Here are two interesting tidbits on the economic situation in Hollywood. The first is from Steven Spielberg and George Lucas, who think massive changes in the way we experience filmgoing are on the horizon:
Steven Spielberg on Wednesday predicted an "implosion" in the film industry is inevitable, whereby a half dozen or so $250 million movies flop at the box office and alter the industry forever. What comes next -- or even before then -- will be price variances at movie theaters, where "you're gonna have to pay $25 for the next Iron Man, you're probably only going to have to pay $7 to see Lincoln." He also said that Lincoln came "this close" to being an HBO movie instead of a theatrical release.
George Lucas agreed that massive changes are afoot, including film exhibition morphing somewhat into a Broadway play model, whereby fewer movies are released, they stay in theaters for a year and ticket prices are much higher. His prediction prompted Spielberg to recall that his 1982 film E.T. the Extra-Terrestrial stayed in theaters for a year and four months.
Lucas is insane if he thinks Hollywood is going to survive by pricing itself out of the middle class market. Spielberg, I think, is closer to the truth: variable pricing would make a ton of sense, especially if you put it on a sliding scale: $25 for Iron Man 3 on opening weekend, $20 on weekend two, $10 by weekend four, $5 by weekend 10. The viability of TV is another question.
Which brings us to item number two, Matthew Ball's breakdown of the economics of Netflix's investment in Arrested Development. I hesitate to summarize—you should, as they say, read the whole thing—but Ball's basic point is that Netflix is moving into the original programming not only to attract new customers but also, and perhaps moreso, to reduce "churn" (that is, customers dropping the service).
I'm not convinced this is a sustainable model for Netflix (they plan on spending more than a billion dollars on original content by 2017). We'll see. Personally, I'm more concerned for the non-pay cable networks (FX, AMC). As DVRs proliferate and ads become less profitable, what will happen to these purveyors of basic cable prestige dramas? Will they have to make a leap to the HBO/Showtime tier? Is there any more space in that market? Will the savior Spielberg hopes for still be there when the theater system collapses?