Entertainment law titan Ken Ziffren offered a clear-eyed assessment on the state of the film business Friday during a keynote conversation at Variety’s Power of Law breakfast held at the Waldorf Astoria Hotel in Beverly Hills.
Moderated by co-editor-in-chief Claudia Eller, the conversation touched on the tectonic shifts occurring in the media and entertainment businesses that have spawned increasing merger and acquisition activity. Ziffren, a co-founder of Ziffren Brittenham, also discussed MoviePass and the rise of China and Saudi Arabia’s box office power.
“We’re behind the times rather than ahead of the times,” Ziffren said of the film business. He pointed to other industries like real estate, auditing and others that have begun consolidating.
The media and entertainment business, Ziffren said, is shifting from a wholesaler to retailer with the advent of streaming. Disney, which is in the process of acquiring Fox film and television assets, is among legacy companies that are gearing up to offer their content directly to consumers.
Disney, and others like AT&T, which is battling for regulatory approval of its acquisition of Time Warner, are reacting to those consumer trends by bulking up, Ziffren said. Movie attendance is dropping because of Netflix and binge-watching culture, he explained, as younger consumers are increasingly gravitating to online digital content. “For the moment that’s where you have to invest,” he said.
The pending deals have also momentarily put a pause on the debate of reducing the theatrical window and releasing films more quickly on digital, Ziffren said. “Until these merger issues are resolved, we won’t see any major changes,” he predicted.
Hollywood has become global and reliant on big-budget, action sci-fi adventures, films that perform well overseas, Ziffren said.
Studios are pivoting to making superhero and action franchises. There are fewer films being made by the major studios overall, and most affected are primarily mid-budget comedies and dramas whose return on investment is smaller than the big blockbusters.
“I don’t see a way out of that in the near future,” he said. “You have to go where the money is.”
With an eye on the overseas film market, which will now include Saudi Arabia, Ziffren said the emerging trade war between the U.S. and China will have broad implications, largely because of the size of the Chinese film market.
While Saudi Arabia could become a significant territory, “China on the other hand is a behemoth,” he said. There are many lingering questions about how China and the U.S. government will resolve the question of how many American films will be imported.
President Donald Trump recently muddied the waters with his tariffs on Chinese goods, just one of many factors that are affecting the ongoing negotiations. Another is the accounting of the Chinese box office, which U.S. leaders found recently to have a large discrepancy that favors China.
On MoviePass, the movie theater subscription company, Ziffren said its success or demise will also have big ramifications for the film industry. Operating at a loss, MoviePass has slashed the cost of ticket prices for consumers, who Ziffren said will be conditioned to expect lower costs at theaters.
If MoviePass fails, these consumers might be turned off from going to the movies again, he said. But on a philosophical level, he agrees that MoviePass is helping to bring people back to the movies. “It’s no different than a loyalty club,” he said. “It makes a lot of sense to encourage greater attendance.”