The Hot Blog Archive for October, 2012
So here is my take on Carl Icahn buying 10% of Netflix.
This is a company that is, in terms of its high-flying history, in trouble. Expansion is a good idea, but Europe and South America are already more advanced than the United States in the streaming categories without Netflix in play. The universe for home content is narrower and often more tightly controlled by national governments. It’s not that there isn’t a business outside of the US… it’s that the business they are pushing for is more like what the US business is turning into and not like the ubiquitous business that Netflix was once in and hoping to grow.
That said, Icahn is right (based on his few comments). Netflix is a better company to sell right this minute, week, or year than it is a business that moves forward independently. There is ton going for the business. But it is flying in the face of the very concept that grew it to where it is today. We have reached a technological cul-de-sac. Netflix has nowhere to go.
However, they do have a technological infrastructure that actually works. And i am not talking about the system that guesses what you might like to watch. I am talking about the basic infrastructure of streaming to homes and tablets and phones in a pretty consistent, reliable manner.
I cannot tell you why, because I don’t know. I have asked studio heads why, and they don’t really know. But the studios have not done a good job developing competing technology that allows them to cut out the middle man. They all want to… and no one has really made it work. Ultraviolet is a car wreck so far. Warner Bros, the smartest and most aggressive studio in this space finally gave in and did a deal with Netflix. And yet, Time-Warner’s HBO Go works beautifully. (Hulu works too.) It doesn’t make sense. But it seems to be the reality, however illogical it may seem.
So there is a big need for a turnkey solution. And Netflix is the clear leader in a working, consistent solution to this technological need.
How does this work?
You develop a system with one or more studios “powered by Netflix,” so they can pay Netflix a residual instead of the other way around. Perhaps you work with one studio that is willing to pay many billions for the entire enchilada and they eat it all, though it wouldn’t make a ton of sense to eliminate Netflix as a working business right now.
Say it is Warner Bros. You know how Netflix now offers Netflix For Kids or Netflix: Everything? Well, the third channel is Warner Bros. $8 a month becomes $13 a month and you have everything in the WB library catalog (that they can offer you at any time in light of competing contracts) at your beck & call for that extra $5. (And eventually $7 and then $9.)
Channel Four is Lionsgate. Channel Five is Sony. Etc.
Of course, there is ego involved at each studio. So perhaps “Powered by Netflix” is separately branded sites, all under the Netflix infrastructure so each sign-up feels separate, but really isn’t. Those details are for those who know every angle on what they need to be offering.
But whatever Netflix is doing, in terms of the delivery technology, seems scalable. Scale it.
The only thing keeping Netflix in the business its in now is ego. The content offering becomes less and less dependable, consistent, and competitive. There is no stopping that slide. Netflix raised the bar on streaming content prices and is now bleeding to death under the weight of said largess.
Netflix was first built on the idea that with a little patience and $12 a month, you could watch film you wanted and get a new one within days of watching the last one, with 2 or 3 or 4 discs in play to keep it all smooth. It was never everything, but it was almost everything… a vast, high-percentage library. Streaming Netflix was a combination of that library as a back-up and then the Netflix Experience of easy home streaming. But the glory and horror of the streaming business is that it at least seems to have a low bar for entry. Competition heated up quickly, not only from direct competitors, but from the cable operators and entertainment divisions of bigger content provides like HBO.
And in an instant—my theories have been mentioned before, so I won’t right now—it became a very expensive acquisitions business, for content high profile enough to, in theory, grow the business. But the cap on acquisitions caused by the high prices meant that there was never going to be enough high profile content to dominate the market as it grew out of its infancy.
Still, no one company has come along to match or crush Netflix. Why? I guess quality streaming just isn’t that easy.
But that’s just a matter of time. I have been able to watch any baseball game being broadcast in the US on my phone for 3 years now. Same with football. The size of these libraries may be an issue. But faster and faster, smaller and smaller, more powerful and more powerful we continue to go.
To survive at a high level, Netflix needs to get out of the content acquisition trap and re-focus on what it does best… content delivery.
And that is what I expect Icahn will be trying to make happen.
The hardest part for Icahn when he owned a chunk of Lionsgate is that the leadership there felt there was a much more lucrative future for them in not letting him chop the company up and sell it for parts. The hardest part here will be the reality that Netflix is a very strong, market-dominant business right now. I believe that the top people at Netflix know the trouble they are in… they signal it all the time. But you don’t want to kill the goose that lays the golden eggs—even if you know that it will drop dead one day with little warning—before you know that there is a lot more money in silver eggs if you change the goose’s feed to change the composition of the eggs. You can have it both ways for a little while, but there is no point in starting down the road without a very good idea of where you are headed.
And so the real drama at Netflix begins.
One thing about Icahn is, he will make you define our company is sharp relief, whether you embrace him or reject him. So I think this is a good day for Netflix any way you slice it.
But it may be the end of some delusions of grandeur… which for a company that is one of the great business success stories of the post-manufacturing age is too bad. This has been a sensational run. But the market that defined the company has changed so much that it’s time for a bigger change in thinking, not a quarterly fight to try to keep people feeling positive at the cost of making that game-changing push.
I’m going to do this as simply as I can.
This is Iger’s legacy… at least it is the current one, after he failed with Rich Ross to turn the company into a distribution-driven studio with little internal production. So now, it’s that Disney will become the first an All-Franchise, All-The-Time studio, owning EVERYTHING they put out. So…
7 or 8 releases a year.
2 Disney Animation
1 Other Disney Franchise Film
I don’t expect DreamWorks to be there at this time next year.
So that’s about $200m, $325m, $160m, $125m, $200m, $90m in production each year… total: $1.1 billion.
Marketing for all these franchises would have to be about $1.2 billion.
So the annual nut of Disney 7.0 will be about $2.3 billion each year.
They’ll gross about $3 billion worldwide this year with 5 new films and two 3D re-releases in distirbution. That’s about $1.65 billion in rentals coming back to the studio. They should hit black ink, but there won’t be a lot of profit.
They did about $3.1 billion last year and $4.7 billion in 2010, with 14 films in release each of those years.
The studio has had at least one billion-dollar movie in each of these years, two in 2011.
And that’s what they will have to count on to make this work. If you have one John Carter for every Avengers, it doesn’t work. If you don’t have at least one billion-dollar movie, it probably doesn’t work.
The theory is that this group of brands will consistently deliver and that they won’t have any big losers because there is a base audience for all of this material.
Marvel still hasn’t delivered a sure-fire franchise internally that doesn’t involve Iron Man. Things have gotten better with Thor and Captain America, but $450m and $370m are triples, not home runs. They are profitable, but not sure hits. All but one of the other film film produced by Marvel directly has grossed under $300m worldwide. You could argue that the catalog is on the ascension. But it’s risky.
Pixar is stable. Disney Animation is pretty stable, but tends to be on the lower end of the formula.
This brings us to LucasFilm. The dream is that future Star Wars films will be a billion-dollar-a-shot cash machine.
So the fantasy is that you get a billion-dollar hit, alternating between Marvel and Star Wars, every year. Until they can get Star Wars back on its feet, the slot is filled by Bruckheimer… perhaps after, if he can get Depp to two another couple Pirates movies. So a billion every year hit is the foundation. You have a solid success with your one Pixar film and the other Marvel film each year. You hope between the two Disney Animation films, you have one that is bigger and one that is just slightly profitable. And then, the 6th film or 7th and 8th films are wild cards, aiming high, and capable of turning a good year into a great year.
So is there any room for the flops?
Not so much. If you have your billion-dollar-plus film, you can take the hit. If you don’t, there starts to be some real trouble. And if you have two major flops out of eight, the only reason your studio isn’t bankrupt is ESPN.
This all reminds me of Peter Guber’s story about The Japanese not understanding why he didn’t just make all the hit movies and not make the flops.
And then there is the $4 billion price tag. Maybe it pays off in time.
It’s been six years since Disney bought Pixar and the deal still isn’t close to being profitable for the studio… but the run has continued, so it now looks like this deal will be a net positive for Disney and actually be paid off by sometime around 2020.
Marvel isn’t even close. But The Avengers has everyone feeling good about the deal. And though Spider-Man and X-Men are unlikely to be coming home anytime soon, they are still nice profit centers for Disney.
And when Star Wars puts $6 billion or so in movie revenues in Disney’s pockets, that deal will be looking good.
But it’s a long way to muthaf***ing Tipperary, man. A long, long way.
The last Iger move was gutsy too… and was dismantled in 2 years, in spite of the studios having had their 2nd – 5th billion dollar grossers in its history during that time. It wasn’t enough.
Scary-high tightrope Iger is walking. No joke.
Old people are funny.
Follow your elders’ advice: visit VotersRising.org
Produced by Michael Moore
w/ Daron Murphy & David Ambrose of ART NOT WAR
Written by Michael Moore & Jonathan Schwarz
Directed by Laura Dawn
Associate Producers: Angela Linneman & Eddie Geller
DP: David Ambrose
Edited by David Ambrose & Laura Dawn
Assistant Editor: Eddie Geller
Original Music & Sound Design: Daron Murphy
Line Producer: Aaron Kinsley-Brooks
Set Design & Art Direction: Adrian Alexis
Props & Production Assistance: Sarah Kinsley-Brooks
Make Up & Hair: Ananda Khan
This ad is, of course, a sequel. Earlier incarnations…
“You wouldn’t ask British citizens to financially support colonists who won’t pay their taxes.”
“You wouldn’t ask white people to pay people to pick all that cotton when they can just buy some niggers.”
“You wouldn’t ask America to pretend that Blacks were full human beings.”
“You wouldn’t ask men to allow those menstruating harridans to vote.”
“You wouldn’t ask unaffected religious people to allow same-sex animals to enjoy the sanctity of a legal (not religious) marital construct that results is dissolution about 50% of the time.”
Privacy is an inalienable right that’s at the core of freedom of religion.
How you use your health insurance, however its paid for, is a private matter. It is so much a part of our culture that doctors are protected from being forced to divulge patient information… even more, are disallowed from doing so without the consent of the patient.
So why would ANY employing organization be allowed ANY voice in that conversation?
“Well, why not allow Catholic institutions to just give insurance to its Catholic employees?”
“That’s absurd. These are not biased organizations. Just allow the Catholic institutions to pick and choose what their health insurance spending will cover.”
In principle, there is no difference between the two things.
And what about the 88% of Catholics who use Birth control?
And what about AIDS medication? Should Catholic institutions have to pay for those meds if they have hired a gay man… or should they be able to decide what meds to pay for based on an investigation of whether HIV was created by gay sex, as opposed to intravenous drug use (or some other method)?
What about Sickle Cell? Or Tay-Sachs? Or diabetes in people with over 20% body fat?
Some will argue that these are stretching the point, but the core of this is not fact, but belief. So if you believe that birth control is wrong and you should be able to force this on others economically, there is not legitimate way to hold the line against any belief that you or anyone else holds.
Perhaps the law should be changed so employers of women who have more than one child in a five year period don’t have to offer health insurance benefits for those pregnancies or other workplace protections? After all, we are in an era of over population.
And let’s not forget that the principle of relentless procreation in religion – not just Catholics, but in many religions – is about increasing the population of that group, not faith. (And don’t even get me started on the freak-out by white people in the United States since becoming aware that we – is this Jew included? – will no longer be 50%+1 of the population of this country anymore.)
The law of the United States is there to protect ALL Americans from all the things the Founding Fathers feared… even if those being protected look, live, and love nothing like the Founding Fathers. The foundation of this nation is NOT the protection of our right to only protect the rights of those with whom we agree. That is not the foundation of unity.
If you or a corporation or the Catholic Church wishes to employ people in the United States of America, you are no longer a standalone bastion of individual rights, but a participant in the principles of this nation, governing all the people, not just those with your belief system.
If you only like Democracy when it fits all things you want and believe, you don’t like Democracy.
I’ve been tweeting about this ridiculous and not-unexpected turd of a piece by the NYT’s Michael Cieply on how terrible the theatrical film business is.
For a change, the headline—”Movies Try to Escape Cultural Irrelevance”—is stupid, but not offensive. It’s a conversation that reasonable people can have. That doesn’t mean that “I’m old now and you kids are fucked” pieces like David Denby‘s are worth the bandwidth on which they travel, but sure… have the conversation.
But what the piece by Cieply tries to do is to use facts about business to try to answer the question. And the first problem with that is that it’s not a legitimate question. How many people saw The Master versus how many people saw, well, Taken 2, much less a free TV show like The Walking Dead is a STUPID question. By Cieply’s standards used in this piece, Kim Kardashian is the most culturally relevant media event of the last five years. And if that doesn’t make you want to jump off of her ass into the abyss, this idiocy is extended like a campaign rally in Florida by citing A Man for All Seasons, 8 ½, The Searchers, Gone With the Wind and The Godfather as the key movie touchstones… the most recent of which was released FORTY years ago.
(Note: It seems a minor point to mention that, “After the shock of last year’s decline in domestic movie ticket sales, to $1.28 billion, the lowest since 1995 (and attendance is only a little better this year)…” puts a $ figure in front of an estimated attendance figure, adding inaccuracy to stupidity. Domestic theatrical revenue alone last years was over $10 billion. And international was over $22 billion, making last year the highest grossing year in history where it matters… in the bank vault.)
According to Cieply, “the weakness in movies has multiple roots.”
1. Television is free… once you’ve paid your cable bill. Uh… duh. Another 50-year-old reality.
2. DVD died. But what does that have to do with people who cannot open movies doing TV for decent money? Nothing. It has changed the economics of the industry, but “movie stars like Al Pacino, Dustin Hoffman, Laura Linney, Claire Danes and Sigourney Weaver” do not open movies. Only a couple of them ever did. Gorillas In The Mist is great… and grossed $25m domestic. Do you still want to mock Ben Affleck’s numbers, asshole?
3. There is some convoluted bit about genre pieces doing well and superheroes doing well overseas. How is this a creator of weakness in movies? Cieply must know that no one greenlights a movie of over $30m these days (with the exception of a few heavily-domestic comedians) without expecting a significant percentage of the revenue to come from overseas, right? Is that bad? Avengers doing $1.5 billion makes it less culturally significant?
Again, I am fine with a conversation about why Avengers feels a lot less sticky than Batman or Spider-Man or Indiana Jones. But I don’t see how massive success at home and abroad is a weakness for movies… at all.
4. “But the number of films released by specialty divisions of the major studios, which have backed Oscar winners like Slumdog Millionaire, from Fox Searchlight, fell to just 37 pictures last year, down 55 percent from 82 in 2002, according to the Motion Picture Association of America.”
Do you mean to lie to people, Cieply. You know full well that Warner Indie, Miramax, and Vantage are all out of business since 2002, right? So 3 of the 6 Dependents are gone and instead of analyzing why, you claim it as proof of something bad being afoot? That is cynical and lazy and simply embarrassing. The New York Times means something to me. This work is contemptible.
Moving on, Cieply cites Denby, whose “get off of my lawn” drivel about the end of movie culture has been gunned down by everyone with a brain… and “Henry Schafer, an executive vice-president at the Q Scores Company” (you know, the people who told you how hot Erik Estrada was), and Daniel Tosh… oy… are you kidding me? You quote a joke about Tosh hating McFarlane, which is a slap at the TV show first and foremost and has nothing to do with any of this.
Also, Bob Gazale and George Stevens Jr…. who are very nice, intelligent men, but whose AFI has done everything it can to whore out its school’s credibility for some more celebrity profile and fundraising.
And don’t forget Colorado State University’s “Allison Sylte, a student journalist,” whose great insight is that The Academy going with King’s Speech over Social Network pushed kids away. And by the way… King’s Speech outgrossed Social Net by 40% domestically. But let’s not bother with editorial consistency.
I hate the personal-belief-based journalism that this kind of thoughtless, lazy piece represents. I am guessing that whoever sent over Sharon Waxman to attack the movie industry by any stats necessary – creating this stupid obsession with tickets sold—is still putting Cieply and Brooks “Huh?” Barnes through their attack paces.
And what I fear is that if a lie is repeated often enough, it becomes perceived as truth.
I expect that from TMZ. I don’t expect it from the New York Times.
Argo deserves a lot of credit for being there when the top spot became available for a $10m gross or better. Ben Affleck, besides being a talented director, is a director who makes movies for adults. That means that will all the momentum of this film, $100m domestic may not happen. Flight, Skyfall, and Lincoln won’t kill Argo, but they will slow it down. But $90m is a great success for a film that doesn’t pander to the biggest moviegoing audience, the under 20s. Huzzah.
Hotel Transylvania, now Sony Animation’s biggest domestic grosser, has another five days – including Halloween – before Disney’s Ralph tries to wreck it. Hotel T is the #5 animated film domestically this year to date, behind the three big summer releases and the March release (this year from Universal). T has an outside shot at #4, though Wreck-It Ralph will probably keep it from adding another the full $30m between them, especially with Halloween behind the monster comedy. But another big step for Sony Animation. Huzzah.
Now, the bad news…
Cloud Atlas is estimated not to hit $10m domestically this weekend. Ouch. Makes Larry Crowne look good. I wrote yesterday about why I think the film isn’t selling. Sigh.
Silent Hill: Revelation couldn’t top the second weekend of a disappointing Paranormal Activity 4 (off 70%). ‘Nuff said.
And then there are Fun Size and Chasing Mavericks. Combined, they couldn’t match Weekend Four of Taken 2. ‘Nuff said.
Was I distracted the weekend everyone got excited that The Dark Knight Rises passed the worldwide gross of The Dark Knight, becoming the #7 all-time grosser and the #3 non-3D all-time grosser?
Samara and Searching For Sugar Man are running neck-n-neck, both docs currently around $2.2 million. Solid numbers for both. Sugar Man will probably pull ahead next week, but really strong numbers in theaters for docs in this era.
Long Shot: The Kevin Laue Story led English-language indies with $10,500 per on 1 screen. It got 4 paragraph review from a freelancer in the NYT.
Remember those blocks of clay you could buy and you’d chip away until you got to the hard plastic statue underneath? That’s what Argo‘s return to the top reminds me of today, finally getting the top slot in its third weekend. It will still be running slightly behind The Town after this weekend, but it may slip that by the end of next weekend. We’ll see.
Meanwhile, with six years in between movies, I kinda assumed that there were a few more Silent Hill movies out there. I was wrong. This one’s 57% off the opening day of the last one. That would suggest an $11.4m weekend… but I’m not sure they’ll get there.
Cloud Atlas just didn’t take. The Wachowskis came out of media hiding… and gloriously so. But to little avail. Their sixth film will be their 2nd worst opener. It might cheer fans of CA that the film that did worse was Bound, which grossed less domestically in total than CA will in its first day and a half. And that film is now considered a classic. But the energy around this just didn’t add up to box office. No one is making fun of Cloud Atlas (As opposed to making snarky, nasty, lazy, infantile digs at Lana) on, say, Funny or Die or Letterman or Leno. It’s not a big cultural event outside of the “cultured class.” I’m not sure WB had a lot more to do with this film. Some sort of 2 minute or 5 minute piece on what the movie is might have helped a bit. But it would have had to have come out months ago to make a difference. It’s really hard when someone says, “What’s it about?” and the answer sounds like fart in a holistic bookstore. I’m not claiming this was the runaway hit of the season waiting to happen. But a $20m opening doesn’t seem impossible.
Paranormal Activity 4 is still tracking to do about 1/3 less than any other PA movie. Is the franchise winding down or the marketing… or both? This is still very profitable, but the last one seems to have been the series peak.
Taken and Taken 2 are more of a classic genre sequel situation. 2 is doing business faster… but 1 seems to have stronger legs. I like Tak2 to wrap up domestically within $10m of the original.
Hotel T passes Cloudy 2/ Meatballs today. And it’s got at least another $20m in the domestic tank.
Nothing fun about that Fun Size opening. Is it a comedy about height-challenged sex addicts?
Chasing Mavericks is a horrible car wreck. A $400 per screen/$1200 per for the weekend (they now hope) release is worse than From Justin to Kelly or Thunderbirds, as a point of reference. Ouch.
Not much non-highly-specialized joy in the indie world this weekend. But I must say, not going to see Pusher (UK version) is a mistake that many people will wish they hadn’t made when they finally see the film.