Q&A: James Schamus and Matthew Blank

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Focus Features CEO James Schamus and Showtime chairman and CEO Matthew Blank shook hands warmly at New York media hot spot Michael's earlier this month, but the two entertainment execs generally spend little time in each other's spheres.

Nevertheless, both will receive special honors at the Museum of the Moving Image's annual benefit at the St. Regis Hotel tonight. Blank and Schamus dug into their breakfasts and forked over answers for The Hollywood Reporter's Randee Dawn on digital strategy, the importance of branding and their long-term outlooks on their changing industries.

The Hollywood Reporter:
Congratulations on your Museum of the Moving Image honors.

James Schamus: Thank you. We've been together for years. This is one of our regular every-48-years breakfasts, you know?

THR: Professionally, your paths don't often cross. And Focus' films end up on HBO rather than Showtime thanks to a deal with Universal.

Blank: As much as we would like to be in business with him ...

Schamus: It is true. But it was just a couple of months ago that you (Blank) sent a few shudders through the film side of the business with the prognostication that these deals might not be renewed on terms similar to what we currently enjoy.

Blank: Only because of all the money we could be making in the electronic download world.

THR: So that digital strategy is likely to change these long-term partnerships?

Blank: Movies are very important to us -- they always will be. But the issue for us is the relationship between the movie products and our original programming. We are trying to shift the economics, wherever we spend our money, more to original programming. We want to have as many top movies for our network. But our creative emphasis in branding the channel is on our original programming. Good movies still work terrifically on premium TV.

THR: So if a channel like Showtime depends more on original programming and less on first-run films, how could that affect Focus?

Schamus:
People are expecting to see movies at the moment of their choosing. There's a rub-off on the branding and the space that people associate with a great premium channel like Showtime, and those associations count for a lot. Going to that piece of the menu to find the movies that you want, that are curated for you, that's a big deal.

Blank: It's hard for anybody to really have ownership of "Atonement" except Focus Features. It's going to play in the theaters, it's going to go to a DVD window, it's going to be on an airplane, you can get it from Netflix. Then maybe it goes to a broadcast network, a cable network. Look, we just put "Dexter" on CBS during the strike, a little experiment that has been terrific for us. All of that was geared toward Showtime owning this great property; there were Showtime spots at the end of everything, and it goes back to Showtime in the fall. There's a lot of Showtime ownership there, and that's what's really driving our success right now. We have a strong belief that the way for us to be successful is to create our own proprietary brand.

THR: And if "Atonement" ever ended up on Showtime, you still wouldn't realize any branding advantage out of it?

Blank: If it came to Showtime, if we took our whole ad budget and put it toward promoting "Atonement," we would never have ownership of it. It's not much more complicated than that.

Schamus: We front-load our marketing costs for the theatrical release, after which you look at the longer-term horizon for the economics of your film. And as the front-loading of those marketing costs begins to pile up, and the uncertainty as to where your windows of later ancillary revenue are and what they actually yield continues to decrease, you have a much more interesting business on my side than you ever had before.

Blank: And he's not making $130 million movies.

Schamus: That's right. I say to my film students at Columbia when they say they want to get into the film business, "There is no such business. It's all TV business." All the film side is is getting people to help you pay for your ad campaign for your TV show and DVD because literally all they are doing is chipping in to cut away at the cost.

THR: For a cable network, branding is an important concept -- but does it come into the mix with Focus?

Schamus: Branding is shorthand for a lot of different things. The Focus brand -- whatever that is -- is a big deal for us. What the brand means is a kind of articulated conversation ongoing with a group of people who are very diverse, who may or may not go for this one but may go for that one. They need to know that what the brand means is that they are being invited to a discussion that they may or may not want to take part in, but that they need to know about. It's much more powerful in my sphere because it's a very inexpensive way of getting people's attention.

Blank: If I were an important filmmaker, and if I could get a meeting with Focus, Focus is a brand. But on a consumer level, nobody goes to a movie because it's a Focus movie -- they go to a movie because it's "Atonement." But (Schamus') ability to make the "Atonements" of the world comes from being Focus. In our case, we have to get people to pay a certain amount of money every month for the brands. And now as you go into the digital world, you know, Focus may be a brand.

THR: Right, Focus recently developed a Web site called Film in Focus, which is like a film magazine. How does that help you as a specialty film label?

Schamus: We're starting a conversation with a small core of people. We're slowly building a space, and you can see where this is going. At a certain point, we know we're going to have to be in a much more direct relationship with our consumers, besides delivering our films to them. And also -- in curating and keeping them part of that curatorial process -- letting them participate. We are accruing an attitude, a rhetoric that means we are empowering our core to be in that space and know that it is going to be delivering incrementally over the years exactly the kinds of things they want.

Blank: There is a real interesting dilemma for companies who try to determine what their brand is in that digital space: Is it Focus, or is it something that you create new for that space? We are very fortunate in that we think our brand travels very well because people are used to consuming that brand. If you look at the success of "The Tudors," that's the one that we really built this year on the Internet using all sorts of strategies. We streamed the first episode over 30-40 different Internet vehicles. At one point, we had six of the top 10 television seasons being purchased on iTunes. That's pretty amazing when you think of the relatively small number of shows that we make. That to us is a tremendous vote of confidence in the way that this brand can travel.

Schamus: Here's the difference for us: The DVD business, you're looking at margins per unit at close to 10 bucks on that first wave. How much does it cost to download a program or a movie on iTunes? What's the total gross cost to the consumer? You're not getting 10 bucks out of that any way you look at it.

Blank: We are very much in the early stage; I don't think there really is a pricing model in the digital world yet.

THR: With all of this change going on, what's on your radar for the next several years?

Blank: We view the changes in technology and in the digital world as a big positive for us. A lot of people in this business are threatened by where ad dollars are going -- we don't deal with that. We've been in the transaction business for the whole history of this industry. Day in and day out, we've got to make sure 10,000 Showtime customers are being added just so we break even in a given year. We've been successful in doing that, we've been successful in growing the business in recent years, and we think that type of marketing and that type of branding translate very well as technology changes.

Schamus: We are on the precipice in the film business of a complete overhaul of the ancillary landscape. Pricing and delivery are big question marks. Media, where it's going to pop up, all those things. All of those acronyms from electronic sell-through to video-on-demand, to pay-per-view to DVR -- all of those things seem to be morphing into one gigantic blob, inside of which certain players such as (Blank) have a decided edge because they have carved out that brand in space that people know how to get to and know how to interact with.

Blank: Nothing about what's going on with technology and the digital world suggests that people still don't want to see "Atonement" or "Weeds," and that's the advantage we have. It's a matter of figuring out how our brands and our product are going to be delivered in the future, and the best way to monetize that with our respective shareholders.
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