewhere in the point. But in the most positive connotation of that word. You wrote this amazing article, what does the film industry think its future is the future of film exhibition, essentially. And of course, you have the numbers to back it up. So what did you find out from your research?

Stephen Follows 6:23
Yeah, this was a really fun project or something I've wanted to do almost as soon as the pandemic started to change the face of the industry. And whether it's a temporary thing, whether it's a long term thing, we obviously won't No, no, no one can know that. But what we can look at is what people think, you know, what's there. And so this is absolutely a survey of opinions and perspectives rather than facts, because who knows. And so I teamed up with screen dollars who have a mailing list, who send out a newsletter, every Sunday to the mostly exhibition sector in the in the US, but also obviously wider than as well. And we've been talking for a bit and myself, I said to them, Look, let's do a survey, let's try and get the take the pulse of the industry and exhibition, but also all the other sectors as well. And let's see what people are thinking. And I had a few suspicions as to sort of whether people were sort of losing sinks slightly as we're not actually trading, you know, on, you know, the, the exhibitors and distributors and studios will be trading normally. And so they will get a better sense of what the others thinking. But now as no business is going on, on that front, they're losing a bit of sync. And so we sent out a survey and we had just under 400, people fill it in. We had a few more, but we decided to focus the results on the domestic market, because most of the people are in domestic but also it's the it's the most interesting to pull apart because so the most evolved market around the world. So we then so we had all these answers. So we grouped people into into four different five different categories. We had filmmakers, so people involved in development, writing, pre production, production, post production, so there are people who make films, sales and distribution. So they've they're sort of middlemen who do the sales and distribution. So film markets and distribution. And also marketeers are in there as well, people who do marketing as well, the main exhibition, so cinema owners and operators. Then the fourth category was home end, which we include TV and all flavors of VOD. And the last one was other, which was sort of lawyers and accountants and film festivals, and almost everything else in there. So it's quite that other group is quite a hodgepodge. So I will refer to them very much. But it was interesting with these filmmakers sales distribution, exhibition at home meant we have the whole journey of a film. And we can see how their views of the same or how they differ and things. So the first thing we asked them, which is this is, this is not a surprising result. We asked them whether we thought different sectors of the industry would be better or worse between January 2020 and January 2021. And to varying degrees, but pretty much the picture was the same. Everyone thinks that if it doesn't happen in your home, it's going to be much worse in January 2021 that it was this year. So finance, production, sales, distribution, exhibition, festivals, market markets, all that stuff. Everyone thinks that's going to be far worse. And obviously everything that happens in the home. So buying desks, all kinds of VOD and also films on TV is going to be a lot stronger. So that's kind of what you'd expect, right? But where we started to see differences was when we started asking them about changes to the business model. The exhibition business model of interest what's your perspective? Alex, do you think that the business this COVID thing is going to make people change their business models so do you think it's always been in the works for a while and it's just going to make it happen sooner?

Alex Ferrari 9:51
I think that any any studio any production, any distribution company that does not expect massive change in The way we do business moving forward will be left behind and left in the the corridors of time as a failure. And they'll go out, they'll go out the way of the blockbuster. If they don't see that this is a massive, massive shift, Titanic shift. And the way we consume content the way we see it, I think it's been in the works for some time, I think what is happening this year, and the last actually, in the last few months, would have probably taken another five or 10 years to go through. Because we're such a slow industry, like we do not adapt to change at all. Look at look at look, think about it, Netflix came out in a weight. And Netflix really came into its own way, you know, what 2015 2016, and it didn't become like a became like a real dominant dominant player, only within the last few years, you know, where it became basically the biggest studio, almost the biggest studio in Hollywood, and change the entire business model of Hollywood. And now this 2020 is the first year that we have, I mean, Disney plus just came out late last year, then we have HBO, Max and peacock, they the other studios finally showed up. They started in 2008.

Stephen Follows 11:21
So the industry is so slow to do that kind of stuff. And so many budgets I've seen in the last six months, even have got things like you know, taping labs, filming labs, and they should

Alex Ferrari 11:32
Still there still there. It's still there.

Stephen Follows 11:34
Yeah, and it will maybe they're in 100 years, there's so much that is just that's the way it was. And so therefore, it's the way it will be.

Alex Ferrari 11:41
But it I think it's a problem that and it happens in every industry. every industry around the world, when there's big giant change, whether it's through technology, or culturally, or in society, in general, is they're trying to hold on to their cash cow. So DVD sales, Home Video rentals, when blockbuster couldn't conceive of streaming or couldn't make it work. They try to hold on to their cash cow and they fight. They fight tooth and nail looking at the music industry, how long they fought mp3, till they finally figured it out. It took them a while to figure it out. That's exactly what's happening with film distribution. And now, this like this fight between AMC and universal, like, we're not going to show anymore universal like, dude, you have no power. He's no power the theater. No power.

Stephen Follows 12:29
Now is not the time to have the argument as well. Like, whoever's right or wrong, you don't know what's happening. And you should just everyone should just keep quiet

Alex Ferrari 12:38
It's like your leg is broken. And I'm gonna go, let's go fight. You know, I have my heart, my arm and shoulder have been thrown out and I have a broken fist. But I'm going to pick a fight. That's exactly what AMC is doing right now. It's the stupidest thing around. And it's because they are so terrified that their entire business model is going to go up in smoke, that they're reacting this way. And they're not being smart. They're doing the same thing that blockbuster did, they're doing the same thing as borders, and all of these other commerce Circuit City and all of these companies that were giants, like Sears and all these other companies and other in other industries that were giants led like just legendary companies, because they are not flowing with the technology, the not flowing with the way things are going. And if they don't, they just can't see past their their core business model. And if it isn't effective, yeah, if they don't shift, if they don't pivot, you're gonna die. And I promise you that AMC will be bought out by Amazon or by somebody else. And the whole spectrum is going to change and specifically AMC, imagine if Amazon bought and I call that mean RB call that I think in February, I would like oh yeah, Amazon's going to probably buy AMC, because it's so cheap now. Because it's not going to go away. All those screens are gonna still be there. But

Stephen Follows 13:57
Yeah and I think the desire to go to the cinema is going to be absolutely, because why do people go because it's cheaper than most of the other alternatives like theater or ballgame. It's much more flexible. It's perfect for like catching up with friends and a low hassle kind of way. And you get to be part of a shared moment. And there's no, if I could buy shares and going to the cinema, I would if I had to buy shares in the individual limited companies that exist today. I'm not sure I would.

Alex Ferrari 14:20
But would you but I think the future is going to go back to where it was at the dawn of Hollywood, which is where the studios owned the exhibition. And then they came up with this anti anti monopoly law, the antitrust thing, so they aren't allowed to it but if you've ever been in El Capitan in Hollywood Boulevard, which is owned by Disney, that is the future of cinema in my opinion, where

Stephen Follows 14:49
Netflix already own the one is in New York where they buy theirs. They own

Alex Ferrari 14:54
They bought they bought exactly so they're going to create like for specifically for something like Disney. They're going to create a experience, they're going to have characters there, there's going to be the gift shop is where they're going to start selling stuff is going to be like a Disney Store inside of the movie theater. Because imagine if you walk out of frozen to with a ton of kids, they're all gonna want to buy something. And you can

Stephen Follows 15:16
It's not just it's not just kids, though I think you know, I've worked really cool. Like, for example, you walk out of a Christian Christopher Nolan movie. And then they say, do you want to buy the Blu Ray 25 quid, but there's a commentary where he explains what it meant,

Alex Ferrari 15:29
Or the script, we want to find a script on it? Or do you want to buy the art book behind it? Or the any of that kind of stuff?

Stephen Follows 15:35
And that's the moment to get me when I'm walking out. Absolutely.

Alex Ferrari 15:39
And that's but I think that's the future of exhibition, I think these studios will start to buy up these chains, because now they've now relaxed that antitrust thing. So now the studios will start to buy these, these these exhibitions, and there's just gonna have more consultation.

Stephen Follows 15:57
Well, it's interesting because the power dynamic has been quite balanced. And we'll come on to what they think about the past but power dynamic in a second. But the power dynamic between studios and exhibitors has been broadly quite well balanced. And they've been a few fights on either side. And the window of release has been getting slightly smaller. But fundamentally, they were holding their own to each other. And this is thrown out the window as far as it's completely in the moment we are in right now the studios have have more power. And exhibitors clearly right now have very, very little because they're not there's no money flowing. But one of the interesting things is this, the studios, I don't know this for a fact. But if I were in the studios, I'd be thinking this, they gotta be very careful, they don't kill the sector. Because the one of the major things that about exhibition for the studios is it's a massive competitive advantage. You know, it's a barrier to entry to the indie filmmaker. You know, if if all films just went straight to VOD, there will be less difference between a Disney film and an indie film, there's still a difference, but less of a difference. Whereas if they can control whether it's through ownership or through just the commercial terms, the exhibition going to the theater, then they have a different type of product. And that's what they really benefit from. But they're going to be quite careful to leave the sector alive

Alex Ferrari 17:10
Could you But let me ask you this is, is the current business model that the studios have, which obviously, the studio business model has changed over the last 15 to 20 years, where they used to do $20 million movies and mid level movies and take chances and do things, original things in original films. But now they don't now it's all IP based. It's all based on properties. It's all based on books or, or something or reboots or something like that, because they have to hedge their bets. And I get it. That's the business that they're in. But is there a world without a theatrical component that Disney puts out eight $200 million movies a year? Like can they financial because you can't go directly to Disney plus, with that, because you will run into a wall eventually, you will reach mass saturation in this market as Netflix is it's gotten really close to doing. So do you? Is there a future that we can do these monsters like Avengers end game style? You know avatar style prop projects without a theatrical component?

Stephen Follows 18:14
I can't I can't see it. Because the thing is that what Disney are very good at is selling you the same thing twice. Or three or more times. Exactly. So they don't want to get rid of a way to charge you quite Yes, absolutely. And so yeah, I think they've got to keep it exhibition life as well as it is an income stream and things like that. But the power is kind of shifting. And you were mentioning AMC talking about talking trash about trolls. Well, specifically the trolls that work at Universal trolls to Sir Jolson, yeah. So this is this is trolls world world Party, which universal? We're planning to release the actually but then went straight to VOD and had an expensive like $20 or so premiere. And so that was one of the things I asked these different sectors or different groups of people within the survey, I said, you know, how much do you agree with the statement, the universal was wrong to release it straight to VOD. And, you know, the listeners will be shocked to hear that most people in exhibition, you know, almost 60% of people thought it was just wrong, you know, but with filmmakers, it's like 15% or so 14 13%. So, fundamentally, filmmakers are like, yeah, of course, they didn't have an alternative or whatever that would. I don't know why they think this but one can assume it's because they were like, well, there was no alternative and it still made a lot of money. And it worked. Whereas people in exhibitions still think that it was a terrible thing to do. And I'm not coming down on either side. I don't know. Certainly they haven't universal announced they made over $100 million. Who knows if that would have been in addition to the box office. I'm sure they're made far more of it than they would have done in the in a theater. So I don't know. And we saw a similar thing. I asked him also about whether Disney were wrong to release frozen two and Star Wars nine, two months early to Disney. Plus, there was less of a disagreement. Most people were more in favor of that and I think it's because the the battle lines have really been drawn around the theatrical release, you know, the the window of release the first where's the first platform people can see it and when does it go to VOD when it goes to, you know, VOD, like Disney plus, after it's been on iTunes people seem to care a lot less. But it's the same pattern though, you know, exhibition thought it was terrible that people were the souls at Disney were releasing it early. And filmmakers again didn't seem to care at all.

Alex Ferrari 20:28
Well, I mean, but if you look at this, because I was studying what was going on with Disney plus, because I saw onward, which was the big Pixar movie that had a small theatrical run prior to the COVID shutdown. And then they released it on the premium t VOD for 20 bucks, then, like a week or two later, they released it on normal transactional and then the next week it was on Disney plus. So that for me and frozen to and Star Wars nine all of them are so extremely smart choices. I completely agree that Disney did that. Because they want subscribers. They have over 15 million subscribers already on Disney plus, that's I mean, that's a massive it took Netflix a lot longer to get to there. HBO took them like two years to get 10 million subscribers on HBO NOW. You know, it took them forever.

Stephen Follows 21:22
And they have the data they have the control over people like right, so yeah, he's better.

Alex Ferrari 21:27
Yeah, the money is bad. So that made perfect sense. The trolls to situation is interesting. Because they didn't have a choice. It was like either release it now. or lose a year basically, and compete so they could go on on to straight to t. s. VOD. Now, where there is basically no or TV, there's no real competition. But if they wait to November, let's say, let's say that they're going to actually release all these movies in November, December, which I can't even I mean, they're basically moving the entire summer blockbuster season to the holidays, which I don't think is going to be a great idea. But let's say they did and trolls to was waiting to go into that window. Well, there's only so many movies you can release in that eight week period. And they already pretty much you know, are you going to go against Wonder Woman? And, and Top Gun and Milan and all these? Like, it was smart for them to do it now? If not, they would have to wait an entire year to release it. And in next summer, so I think it was smart. Now they did over $100 million, according to them, according to them, which we have to keep saying. According to them, it was over $100 million, which is great. And if that's the case, that's fine. They would have made more than that theatrically? Well, they would have grossed a lot more than that, would they? I'm not I'm it's different. That's the other thing. Yeah, that's the other thing. Yeah, you're right. So they would have grossed more, but how much take home would they have made. So there's a good balance, but also, that's a very specific kind of movie, the kids are at home, there's not a lot of other things going on. It was in a crazy time when it came out. So people were still like kind of freaking out.

Stephen Follows 23:08
It was and they had no choice as well. The other choice was to completely snooze it for ages and take it out in a competitive market. So in the money in the hand, because that meant that you know, the funding of that has got costs to spending what they are they spent making that movie is accruing interest, it's costing them something so there is a lot of opportunity costs as well. And there was no competition for that, that there was no movie like that. week or two that was doing that. Whereas whenever they come out theatrically, they would have if they waited, it would have been a busy market.

Alex Ferrari 23:38
But But the question is why? Because a lot of people are like, Oh, you know, movie theaters are over. And you know, premium t VOD is what we're that's the future and to a certain extent, there is agreeing or disagreeing on that cotton that statement, but you have to ask, Well, that was what movie like trolls to? What would happen if Avengers endgame or Wonder Woman or the next bond showed up? Like I would pay $20 for any of the movies. We just talked about to watch it. Uh huh.

Stephen Follows 24:10
Yeah. I personally, I feel cheated. Not No, not cheated. That's too strong. I feel disappointed. on a big screen.

Alex Ferrari 24:17
Of course I do. Absolutely. But if we don't have that option, you know, if if Bond was available to me tomorrow, I would probably get it. And I think a lot of people would probably do it but or the next Fast and Furious or is one of these big

Stephen Follows 24:34
About them or they're about spectacle them what you and by the way, you're right people will pay there's no doubt you're absolutely right. But the more it's about spectacle should be more I think. Yeah. And you know what this is I can't remember if we talked about this on previous podcast, but this is my sort of, I don't go in for predictions. But if I had to as far as how exhibition evolves over the next say, 10 years, it's I think it's going to split into two particular types of exhibition. And the same way that you don't have the like you said those mid budget movies it becomes very They go very small, I think exhibition is going to become either thrill seeking, which is the IMAX bond fast if you're louder, bigger, brighter, yeah, you know. And then the other side of exhibition that will drive will be the, the, you know, 30 bucks a ticket, you get a nice red wine, you can buy this,

Alex Ferrari 25:17
Which is where it's been going away, which is

Stephen Follows 25:19
Exactly and those films really do support, indie films and those kind of environments. It's not only them, but that's an older audience, which is who are living longer, richer, more grown up on movies, and also are more likely to go and see films with, you know, good ratings and stuff. And so it will start to split in the same way that you have different kinds of theater, right? Like, we're going to see, you're going to see an Epson play, it's very different to a pantomime, or cats on on Broadway or whatever. They're they're technically both theater, but you wouldn't go and see one as a substitute for the other. And they wouldn't happen in the same building. So

Alex Ferrari 25:55
Yeah, without without question.

Stephen Follows 25:57
So so on that? Well, one of the things that's interesting is that, what does that mean for the theatrical window. And in those two examples, you need to keep a theatrical window for the spectacle, one, because you want to really make it more exclusive. But for the other one, it matters far less, you know, I saw parasite in the theater, and I could have seen it home. And I chose to see in the theater because it's a movie I want to be engrossed. And so I asked him, How long do you think the exclusive theatrical window should be? And I said, you know, longer than than than pre lockdown, which I sort of threw in there is a kind of like, ah, we might as well put it in there for completeness, the same as the lockdown. And then at the moment, it's about 90 days between the article and the first home version that's available in the US. It's, it's, it's four months in Britain's three months in America. So should it between should it be longer than 90, which thought it was, should it be 9060 to 93rd 30, or 60, less than 30 days or I put an option, there should be no exclusive window for theatrical. And it's exactly what you'd expect, like the exhibition sector absolutely thinks there should be a lockdown, there should be a window, and over half of them thought it should be the same, if not more than it was before. So they're still fighting to increase.

Alex Ferrari 27:11
They're just they're just stuck there blockbuster guys their blockbuster, that's all they are, they are, they're stuck in the old ways, they cannot conceive of a way to do business other than what they have been doing for the last 100 years. It's why it took him so long to get the gum off the damn floor, you know, and get seats that that are comfortable. And to get real food in there. It took them forever to do that they are they are not an innovative industry

Stephen Follows 27:42
Oligopoly, you know that there's a number of players, they don't need to evolve. But what's fascinating about this is that the filmmakers are almost the polar opposite, you know, the amount of third of them thought they should be no exclusive window. And the vast majority of them, almost 90% of them thought it should be less than locked down. But here's the thing so that there's so far as you'd expect the I didn't expect it to be such an extreme difference. And I'm surprised about the sort of 15% of exhibition who think it should be longer. But then this is their opinion. So it isn't, what do you think will happen? So you know, fine, that's their own terms, their opinion. What I find most interesting is that the two other major groups, the home end group, which includes TV, and VOD, and then sales and distribution as the other group, where do they align? That always interests me, because how many you'd imagine would be the antithesis of exhibition, because if the window gets smaller, they benefit. And sales and distribution have a much better sense of the overall value chain, because they'll get a cut of every dollar, where at whichever platform it comes from. So I those two are the two that I thought were most interesting. And on this question, the home end people actually are much closer to exhibition than anybody else. And so actually, home end, when taken in this survey of opinions on this particular day that people fill it in, actually is supporting to less extent but still exporting supporting exhibitions idea that the window is important. And I actually think that they do need it to feel premium. You know, I think that the home meant people are worried that if it feels like YouTube, you can't charge the 20 bucks for the in a vat thing. Whereas the sales and distribution people sort of sit somewhere in the middle so they're the people I would really be interested in looking at and on the sort of the previous question around universal and Disney, they sided with the filmmakers, whereas here they're much more closer to the, to the exhibition people.

Alex Ferrari 29:35
Well, if you look at Netflix, because Netflix is a great example. I mean, look, look at a movie like the Irishman. Or that last Michael Bay movie or this new extraction with Chris Hemsworth. Those were those are big movies. Those are big movies with big stars and big budget. We'll be right back after a word from our sponsor. And now back to the show. Does the Irishman have the same gravitas that it would have had if it had a real theatrical run? Or that or that's that that Michael Bay film or extraction? You know, does it have the same gravitas? Does it matter in the new ecosystem, or the the new economy that Netflix has created? Obviously, it didn't matter to Netflix at all. Because they're playing by a completely different set of rules. They don't care about exclusivity. They don't care about the old model. The only ones that are worried about the old model is people who live in the old model, which is the general studio system, and the X the the theater owners. But if you notice, there's already a shift happening. Disney plus HBO, Max peacock, all three of those are basically cover three of the major studios out there and multiple television networks out there. So they're already starting to shift. Do you mean to tell me in 10 years, that we're gonna have this conversation, I doubt it, because there's gonna be so much more lucrative to go directly to consumer. And that's what that's what the studio system is starting to figure out is like, why do we need to go to a movie theater? Yes, I get it, you know, it's a billion dollars, but out of that billion dollars, that we have, maybe we take in half a million. And then let's not even talk about all the marketing that we did out there, which is another couple 100 million dollars. So

Stephen Follows 31:39
I had deal with those people, like the power dynamic has meant that they they're not as powerful as they are in other sectors, you know, like Disney, when it owns Fox stuff, and it wants to put he wants to adjust the aspect ratio of The Simpsons on Disney Plus, it just decides to do it as a monolith. And of course, lots of has to happen, but it just decides it's all in agreement, right? one entity. Whereas when you when there Disney are talking to the theaters, and they say, you know what, actually, we want to be flexible on the, on the release for this one because of Christmas, or whatever it would be. The theaters have been able to say no, or at least fight back. And that was a question I asked as well. I asked after the lockdown. Will exhibitors have more power to maintain the 90 day now and the exhibitors I mean, they, they still think they're gonna,

Alex Ferrari 32:25
Because they're idiots. They're idiots. They don't, the difference is this, and I'm going to cut you off. But the difference is this. The studio system, the studios have multiple ways to generate revenue with their, with their property, with their films, all of them have multiple ways to do it, they can go directly to TV, they can go, there's just so many different revenue streams to have the movie theater exibit exhibitors have one way to make money and it's reliant on someone else, providing that it is a very, very difficult business to run, if you have no content. And they have built an entire industry around the promise that the studios will continue to provide them content, high end content. If the studios decide, you know what, screw you, we're just going to go to Disney plus HBO, Max and peacock now, and we don't really need to deal with you anymore, because our business model is changed. This the movie theater chains are going to all go down and it'll just be a ghost town. And that is the that's the difference that the stood that the exhibitors are thinking it's 1980. It is not Yeah,

Stephen Follows 33:38
Okay. Well, listen, I know you're not attacking anyone. But in defense of the exhibitors, I'd say two things, right? One, all jobs. And certainly leadership roles involve a certain level of belief in your own self in the course, of course. And so sometimes when we talk about films, when we talk about delusion, we talk about, you know, the vast majority of films fail, but your one won't, because you believe in it. But then again, if you didn't believe in it, it definitely would fail. So there is a certain amount of positioning, but also there is a perspective of and I would imagine that the studios are not taking into account some of the things that the exhibitors are and vice versa. For example, cinemas, actually I think you're right, they're a hard business to make money, they're a hard business to actually flex, you can't move your location, it's very hard to open up a new location, you can't really change your prices, because they've pushed that to the maximum and same with concessions. But there is a there is a knock on effect. So we've already talked about how the studio's need exhibition as we have it now to provide a barrier to entry to other content providers to make their content a different thing. The other thing is that we there are other sectors that need theaters as well. So you think about how we all need a theater. Yes, the nation. You know, like let's say every theater closes tomorrow and the studios are fine. filmmakers are fine. They're all the other sectors are not fine. Oh, no, no, I'm out of town. places. And also, you know, it's not the VOD supports all different sectors of the industry in the same way theaters, so there will be a theatrical that so there'll be an experience there. But there will these are the things that exhibition is taking into account that the, if we ask purely about dollars and cents for the for the films, where we're not taking into account the whole thing

Alex Ferrari 35:19
Agreed with you 110%. But that doesn't stop anything. Because when blockbuster shut down and shut down 2500 stores, and it not only hurt a blockbuster company, but it hurt a lot of companies out around them that supported their company.

Stephen Follows 35:37
And they and they weren't even foundational, like no one would build a mall based around a blockbuster correct, but a bowling alley or a theater, they become the anchor of how you get people to come and shop beforehand and he afterwards. And that destination is a real problem. And yet people still have the same need to meet. I mean, obviously we can't do it right now. But that's not gonna change so that but that's also not the studio's problem because they've got shareholders and they got to

Alex Ferrari 36:01
No its about it, or they don't give us a flying f about anybody else other than themselves and making money for themselves. That's, that's that's the legal duty, right. That's that for data. That is their fiduciary duty. So they don't care about other industries. They don't care about exhibitors, they don't care about any of that. I think the new world should be this. I think that this should be a 30 day window. That gives you a four week window for those people who want to see it theatrically. And then it's available online, in premium t VOD for a month, and then goes into general t VOD, and s VOD. And those platforms that makes sense to me that it's still because basically you make most of the money is made in the first four weeks of all these big movies

Stephen Follows 36:46
Sure but it but but it's about denial of I was the right phrase, but it's like the delaying of gratification. If I thought I only had to wait one week, then I actually might might be willing to wait a week

Alex Ferrari 37:00
That's what weeks? Maybe I will. But but that's but that's the thing, though.

Stephen Follows 37:05
Wait three weeks? I'm three months, I'm not gonna, you should really do if you if you look at the psychology of humans, they should make it random. Every single fall, you roll the dice, and no one announces when it will appear on Disney plus or iTunes until the day it does. It just drops. Right? super smart with a massive maximize this tickets,

Alex Ferrari 37:26
right? But the point is this that they'll eventually figure out the patterns.

Stephen Follows 37:30
I don't know, random through random like people like me to not be able to crack it. And if it's truly random, that's how people get so the slot machines in Vegas,

Alex Ferrari 37:37
I just don't think I just don't think that I just don't think that the theater Oh, first of all, that would never happen because that takes way too much intelligence and coordination. It's not a workable plan. But it's a fantastic idea. And secondly, that I feel that the plan that I just laid out being a 30 day window, is if you want to go see your your movie in a theater, it's gonna jam everybody in, in those first four weeks. The people who will wait, they'll wait, they're gonna wait a month, or they're gonna wait three months. Why? Because there's so much content. There are so many options. Now, when Batman came out in 1989, there wasn't as many options. everybody on the planet knew that movie was coming out and everybody went to go see it. In the theaters that were available.

Stephen Follows 38:29
You didn't have maybe I can't remember where we were with VHS and films on TV?

Alex Ferrari 38:33
Well, no, no, it was so VHS. I was working at the videos of my video store at the time. So videos, video stores were in full effect. blockbuster was probably a year, a year, year and a half away from being completely dominant. They weren't yet in 89, if I'm not mistaken, but they were still they were becoming a juggernaut. And then, so there was there were other options, but not the same as there is now there is just everything ever made accessible instantly. So the you know, like, Oh, I want to go see that movie. But all I gotta get it, I gotta get to it. And then a week goes by two weeks go by three weeks go by and you're like, I'll just wait three months when it comes out. And that's what happens. And because there's just too much other competition. So again, the the exhibitors are feeling that they're reacting to this, like they are the last Coca Cola in the desert, and they're just not. They're just not. And also and I have to say this one more time, because Please forgive me. I look first and foremost, I love the theater going experience now. I still think that the movie theater industry and the exhibitors in general have had a combative relationship with their customer base for decades, for decades, because we're the only guys in town go screw yourself. Oh $8 for a bucket of popcorn that cost me 15 cents. Yeah, that's just the way it is. What do you have an airplane hangar like where we go and we have no other choice. They, you know, why are you charging us $5 for this Coke, you know, if I literally walk outside, I can get a big gulp for $1.50 like, Why are you like it's just such a abuse. And then before was also just the experience, the sound wasn't always good, the projectionist wasn't always good, the floor sticky and stunk. They eventually figured out that like, ooh, but we got to make this look somewhat better. And now they've made it more of a high class scenario. But there's still a combative relationship with with the customer, because they're still charging obscene amounts of money for things that they shouldn't be charging more for. And unfortunately, that's their business model, because the business model is flawed to begin with. It's always the business model of a an airport. It's a business model from 1930. They're still working the same business model, as it did in 1931. chaplain was running around.

Stephen Follows 40:56
Well, here's the last stat that there was more on the survey that you should go and go to the article and have a read of it. But there was one last thing which speaks to this, which I think is perhaps the thing to really ponder. For me. It wasn't the headline that indiewire or whoever else pulled out of the, like, this is the big finding, it wasn't the sexiest, but I think it's one that reveals, really, is really food for thought. So as asking people day and date releasing, you know, what will that you know, goes and so it goes in theaters and it goes, wherever else it's going to go on the same day, in a would doing that increase overall income for the distributor, when compared to a theatrical, windowed release of you know, whether it is 30 6090 days or whatever. And the most people in home end, unsurprisingly, over half of them thought it would increase overall income, they would say that, and obviously the cinemas under under a third thought it would they would say that what was so interesting for me was that the sales and distribution people who are closest to it, the people that take $1, from every dollar, okay, and that was a 14. That's it. Yeah, basically, that's a Freudian slip, I meant a percentage of every dollar No, no, no, that's right. Absolutely. plus, plus the costs, obviously, and

Alex Ferrari 42:07
Then you owe them for the privilege of them taking the dollar.

Stephen Follows 42:10
Yeah, it's $1 for every dollar plus, plus tax costs. But yeah, the people who get a bit, you know, arguably, a sales distribution don't care where the money comes from, they care how much it is, at the end of day. They agree with the extra bit of exhibitors, they don't agree with homerun. And it might be that it's an evolutionary market, we haven't seen the right version of it, maybe it's something that will be ready in future, maybe this whole Corona thing will warm audiences up to it. But fundamentally, the people who you really would think he would have all the data and be would have no reason to be ideological, because they just want to increase their income. They actually agree with this, the theaters right now, that that wouldn't increase. So if you were to apply that controls and in a normal market, the argument would be that trolls would make more money if it was in theaters for a windowed period of time, and then go to pod. So that might underline the kind of arguments we're going to be having over the next few years. And it's going to take some big film some big studio to do day in day out and for it to make a fortune for the dam to burst the way that you know, Cameron, Bertha 3d or, or, you know, these low budget horror films that burst the dam of the idea that low budget film can really break out. So we've got to wait and see. I mean, it's right now it's all moot because there aren't films in theaters and there aren't going to be for a little bit. I'd be fascinated to see if it's so interesting how the the gods have given us the most theatrical filmmaker releasing a film in theaters the most traditional thing in July so you've got Nolan coming. That is such an interesting film well timed film it's almost a shame it's not the Irishman as well you know people who really know cinema other than just movies. We'll wait and see and then for me bond will be the big one bond will be the one that that one will be missy.

Alex Ferrari 44:02
Watson's one Wonder Woman as well.

Stephen Follows 44:04
Wonder Woman of course gay. I don't know what's going to happen and I know

Alex Ferrari 44:10
My feeling day on day and date releasing that makes sense for a smaller film. For an event film, it's stupid. It's independent.

Stephen Follows 44:20
How much is it? If it's 40 bucks for Dan date home because you're having your own premiere? Then I didn't they try that with a few films.

Alex Ferrari 44:27
They did but it didn't not with anything big now there's anything of any major magnitude. So I mean, look day in day okay, so yeah, okay. So if you're going to charge a higher like a substantially like pay per view, cost for day and date, then then maybe, and it's like for the week it's going to be 40 bucks at home. And then it drops to 20. Like it's so weird because it's like all about windowing. It's all about time. So, I still think that there is you can milk, the the audience if you want to look at it. This way you can, you can pull more revenue off of your film, if you do certain amount of windowing something, because the people who are going to go to the theater are going to go to the theater. The people who are going to wait for home video are going to wait for home video. It's just the nature of people. And some people will just get lost between all the other content that they have the world that they're dealing with, or so on and so forth. So if you're able to release a film, I still I still hold on to my thing and like James Bond, you give me a 30 day window. And people who want to go see bond in the future will you have four weeks to go see it, you'll go see it. And, and then and that they want to keep it in the theater after it's released. I've seen movie theater movies that are theatrically in theaters and are on home video and are doing well because of the Oscars or something like that, where they do a rerelease. And people still go because they want to go see it theatrically. So there's there's an option there. But I think day in day would only really work for more independent smaller budget films. I think that's a good strategy. But for these event films, they have to have some sort of windowing. And if you did a day in day out at a higher price point for s VOD, or for D VOD at home. That's that's now you're rolling the dice. Now we are in completely unchartered territory. And like if tomorrow you told me that Chris isn't Chris Nolan's film was 40 bucks. First of all, I don't want to watch it at home. I want to see an IMAX. You know, I don't want to watch it at home. I want to see it in IMAX. But if there's no other option, you know, okay, let's let's say Wonder Woman or black widow, let's say Black Widow. That's a good you know, it's a it's a Marvel movie. But it's not a massive Marvel movie. It's not like this big giant event. So but it's a it's a it's a standard Marvel movie. Would I pay 40 bucks to see that film? Probably not. I'll probably wait a little bit. Bond, though, on the other hand, because it's the last one with Daniel Craig and all that stuff. I might, I might spend the $40 to see that on opening night at home on my entertainment system. So we are in such unchartered waters, it's not even funny when nobody knows anything. All we're doing is speculating if Nolan's film does actually come out in July, which I still say is up in the air, personally, because we have no idea how this is going to the virus is going to react, you know, and if we have a second wave and all that kind of good stuff, if it actually comes out is not going to be the box office that we're accustomed to. Because not everyone's going to be able to go so I I don't know. I don't know. I really don't know. It's really interesting. We are sitting living an exciting time, sir. Exciting and terrifying times.

Stephen Follows 47:46
Also, you know, it's not like the previous model worked very well for indie filmmakers. So it's this not might shake out to be a better model, or it might be a different bad model. But I don't think this is a bad thing for indie films. Because it's like I said, it's the studios and exhibitors who really had the lock on the previous model. Well, maybe

Alex Ferrari 48:05
Go go go I'm sorry.

Stephen Follows 48:06
No, no, go on

Alex Ferrari 48:07
No, no, I think that there is potential for independent filmmakers in the theatrical space. After this goes off goes away because it's already starting to happen. There's only so many movies at the theaters are other the studios are actually releasing a year. And the the movie theaters are starting to need content. And theatrical is aware of place where independent filmmakers could make their bones specially locally, where you can, you know, rent out or partner or you know, book, five or seven local theaters that make it more of a regional release in your neighborhood in your in your town, and then you get the local press and build that up. I've seen multiple case studies of that working very, very well. And movie theaters are super happy because they're like, okay, should I wait for like, should I have your fresh brand new movie in my theater for Friday night? Or should I have Avengers? That's on week? 10? How am I going to make more money with you? Am I gonna make more money with Avengers. And if you're good as a filmmaker, filmmaker, as a marketer, and understand the business, you should be able to outperform Avengers for that weekend. So there is going to be some more potential for independent filmmakers. And just the world is changing so drastically that everybody's got to start looking four or five steps ahead around the corner and start figuring out where we're going to be and not where we've been, or where we are. Because we just don't know, man, this is so unprecedented. It's something that I mean, in my lifetime. I've never seen anything like this. I don't think in the history of the entire industry. Anything like this has ever happened.

Stephen Follows 49:42
I've been half joking with friends that I'm going to change my job title, from film data analyst to film data historian because much of what used to work will work and it might be that lots of it does. I'm not saying it's all gone, but it's most of the time you could say last year Next year is going to be like last year, give or take, right? trends are pretty slow. And you know, certainly in the big picture here, who knows?

Alex Ferrari 50:07
No, there's no way there's, I mean, look, I mean, it changes Well, now, it's literally changing week by week. That's how fast the consensus is changing within our industry. Before it was, you know, six months a year, you know, from one one film market to another film market, the whole world has already changed. I've seen that happen over the course of the last four or five years that I've been going to American film market, I've just been seeing how the industry is changing, and seeing what the tastes are like, and seeing how the distributors are losing their minds, because they don't know what's going to make money before they could count on DVD. Or they could count on theatrical, they could count on foreign sales, or they can count on something that was a cash cow. Now, there are no cash cows. Now, it's just like they it's just so watered down all over the place that now it's like, oh, Avon is the big thing. Well, that's this year. Who knows what happened with the advertisers, you know, go somewhere else? Well, then that's the end of Avon. So there's so much change. And that's why filmmakers now more than ever have to stay up on all the latest trends and what's going on. And listen to people like yourself, listen to this podcast, because we're trying to stay on the on the cutting edge of what's happening right now, and where things are going to be going in the near future, which is why I wrote my book. This is why I talk about all these things are happening with distributors, and how the business is changing dramatically. I said last year, that Rome is burning, and the walls are coming down around us. As far as film distribution is concerned, I did a whole episode called the death of traditional film distribution, which I still 110% believes the old way of doing things is dying, if not dead. And now the COVID is just throw this massive amounts of gasoline on that fire, that we now are like, oh, shoot, we don't even know what the hell is going on. like nobody knows what's going on right now. So as an independent filmmaker, it is It was tough before it's tougher now. But if you're smart, there's a lot of opportunity.

Stephen Follows 52:14
There's a lot up in the air and how it lands and who, who is going to be the first to figure this out the way that Blair Witch were the first people to figure out what a website can do for an indie. Right? You know, like that, there's a lot of things like that where you get one shot to do that thing. And there's, we don't know what those things are, if you can think of that thing is if you can get in there at the right time, if you can do the right deal, come up with the right product, then there's a lot of opportunity. It's just and it will be obvious afterwards, and it will be too late afterwards. Right now, everything's up in the air. And it's interesting to see where it lands.

Alex Ferrari 52:46
Absolutely, absolutely. But so for everyone listening, we're going to have a link to Stephens findings on his website. And I'll have it in the show notes, as well. So I'll give you that link a little bit in a few minutes. But it will be at the show notes. So you can get a check, hit check that article out and then check out everything Stephen does. Because if you need to know about film data and understand where the industry has been, where it is and where it's going, there is actually nobody else on the planet who does what he does. There's just says it, and no one does it as good as you do. Steven, well, that should be a warning to me, right? Like, that's not a compliment. Well, I look and I always tell people this is like there's there's basically one man who could walk one film director in Hollywood, who could walk into a studio and tell and say these words and actually get what they need. I need $500 million to develop new technology to launch a brand new IP that is not pre existing anywhere. Don't have any major stars in it. And we really don't know how it's going to work out at the end. And I'm going to need about five to seven years to develop this. And if people who have that don't haven't figured it out yet, that's James Cameron. There. Spielberg doesn't get that. Scorsese doesn't get that Fincher doesn't get that I don't even think Nolan gets that. And Nolan is close to Kubrick as we have right now, as as artistically and also in absolute power at Warner Brothers. I mean, he crashed at 747 real lives I mean, that is that's Kubrick level crap

Stephen Follows 54:32
No he's got another level to go where he's going to start doing that but on the reverse angle to that the actors we've got the right expression but off camera when he starts crashing seven four sevens off camera so the reaction is for that,

Alex Ferrari 54:48
No, no, absolutely. But but there's so don't feel bad if you're the only person that that's a very blue ocean, sir. That's a you. You have cornered your niche, sir.

Stephen Follows 54:59
It's not 500 millionaire, I can tell you, anyway, listen to back and let me give me that more. So I can try and beat Arby's record. Just don't tell him,

Alex Ferrari 55:07
Obviously we'll keep it, we'll keep it between you and me. I won't tell anybody. He's a nice guy, but I don't want to push him off the edge. You know, like this is probably important to him. But Steven, thank you so much for doing the work you do, brother, man, thank you for coming on the show and discussing this very timely issue with with the tribe today. So thanks again, brother.

Stephen Follows 55:26
Right back at you. Thank you for all the work you're doing. Thank you for inviting me on and getting this podcast out so quickly, so that everyone can can share in this it's interesting times to be alive, interesting times to be a filmmaker. If you have a thought go to the article, add a comment at the bottom. And yeah, as always, thanks for supporting the work.

Alex Ferrari 55:43
I want to thank Stephen not only for this article and coming back on the show to discuss this very important topic about Hollywood and post COVID-19 and how it's affecting independent filmmakers, specifically, but also just thank you, Steven, for all the insane work you do. Like I said in the show and the interview, there is nobody else that does what you do. You are a unicorn in our industry, and all the insights that you get from digging in. Just diving deep into the numbers really helps us all out a lot. And thank you, Steven for doing that work because God knows I can't do it. Now if you want to read the original article that Steven wrote, as well as all these amazing articles and insights to offer on his website, just head over to the show notes at indiefilmhustle.com/391 for the show notes. Thank you so much for listening, guys. I hope this has helped you on your film making path. Stay safe out there. And as always, keep that hustle going. Keep that dream alive. And I'll talk to you soon.



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