The death of Miramax and the demise of the indie cinema model

Drew Barrymore, Robert De Niro and Kate Beckinsale at the premiere of “Everybody’s Fine” in New York. Source: Paul Kramer/AP/New York Times

Continuing this week’s cinema theme, today I’m looking at one of the micro-economic reasons for the struggles of Australian cinema: the demise of the US independent cinema model, made famous by film festivals such as Tribeca and Sundance.

As we’ve explored before on this blog, the nature of cultural production makes selling cultural and symbolic products like books, movies or records inherently risky – much more so than selling simpler goods and services like lemonade, flatscreen TVs or lawnmowing. One popular explanation for the enduring importance of stars and genres is their role in reducing this risk – or at least giving producers and investors a reason to believe a particular project is less risky. You can see this strategy at play in the growing use of computer algorithms (like the one developed by Relativity Media) to try and model the projected earnings of a particular movie, based on variables. According to SBS blogger (and all-round nice guy) Craig Mathieson:

The algorithm – which really needs a catchy name based on an acronym – was originally designed to evaluate financial instruments (nice work spotting those mortgage backed securities), but it now uses 65,000 rows of a Excel spreadsheet to consider everything from an actor’s box-office draw in France (apparently Natalie Portman is the go) to whether it would be better to have an R or PG rating or more fight scenes.

Another trope of this “nobody knows” principle can be seen in the reluctance of big studios to finance independent cinema, particularly in the wake of the global financial crisis.  Now, once-famous indie producer Miramax is being dissolved, and indie production more generally is in the deep doldrums. According to the New York Times’ Carpet Bagger blog,

Kirk Jones, the British writer-director of “Everybody’s Fine,” said he worried about the future of adult drama.

“It seems to me that people at the top are saying we don’t want to do adult drama, there’s nobody that wants to be reminded of the real world, they want escapist cinema,” he said. “I love watching sci-fi movies and romantic comedies and teenage movies as much as anyone else, but I think it’s about balance, and you have to have adult drama because that’s often one of the few categories that makes people leave the cinema thinking about their own lives and reflecting on who they are and how they are in the world.”

In a previous post, the Carpet Bagger reported on how the big studios are shuttering their specialist and boutique production houses, while the smaller indie production companies are struggling to find finance. Independent cinema appears to be moving to a model similar to indie music, where word-of-mouth and guerilla marketing are the mainstay of low-cost, low-revenue artist-distributors.

Here is how it used to work: aspiring filmmakers playing the cool auteur in hopes of attracting the eye of a Hollywood power broker.

Here is the new way: filmmakers doing it themselves — paying for their own distribution, marketing films through social networking sites and Twitter blasts, putting their work up free on the Web to build a reputation, cozying up to concierges at luxury hotels in film festival cities to get them to whisper into the right ears.

The economic slowdown and tight credit have squeezed the entertainment industry along with everybody else, resulting in significantly fewer big-studio films in the pipeline and an even tougher road for smaller-budget independent projects. Independent distribution companies are much less likely to pull out the checkbook while many of the big studios have all but gotten out of the indie film business.

Lyndon Barber has also written about the issue extensively. Here’s a post on his blog from last year in which he explains that:

the Australian scene is over-saturated with distributors trying to grab a small slice of an ever-decreasing pie. Britain is clearly similar. The result is likely to be a few more failing companies before a serious change in the way cinemas and distributors release films.


What’s the real reason Australian films aren’t popular?

It’s the AFI awards this week, so I’m celebrating with a series of posts about Australian screen policy.

If you’ve been reading tis blog, or following the apparently endless troubles of the Australian film industry, you’ll be well aware of the continuing angst about the supposed unpopularity of Australian features.

This makes the release of the latest Screen Australia report, Australian Films in the Marketplace: Analysis of Release Strategies and Box Office Performance, all the more interesting. A close reading shows that, pound-for-pound, Australian films punch above their weight. The big problem is not that audiences don’t want to see them, it’s actually that they don’t get to see them, at least not in the multiplexes anyway. Let’s drill into the figures and see if we can find out why.

The report analyses nearly 1400 films released in Australia and looks at how many screens they showed on, and their comparative box office takings. The results? Most Australian films receive only limited distribution. 82% are released on less than 100 screens, and 39% are released on less than 20! This segment of the market accounts for only 11% of total box office takings, so even though Australian films do quite well on the screens they show on (taking roughly similar median box offices to British and US films, though below the French), they are generally confined to the ghetto of arthouse and independent cinemas.

At the blockbuster end of the market, it’s a sorry tale. In the period of the study (2005-2009), only two Australian films screened on more than 400 screens.: Australia and Happy Feet. These did well, both grossing more than $30 million, above the median figure for films in this category.

It’s worth pointing out that Australian producers don’t determine what shows in the multiplexes, distributors and exhibitors do. And they’re clearly not buying Australian films for these wide releases. That’s not surprising, because in this market segment Australian films are competing against the massive production budgets, A-list star power and marketing juggernauts of the Hollywood studios.  After all, the production and marketing budget of just one blockbuster film like Transformers or Pirates of the Caribbean 3 comfortably exceeds the entire production slate of Australian films (only $128 million in 2007-08).

Moral of the story? Australian films simply can’t compete in the multiplexes – there’s not enough production and especially marketing money.

Screen Australia is responding to this market reality by moving up-market, indicating to the industry that it wants to fund fewer, bigger budget productions. But is this the right strategy? I don’t think it is, for reasons I’ll explore tomorrow.

Can governments pick cultural winners? The FFC’s 20 years of “commercial” film funding in Australia

Film Finance Corporation of Australia, total investment versus recoupment, 1988-2008. Source: FFC 2007-08 Annual Report

One of the key themes  of Richard Caves’ 2000 cultural economics monograph, Creative Industries: Contracts between art and commerce is his detailed exploration of the idea that “nobody knows.”

The quote comes from Hollywood screenwriter William Goldman, who famously opined that when it comes to the entertainment industry, “Nobody knows anything.”  (Goldman, by the way, also penned the line “Follow the money” in All The President’s Men – a phrase that doesn’t appear in Carl Bernstein or Bob Woodward’s notes or articles).

If high-powered Hollywood moguls struggle to predict the successes and failures of the films they finance and produce, how well do Australian screen bureaucrats do?

Not very well, if figures from Australia’s Film Finance Corporation are any guide. The FFC, an Australian government film agency, existed for 20 years between 1988 and 2008 before being amalgamated into Screen Australia last year. Unlike arts funding bodies in this country, the FFC was specifically set up to finance film and telelvision projects along commercial lines. As film critic Lynden Barber points out, “FFC production funding was triggered when a project reached a minimum level of pre-sales from mostly private sources.”

The FFC acted as a kind of automatic co-investor. If a producer could arrange seed capital for a promising screen project, the FFC would then top up this private investment with government funding. This meant it acted as a public-sector but commercial investor, taking a cut of the intellectual property and box office returns of projects it financed. In other words, the agency didn’t just hand out money: it actually recouped returns on its investments.

The problem was, these returns were meagre. Over two decades, the agency supported 1165 productions and spent $1.345 billion (these figures are from the FFC’s final Annual Report in 2007-08). Many were critical successes and some of them even won Oscars.  But only a few made money. The FFC states in its “20 years” brochure that this investment translated into a total screen production value of $2.872 billion, a multiplier of roughly two. But total recoupment to the FFC was a paltry $274.2 million. That’s an astonishing cumulative return of -80%.

No wonder Barber points out that “many of the failures of the local industry have been the result of commercial misjudgments — not only by the federal and state funding agencies, but also by private investors, distributors and filmmakers.”

Lynden Barber on unspectacular acting



Alfred Molina (source: Circus Theatricals).

There’s a great piece about film acting up at New Matilda at the moment by Lynden Barber.

He mentions the wonderful character actor Alfred Molina as an example of a screen actor who often “perfectly embodies a character.”

Good films — and sometimes even mediocre ones — are full of great acting that goes unnoticed. That’s why they’re great — we’re not meant to notice the craft behind them. Genuine performances don’t have tickets on themselves. Sadly, this means they often pass uncelebrated.

For instance I can’t recall anyone ever writing that Alfred Molina, who plays the father of Carey Mulligan’s schoolgirl heroine in An Education, is one of the greatest British film and TV actors currently working — which he so clearly is. Incredibly, I’ve never read a single interview or profile of the man, whose long line of screen credits stretches back as far as a 1981 appearance in Raiders of the Lost Ark. Not once has he been nominated for an Academy Award.

Yet there is a very good reason he keeps on getting so much work. Molina is one of those actors — and oddly we call them character actors, as if there were any other kind — that most viewers recognise, but whose name is known by few outside of a small circle of film critics and screen industry professionals.

There are shades here of the hilarious conversation between Ben Stiller and R0bert Downey Jr about the craft of playing handicapped characters in Tropic Thunder.

Why don’t Australians like Australian films?

It’s the debate that just won’t die. Australian films continue to draw just a few percent of total Australian box offices, and the local industry continues to scratch its head and wonder why.

On October 22nd, Metro Screen held a sold-out forum on the issue, chaired by Andrew Urban and featuring a panel of distinguished panelists including Margaret Pomeranz, Tony Ginnane, Troy Lum, Rachel Ward and the new boss of Screen Australia, Ruth Harley.

The debate swirled around many of the same-old, same-old standards of the “what’s wrong with Australian film” issue, which has been debated extensively in the press and the industry by critics and commentators like Jim Schembri, Luke Buckmaster and Lyndon Barber.

Does “Australian film” have a branding issue? Are Australian scripts and movies too depressing, mundane and dull? Are the marketing budgets unrealistic? Does cultural imperialism mean Hollywood is a natural advantage? Should we abandon “telling stories” and instead concentrate on “creating myths”? Do Austraolian film-makers and funding bodies even understand their audiences and why they go to see movies? And is it all about to change with the coming of digital delivery anyway?

One issue that came to my mind immediately was the uphill struggle most Australian cinema faces. Not only is it competing with the Hollywood juggernaut, but the small size of the Australian market means limited sources of capital investment, development funding and ultimately cinematic audiences.

There’s also no doubt that, structurally speaking, the market for film production in Australia is skewed towards blockbusters and against independent productions. That’s just an unsurprising fact of life; even though film has certain unique facets it is still hostage to the sorts of competitive advantages and economies of scale that make it easier to market and screen Transformers than an indie Australian drama.

Having said that, as a cultural economist I am constantly amazed at the lack of price differentiation in cinema. If audiences aren’t going to see Australian films, why not drop the price? It seems insane to me that we expect audiences to pay the same to see a Michael Bay special effects monster as for a $1 million Australian indie. Maybe it would not be more profitable in the long run to do this, but in the name of market share alone it seems to me a no-brainer. Maybe Australian dramas would sell at $9 or $7 or even $5. Of course, there are structural issues to do with distributors and exhibitors that would make this unlikely.

Williams and Currid’s “2 Cities, 5 Industries”

CORRECTION: In the initial version of this post, I wrongly confused Sarah Williams and Ezliabeth Currid’s paper “2 Cities, 5 Industries” with their “Geography of Buzz” paper. Thanks to Elaine for pointing out my error.

With that in mind, this post is about Williams and Currid’s new paper “Two Cities, Five Industries: Similarities and Differences Within and Between Cultural Industries in New York and Los Angeles” is marked “Do Not Cite Without the Permission of the Authors”, but as it is online and as Sarah Williams was interviewed by the New York Times today, I think it’s worth a look.

Currid and Williams drill down literally to street level to examine diaggregated data about the cultural industries in New York and Los Angeles. In doing so, they are able to generate a far more fine-grained analysis of cultural industries location and co-location that previous analyses: Continue reading

What’s new in the International Journal of Cultural Policy: Parker and Parenta on Australian film policy

I’ve been busy lately with my NEAF ethics application, but after emailing that off to Elaine earlier this week I thought I’d spend some time today on some close reading of a recent journal article on Australian film policy. In doing so, we might be able to draw out some of what I think are the antinomies between the way academics and practitioners write about cultural policy in Australia.   Continue reading

The Toronto Star’s series on Canadian culture

Over the last three weeks, the Toronto Star has been running a fascinating series on the lives and livings of artists in Canada.

While it’s not an academic treatment of cultural policy, there is still much of interest in the many anecdotes that Bruce Demara and his colleagues have gathered on the cultural economy of Ontario, particularly as Canada is in many ways a similar-sized country as Australia.

We Australians often think Canada has quite an enlightened approach to supporting culture, particularly in terms of broadcasting, but as the series reveals there are some disturbing similarities to the plight of our own artists as revealed by Throsby and Hollister’s Don’t Give Up Your Day Job.

The Star’s series reveals that Hollywood film production – long a staple of the Canadian cultural industries – is drying up, probably in response to the introduction of many state-based subsidies in the US. As Allen Scott has shown in his research, this is characteristic of subsidy-based foreign film production – a kind of “hot money” which tends to chase the highest subsidies.