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September 30, 2004

Is Disney Dancing With Another Partner?


Strange how the timing is, and frankly I only noticed it because the first project is on Opus -- the best comic strip character ever -- but, according to Variety, Miramax and Dimension Films have struck a deal with Wild Brain to co-finance and co-produce CGI films (see article).

Given the content of my previous post -- about Iger kissing off Pixar for the non-sequential of you out there -- this could mean either that Disney is looking for a back door play for a new CGI player (although they pointed to their own efforts with Chicken Little) or Harvey Weinstein is adding a valuable asset to his Dimension stew to take with him when he goes, if he goes.

In Miramax's favor, given its current budget limitations, is that the deal calls for the co-financing of the pictures with Dimension/Miramax to distribute worldwide and fully-financed (by Wild Brain) straight to DVD fare pushing through the same pipeline. Of course, it will be a test of the newly lean Miramax's ability to exert the same marketing and distribution prowess it has exhibited in its past (see article on the miramAX).

Wild Brain CEO Jim Miller hopes that his experience overseeing Warner Brothers' co-production deals will help the company to drive through cost effective ($50 million) animation efforts every nine months.

The other side of the coin is that relationships like this will allow Miramax to have a steady stream of pictures without taxing its checkbook.

Further analysis has been provided by BusinessWeek.


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Animators in Play


According to The Hollywood Reporter, Bob Iger, speaking up more and more every day in his bid to replace Eisner, addressing a group of UK broadcasting executives advised that a deal with Pixar is not likely in the cards for Disney (see article).

"Deals like this have a certain longevity or life span," Iger said. "When Pixar started, it needed the might of the Walt Disney Co. in terms of marketing clout and distribution clout and money just to pay for those films. As it grew, it weaned itself from its need for Disney. It now sees itself as able to pretty much go out on its own, not needing funding or marketing support."
It's an interesting concept that Pixar can stand on its own. While it is incredibly successful at the movies it makes -- buzz on The Incredibles and its trailer is good -- Pixar can only manage a limited number of releases. Given its production timelines and manpower needs, it still hasn't delivered more than one title a year. Of course, each title has grossed several hundred million at both the box office and home entertainment window and the merchandising tie-ins enviable. So the question next is where will Pixar go? Much like Fox working hard to keep Star Wars for the distribution fee, these animated gems will definitely drive its distribution partner's bottom line.

Let the games begin.


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September 29, 2004

New York: Shoot Here for Rebate


In conjunction with the official opening of Steiner Studios at the Brooklyn Navy Yard, "[Governor] Pataki signed into law the Empire State Film Production Credit Program, which offers a 10% tax incentive to feature films and TV series that do most of their filming on qualified New York soundstages." (see article)

Add this to the Made in New York Incentive Program, launched by Mayor Bloomberg, and New York State and City become more hospitable to shoot more than just pickups. The city program "features a combination 5% tax credit, marketing credits and expanded services for productions completing 75% of their work in Gotham."

The studio opened to its first production, "The Producers," which is a movie remake of a musical remake of a movie. Nothing like recycling!


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September 28, 2004

ContentFilm Looking for a Twenty


According to Variety, Entertainment Investor will assist ContentFilm in raising $20 million for production funds, to fuel films totalling $80 million in costs. ContentFilm films include "The Cooler," "The Hebrew Hammer," and "Party Monster," with "Rick" currently in production (see article).

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Scientific Management, Hollywood. Hollywood, Scientific Management


In an interesting piece in The New York Times, Laura M. Holson takes a look at the continued integration of Universal into the folds of GE's NBC Universal, and Bob Wright's in depth interest in how it works (see article).

Known for a very organized and systematic operating model, employing "Six Sigma," GE is bringing that discipline into the film studio and this article examines that impact on marketing and operations. With an $800 million operating budget that includes production and marketing costs, GE is interested in understanding the rationale for salaries, marketing spends and budgets.

In the most interesting thought to arise from the article, Wright pepper Stacey Snider, Universal Pictures' chairwoman, "with questions about how the studio greenlights movies." Perhaps he can let the rest of the world understand too.


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September 23, 2004

Evolution of a Business Model


News today comes, at CNET, of an agreement between Warner Brothers and Netflix for access to limited theatrical content for a VOD test run (see article). Most importantly, "The downloaded film would then be accessible on TiVo's personal video recorders for viewing on a TV set."

What does this mean? Well, it furthers the speculation that TiVo and Netflix, each searching for ways to expand their product offerings, maintain and grow their customer base and stave off competition from more well funded rivals, are looking to get together.


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September 22, 2004

Please Make Your Picture Here!


According to Variety, the UK Film Council has announced its replacement to the expiring Section 48 tax break available to films that qualify as UK productions (see article). While the provision is said to allow for a 20% rebate across all prodcution costs, there is actually a sliding scale of rebate depending upon a film's recoupment of its budget. There has also been an increase in the budget that qualifies for this treatment from £15 million to £20 million.

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So You Say Studios Are Spending Money to Make Money? Huh...


A very good and detailed analysis from the Hollywood Reporter on the final proof in the pudding of the importance of DVD revenues to studios (see article):

Nielsen Monitor-Plus estimates that the home entertainment divisions of the top nine movie studios spent $887.5 million to market their titles in 2003, up nearly 26% from $705.6 million in 2002.
With an overall per-title average of nearly $1.6 million and $3 to $4 million spends on large grossing films, studios are working hard to push revenues in the lucrative home video window.

And it's getting crowded and accelerated just like the theatrical window. According to the article, because big box retailers are providing the discs at a discount for the first week of sales, 50% of total sales can be derived during this period. So studios need to roll out bigger campaigns earlier to drive awareness and sales during this week.

Not unlike the creeping, some would argue racing speed, of advertising dollars at the box office, DVDs are demanding higher investment for their higher return (and margins).

The world is speeding up and the cost of controlling it skyrocketing.


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Movies for Grown Ups?


Unbelievable that studios could even consider the value and existence of the post-25 market, but USA Today presents a fairly detailed analysis (especially for them) of this summer's movies that attracted older audiences (see article).
So why should the young-run studios focus on older audiences? Money!

Yet shifting demographics, economics, politics and consumer tastes...are prodding studios to offer more adult-themed summer choices and get them on more screens than ever before. These plot- and character-driven films, which often eschew overblown action scenes, computer-generated effects and implausible story lines... Unlike blockbusters that open big and fade fast, many have staying power. "Fahrenheit [9/11]", "[The] Notebook" and "De-Lovely" are currently posting higher weekly grosses than "Shrek [2]", "[Harry] Potter" and other early summer biggies.
The article focuses on three factors that may have driven this past summer's senior oriented lineup: cheaper costs for higher profits, the rise of older women, a shortened awards season. The first is straight forward, the theory being that older audiences need less expensive fare to enjoy a film and arrive in droves. Frankly, it would be interesting if Hollywood could adopt this message for more films (see the success of "Napoleon Dynamite" and "Garden State").

The second is the most pointed, that there are hordes of older woman with purse strings and disposable income that are willing to plunk it down on a ticket when attracted by a film. And the third is interesting in that with the Oscars earlier and studios not wanting to dump product in December to get lost among the flotsam and jetsam there appears to be an effort to push movies more evenly across the year.


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IFC Grabs Searchlight


In a vote of confidence for Fox Searchlight's pipeline, IFC just closed a reportedly $30 million multiyear output deal with the distributor according to Variety today (see article). With "Garden State" and "Napoleon Dynamite" playing well in theaters and "I ♥ Huckabees", "Sideways" and "Kinsey" coming up with decent buzz, Fox Searchlight seems to have a good amount of quality material that fits IFC's needs.

Grabbing the first network slot for a number of films from Searchlight through 2006,

"These films, which make up 90% of our schedule, continue to be the engine that drives the network," IFC general manager-exec VP Ed Carroll said, adding that Fox Searchlight's hit-heavy track record makes it the perfect partner for an extensive output deal.
It'll be interesting to see if Focus Features or Sony Pictures Classics gets added to a mix that includes product from Lions Gate Films, Miramax, MGM and New Line Television.

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September 20, 2004

Another Lion at the Gate?


Well folks, in the domino theory of independent studios, the Daily News is reporting that Lions Gate is being given the once over by the major conglomerates. According to the report,
"Analysts noted that Lions Gate may not be ready to sell and would likely hold out for as much as $1.6 billion to $1.8 billion, or $14 to $16 a share at more than double the current price of the stock, which closed yesterday at $7.79."
Of course, the library it has built up from its own productions and acquisitions, primarily Artisan Entertainment in December 2003 as well as Landscape and Trimark. And the story is one familiar and simple after the Sony-MGM announcement.

This report also comes on the heels of greater studio performance with the expectation of profit for the fiscal year ending September 30, 2004. CEO Jon Feltheimer understands that he is not a major and points to the speed at which Lions Gate can make decisions and its focus on more edgy material ("Fahrenheit 9/11") as what will support the success of their new product.


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Bring in the Brands


Dave Kehr has an interesting piece in the New York Times where he is explores a side effect of the Sony-MGM transaction: multiple studio branding. Sony already has Screen Gems, Sony Picture Classics, Columbia and TriStar. It will be acquiring the United Artists brand from MGM. While it is fair to argue that with the exception (at best) of Disney, Miramax and Pixar -- and the rise of Focus Features -- there is very little in the way of coherent brand identity in studio labels.

Kehr argues that for the first time since studios still owned both the theaters and the stars in the 30s and 40s, Sony might have the opportunity to intelligently assign pictures to different logos that could create specific identity for each logo.

What does this mean financially? Well marketing and money are very close siblings -- though often of the bickering variety -- and anything that might strengthen market awareness of your product (movie) is a good thing. And in general, as studios utilize a variety of stars across a variety of genres, it is a difficult approach for most studios to take. Disney and Pixar have that kid-friendly thing to fall back on and Miramax tends to focus on Oscar-type fare that employ a small stable of artists. Absent this, it makes more sense to market to film concept and stars.

Sony could potentially have the opportunity to manage a number of brands if it allocates product appropriately. However, it would need to give each brand a distinct identity and presence (including website and campaign and animated logo). It is a potentially expensive proposition and one that studio marketing teams are unfamiliar with.


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September 17, 2004

100 Million Reasons to Visit South Africa


Variety reported today on a new fund from Shyanne Media, CP Medien and Frame werk that will fund a collective E100 million in film production in South Africa (see article). Apparently, besides having a fantastic array of locations and experienced crew:
"The dollar is strong, and we got a 15% rebate on every penny we spent there, which was around $8 million," McCord said [based on his experiences with "Ask the Dust"].
It would appear that the fund is the initial foray into location based tax funds that will likely benefit from creating deep relationships with local crew and politicians to gain access to the greatest amount of soft money possible -- thereby reducing their absolute financial commitment.

And how do they intend to attract productions? Well, with the option of the filmmakers to purchase their film back within twelve (12) months of release for an (apparent) 25% fixed return on investment. Of course, the fund also provides the tax write-off for investing in the film in the first place.


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September 13, 2004

The Speed of Light


Argh! Mark one down to premature pronouncing. Variety is reporting that Sony has bagged its quarry (see article). Within hours of Time Warner's withdrawal, Metro-Goldwyn-Mayer agreed to an acquisition by Sony:
Sony agreed to pay $12 a share for the studio, which amounts to $2.94 billion plus the assumption of $2 billion in debt. Sony, backed by Texas Pacific Group and Providence Equity Partners, raised its bid over the weekend, triggering Time Warner's withdrawal.
Variety revealed that a key to Sony's increased bid was an arrangement with Comcast to package Sony and MGM content on movie channels and in VOD offerings, in exchange for the option to purchase a minority interest in the combined entity in the future.

Let the commentary commence and watch for news on the integration of the last major independent studio in Hollywood.


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Will the Lion be Caged?


Looks like it's down to one suitor: Variety reported today that Time Warner pulled up stakes in the race for the library, with CEO Richard Parsons ceding to a superior $5 billion bid from the Sony investment group (see article). It would appear that Sony and its moneyed partners Texas Pacific Group and Providence Equity Partners have clinched the prize, but it wouldn't be the first time that an auction for MGM ended rather anticlimactically (see articles here and here).

The Sony rebid was in response to Time Warner's upped $4.5 billion bid last week that threatened to have the final gavel bang. We'll see what happens this week. With the library in Sony's hands, it will be interesting to see if they decide to get back into heavier television production.


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Immersive Interaction


Okay, a little off topic, but with the announcement of the pseudo-AI capabilities of characters in The Sims 2 (see article) and the mainstreaming of video game character movies, episodes and music videos, it would appear that a new form of entertainment is taking significant hold.

Stick with me here, it's not gonna happen tomorrow or even in a year or two, but imagine the convergence of immense computing power, unlimited storage capability, large flat screen televisions, controllable animated avitars and easy to use digital editing software. MTV has already embraced the trend of home-made animated content from video games (generally online worlds) that arose with groups like Windspire Entertainment and its Star Wars Online music videos and Red vs. Blue done in a style it's creators call "machinima." It has a new show "Video Mod" premiering on MTV2 September 18 at 9:30 p.m. ET, that "transforms music videos by injecting a unique video game environment and featuring characters from one or even a few video games." And let's not forget about Playboy's spread "Gaming Grows Up" that demonstrates the graphics leaps that game design and animation have taken.

So what am I saying? Well, the fear for the industry used to be that digital technology would allow actors to be replaced by digital replicants that directors could control and voice on their own (the premise of S1m0ne). I think what is more legitimate is that we will see animated content arising from anonymous characters available in video games, especially online universes where players could cooperate and create an ensemble event. And that leads to a larger question: will the wider availability of easier-to-use and more satisfyingly sophisticated content creation tools further fracture the consumption of mass media? And where do the dollars go?


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September 10, 2004

Premature Departation


In a letter delivered to the Board of The Walt Disney Company on Thursday evening, Michael Eisner officially acknowledged his intention not to seek a new term as CEO after his contract expires in 2006. Presumably intended as part of an end of fiscal year review letter (he has just completed TWENTY years in office, Eisner aluded to the trials and tribulations of the last year or so which found Disney battling against reduced tourism, a middling economy and a foundering network as well as former dissident Board member and company namesake brother (Roy E. Disney).

By delivering this announcement two years in advance of the turnover, and having publicly stated that Bob Iger would make a strong successor, Eisner is apparently seeking to create a smooth transition and a way for Disney to progress and grow, though he will have to navigate two years as a lame duck. Major shareholder CalPERS issued a statement to that point.

This news brings about interesting possiblities in Disney's talks with Pixar (perhaps back on?) and the Weinsteins.

The letter was released by Disney as an 8-K filing with the SEC. Expect widespread commentary and analysis to follow: ABC Online, Variety, E! Online, Washington Post, Wall Street Journal (subscription required), and The New York Times.


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Yes Chicken Little, The Windows are Collapsing


Making news for like the thirtieth day in a row, TiVo, along with ReplayTV, have confirmed that they will be including technology in future versions of their DVRs that will limit both the amount of time pay-per-view (PPV) movies will be saved as well as the number of times a movie can be watched. (see article)

This move was likely at the behest of both cable and satellite companies, as well as the studios themselves. In the everchanging ecosystem that digital technology is laying waste to, content is become available and flexible -- movement of pristine copies between viewing and storage devices -- in a way that makes content providers and distributors nervous.

Never before have consumers had the opportunity to control and maintain a library of quality content and the toll takers are reasonably nervous. What we are witnessing through this effort, various legislation, and other technical tools is the battle between content provider and content consumer and who will control the consumption of said content. With DRM, storage and transmission costs dropping is that providers will seek to provide controlled consumption across an array of pricing plans. What we should see - albeit in a number of years -- is the eradication between alternative post-theatrical windows: there won't be "home video," "PPV," "VOD," "rental," "purchase." Instead, consumers will choose how much they are willing to pay for what type of access (one-time, temporary, permanent) and how soon that access will available.

Pity the providers who are comfortable with today's business model and not preparing adequately for tomorrow.


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What! They Don't Watch the Commercials?!?


That's right, who'd believe that given the relatively simple ability to zoom past uncreative, often irrelevant ads, television viewers with DVRs would actually choose to do so. Well, according to the folks at Forrester "ad exposure drops 54% among DVR users," but the good news is that "about three-quarters of DVR users watch some ads at least sometimes." (see article)

Speaking as a TiVo habitué myself, if I'm gliding past the ads and something catches my eye, I'll stop and check if it's relevant or interesting.

Why does this matter? Well, advertising dollars follow the eyeballs and if television can't figure out a response -- in the long term, because DVRs are in at best 5% of households -- there may be less interesting things on tv if dollars more to a different medium or delivery format.

No prognostication here, just notice.


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September 08, 2004

Sony still pursuing in MGM


Variety today reported on statements by Sony's CFO Katsumi Ihara that indicated that Sony believed the purchase of MGM was needed to insure the continued health of its Pictures group. The article does point out that Sony, with a relatively small library compared to MGM's over 4,000 titles and certainly smaller than WB -- which is either tied with or second only to MGM -- would experience much greater gains with access to the titles that would become available to them. (see article)

For a couple of good pieces further describing the MGM affair, take a look at this rundown on the MI6 website, seemingly devoted to all things Bond and this piece in the Movie Marketing Blog on July 19, 2004.


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September 07, 2004

The Slow March Home


Newsweek reported in it's September 13th issue that a partnership deal is all but done between Netflix and TiVo (see article). In a move most people will respond to with "Oh. Yeah!" the two companies are planning to work together to deliver Netflix VOD straight to the home via TiVo boxes and broadband pipes.

Answering the question of what Netflix and TiVo need to do to survive in a world of Blockbuster delivery service, cable VOD offerings and services like Moviebeam and Movielink, this extension of both services might be the competitive spark they need.

TiVo had already been exploring extending its technology through its purchase of Strangeberry -- a company with technology to deliver content to a TiVo box through cable or dsl broadband. A partnership with Netflix provides it with the content source it needs without requiring it to acquire expertise outside of its own areas of expertise.


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September 02, 2004

The Foliage is Green in Hyde Park


Hyde Park Entertainment has picked up the tab for most worldwide rights on DreamWork's project "Dreamer" (see Variety article). In what is apparently the first major project out of the gate for Hyde Park to cofinance through the funds raised by the Brass Hat Group, DreamWorks will retain Japan (presumably the result of its capital structure and sourcing) and the domestic market. Hyde Park is expected to have the ability to splurge on about $400 million in production funds over the next five years.

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It'll Be Filet Mignon for the Lion


Time Warner, seeking to undercut Sony's involvement, is putting its cash pile and lowered debt levels to shift to an all cash offer for MGM, thought to be $4.5 billion, as reported today in Variety (see article). It's still unclear who will come out on top as Sony is purported to be willing to put $4.7 billion in cash on the table as part of their reportedly "complicated" offer, per an article in today's Los Angeles Times (see article).

Regardless of the party that may or may not become ultimately victorious in this Hollywood safari, it's likely that MGM's production activities will cease as a separate endeavor, with projects brought under the large film groups of either WB or Sony. As for MGM's successful home video group (highlighting the attraction the library titles), let's hope there's not too much redundancy in the new organization.

Of course, at the end of the day MGM may still chug along as a second tier major studio without any of the conglomerate leverage of its competitors.


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