George Lucas Announces The Death Of The $200 Million Feature Film

from the good-for-him dept

Back in April, at the Cato Institute conference on copyrights, someone in the audience from NBC Universal challenged both myself and Professor David Levine from UCLA on how the movie industry could keep making $200 million feature films in a world where copyrights were less stringent (or non-existent). The response, of course, is that he's asking the wrong question. Why focus on the cost of making the movie? It's like a mainframe maker asking how they can keep making million-dollar mainframes as PCs become more and more powerful. The answer is that you don't keep making $200 million films, but figure out how to make films for less. That means embracing technology that makes moviemaking, distribution and promotions much cheaper, while also recognizing that the value of star power (which is extremely costly) is greatly overrated. While the folks at NBC Universal may not like that, it does seem like some big moviemakers are recognizing the trend. John points us to an interview in Variety with George Lucas, where he discusses why he won't be making $200 million movies any more, saying that they're just too risky. Instead, he can spend the same amount of money making a lot more video for TV or for online. While he doesn't discuss ways to make quality films for less, he's clearly realized that the market is changing -- and it's changing in a way that will make him produce more content, not less. That's important, since the assumption from the NBC Universals of the world has always been that, if they can't make $200 million movies, the world would have a lot less content. Looks like that assumption isn't holding up either.

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  1. identicon
    Questioner, 6 Oct 2006 @ 12:42pm


    Since I asked you the question at the CATO event, I have it on good authority that you are wrong about the question you were asked.

    I was responding to your assertion, also made by Prof. Levine, that copyright protection for movies was unnecessary because movie makers could adopt the open source software model and sell services rather than the movie itself.

    My response to your assertion asked how it would be economically rational for a movie creator to invest in creation of a movie, like the $150 million+ invested in creating King Kong, Narnia, or Lord of the Rings, if the absense of copyright protection meant the creator could not prevent free riders from performing, distributing, and reproducing the movie.

    You responded that the movie makers could still sell the theater experience, and sell DVDs with extra features. I did not have the opportunity at the conference to do so, but now take the opportunity to discuss why your answer makes no sense.

    The theater part of your answer utterly fails to take into consideration that (1) movie makers are prohibited under established anti-trust cases from owning theaters; (2) even if movie creators could own theaters, the absense of copyright protection would create a free rider problem, since the movie creator/theater owner can not compete with free rider theaters that could profitably charge far less for admission because they had not invested millions in the initial creation; and (3) very few movies, ESPECIALLY LESS EXPENSIVE ONES, turn a profit during theatrical release, and thus need a DVD, PPV, VOD, and TV window to recoup costs.

    Your assertion that movie creators could still make a profit by selling DVDs with extra features (Director's cuts, Unrated versions, behind the scenes) suffers from the same flaw. Namely, without copyright and anti-circumvention protection, any competitor can sell the same DVD WITH the extras at a far lower price than the movie creator, who must recoup the initial investment in the movie AND the extras.

    Prof. Levine's answer to my question was even more flawed. He positied that the mainstream movie industry should just follow the model of the pornography industry and make far cheaper movies. Apparently, he would be just as happy seeing some $100,000 version of King Kong, Narnia, and Lord of the Rings filmed with people in rented costumes jumping around a backyard in Van Nuys. However, the vast majority of movie viewers actually want to see the $150 million versions filmed in New Zealand and on painstakingly crafted sets, using state of the art CG technology, and employing hundreds of skilled actors, stuntmen, carpenters, costume designers, engineers, musicians, Foley artists, etc. Furthermore, he was wrong to say that the pornography industry doesn't rely on copyright protection to prevent free riding. The case law is rife with examples of pornographers suing to prevent infringement of their movies.

    So, my question was directed at revealing the fallacy of the economic model you proposed, not a defense of big budgets for films. (Movie studios have the same economic incentives as any other market actor to keep down their costs.) The fallacy in your argument applies as equally to a movie that costs $2 million as one that costs $150 million. Why would someone invest $2 million in creating a movie if free riders could sell all the potential services (theatrical experience, DVDs with extras) for less than the creator? The more rational economic decision is to go into the free rider business, and wait for someone else to be stupid enough to invest in making a movie.

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