On In House Production – Second Thoughts

Well, after the better part of a year producing in-house for Networks, I can confidently say, I was wrong.

Producing programming in-house does *not* save money for the Networks.
In fact, in my experience, it actually seems to increase the cost of the programming.
There are a number of reasons for the increase in cost, but in general they can be outlined as follows:
  • Legal inability to use the lowest-cost vendors; primarily driven by the insurance requirements of the Network. While this worked when out-of-house production companies were willing to assume risks; the Network isn’t willing to assume those risks, which results in vendors directly charging more than they would have to otherwise, because they must purchase special insurance policies to satisfy the Network. Direct Price Increase – 7-10%
  • Financial processes are so slow, that vendors working with the Network increase their pricing. Vendors know that the Networks are notoriously slow in paying their bills. In return for this reality, Networks get just about the worst deals on everything. You may get a good deal once or maybe twice, but after that, forgettaboutit.
These two primary facts of Network life, more than offset the cost savings of going out of house. The final nail in the coffin, at this time; is that Networks simply do not have the experienced people they need, internally, to make good production decisions. They just don’t.

Thought of the Day

It’s been a long time since I’ve posted here – sorry about that. Been very busy with back to back shows.

Here’s my thought of the day.

It doesn’t matter one whit what your “corporate policy” against bribery is, if you are in a foreign country, and getting out of said foreign country depends upon you greasing some palms.

If you want to say in said country’s jail indefinitely, you can sit there and say “it’s against my employers policy.” Me, on the other hand, will happily shell out the ducats and get myself home.

Just sayin’.

Interesting Television Production Trend

The last 6-10 months as we’ve seen cost cutting accelerate at networks, it’s interesting to see a new trend emerging.

Some networks are moving more production in-house.

Meaning, they’re taking more individual pitches, and fewer pitches from production companies.

This, I believe, is good for the shows, and good for the networks, but good only for the show creators to the extent that they and their lawyers can cut a deal to retain international rights and participation in ancillaries.

Off the bat, in-house production means you might actually have *more* money to spend on your show, since your budget doesn’t have to cover the overhead of a third-party production company (typically a 10-15% markup). So if you don’t have to whack that off of your actual production budget, maybe you can spend 2-3% more on stuff that actually ends up on-screen.

Most recently, I’m noticing this trend accelerate at places like BET, and E!

The downside is these companies will have to learn to carry larger idle assets in between productions (such as physical production space, and office resources), but the costs of those are far lower than what they lose in “fees” to third party production houses.

It’ll be interesting to see if this continues to tick upwards or not. My guess is that it will.

More info on the Camera Assessment Series

A brief trailer for the upcoming CAS presentation at the Produced By Conference.

*fun note – I got to write Mr. Freeman’s VO…

The presentation of the results should be interesting, hopefully the PGA will make it a priority to make the videos and results accessible to all.

Absolute Proof of how screwed up the stock market is.

Well, it’s official, the space-time continuum must be in complete ruins and dolphins everywhere must be close to packing their bags.

As of today, our little indie film “Family,” has returned all of its investors capital, plus 3.9%.

Granted, we didn’t spend much, but it was still a considerable amount, and the proof that the stock market is a mess?

If you had invested in the S&P; 500 in October of 2004 when we financed the bulk of the film, the S&P; 500 index was at 1,106.59. Today, at 893.07, you would have lost 19.3% on your investment. That makes a 3.9% positive return not look all too shabby, I suppose.

I never thought I’d see the day an indie film outperforms the stock market over a 5 year period. So, that said, if you’re considering an indie film investment, AND the filmmakers have a good plan for selling and marketing the film (DO YOUR DUE DILIGENCE!!!), then hey, maybe now isn’t a bad time to support an indie filmmaker.

(Yet Another) Reason Old Media will continue to decline

In another mind-boggling example of why television networks will continue to decline in relevancy and dominance, there is a circumstance that networks foist upon small production companies with great frequency.

That circumstance is called “Deficit Financing.”

More and more, I see companies being “forced” into production by a network they want to do a show for, without any funding in place from the network.

With increasing reliance on reality-television formats, which by default means higher reliance on smaller companies less able to cope with the intense cash flow demands of production, I’m pretty certain we’re going to continue to see a lot of churn of production companies going out of businesses as their cash flow gets hammered by this setup.

A single reality show episodic pilot might set you back $200-300K, a full series order, several million.

The network says “we want the show delivered on this date” and the production company says, “well, we have to start production on this date to make that date.” The problem is the networks drag their feet on cash-flowing production.

With contracts that never account for the current value of money, or have any sort of penalties or interest, production companies put up and shut up, hoping they’ll get paid soon enough to not lose their companies.

In the process, they delay payroll, rental payments and a host of other payments that virtually guarantee they’ll have more difficult and more costly labor and services agreements on the next show, if they get a next show. Vendors and employees loathe doing business with a company they know is going to screw them and leave them holding an empty bag for a month or more.

This is a self-perpetuating cycle driven by networks that over-value their distribution chain, and by producers who are clinging to the old models because no one has figured out the new one yet.

In the end, this practice leaves behind a lot of carnage and will only result in a lot of pain, and a continued decline of network relevance. Creatives with any wit of business sense will flee farther and farther from these companies until all those networks have left are the idiots who produce junk and will put up with permanent cash-flow handicaps.

There is one note to add; however. That is to say that there *are* a few networks who cash-flow properly, and quickly, and turn around payments in fair time-periods. Those are an exception, not the rule, they will survive, and eventually attract the smartest talent to their networks.

2009 Camera Assessment Series

Back in December & January, I volunteered to work on a rather historic shoot being produced in conjunction with Revelations Entertainment, the Producers Guild of America, and the American Society of Cinematographers.

As the PGA has finally started to release publicity about it being a part of their 2009 “Produced By” conference, now is a great time to finally release some of the behind-the-scenes photos from the production.

2009 PGA-ASC Camera Assessment Series

The link above is to a Picasa Album of the pics – though I’ve not yet had time to caption them – I’ll try to over the next few weeks.

The shoot itself was really quite interesting, and we assessed both the physical production and the image capture performances of eight cinema cameras. The cameras were selected based upon their common ability to capture 4:4:4 10 bit images, and deliver 4:4:4 10-bit DPX files for DI and film outs. (which is the reason a number of other excellent cameras, such as the Sony PWM-EX3 were left out – it can “only” record 4:2:2).

The cameras in the test included:
– Arri 435 film camera (various Kodak film stocks, but primarily 5217)
– Arri D21 digital camera
– Panavision Genesis digital camera (based on the same sensor as the Sony F35)
– Panasonic 3700 digital camera
– RED One digital camera
– Sony F23 digital camera
– Sony F35 digital camera
– Thomson Viper

Some cameras were tethered to decks, some had their own on board storage, some used tape. The full results of the test, as covered by ASC members from the whitepaper perspective, and from the production and narrative side by nine field teams of documentary filmmakers (which I produced, along with PGA member Michael Shores), will be presented this summer, and then be archived in the libraries of the Academy of Motion Picture Arts & Sciences, the American Society of Cinematographers, and the Producers Guild of America.

We took each camera from delivering 10 bit DPX files, (and conversions from native capture files such as with RED RAW) to Laser Pacific for both one-light and fully-windowed Digital Intermediate passes, which are then being finaled as DCP (digital cinema packages) and as filmed out negatives.

The results of the tests really showed that producers and DP’s alike face a growing need to consider not only the aesthetics and the budget of their shows, but the workflows in production and post production in terms of extra time transcoding or managing data.

Anyone interested in the results should really check out the upcoming conference, and I hope that eventually the PGA and ASC will make the documentary (for which we shot over 100 hours of footage) and the white papers accessible online.

Artist as Marketer, Part 2

By the way, just to follow up on the Artist as Marketer thread I just posted, this is exactly what we did with our indie film, “Family.”

In addition to the film itself, we (meaning the director, and myself as the producer) cut our own trailers, created our own printing artwork and silk screened DVD promos to hand out at the American Film Market, and I built the website myself (figure it out, y’all – plenty of tutorials on the web…).

This led to us selling the film to a reputable sales company, and while I’m not going to argue whether or not it’s a *good* movie (I like my first film, Solitude, better), it’ll actually make it’s money back.

I’ve worked inside large production companies at the exec level, and can safely say that had “Family” gone through one of those, and/or a large distributor, the movie would never, ever recoup what was spent on it because we’d be paying off overhead forever and a day.

It IS possible to do your marketing and do it well. It just takes some creative thought and a little work – and for all you “creatives” out there, who think you’re only responsible for your “vision” of your movie or television show or whatever, you’re going to be into a world of hurt when your services are exchanged for those of others who are willing and able to contribute more than just ideas.

You Are the Marketer

As I’ve posted a few times about the realities of the evolving IP marketplace as dictated by the consumer and not the rights holder, Trent Reznor just keep on popping up with gems. This quote is one that terrifies most of the highest earners in creative businesses:

“As an artist, you are now the marketer.”

Wait a minute, that means you’re destroying my carefully crafted business model that relies upon delivering a highly-polished turd wrapped in sticky marketing hooks for “your people” to figure out how to sell… because if I tried to sell it on it’s merits… well, then… uh… I’d be broke.

To which, I say, GOOD!

For the first time in a century it would be dependent upon the folks who call themselves the “creatives” to create their way into making better content, and figure out how to monetize and market it themselves.

And guess what, if you can’t figure it out, it doesn’t mean the market is betraying you, it probably means that either your content, or your business model, or your marketing (or all three), totally sucked. And you don’t deserve to get paid for it.

Imagine how much more $$ you could make if you didn’t have to pay for all the overhead from the (large) production company and the (large) distributor in making media? I can tell you right now that on a $7m production I’ve worked on, that somehow, the company and the distributor had to make at least another $3m on top of that just to cover overhead.

Now, this still leaves a gaping hole on “well, how do we finance our media projects” and that, my friends, is still very much an open discussion. I do not know how that is going to be solved, yet, but it will be.

Overheads will be smaller, budgets will be smaller, and if you’re any good at what you do, your profit margins will be higher, and you’ll be happier because you’re dealing with a smaller number of schmoes upstream in the foodchain.

Tell it Like it Is

As I’ve mentioned time and time again, our business (entertainment) is in a rocky period of creative destruction. I believe this is good for culture and society, and probably less good for loads upon loads of highly paid execs – but oh well.

The best quote I’ve seen in a long time was a comment on this Digg submission today:
(emphasis mine)

Dear Hollywood,

We aren’t making money from downloading, we are sharing copies of stuff we have gotten through renting or borrowing from friends.
You wont make any more money by shutting down the Internet.
The only reason you don’t make as much as you would like is due to the quality of most of your product. The Dark Knight made money, it was good. The Love Guru didn’t as it sucked big time.

Start believing in vision and stop believing in focus groups.
Take a risk, make entertaining art or get the hell out.

Or just keep trying to remake the world the way you think it should be, ie the 1980’s.

Welcome to the 21st Century, torrents will never die, and you cant put the genie back in the bottle.

Get over it, shut up and hang on, its gonna be a bumpy ride.

This is spot-on. We’ve had a media culture for a very, very long time where the hits (Dark Knight) subsidize the losses (The Love Guru). As the safety net disintegrates for the losers (and there’s a LOT of bad, awful, terrible movies); of course there’s going to be a lot of rancor and squealing.

In the old media model (still very much in existence, but fighting for its existence); A studio producer can easily collect a 6-7 figure producing fee for a film. You get paid most of this upfront. And there’s too many variables to “know” if a film is going to be good or bad at the end. Directing, casting, writing, exec notes, cutting, scoring, acting – all things that can go badly after a film has been greenlit. It’s not easy.

At the same time, we’re quickly moving into an age where if your media sucks, the only $$ you will have made are the crazy upfront costs we all acknowledge hurt profitability – but lots of producers can’t (or won’t) work on a film for years (often the case) without being able to pay their bills at the very least.

Interesting times we live in – but the commenter above is generally right. The large studios will become more and more risk averse – leaving independent producers trying to figure out new business models (which they are not largely very good at…)