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. icon
    Mike (profile), 9 Oct 2006 @ 2:26am

    Re: Rebuttal

    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.

    Cool. I'm glad you've come here to discuss in more detail.

    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.

    I never said anything about the open source model, though Prof. Levine did. Also, you may have misunderstood my comment as well. I did not say that movie makers *could* sell services, but that they *need* to sell services -- because that's where the market is taking them.

    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;

    They don't need to own the theaters to benefit from a better movie going experience.

    (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;

    Again, you seem to think about this in very simplistic terms. There's value in providing the complete experience, including an "authorized" version of the film. On top of that, as we've discussed here previously, there are plenty of tie-ins that a legitimate moviemaker can add to a movie: such as movie ticket holders who go to a theater playing official versions get a discount on the DVD. Or, get admission early to new movies. Or get other special perks. There are lots of ways to ensure that people are still willing to pay for the official version.

    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.

    Hmm. Considering all of those things are relatively new, there was a day when movies did make money on their theatrical release. That would suggest that the business has made some bad decisions lately.

    Either way, that doesn't matter, because none of this limits the possibility of making lots of money from other avenues.

    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

    Again, you act as if your customers are criminals and morons, rather than those who would be willing to buy the official versions if given incentives and perks to do so (no need to repeat myself, but access to new releases, discounts on other merchandise and plenty of others ideas are out there...)

    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.

    I won't speak for Professor Levine, but I will say that I believe you misunderstood his answer. My understanding of what he said was simply that the adult entertainment industry has made an awful lot of money without worrying about copyright, and they do so by continuing to produce content that people want. That doesn't necessarily mean you have to have the production qualities of pornographic material, but that copyright isn't the only way to make money in film.

    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.

    Again, you go back to the cost, rather than noting that it's increasingly possible to make movies that are just as good at lower 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.

    I disagree completely. At $2 million, it's even easier to recoup the costs -- and I listed above just a few of the ways that *any* movie could keep making money even without copyrights -- even if there were free riders. So, I disagree with your assertion that it's better to go into the free rider business. In that business, it's much more difficult to have any kind of competitive advantage. Whereas the actual creator of the content has all sorts of competitive advantages that have nothing to do with copyright.

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