Reading the tea leaves: The Future of Cinema as described by Misters Spielberg and Lucas

Part Two: Of Blockbusters and Budgets

This is part two in a series. You can read part one, which discussed Mr. Spielberg and Mr. Lucas’ ideas of tiered movie ticket pricing, here. And you can read The Hollywood Reporter article here.

 

"That's the big danger, and there's eventually going to be an implosion — or a big meltdown. There's going to be an implosion where three or four or maybe even a half-dozen megabudget movies are going to go crashing into the ground, and that's going to change the paradigm."

 

~ Mr. Spielberg

In his conversation with Mr. Lucas, Mr. Spielberg put forth the idea that, in the future, some big budget films are bound to flop, and flop big. I mean Waterworld big. But a whole lot of big budgets flopping all at once, probably would cause an implosion in the film world.

The truth is, he’s right. We are already seeing “blockbuster” movies fail at the box office. I’m thinking about Jack the Giant Slayer, which has only just managed to break even, sort of.1 Or last year’s John Carter.2 Or the lack of enthusiastic audiences for Jack Reacher or After Earth – which have done okay, but only because of the worldwide box office, not domestic, and not nearly as well as one would think films with Tom Cruise or Will Smith in them should do.3

I mean, by rational, real world, non-Hollywood standards, none of these films have done particularly badly — in any other art form, $197M in sales would be considered a rousing financial success.

Something is wrong with Hollywood.

The “bigger is better” attitude is crippling the film industry. The cost of making these huge, exciting, wonderful movies just keeps increasing at a completely unsustainable rate. In comparison to current big budget films, the production budget for Star Wars (1977) was $11M (adjusted for inflation, still only $41M), Wizard of Oz was $2.7M ($44M after inflation), and Back to the Future (1985) was 19M ($40M after inflation).4 It’s a big jump from those relatively modest budgets – for arguably some of the most popular films of all time – to the budgets we are seeing today, which are routinely closing in on (and often passing) $200M.

I’ll repeat: It is unsustainable.

And now I’ll tell you something that will really blow your mind: You know those $200M budgets? They should actually be a whole lot higher. The cost of CGI is grossly underfunded by the film studios, and it’s because of how CGI companies are paid.

When CGI companies bid for film projects, they bid flat rates for the work, and there is a good amount of competition, so bids are highly competitive. But they still need to pay their artists an hourly wage – and anyone who works in the graphic arts knows that this type of work always, always, always takes more time than expected…even when everything goes right. And trust me, in the film world, you can expect at least one person of power will want to make changes extremely late in the game, so suddenly the artists are working nights and weekends – all overtime pay – to finish the film on time. And you better believe the studio doesn’t pick up the extra costs.

The problem is so bad, in fact, that CGI companies are closing their doors all over the place. Recently, Rhythm & Hues made headlines for filing for bankruptcy.  If any CGI company should have been able to survive in this environment, it should have been them. They are a (multiple) Academy Award winning CGI company, and were nominated twice last year for Best Visual Effects for Snow White and the Huntsman and Life of Pi, for which they (deservedly) won.5

If the company that made Life of Pi work on the big screen can’t stay afloat, there is something seriously wrong here.

Something is going to give. I suspect we are going to see pushback from the CGI companies, who will rightfully demand that they get paid a fair fee for the work they are doing – whether that means an OPEC like agreement among the companies to negotiate higher fees or a move to a fee per hour of work system – and they will probably get something.

And that’s going to make those “megabudgets” that Mr. Spielberg talked about skyrocket, causing his prophesized flops to be even bigger and more devastating to the film studios. At the moment, big budget blockbusters are a safe choice for studios, because they generally do extremely well, and even when they don’t, they often make back their production price or close to it, especially with the global box office. But when that ratio changes – when the cost of production goes up but the box office stays the same, I suspect that film studios are going to think twice about green-lighting Die Hard 27.

So I'll say it one more time: This is an unsustainable model.

Hollywood needs to take a long, hard look at the production choices they are making. Is going for bigger and bigger chases and explosions actually the best thing for either the story or the box office? Is paying $20M – or more – for one single actor actually worth it? Does compulsively throwing CGI into every frame actually add anything to the ambiance of the story being told?6

Interestingly, Mr. Lucas alluded to the budgetary issues studios will soon face when he suggested that there would be fewer films with much higher prices that stayed in the theater for much longer, à la Broadway shows (previously discussed in part one). But, according to The Hollywood Reporter article, Mr. Spielberg didn’t really elaborate on the problem. He just said it would change the paradigm, but not how.

For some reason, Mr. Spielberg didn’t seem to think that the impending implosion in any way spelled the end of the big budget film. If anything, he suggested the opposite – that the big budgets will stay in the theater, and the art films will end up on television – on HBO or Netflix.

While he has a point – these films are already starting to end up there – I’m not sure, in this future he foresees, that art films will be relegated to the realm of television is the logical endpoint.

We will talk about the future of the art film in relation to the big budget that in part three of this series.

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1 Worldwide box office: $197M, production costs $195M, and that doesn’t include the marketing budget (I would safely add $100M to that $195M).

2 Worldwide box office: $283M, production costs: $250M, again, safely add $100M to that for marketing.  The BBC reported on March 20th of last year that they expected to take a $200M hit from the film.

3 In comparison, Waterworld, which is often pointed to as the biggest flop ever, has a worldwide box office of $264M, with a production budget of $175M. (As far as I know these numbers are not adjusted for inflation or the rising prices of movie tickets.) I don’t have a best guess for a marketing budget, but I think, considering that the film came out in 1995, it probably was not $100M. Interestingly, Waterworld is not listed on Wikipedia’s page of box office bombs.

4 All production budgets from Box Office Mojo, inflation calculated using The Inflation Calculator.

5 For more information, see The Independent's reporting.

6 To be very clear, I’m not saying that all of these are necessarily bad, or even the wrong choices all of the time. I’m just suggesting we need to think about why we make these choices and if they are necessary.

 

Sources:

Bond, Paul. "Steven Spielberg Predicts 'Implosion' of Film Industry." The Hollywood Reporter. June 12, 2013. Accessed June 27, 2013. http://www.hollywoodreporter.com/news/steven-spielberg-predicts-implosion-film-567604.

"Box Office Mojo." Box Office Mojo. Accessed June 27, 2013. http://www.boxofficemojo.com/.

"Jack the Giant Slayer - Box Office Numbers." The Numbers. Accessed June 27, 2013. http://www.the-numbers.com/movie/Jack-the-Giant-Killer#tab=summary.

"John Carter (2012) - Domestic Gross." Box Office Mojo. Accessed June 27, 2013. http://www.boxofficemojo.com/movies/?id=johncarterofmars.htm.

"John Carter Flop to Cost Disney $200m." BBC News. March 20, 2012. Accessed June 27, 2013. http://www.bbc.com/news/business-17442200.

"List of Box Office Bombs." Wikipedia. Accessed June 27, 2013. http://en.wikipedia.org/wiki/List_of_box_office_bombs.

"The Inflation Calculator." The Inflation Calculator. Accessed June 27, 2013. http://www.westegg.com/inflation.

Walker, Tim. "And the Oscar Goes To...the Life of Pi Visual Effects Company Filing for Bankruptcy Protection." The Independent. February 25, 2013. Accessed June 27, 2013. http://www.independent.co.uk/arts-entertainment/films/news/and-the-oscar-goes-tothe-life-of-pi-visual-effects-company-filing-for-bankruptcy-protection-8508940.html.

"Waterworld - Box Office Data, DVD and Blu-ray Sales, Movie News, Cast and Crew Information." The Numbers. Accessed June 27, 2013. http://www.the-numbers.com/movie/Waterworld#tab=summary.