Sleepless in Hollywood: Tales From the New Abnormal in the Movie Business by Lynda Obst Read Free Book Online Page A

get here,” I asked, “where things are so different from when we started? What happened?”
    I leaned back a little on Peter’s comfortable couch, and he sat forward to say, “People will look back and say that probably, from a financial point of view, 1995 through 2005 was the golden age of this generation of the movie business. You had big growth internationally, and you had big growth with DVDs.” He paused to allow a gallows laugh. “That golden age appears to be over.”
    It was good we both could keep our sense of humor, the only way to survive the industry’s crazy carousel of wild ups andlow downs. And this very carousel and its need for constant—bordering on psychotic—optimism to keep your projects going made it hard for a person like me to find a steady perch from which to see what was really going on. Peter, however, had one.
    He seemed to be saying that the DVD market was critical to the life and death of the Old Abnormal. I knew the DVD profits were key, but it seemed to me like a classic case of the tail wagging the dog. “Why did those little silver discs go to the heart of the business?” I asked. “There have to be other key revenue streams.”
    “Let me give you the simplest math,” he replied. “The simple, simple, simple math.”
    Good, I thought. Because my friends and I are not so great at math. I can guesstimate the budget of a big movie to within a hundred thousand dollars by reading the script, but I can’t add the columns therein.
    “The movie business,” Peter said, “the historical studio business, if you put all the studios together, runs at about a ten percent profit margin. For every billion dollars in revenue, they make a hundred million dollars in profits. That’s the business, right?”
    I nodded, the good student, excited that someone was finally going to explain this to me.
    “The DVD business represented fifty percent of their profits,” he went on. “Fifty percent. The decline of that business means their entire profit could come down between forty and fifty percent for new movies.”
    For those of you like me who are not good at math, let me make Peter’s statement even simpler. If a studio’s margin of profit was only 10 percent in the Old Abnormal, now with the collapsing DVD market that profit margin was hovering around 6 percent. The loss of profit on those little silver discs had nearly halved our profit margin.
    This was, literally, a Great Contraction. Something drastic had happened to our industry, and this was it. Surely there were otherfactors: Young males were disappearing into video games; there were hundreds of home entertainment choices available for nesting families; the Net. But slicing a huge chunk of reliable profits right out of the bottom line forever?
    This was mind-boggling to me, and I’ve been in the business for thirty years. Peter continued as I absorbed the depths and roots of what I was starting to think of as the Great Contraction. “Which means if nothing else changed, they would all be losing money. That’s how serious the DVD downturn is. At best, it could cut their profit in half for new movies.”
    I’d never heard it put so starkly; I’d only seen the bloody results of the starkness. The epic Writers Guild strike of 1988 was about the writers trying to get a piece of home viewing profits. It shut down the town for eight months, and estimates of what it cost the Los Angeles economy run between $500 million and $1 billion. They held out as long as they could, until all parties had bled out as if they’d been struck by Ebola. And still the writers got no piece of those golden discs. Then the writers struck again in 2007–8 for a piece of the Internet frontier, and won not much more than they did after the last awful strike, and we all watched its terrible and unintended aftermath play out during the recession and in the subsequent suspension of writers’ and producers’ deals.
    “I think the two driving forces [of what