Why the film biz still has far to go

Even with SAG's resolve, the future is uncertain

With the SAG contract ratified, will the film business finally get back to normal?

Unfortunately, no. Although we’ll see a brief spike in production, the business we once knew may never reappear in its previous form.

Here’s why:

Labor unrest: It’s not going to end. The 2011 negotiations start within 18 months, a scant period of relative peace, then it’s off to the races again. Production could stop in spring 2011, as it has in the past as the biz awaits the outcome of contract negotiations, meaning that script acquisition will probably slow beforehand. The specter of a joint writers-actors strike hangs over 2011, and future union negotiations in any case will feature continuing unrest as new media evolves relentlessly.

The Internet: It’s devaluing content, for several reasons.

  • Supply and demand. Supply — online content, both legal and pirated — has ballooned, but demand stays relatively constant because of audiences’ limited leisure time as well as the price of content.
  • Piracy.
  • The ease of obtaining content online. When it’s easier to get something, it loses perceived value.
  • Ad-supported business models. No-cost content just seems less valuable.
  • New platforms. User-generated content and pirated content quickly flood new platforms, whereas traditional media companies delay for fear of cannibalizing existing revenue, offending distribution partners and violating license agreements.
  • Loss of physical form. We tend to value intangibles less than physical things: For instance, people who would never shoplift a DVD may have no compunctions about downloading a pirated movie or sneaking into a movie theater.

Industry trends: Domestic box office scarcely increased from 2002-2008, while admissions dropped. The more lucrative DVD business peaked in 2004 and is declining.

The recession: Hedge funds are a distant memory and state tax credits are imperiled by budget cuts. Presales and gap financing are harder than ever to realize, and Indian and Middle Eastern sources haven’t lived up to the hype.

New media also threatens the studios’ grip on homevideo, which may leave them primarily in the content creation business. That’s a problem, because the economics of development and production are inferior to those of new media distribution. The former is an industrial process, painstaking and manual. The latter — largely the province of Silicon Valley — is post-industrial and automated.

All of this could mean fewer movies, fewer jobs, lower salaries, diminished budgets for non-tentpoles and caution instead of creativity. Scripted television shares these woes, driven by many of the same factors. Will Hollywood survive? No doubt, but it may not thrive. Welcome to the new normal.

Jonathan Handel is an entertainment and new media attorney at TroyGould in Los Angeles. He blogs at jhandel.com.

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