Los Angeles film czar Ken Ziffren wouldn’t give the state of the entertainment industry a thumbs up or a thumbs down Wednesday in his eighth annual presentation before a crowd of Beverly Hills Bar Association members.
“There’s change and there’s opportunity and there’s risk,” he said in summary of his hourlong talk, which covered current issues in film, TV and digital.
The following is a snapshot of Ziffren’s perspective on issues that have impacted the entertainment industry in the past year, broken down by topic.
Case law and legislation
Ziffren says the most important legal case of the year was that of net neutrality and the appeals court’s decision to allow the government to regulate internet service under Title II. Initially, he says, the decision sparked concern over whether the regulation would deter investment — but he thinks it was a false alarm. “I see absolutely no indication that there’s any slow down in investment,” said Ziffren.
The European Union’s decision to move toward a digital single market is another averted crisis, in Ziffren’s opinion. He says concern that the decision would derail foreign presales “seems to now be in the past.” Meanwhile, he points to Paramount’s recent settlement with the European Commission as a positive sign for the future. The commission sued six major Hollywood studios over clauses in distribution agreements that prohibited Sky UK from allowing customers to access content across EU borders. Ziffren sees Paramount’s settlement as favorable, as the studio admitted no wrongdoing and promised to put an end to the practice, but so far none of the other studios has followed suit.
Ziffren also pointed to BMG Rights Management’s $25 million damages award as an important development for content creators. Cox Communications was ordered to pay up after a jury found the company contributed to the copyright infringement carried out by BitTorrent users. The case was a landmark win for rights holders, as Ziffren pointed out. Prior to this case, he said, “it’s all gone the other way.”
“There is no question this is a franchise boom or bust era,” said Ziffren. Of the 600 features last year, only about 90 of them were shown on 2,000 or more screens — compared to about 400 films shown wide the previous year. Ziffren describes the major studios’ film budget breakdown as an hourglass. They’re releasing six to seven films with budgets of $100 million and up each year, along with six to seven films with budgets of $20 million dollars or less. The “little stem in between” is “all the Oscar pictures,” he said, adding that producing those is now generally left to the mini-majors, SVOD studios and venture capital firms.
In response to changes in the ecosystem driven by streaming, theaters and distributors are beginning to think outside the box. Ziffren finds the experimentation with dynamic pricing at movie theaters especially interesting, noting that consumers are already used to paying more for evening and weekend show times. The goal now is to “calibrate your interest to see a film” and adjust the price accordingly, which Ziffren likened to Uber’s surge pricing. He also sees movie theater subscriptions as a smart move, as they offer patrons a discount on tickets but not on concession prices — which is revenue the theater keeps all to itself.
Ziffren says it’s time for studios to stop the stubborn resistance to home viewing. He asks rhetorically: If $100 million movies want a longer run in theaters, what happens to mid-range projects? His answer: There are only two Hollywood films with budgets less than $100 million that will break $75 million in domestic box office this year; last year there were seven. “We all have to worry about what’s going on in that mid-range,” said Ziffren, pointing to Screening Room’s model as a possible solution. If consumers pay a premium ($50) to watch films at home while they’re still in theaters, and that revenue is shared with the theaters, more mid-range films could survive. (You’re welcome, Oscars.)
As for physical home video, Ziffren says it has “almost fallen off the ledge,” losing a billion dollars each year for nearly a decade. “Digital has not made up for it,” he said.
Ziffren says basic-tier cable is in a “scary state” and, despite 400 scripted shows airing last year, Hollywood hasn’t “had a valuable sitcom in six years.” Modern Family, he says, was the last network comedy hit. (He defined “hit” as garnering $5 million per episode in syndication.)
The good news? Ziffren expects viewers to keep tuning in to broadcast TV despite numerous new services on the market. Right now the viewing breakdown is this: 5 percent from broadcast, 6 percent from OTT stand-alone services and a whopping 89 percent from multichannel networks. In five years, Ziffren portends, broadcast will be the same, OTT will jump to 10 percent, MCNs will drop to 70 percent and the remaining 15 percent will come from virtual multichannel video programming distributors (V-MVPDs), which bundle content like cable packages but distribute it online.
Also, Ziffren says features being shown on cable is on the upswing, as they’re cheap to license and don’t hurt ratings. Fun fact: “Happy Gilmore was played 72 times last year.”
The information advertisers are looking for is undergoing “potentially a tectonic change” from counting eyeballs to targeted advertising, Ziffren says. In the ad man’s dream world, data would be available to show when every household in the U.S. has a vehicle lease coming up for renewal, so consumers could be flooded with car ads around that time. But, it’s not quite that easy. Ziffren explains that researchers have recently discovered “this targeting thing” is more complicated than people anticipated — and the proof is in the pet food. “People don’t buy pet food because of ads,” he said. “They buy it because of economics and veterinarians.”
Ziffren ended the presentation on a light note, responding to a question about whether Charter’s acquisition of Time Warner Cable will bring positive change for sports fans who are tired of local games being blacked out by most cable providers. “Will the new bosses have mercy on us for the Lakers and Dodgers?” he said, laughing. “That’s above my pay grade.”