A Widening Chasm, Part II
In the last article, I wrote about what I perceive to be a growing gap between the way writers look at new ways to gain power and the way writers’ representatives look at new ways to gain power.
To summarize, the writer’s model is a traditional one, in which writers work as employees and collectively bargain with management for better terms…hoping to move our participation in revenues forward…and pursuing a strategy of organizing and strike threats to achieve this goal.
The representatives’ model, which is currently evolving, works a little something like this.
In the future, a filmmaking unit will not work as employees for a studio. Rather, the filmmaking unit (writer and director and perhaps star) will present their vision of a movie to a group of independent financiers, who will form a partnership with the filmmakers. Obviously, this is nothing new. Hell, just about every indy art film is made this way. What’s changing is the amount available.
For the sake of argument, let’s stipulate that the financiers will spend about 25 million dollars to finance the film, and in exchange for that, they will own 75% of the film. The filmmakers will still get paid their normal front-end salaries, but they will also own 25% of the film.
The financiers do not give notes. They do not request final cut. They have simple terms like “it has to be PG-13 or R” and “it can’t run more than 120 minutes.”
While the film is in production, the representatives shop it to studios. They state that given the economic realities of foreign sales, broadcast fees, etc., if a studio purchases the film for 40 million dollars, the studio pretty much knows they can automatically make that back and then some, just by dint of standard global exploitation of the property.
The studio buys the film for 40 million dollars. The financiers recoup their 25 million dollar investment, leaving an additional 15 million, which is instant profit.
The filmmakers’ 25% nets them nearly four million in additional cash. But that’s just the beginning.
The studio will spend money to market and distribute the film. Let’s say that they spend enough to offset the entire worldwide theatrical gross of the movie. No problem. As everyone knows, the profit is entirely in the video. That’s the free money. Because the studios rely on video for their profit, they have been loathe to share it with the artists.
The WGA strikes in ‘85 and ‘88 were over video residuals definitions. If we strike in 2007, it will be over internet video residuals definitions.
Currently, a writer receives 1.5% of 20% of the studios’ video earnings.
Surely that number is better for big stars or big producers, right? Well, maybe bigshots can do better than the 1.5%, but everyone gets screwed on the definition on the earnings. In the WGA’s case, it’s that 20% number. Some people get that number to 25%. Really big-time producers and stars can push it to 35%.
But financiers? The people who post the cash to finance the film?
In our example, the filmmakers are partnered with the financiers, so they piggyback on to the 100% definition. Now let’s say the sales deal to the studio included a 15% share of the video. Our filmmakers’ take would be nearly 4%.
4% of 100%. As opposed to 1.5% of 20%.
In other words, 4% vs. .3%. The video earnings would be 13 times as much as you would normally get.
If you’re talking about a decent hit, it’s the difference between earning a few hundred grand in residuals…and earning 30 million dollars in video profits.
Now, think that’s all crazy talk? Think that’s never gonna happen?
What if I told you it happened last week?
Instead of selling his next script to a studio, Sascha Baron Cohen packaged his next film with independent financiers for 25 million dollars, presold it to Universal for 42 million dollars, and will likely earn tens of millions if the movie does decent business.
Sascha Baron Cohen has leapfrogged beyond unions. He has leapfrogged beyond employment. He is an owner now.
Think this only works if you’re a star as well as a writer? Well, the filmmakers of Babel did the same thing. It’s happening more and more now, and I think it’s the wave of the future. Mid-sized budget films are going to be independently financed, and the studios will simply serve as releasing companies, providing the services that they provide best (marketing and distribution).
Why would the companies allow this?
First off, they’re not. They’re being competed against by new money, and if Baron Cohen wants to partner up with some Wall Street money to make his next movie, there’s nothing they can do about it.
Secondly, the very corporatization and conglomeratization that unions fear is very likely a source of advantage for entrepreneurs. The studios used to fly by their gut. No more. They’re not in the business of building a library that will pay off huge dividends in the future. They’re in the business of increasing their stockholders’ value right now, and that means minimizing risk.
As one agent explained to me, “Just about every studio film is now cofinanced with another studio or an independent partner. If they’re going to hedge their bet with outside money, why shouldn’t you be that outside money?”
In my mind, reliable filmmakers who shoot genre films for a price will be the immediate beneficiaries of this new model. Think Baron Cohen, Judd Apatow, Eli Roth and so forth. It will spread, though. Once a writer makes 30 million dollars on a movie that only earned, say, 90 million at the box office in the U.S., every single writer in Hollywood is going to want to do the same thing.
What’s the practical effect?
Studio development will wither away.
Production companies that aren’t based around artists will wither away.
The unions and studio management will continue to negotiate contracts that will cover fewer and fewer artists.
Total filmmakers will be rewarded.
Specialists will not.
Granted, this could all be crazy talk. Maybe what Baron Cohen and Guillermo Arriaga (Babel) did is just a brief quirk in the Hollywood timeline, and we’ll all be laughing about it five years from now.
Something tells me, though, that this trend will continue because it makes sense. If it does, we may finally get everything we ever thought we deserved.
And then some.
Edited to add: Ted just alerted me to an L.A. Times article about this very topic. Of particular note is the paragraph that describes how Tony Gilroy wrote a script, then declined to sell it to a studio, preferring instead to meet with private financiers.