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Hollywood and the Distributed Death Eaters

Death EatersHere are three key passages from last Sunday’s Times feature on the changing economy of the Hollywood feature film. The question is what they have in common, and what might be done about them.

On making films:

For any studio looking for cuts [in production costs], that is a logical place to start: a $30 million movie can quickly become a $50 million movie or more if a studio hires someone like Julia Roberts.

As a result, the kind of deal Warner recently struck with Brad Pitt is starting to become more commonplace. Mr. Pitt agreed to take less money upfront for “The Assassination of Jesse James,” a $32 million Western that the actor wanted to make.

“We needed help,” Mr. Robinov said. “We had to sit down and say, ‘To make this movie you have to make financial concessions.’ ”

Of course, those deals can also limit the studio’s rewards because they often include profit-sharing. Mr. Clooney and Mr. Pitt earned more cash on “Ocean’s Eleven” by agreeing to take a percentage of the profits than they would have by getting a big upfront fee.

Mr. Clooney said he was willing to take a gamble on roles that interested him. His “Good Night, and Good Luck” cost $7.5 million and wouldn’t have been made if he had demanded a $20 million salary for acting in and directing the movie.

“Economically, it is getting harder and harder,” Mr. Clooney said. “If studios are forced to pay top dollar, the film gets compromised. You can’t get the other actors you want. The edges get knocked off. It is better to participate, because then you get to do the films you want.”

On buying films:

“Something is changing in the movie experience,” [Warner Brothers Pictures head of production Jeff] Robinov said in an interview at his office on the Warner lot last month. “Is it piracy? Is it commercials? Is it the availability of movies? Or are we not creating enough things to drive people out of the home? My biggest fear is having a movie that deserves to be seen, but is not.”

On selling films:

These are confusing times for marketers like [Warner Brothers domestic theatrical marketing head Dawn] Taubin, who have found that spending buckets of money on traditional advertising – including newspapers and television – doesn’t corral moviegoers the way it used to. Teenagers are now more spontaneous about their movie choices, which means that studios have a harder time reaching them through magazines and television. Not surprisingly, more and more young people are relying on the Internet to help them decide what to see; according to the studio’s own survey, 30 percent of teenagers said they learned about “Charlie and the Chocolate Factory” online. It is conceivable that studios could forsake newspapers altogether someday.

You can look at these three items as pieces of an outdated risk-allocation structure, or as relics of fading cultural traditions. In either case, what is happening is that at each of these three levels, a hierarchical, static model that concentrates both power and risk is being replaced by a distributed, dynamic model that shares them.

Looking at Hollywood as a risk-allocation structure, the production studio occupies the center. It sucks up all the risk. It finds and finances the film, paying the actors up front and collecting money downstream from audiences (who, classically, go to the movie theater regardless of what’s showing). If these quotations represent the Hollywood mindset more broadly, note how little that mindset has changed since the era of the big studios, even while the risk-allocation reality has changed dramatically. Actors that take less money up front help movies get made, help production companies stay in business, and keep working. Marketers seed social networks with information about new films, rather than placing notices in newspapers and expecting people to migrate automatically to the multiplex. And consumer — well, we know what they do — they construct their own entertainment complexes at home, and in private LANs, and they dip in and out of the multiplex occasionally. On this buy side, this roll-your-own philosophy means that what you roll may be terrible — or may be great. Actors are gambling with their own money to get movies made; consumers are gambling with their own money to watch them — or something else.

I like to look at this in “traditional culture” terms as well. I’m struck by Jeff Robinov’s quotation. “Films” in Hollywood-speak still refer to what you see in the movie theater. What you see on DVD or videocassette is a different “thing.” (This resonates with a comment I heard recently at an academic conference, from someone who used to work in the film business. Hollywood, she said, still thinks that the VCR has been bad for business.) The idea that “the film” is really an agglomeration of the many different ways in which audiences experience the product — even if those “different ways” merely reflect different venues — seems foreign. But that’s clearly the way that consumers are behaving. Movie theater v. DVD v. cable v. broadcast is a matter of price, convenience, and comfort.

To use an imperfect shorthand, what we have is an emerging P2P Hollywood reality. Not in the sense that filesharing networks and BitTorrent are going to supplant hierarchical distribution channels, but in the sense that the very hierarchical foundations of filmmaking are being eroded and replaced by a distributed model. As the folks at Warner Brothers puzzle over what’s going wrong, they should pay attention to distributed information processing in all kinds of domains — from open source software development to virtual worlds. It’s not so romantic as pragmatic: Empower the agents around you, and in the end the money you need will flow back to you. And you’ll still have a job.