It's a dirty truth, but film production companies and studios collectively waste millions of dollars per year to option and develop film projects that will never see the light of day. At the same time, they may be unintentionally overlooking potentially lucrative projects or scripts that will never make it from script to the screen because of the significant financial risk associated with producing big-budgeted films and untested original film concepts.
As mentioned in a previous post, in 2009, when the MPAA stopped disclosing the average cost of making and marketing films, the average cost of a studio film was more than $106M - spent over the course of an average of two years. That's a lot of tied up capital, and a lot of spent time, and in all likelihood a lot of inefficiency. Hollywood production companies and studios might be wise to take a page out of Lean Startup Methodology.
2001: A GOT MILK? ODYSSEY
At the age of 20, my business partner and friend Marty didn't know what pitches were, but felt confident that it was possible to walk into a room at a studio, push play on the DVD player and projector, and demonstrate what you could do with a camera, a little budget, and some software.
Marty knew that if he shot a trailer speculatively (i.e., self-funded, or "on spec") that looked studio-quality, he could sell studio execs on the idea visualized in the short representative piece, and convince them to provide the money to make a bigger-budget project.
Before a "spec trailer" was a 'thing' in Hollywood, before anyone was using it as a tool to showcase their talent and make connections in Hollywood, Marty spent $4,000, taught himself a little about filmmaking, and shot and edited the first attempt at his vision with a trailer for his speculative film "Got Milk? The Movie":
Marty's logic at the time (and I'm paraphrasing) was this: "If I can take an original concept and for $4K create a piece of media that visually conveys the core of that concept - something digestible that makes people say, 'yes I like this and would watch it,' or 'this sucks, no thanks' - IMAGINE WHAT STUDIOS COULD DO TO SAVE MONEY IN DEVELOPMENT OF THEIR MOVIES."
“Hollywood is the only industry, even taking in soup companies, which does not have laboratories for the purpose of experimentation.” — Orson Welles
Assets are a resource with economic value that we own or control with the expectation that it will provide future benefit - ideally repeatedly. Assets can be bought and sold, and most important, assets can be developed. Every organization (and every individual) already has assets, and the open question is: which ones should they develop further?
Hollywood financiers have money. Production companies and studios often invest anywhere from tens of thousands to many hundreds of thousands of dollars in the development of a single film before the first day of shooting even starts. Various film projects even fall apart in development, pre-production or production for any number of reasons, leaving various unproduced films completely unrecoupable losses to their investors. And, even when completed, most films lose money.
Hollywood is a business with pre-existing physical and digital infrastructure, from creation to distribution of its films. It's a magical machine that since the early 20th Century was founded upon discovering, cultivating, and creating original film concepts. It's established a workforce over the last century to create those concepts.
Every production company, mini-major and studio presumably already has a pre-established marketing platform, sales and marketing team, and a budget for running them. Every finished film they distribute with even the smallest marketing budget already has a movie trailer(s) created to promote it. And, every Hollywood entity presumably also has a youtube channel to which they already post film featurettes and trailers.
Reachable film-going audiences still attend movies in the theater. And, they almost all carry in their pockets wireless devices from which audience feedback can be obtained.
Boundaries are things we can’t, won’t or shouldn’t do.
While some boundaries are self-imposed (see narrative, below), two primary forces have significantly shaped both the structural and technological boundaries of the film industry in the last thirty years.
“The emergence of cable television and VHS
The late 1970’s and early 1980’s led to an explosion of revenue for major studios. Suddenly, new movies had a longer and more profitable release window and each studio’s vault of past titles had a line of suitors vying for the rights to home distribution. This influx of capital challenged the existing studio model of oligarchs and artisans, ushering in a new era of corporatization. The sheer size of financial negotiations, the complexity of the market itself (now global), and the shifting ownership structures of the major studios necessitated a new breed of industry player: the middle manager.
The introduction of digital technology
As Hollywood continued to prosper and mature well into the 1990’s, the second dominant force emerged: digital technology. Immediately, digital distribution (and piracy) shrank those post-theatrical release profits which studios had restructured themselves to pursue during the 70s and 80s. Consumers grew in power, as their ability to circulate information and opinion challenged a top-down marketing approach and then gave rise to crowdsourcing and crowdfunding of creative works.
New competition for attention emerged from players like YouTube followed by Netflix and Amazon. The cost of entry plummeted as production tools became free or very nearly free. All the while, this explosive disruption met a management structure replicated from the most resistant-to-change multinational conglomerates. Producing creative work had come to be nearly indistinguishable from producing sugared water.
Together, these forces conjure a plot that Hollywood would love:
What happens when an unstoppable force (digital disruption) meets an immovable object (corporate management)?”
NARRATIVE (OR WORLDVIEW)
Narrative is our self-imposed view of the world, or worldview.
Hollywood has painted itself into a corner. It's spent over 100 years focused on creating films for audiences in the theater, while trying to keep up with and shove its content through other distribution channels that have emerged during that time: television, VOD, internet, mobile devices and tablets, wearable devices, etc.
That's what it does - and often very well. That's what it knows.
Hollywood believes it is in the business of making, marketing and selling FINISHED movies to audiences.
And it generally makes movies before receiving any audience feedback until shortly before release.
That's like launching a startup (into which you've invested hundreds of thousands or even millions of dollars) without ever running any customer feedback tests or establishing any feedback loop.
What Hollywood needs is a content feedback loop.
FLASHBACK TO 2006
INT. BLOCKBUSTER VIDEO RENTAL STORE - EARLY EVENING
MARTY, a vibrant new film director in his mid-20s, paces slowly from isle to isle, past wall after wall of DVD (and VHS) boxes lining the store. He speaks into his phone, which he holds up to his ear while he reads the back of boxes, looking for a movie to rent and watch that evening.
So what's the spec trailer thing you mentioned?
"The Speculative" is just a concept right now. But I'll
tell you man, it would prevent so many of the
films that lose MILLIONS of dollars for prodcos and
studios from being made and filling the aisles and
walls of Blockbuster.
MARTY gazes around the room with fearful amazement as he gazes over thousands of rental boxes.
There's SO damn many of them.
He pulls a red bandana from his left hip pocket and ties it around his head like Rambo.
(in strong, deep tone, almost growling)
Let's DO this!
SCREEN WIPE TO BLACK - LEFT TO RIGHT
One of the inherent contradictions with the film development process lies in the lack of audience engagement used to measure a film’s potential real-world box office viability. If all you have is a script - a format unfamiliar to most filmgoers - or perhaps some concept art - how do you use a filmgoing audience to help determine a film’s potential?
Marty has entertained "The Speculative" (or "The Spec") idea for a decade now, and like my unquenchable thirst to be a film producer, it keeps coming back to Marty because it's a good idea. It mitigates much of the risk in the film development process by creating tangible, judicable proof-of-concept (speculative) video material (trailers) that filmgoers could consume, providing instant feedback of interest or disinterest to film financiers.
The Spec establishes a layer of protective iteration between concept development and product shipment, and allows for consideration and incorporation of much higher levels of consumer feedback. Instead of placing all of their development fund eggs into one feature film's basket, studios and production companies could use a tool like The Spec, which focuses on a Lean Startup, MVP-centered approach, and allocate just a small percentage of their total project development budgets to making a few relatively inexpensive trailers designed for solicitation of audience feedback.
Think about it. While movie attendance has declined significantly in the past thirty years, box office records are still being set - that is to say there's still a LOT of people watching movies in theaters. What if a short 30-90 second spec trailer played before the upcoming feature film trailers instead of a bad local refrigerator or insurance commercial?
What if this screen also came up BEFORE viewers were asked to turn off their phones?
Everyone has a phone, and if given the right incentive could be convinced to give market feedback on a movie they might see anyway. Proof-of-concept previews could even be for 'select' audiences who receive some small, cool token of appreciation from the studio. Hell, DVD sales are down - maybe hand out a few of those.
When market-testing content, a studio could spread the same development budget for one film over two to four film concepts, produce spec trailers which effectively communicate a movie’s envisioned tone and story, and then sit back as a real audience provides their preferences.
Online audiences could provide even more key insights as to which film project(s) or property(ies) has the most potential - which seem to be the safest financial choice based on proof-of-concept audience feedback. Data analytics could be run on a regional, national and global level to gain demographic and monetary insights, as well as audience feedback on story, tone, pacing, and perhaps even actors.
Hollywood already has everything it needs to add a layer of ideation + feedback into its pre-existing infrastructure, and doing so could save up to 50-70% of development budgets - and likely increase average box office numbers. Using a tool like The Speculative to explore the viability of in-development film projects allows studios and production companies to mitigate much of their investment risk by relying on audience feedback to shape and develop the projects themselves.
Incidentally, the same audiences will likely later recognize the name and proof-of-concept trailer for the film project they reviewed last year, and buy tickets to the finished film.
Hollywood believes it is in the business of making, marketing and selling FINISHED movies to audiences.
If Hollywood continues to operate this way to make short term aggregate gains on a few massive tentpole movies per year, it will eventually have to come to terms with becoming increasingly irrelevant.
What Hollywood should realize is that it is in the business of making, marketing and selling CONTENT to audiences, and then decide whether short content with great audience feedback can serve as a more reliable investment strategy than this: