Bigger Picture Research

European digital cinema screens in 2009

As flagged last week, the European Audiovisual Observatory has published a good helping of European digital exhibition data.

According to MEDIA Salles, who collected the information, there were 4,693 screens equipped with DLP Cinema or SXRD technology at the end of 2009, a rise of 207% over 2008.

Digital screens accounted for 13% of all European screens in 2009, up from 4% in 2008 (Table 1). The average number of screens in digital sites has also risen, from 1.6 screens per site at the end of 2007 to 2.0 screens per site in 2009.

Table 1: Digital cinema sites and screens in Europe 2003 - 2009 (courtesy of European Audiovisual Observatory- click to enlarge)

 

According to MEDIA Salles, most digital theatres are found in Western Europe (Table 2). The five leading European markets in terms of admissions also have the highest number of digital screens. France accounts for 19% of the digital total, followed by the UK (14%), Germany (13%), Italy (9%) and Spain (5%).

Meanwhile, Russia has witnessed strong growth since 2008, and now accounts for 7.5% of Europe’s digital screens (352 in total).

The Observatory’s press release picks up on the fact that a handful of companies account for a large share of all digital screens. ‘In Europe’, the release explains, ‘the development of digital screens seems to be highly concentrated in terms of exhibition companies, in view of the fact that, at June 2009, 5% of exhibitors were responsible for 33.6% of the overall number of digital screens.' Further evidence, perhaps, that smaller operators are being left behind in the switch to digital.

The press release goes on:

'The top five players are the French company CGR (with 13.1% of digital screens), Kinepolis (6.8%), operating in Belgium, France and Spain; Cineworld Group (5.6%), present in the United Kingdom and Ireland; Odeon and UCI Cinemas Group (4.8%), operating as Odeon Cinemas in the United Kingdom, as UCI in Austria, Germany, Italy and Portugal and as Cinesa in Spain; Cineplexx (3.4%), present in Austria and in Italy.’

3D has proven to be a significant catalyst for digital screen growth. One indication of this is the fact that 69% of all European digital screens were 3D-ready by December 2009 (in time for Avatar in most European markets), up from 54% only six months earlier in June 2009.

Table 2: Digital cinema sites and screens in Europe by country 2007 - 2009 (courtesy of European Audiovisual Observatory- click to enlarge)

More on East Midlands investments

Last October I posted about the East Midlands Media Investments Fund (EMMI), as featured in EM Media's review of Economic Achievements 2008/09, which I was covering at the time.

Just last week EM Media and the East Midlands Development Agency announced a further round of EMMI investments, totalling over half a million pounds, including four feature films (The Brutal Game, Oranges and Sunshine, Tyrannosaur and The Weekender), a feature documentary (AnDa Union), TV development (Over the Hill and Under Cover), a documentary short (PS, Your Mystery Sender), a Facebook application (GangstaPets), and an online game (Natural Born Racer).

A tenth project will be announced shortly, and EM Media anticipates these investments will together deliver over 90 jobs, generating around £13 million for the East Midlands economy. This latest round of support brings EM Media's total to 37 feature films, 75 short films, 15 TV and 15 games and interactive investments to date.

Further information, including details of the talent involved in the funded projects, can be found on EM Media's web site.

2009: a year in rear view

So how was it for you? As 2010 gambols into view, like a newly minted foal, it seems only polite to ask.

For my part, I’ve been wondering these last few days whether 2009 was especially significant for the film business. It’s probably too early to say, and in any case every year is one of highs and lows, winners and losers. The one just past is no different.

On the strength of available evidence, it’s probably fair to say 2009 was not a singularly momentous year for the film biz. But it did bear witness to a number of watershed moments, and the question of its lasting significance will only be answerable in years to come.

We can say with certainty that theatrical exhibition in many parts of the world has fared well in 2009, further evidence that cinemagoing can be remarkably resilient even in the teeth of a recession (a point made in a paper published by the UK Film Council back in September 2008).

What role did 3D play in all of this? There’s an interesting study to be done to find out the answer (any takers?). 2009 saw the long-heralded relaunch of 3D courtesy of the digital cinema roll out across the globe, and the extra dimension gave movie theatres an added advantage over home entertainment (which makes it my Watershed Moment #1). It’s difficult to predict how long this advantage will last (3D TVs are in development, we’re told) and it remains to be seen whether the premium ticket prices charged to 3D goggle wearers will be sustainable once the novelty wears off.

While we’re on the subject of exhibition, I must mention the Splendor Cinema blog (my Find of the Year #1), which is dedicated to the exhibition business and written by Jon Barrenchea, General Manager of the Duke of York's Picturehouse in Brighton.

With cinema cash registers ringing fulsomely throughout 2009, there’s a certain irony in the fact that the year also saw more concerted experimentation with release windows by the major studios. Exhibitors have resisted any encroachment on the theatrical window, and the studios have contented themselves by playing around with various combinations of home entertainment windows, shuffling VoD and DVD releases on certain titles (Watershed Moment #2). But as trade journalist Diane Garrett reports in her Consumed by Media blog (Find of the Year #2), it may be only a matter of time before the theatrical window comes under renewed pressure.

Online piracy continued to loom large in 2009, despite the high-profile prosecution of Pirate Bay. But faced with dwindling finance from traditional sources and a theatrical market place dominated by expensively marketed studio pictures, independent filmmakers turned in increasing numbers to the digital sphere for production funding and DIY distribution opportunities.

To paraphrase Churchill, 2009 did not mark the end of old way of making and distributing films, and it was not even the beginning of the end. But it was, perhaps, the end of the beginning (a Watershed Moment #3 of sorts; Mark Anderson, writing recently in Wired, certainly thinks so).

The global banking crisis, the explosion of social networking, audience fragmentation, digital media convergence, the rise of multi-platform story-telling, the profusion of free online content and rampant file sharing: individually and collectively they pose a challenge to the status quo, as well as untold opportunities for those less wedded to the Twentieth Century way of doing things.

So much for the bigger picture. Here’s a quick run down of my highlights from the year’s posts:

January, February and March
At the top of the year some video game suit claimed ‘video games are poised to eclipse all other forms of entertainment in the decade ahead’. According to figures published only last week, it looks like he might have a point, at least in revenue terms. But it’s patent nonsense to suggest this makes video games more popular than film, a line some hacks have been touting in recent days.

It’s not only this kind of spurious logic we need to guard against in media coverage of the film business. As LA Times columnist Patrick Goldstein reminded us in January, feature film budget numbers quoted in the media should always be taken with a pinch of salt. Or in Avatar’s case, perhaps a good handful.

The start of the year also saw the launch of a House of Lords enquiry into the British film and TV industries. The Lords Communications Committee took written and oral evidence throughout most of 2009, but there’s still no sign of their final report. Let's hope it's worth the wait.

2009 was a pleasingly fertile year for film business research sources, with the launch of several new web sites including Film New Europe in March, followed in June by Movie Review Intelligence and Marqeestars.com in September (Finds of the Year #3, #4 and #5). Be sure to check them out, if you’ve not done so already.

April, May and June
As previously noted, in 2009 it seemed we were never very far away from a piracy-related story, and in May an independent study by an academic research institute claimed to have established the size and impact of film and music piracy in the UK. Problem was the original press release included a wildly inaccurate figure, as pointed out by Ben Goldacre in the Guardian’s ‘Bad Science’ column. But that didn’t stop The Daily Mail, and others, running with the story.

In terms of the number of page views, by far the year’s most popular post concerned publication by the UK Film Council of Peter Bloore’s paper re-evaluating the independent film value chain (Find of the Year #6).

And around this time the UK Film Council also published a report into the cultural impact of UK film during the period 1946 to 2006 (the report can be downloaded as a PDF here) (a seminar was held to discuss the findings in November- presentations can be found on the UK Film Council web site).

July, August and September
July began encouragingly enough with publication by a couple of US academics of a paper about the use of film data to teach students basic business statistics.

But the big news in this period, certainly from a UK perspective, was of the proposed merger between the UK Film Council and the British Film Institute. I posted my initial thoughts on hearing the news, and was rewarded with an honourable mention in a Sight and Sound editorial. I duly renewed my subscription.

Critic and film writer Jason Solomons tried to kick off a debate about British films with his verdict that most of them are ‘crap’ (in a feature article for The Observer). Such is the lacklustre state of public discourse about film culture in this country that the article sparked nary a whimper in response. Did all of Solomons's readers simply shrug in resigned agreement? Where were the dissenting voices? Maybe he has has a point, after all.

October, November and December
Autumn greeted a new study of the European video on demand market, published by the European Audiovisual Observatory. The Observatory came up trumps again later in the year with publication of a detailed report into the Russian film business, prepared by Nevafilm and Rfilms (my Find of the Year #7)

A little late in the year, perhaps, for a silly season story, but news broke in November of a study estimating Kate Winslet’s financial value to the UK economy. We learned the actress is worth roughly £60 million to UK plc. If push comes to shove and the recession bites any deeper, I wonder how much we’d get for her on Ebay?

Better late than never, in December I finally found time to write up details of my favourite film-related infographics, an area of endeavour I plan to return to again in the coming year. There are many talented and generous people producing and freely sharing these fine works, and collectively they make my Find of the Year #8.

So there you have it, 2009 done and dusted. I look forward to welcoming you back in 2010.

New study of Video on Demand in Europe

After what feels like endless years of speculation it looks as if the long held out promise of Video on Demand (VoD) may finally be gaining some market traction (albeit still relatively modest in revenue terms), in part as a result of ‘day and date’ release experiments by certain of the major studios.

But don't take my word for it.

Here’s Variety scribe Diane Garrett writing recently in her splendid Consumed by Media blog:

‘To hedge their bets, more studios have decided to follow Warners lead and release pics simultaneously on  DVD and VOD. Sony and Universal collapsed the VOD windows for “Angels & Demons,” “The Ugly Truth,” “The Taking of Pelham 1 2 3,” “Julie & Julia” and “Bruno.” Warners will do it on “Orphan,” “Four Christmases” and “Terminator: Salvation.”

If people are going to rent rather than buy, studios vastly prefer they view movies on VOD. It’s simple economics: Studios get a bigger cut of each VOD transaction than they do with disc rentals. The shorter the VOD window, the more enticing a rental prospect that delivery platform becomes.’

In support of this shift in the business model (shift is the correct term, as it's hardly revolutionary; a shuffle of the cards rather than a whole new deck), Susanne Ault, Garrett’s Variety stablemate, quotes Sean Carey of Sony Pictures Home Entertainment:

"It's much more beneficial if the consumer buys content (instead of) renting content. That being said, we do feel that, for some titles, moving the VOD date to the same day as sell-through can grow [the business]."

Against this backdrop, the European Audiovisual Observatory (in association with the French government Directortate for Media Development) last week published a timely study charting recent developments in the European VoD market ('Video on demand and catch-up TV in Europe').

Using criteria established by the European Audiovisual Media Services Directive to determine what constitutes a VoD service, the study identified a total of 696 services operated by 366 providers at the end of December 2008. The UK had the most services in Europe (145), followed by France (106) and Italy (93) (see Figure 1). 

More than half these services were delivered via the internet (57%), 30% by Internet Protocol television (IPTV) across a DSL network, 7% on cable services, 4% by digital terrestrial television (DTT) and less than 3% by satellite. According to the press release, the study does not ‘take account of services distributed on mobile telephones […] websites devoted solely to the provision of information, trailers or adult programmes. Nor does it consider the channels set up by commercial undertakings in the context of video sharing sites such as YouTube or Dailymotion.’

Figure 1: Number of on-demand audiovisual media services in Europe by country of reception and type of network (December 2008)

Source: European Audiovisual Observatory

The press release concludes with the finding that on-demand services are provided by a variety of different players, including broadcasters, film companies, satellite and cable operators, alongside relative newcomers to content distribution in the form of telecoms operators and hardware manufacturers (of games consoles, mobile telephones and other multimedia devices).

Although the press release doesn’t go into detail, the study also looks at the prevailing VoD business models and surveys the commercial landscape within which these developments are occurring. A full content list and purchase details can be found here.

The future of home entertainment

The future of home entertainment has come under renewed speculation recently, with a flurry of conference reports and trade press coverage replete with hard data. Commentators point out we’re in a long period of transition as consumers move from transactions involving packaged media (DVD and Blu-ray) to the consumption of unboxed, digital product across a variety of platforms.

This is far from a straightforward transition because those punters with broadband connected devices in the home generally want video content on demand and for free.

Under prevailing business models this puts pressure on release windows and revenues, a pressure emanating from technological and social change rather than business imperative. 'We're in an accelerated period where technology and the consumer is outpacing the studios' current business model,' Mike Kelley, a partner at PricewaterhouseCoopers, told Alex Dobuzinskis writing for Reuters.

The attraction of unboxed content for studios is plain enough: Dobuzinskis cites higher margins and ‘the ability to collect and use information about customers’. The sticking point is one of scale: revenues from online video are projected to hit a $753 million in the North American market by 2013, according to figures quoted by Dobuzinskis. But that’s still only equivalent in size to 5% of the US DVD market circa 2008.

Truth is, there’s burgeoning demand for online video content but consumers are hitting the ‘free’ stuff in massive numbers rather than opting for paid-for product. David Mercer of Strategy Analytics, writing recently in DVD Intelligence, provides evidence of the popularity of ‘free’ online content services. The US-based Hulu.com, second only to YouTube in the free download sector, hosted 373 million streams in April 2009 according to Nielsen data. That compares with 260 million units of TV shows, movies and other video content sold worldwide for digital download in 2008, according to Strategy Analytics’s own data.

More recent data published in World Screen reveal the scale of YouTube’s dominance, with a staggering 10 billion video viewings in August alone according comScore data. From the same source: more than 161 million viewers watched an average of 157 videos per viewer during the month of August, and 82% of US Internet users watched online video last month, with the average viewer watching 9.7 hours online. The words voracious and appetite spring to mind.

But as Mercer goes on to make clear in DVD Intelligence, ‘successful business models for online video have still not been defined. Content owners and distributors are still experimenting with the appropriate mix of paid-for and advertising models.’ Consumer demand for ‘free’ content would seem to favour an advertising-based model, but this has yet to deliver significant enough revenues to satisfy most rights holders.

Jason Kramer, of research outfit Interpret, told delegates at last month’s Digital Media Pipeline conference in Los Angeles (laid on by the Entertainment Merchants Association) that nearly half (49%) of US consumers watched at least an hour a week of online video in the first quarter of 2009, compared with 32% who said the same during the first three months of 2008- further evidence that online video’s star is rising. But as previously noted, the majority of this viewing activity is directed at ad-supported free streaming sites (YouTube, Hulu etc.). ‘The studios are not really set up for ad-supported models,’ concludes Kramer. ‘There needs to be a new model’.

The experimentation David Mercer mentions is highly tentative at this stage. Put simply, the biggest players are fearful of cannibalising their existing business. Take the example of Warner Bros., who last month became the first major studio to release films on VoD before DVD with the home entertainment premiere of Observe and Report and Ghosts of Girlfriends Past via cable-operator Comcast, days before the titles were released as packaged media. This small but significant step was taken in an effort to ‘boost revenue on VoD (for which the studio gets a bigger cut of rental revenue than with DVD) without hurting DVD sales’, according to a piece in Video Business.

Understandably the studios wish to protect the DVD cash cow (and it’s hormone injected successor Blu-ray), or at least delay its demise until something lucrative enough is found to replace it. So the key question remains to what extent is unboxed content (whether free or paid-for) cannibalising legitimate packaged media transactions? It’s hard to say for certain on the basis of publicly available research, but Mercer reports findings from a survey of 3,500 people in the US and Europe that throws some light on the subject.

The research reveals that regular DVD users tend to be more active users of online video than the wider population of broadband internet users. For example, the number of broadband users claiming to download movies over the internet on a regular basis is relatively small (15% of the total) but the proportion of DVD users downloading movies is nearly twice the population average.

‘We can’t draw the conclusion that usage of DVDs will inevitably fall directly as a result of the growing number of alternative sources of video content,’ writes Mercer. ‘[But] we would expect that DVD usage will come under increasing pressure as the quality of online video and the range of available content continue to improve’.

As rights holders naturally wish to maximise their returns across revenue streams, what are the likely future prospects of paid-for unboxed content? Apple’s iTunes service demonstrates a market exists for pay-as-you-go movies and TV shows, but – once again- revenues remain small in comparison with the overall packaged media market.

During a Spotlight Presentation at the Digital Media Pipeline conference, Arash Amel of Screen Digest put Apple’s iTunes share of web-based VoD at 52% of the market, followed by Xbox Live on 31%. Screen Digest values the global web-based VoD market at $500 million in 2009, rising to $2 billion in 2013 (to put this in some perspective, DEG valued the US – not the global- home entertainment market, including VoD, at $9.73 billion in 2009, the lion share of which is down to DVD).

A quick digression, while we’re on the subject of iTunes. Scott Kirsner, writing this week in Variety, points out that Gary Hustwit’s 'Helvetica’ has generated a six-figure sum from its showing on iTunes (priced at $9.99 per download). Impressive stuff for a documentary about typography, but, as Kirsner laments, it remains an uncommon case: ‘The indie download business is still having problems gaining traction. The power of the Internet was supposed to level the playing field on which independent filmmakers and studios compete for audiences. So what happened?’. Check out the article, and Kirsner’s follow up on the Cinematech blog (An update on the State of Indie Film Online), for further analysis and case studies.

Returning to the Screen Digest data, Xbox Live’s market share is noteworthy because games consoles with online capabilities are well placed to bring VoD content onto TV screens in the home, arguably posing a bigger challenge to packaged media than PC-based viewing alone. Jennifer Netherby, writing in Video Business, reports the Xbox 360 console is happily ensconced in 16 million US households (the Playstation 3 is in 8 million and Nintendo Wii is in 20 million homes), ‘making gaming consoles the leading internet-connected device already hooked up to TVs’.

In closing, here’s one final angle to consider: what’s in store for the size of the home entertainment market as a whole (as opposed to the relative market shares of VoD and DVD)?

'I don't think that studios are looking at online to save the home entertainment business,' Stephen Prough, founder of Salem Partners, told Alex Dobuzinskis. '[B]ut I think they want to avoid what happened to the music business and try to come up with alternative modes of distribution before physical media goes away.'

The Internet’s influence on film audiences (and studio executives)

In the last couple of days the trade press has reported a study produced by Stradella Road, a marketing company founded earlier this year by Gordon Paddison, former Head of New Media and Integrated Marketing at New Line Cinema.

Among other things, Paddison worked on the campaign for The Lord of the Rings trilogy, establishing a link with Peter Jackson’s Wingnut Films which led in February 2009 to the signing of a multi-year deal to deliver digital brand strategy on all Wingnut entertainment products.

The study looks at the influence the Internet has over film audiences, a subject of obvious interest to Stradella Road in its efforts to build a client base. As Paddison noted at the time the deal was struck with Wingnut Films, ‘Social media has revolutionized the way consumers connect with each other and include brands in their life and Stradella Road is the place for clients looking to leverage and evolve with the medium.’ Anything that demonstrates the growing influence of new media is obvious grist to the mill.

That’s not meant in any way to undermine the research; but awareness of who’s behind the study, and whose interests are being served by its propagation, is instructive. Thus you may like to know the study was sponsored by AOL, Facebook, Fandango, Google, Microsoft, MovieTickets.com and Yahoo.

Anyway, the research, appearing in a report entitled ‘Moviegoers 2010’, was conducted by Nielsen NRG and involved a survey of 1,547 moderate-to-heavy moviegoers over an eight day period in July 2009, plus phone and online interviews with 2,305 others during the same month. Methodological details are sketchy, and as I haven’t seen a copy of the report I can’t offer any further background on the questions posed, the survey format or the sample.

Nonetheless, thanks to online sources not (yet) buried behind paywalls, we can glean details of the principal findings. For Marc Graser, writing in Variety, the study’s main message is that ‘if marketing mavens want to reach younger moviegoers when promoting their films, they need to embrace social networks or risk being ignored.’

Teens and ‘twentysomethings’, the demographic that so preoccupies studio executives, are, according to the research, ‘especially focused on being able to customize entertainment and are quick to share their opinions with others digitally’.

Graser reports the study’s estimate that 94% of all US moviegoers are now online, and 71% of moviegoers surveyed have profiles on social networking sites. But in broad brush terms, as the study shows and common sense dictates, use and influence are highly dependent on age:

• Those aged 13-17 are ‘all about sharing information and group thinking’, and social media are crucial to this (67% socialise with friends online).
• Those aged 18-29 ‘are digital natives that have grown up with technology’ who search online for movie information and share their thoughts via social networks (58% socialise with friends online).
• Those in their 30s are ‘time-constrained, with parenthood dominating their decisions’. They ‘spend the highest number of hours online and rep[ort] the highest use of technology (Internet, broadband access, DVR ownership and cell phone).’
• Meanwhile those in their 40s tend to favour traditional media ‘like magazines and newspapers’, and moviegoing is ‘dominated by special family occasions and influenced by teens’. Those in their 50s ‘avoid crowds, prefer matinees’ and ‘skip ads because they think there are too many commercials on TV.’

Covering the story for The Hollywood Reporter, Paul Bond reports additional data revealing that ‘73% of moviegoers -- those who attend movies at least twice a year -- first gain awareness of releases from TV commercials, followed by 70% from in-theater trailers. Word-of-mouth follows at 46%, and the Internet, at 44%, has passed such traditional methods as billboards and newspaper advertising.’

Bond notes the fact that ‘TV commercials remain such an effective way of spreading the word is good news for TV execs, especially given that 52% of moviegoers use DVRs. That's roughly 20 percentage points higher than the general population.’

But it’s the evolving nature of online behaviour that primarily interests Stradella Road. According to Bond, the study shows that ‘once they learn of a movie they'd like more information about, 93% go to the Internet, with 62% seeking an online film review.’ (I'm not clear which group we're talking about here- the figure seems too high for all ages).

Yet it’s not so much the Internet that influences audiences- the crucial role is played by those members of the peer group who choose to share their opinions online: 40% of respondents said ‘that negative reviews from typical moviegoers will keep them from seeing a movie, while only 28% say that a bad review from a critic will cause them to steer clear.’ (And as a further snub to professional critics, Marc Graser reports the finding that 84% of moviegoers say ‘When they make up their mind to see a movie, it doesn't matter what the critics say about it’).

I’ll leave the closing words to Paddison, as quoted by Daniel Frankel in The Wrap:

‘We talk all the time about how much the market is changing, but somehow, we stop short of dealing with the magnitude of that change. Perhaps it’s because we don’t know our market as well as we should.’

Enter Stradella Road, stage right.

>>>UPDATE 1 OCTOBER 2009>>>

Ben Fritz, covering the story for the LA Times, includes a chart and data table from Stradella Road providing additional detail about the study findings.

US DVD and Blu-ray market, H1 2009

There's more intelligence for the first half of 2009 to report, this time concerning the US home entertainment market. But first here's a related item from earlier in the week when the International Intellectual Property Alliance (IIPA), a coalition of trade associations representing U.S. copyright-based industries (video games, business software, film, TV, music and publishing), released its twelfth economic study, covering the period 2003-2007.

The report, Copyright Industries in the U.S. Economy: The 2003-2007 Report, was prepared for IIPA by Stephen Siwek of Economists Incorporated. In presenting the key findings, IIPA’s press release leads with news that the real annual growth rate of the copyright industries stood at more than twice that seen by the U.S. economy as a whole in the years 2004-2007, and that in 2007 the core copyright industries contributed 23% of the real growth achieved for the US economy as a whole. In other words, the copyright industries are a key driver of the wider economy.

The IIPA hopes these numbers, along with others in the report detailing the copyright industries’ contribution to employment and the US trade balance, will help to secure continued government support for anti-piracy measures. To this end the study was launched at an event at the US Department of Commerce, attended by Secretary of Commerce Gary Locke. 

Eric H. Smith, of the IIPA, makes the case:

“This study, like those that preceded it, strongly supports the continuing need for our government to focus its full attention on the economic and social importance of the creative industries within our 21st century economy.  Because these industries that depend on creativity and innovation contribute so significantly to economic growth and job creation in today’s economy, our government, and governments throughout the world, must redouble their efforts to provide a safer environment for them to prosper.”

Smith goes on:

“Only through the legal and secure transmission of valuable copyrighted content over the Internet can this continued growth and productivity be fully realized. Piracy threatens that growth and all governments must redouble their efforts to combat it.”   

Far be it for me to belittle this contribution to what is clearly an important and highly charged debate, but I can’t help feeling representatives of the copyright industries need to take care when making their case. After all, the report presents a slew of impressive numbers. But wasn’t this growth achieved against a backdrop of rampant piracy? Given the horror stories we’ve been fed about the scale of piracy over the years, it’s hard to imagine the problem will get any worse, especially now that authorised  online distribution channels are taking off, and illegal ones (like The Pirate Bay) are turning legit. In making the case for how vital the copyright industries are, there is surely a danger in over-selling their success.

Be that as it may, the news from one sector of the US copyright industries, rental DVD and Blu-ray, looks positive for the first half of 2009. According to data from Rentrak and reported by Marcy Magiera writing in Video Business, consumer rental revenue for DVD and Blu-ray rose 8% to $3.4 billion in the first half of the year compared with the same period in 2008. Growth was driven by consumer interest in Blu-ray and by the roll out of rental kiosks offering over night DVD rental fees for as little as $1.

Meanwhile, data released by the Digital Entertainment Group (DEG), once again reported in Video Business, shows overall US home entertainment revenues fell by 4% in the first half of 2009. There was a steep decline in DVD retail revenues (down 17% according to Video Business calculations), although this was offset to a large degree by rising Blu-ray sales (up 91%), the growth in rental activity (described above) and online distribution (up 21%).

DEG puts the US home entertainment market at $9.73 billion for the six months to the end of June 2009, which includes nearly $1 billion in digital sales and rentals (including cable and satellite VoD).

Against this backdrop, isn't it time industry reps started to bang the drum more loudly about the opportunities offered by digital channels, rather than the threats?

Digital Britain

Today saw publication of Lord Carter’s long-awaited white paper expounding the government’s ambition for the UK to become ‘one of the world’s leading digital knowledge economies’.

By way of a quick digression, the Digital Britain final report comes a week after Ofcom published research exploring access to the internet at home, which found that 70% of people aged 15+ have an internet connection where they live (Accessing the internet at home: A quantitative and qualitative study among people without the internet at home by Ipsos Mori).

Yet of those without access, 43% ‘would remain disconnected even if they were given a free PC and broadband connection’. These are the ‘self excluded’, who ‘tend to be older and retired and 61% have never used a computer’. Around another 30% say they’d like to get connected but cannot afford to do so (a group the report refers to as ‘the financially/resource excluded’).

Clearly the vision outlined in Digital Britain has a job and half to get the self-excluded online, and to ensure that no-one is prevented from participation in the 'digital future' by a lack of resources. "Broadband is becoming increasingly important to people's ability to participate in the economy and society," notes Ofcom's market development partner Peter Phillips. "The report shows that some creativity will be required if we wish to capture the imaginations of those who have yet to engage with the benefits the internet may bring."

Returning to the final Digital Britain white paper, I’ve barely managed to scratch the surface of the document. A thorough read through will have to wait until the weekend. But courtesy of the executive summary and the word find feature in my PDF reader (digital literacy in action...) I’ve been able to glean some snippets of interest from a film perspective.

First up, piracy. The UK Film Council has welcomed the ‘aggressive target of a 70% reduction in piracy over a year’ outlined in the report. But this is not strictly accurate. The report sets out plans for a reduction in unauthorised file sharing activity by at least 70% of those people notified by ISPs. The reduction in file sharing activity overall may be more or less than 70% as a result of this, as individuals will invariably be responsible for different levels of activity.

The white paper goes on to state that if the target of 70% is not met after one year, Ofcom will be empowered to ensure that ISPs take tougher action, like ‘blocking’, ‘capping’, ‘bandwidth shaping’, ‘content identification and filtering’. Use of thumb screws and water boarding were allegedly discarded in an earlier draft of the report.

Second, the white paper calls for examination of the case for tax relief ‘to promote the sustainable production for online or physical sale of culturally British video games’. This issues from the idea that video games ‘may in future have a cultural relevance to rival that of film.’

Maybe I’m getting old and out of touch (or maybe I’m just biased), but this sounds like a load of rot. Be that as it may, the idea of pegging video game tax relief to some sort of cultural test would put it on a par with the film tax credit currently available. So lawyers and accountants may well be big winners in Digital Britain. Nice to know some things never change, even in the white heat of technology.

Piracy data mashup thingy

Last week I came across the guardian.co.uk’s Data Store for the first time (along with its companion Data Blog).  If you haven’t visited I can recommend it as a splendid use of the Scott Trust’s money. It’s free to you and me.

The idea is simple enough. Using web 2.0 technology, guardian.co.uk aims to make ‘important data more accessible to people’, by publishing facts and figures from publicly available data sources, and encouraging users to analyse, re-interpret and share the results. The site even invites you to mashup the data, which as far as I can tell is a bit like a fry up but with more potato and a lot less saturated fat.

Now if truth be told, I don’t have a statistical bone in my body (unless, of course, you count my digits). Nonetheless I find this a really exciting development. There’s even a Guardian Data Talk Group, ‘to discuss data, tools, formats, standards, how to use the data The Guardian publishes, where to get it, etc.’. Judging by the archive, the Group hasn’t seen that much activity since it came online in late February, but it’s good to know it’s there should the need ever arise. I’ll certainly be chipping in.

If you’re wondering what any of this has to do with the usual film-related themes of BPR posts, I only came across the Data Store by chance while chasing a link to Charles Arthur’s technology blog post about music piracy, in which he uses Data Store numbers to advance the idea that file sharing is not cannibalising music sales to the extent claimed by the music industry.

Arthur contends the decline in music revenues since 1999 has been driven by people switching their spending to other forms of entertainment, notably video games and DVDs. It’s a plausible idea, although as presented it remains only a correlation that may in reality be no more substantial than the view he seeks to challenge. (What if people are spending more on video games because they can get their music for free?). But I think we should welcome the fact these issues are being raised and debated within the context of a growing community of data sharers and mashup artists (now there’s an image to conjure with). So three cheers for guardian.co.uk.

All this has set me thinking that it would be great if all public agencies made their data available like this, actively encouraging users to analyse and share results in interesting and novel ways, rather than issuing statistics in static publications and news releases. Even if they don’t have the web 2.0 infrastructure to do it themselves, perhaps public data owners should donate their holdings to the Data Store, or equivalents. This would deliver genuine public value, and the quid pro quo is that data owners may even learn something new about the information they hold, if enough people run inspired and innovative analyses.

Anyone who has ever visited the lamentably labyrinthine and obstructive web site operated by the Office for National Statistics (ONS) surely must agree that a bit of community datasourcing (crowdsourcing for anoraks like me) has got to be an improvement. The Data Store has left me hungry for more.

Pie chart and mashup, anyone?

Piracy: latest research

Last week’s publication of a report for the Strategic Advisory Board for Intellectual Property Policy (SABIP) sheds further light on unauthorised downloading activity in the UK (Copycats? Digital Consumers in the on-line age).

But before launching into the key findings, it’s worth taking a moment to consider the provenance and methodology of the research. The study was undertaken by University College London’s CIBER team, which operates independently of the creative industries. This means their assessment of the scale and nature of unauthorised online distribution is impartial- a valuable trait in this highly charged and controversial area.

Furthermore, SABIP, who commissioned the research, is a Non-Departmental Public Body sponsored by the government’s Intellectual Property Office. It advises Ministers and the Intellectual Property Office Chief Executive on the development of intellectual property policy. In other words, SABIP carries some clout in policy terms.

In terms of methods, the research involved a review of exiting literature (mainly primary research carried out by other academics, in the UK and internationally); selected interviews with ‘major stakeholders, regulatory bodies and industry experts’; analysis of media reports on the subject of ‘digital consumers’ in the period January to April 2009; and original fieldwork in the form of ‘an empirical exploration of the phenomenon of online downloading’ (i.e. ‘we went online and found out just how easy it is to “file share”).

So the balance of evidence comes from non-industry sources, although a lot of the large numbers quoted at the start of the report (and which found prominence in subsequent news reports) are from existing industry research (for example, the estimate that at least seven million people have downloaded unauthorised material in the UK). I’m not suggesting industry-derived data are suspect (far from it); but it is helpful, given the nature of the public debate, to draw upon independent evidence (or independently verified evidence) wherever possible.

Which is why the CIBER report is all the more valuable. And from an industry perspective (by industry, we’re talking about commercial music, film and TV businesses, and other IP rights holders including computer software publishers), the research lends weight to the view that piracy is a significant problem. Thus, the authors indulge in a back-of-the-Nicorette packet calculation and estimate that the online members of just one file sharing network consume approximately £12 billion worth of content annually for free. ‘These figures are staggering’, they conclude, and it's hard to disagree.

The CIBER team helpfully present their key findings using a rating scale, where one star means there is little evidence and five stars offer very strong, almost incontrovertible, evidence. In order of strength, here is what the current research literature tells us:

Very strong evidence (CIBER confidence rating: *****):

• ‘There are myriad choices when consuming content and consumers are confused about what is legal and not legal’;
• ‘Attitudes and behaviours towards property in the online and physical worlds are very different’;
• ‘It has never, ever been easier to break the law’;
• ‘Internet service providers and the consumer electronics industry: two elephants in the room’ (in other words, both ISPs and consumer electronics businesses are involuntarily complicit in unauthorised sharing, and they should therefore form part of the solution);

Strong, but not conclusive evidence (CIBER confidence rating: ****):

• ‘The scale of the "problem" is huge and growing’
• ‘There is a powerful idea that there is “no victim”, and so “no crime”’
• ‘Education isn’t working, yet’

The evidence base is somewhat inconclusive and contradictory here (CIBER confidence rating: ***)

• ‘There are fewer cues to guide behaviour in the online world’

In conclusion the authors call for further research, not least to address the ‘fundamental question’, which is not ‘how or why the downloading, copying and dissemination of unauthorised content takes place’, but ‘who does it, (and therefore, who doesn’t), and can this behaviour be changed?’. SABIP is in clear agreement. Dame Lynne Brindley, SABIP Board member, said at the time the research was published: ‘This report gives us some baseline evidence from which we can develop a clear research strategy to support policy development in this fast moving area.’

So we can expect more from CIBER in the near future. But as it is a fast moving area, will the research effort be able to keep pace?

US home entertainment revenues, Q1 2009

According to a report in Home Media Magazine, data provider Digital Entertainment Group (DEG) estimates consumer spending on DVD, Blu-ray and content through digital distribution channels totalled $5.3 billion in the first quarter of 2009. This result is better than anticipated in view of the economic downturn, and marks a fall of just 5% on 2008's first quarter total.

Blu-ray discs remain a small part of the overall picture, but spending grew to $230 million in the first three months of the year. Digital distribution also saw growth, with consumer spending hitting $487 million in Q1 2009, up 19% on the same period in 2008.

Feeling the digital heat

The last few weeks have seen a flurry of news stories and events linked by a common theme: the opportunities and threats posed to the film business by digital technology.

Let’s deal with the threats first. For starters, a court in Sweden found those involved in Pirate Bay guilty of breaching copyright laws. That same week, figures released by Italy’s Federazione Anti-Pirateria Audiovisiva (FAPAV) put the annual loss to the local cinema industry at around $699m (Euros 530m). The research, conducted by IPSOS, estimated the number of Italian jobs at risk due to piracy to be around 250,000.

According to the study, just under one third (32%) of Italians (around 16 million) have used illegal copies of films over the past twelve months. These figures include all types of pirate activity but, significantly, online/digital film theft (e.g. illegal downloading and file sharing) accounted for 21% of illegal activity.

Closer to home, last week I attended an event in London hosted by the Film Theft Task Force entitled Digital Heat. The gathering provided a forum for the content and distribution sectors of the industry to consider ‘how digital technologies can be turned into legitimate business for the UK film and TV industries’.

The discussion hinged around the question of how best to capitalise on the opportunities presented by digital distribution while managing the attendant risks. A short AV presentation kicked off proceedings with some indicative data:

Opportunities…
• 67% of UK households had access to broadband in 2008
• 23.5 million people use the internet every day
• 16-24 use it most (77% every day)
• 20.2 million people have used a legitimate online content service - doubling use since 2007
• Most (96%) used free streaming sites

Threats…
• Annual loss to the UK audio visual industries from film theft is estimated to run at around £500 million
• 62% of people who use illegal online services would think twice if they faced suspension by their ISP
• 66% of adult file sharers would stop accessing illegal content if they thought they had a greater chance of being caught

The AV was merely a warm-up act for the main billing: a panel discussion chaired by Michael Gubbins (former editor of Screen International) and featuring Stephen Garrett (Joint MD Kudos Film and Television), Andrew Keyte (CEO FilmFlex Movies), Simon Morris (co-founder and Marketing Director, LoveFilm), Jonathan Lewis (Head of Digital Media at Five TV) and Steve Purdham (CEO, We 7).

I can’t possibly do justice to what turned out to be a highly informative and entertaining debate, but the discussion boiled down as follows:

1. We’re living in a digitally converged age- it’s no longer just around the corner, it’s a reality and it’s time to face up to the fact.
2. The vast scale of online film theft demonstrates one simple truth: there is huge demand for accessible, good quality audio visual content. The legitimate business has so far failed to meet this demand, and file sharing and other forms of film theft are flourishing.
3. Whatever business models are developed to tap this latent demand, they must satisfy three criteria: 

• Online content is very price sensitive (the pirates are offering the stuff for free!)- so download to own or rent, or streaming services, must be offered at very competitive rates, or free to the user (funded by advertising, sponsorship etc.).
• Consumers want content whenever and wherever they can get it: release windows and DRM create barriers and must be scrapped.
• Consumers will switch to legitimate platforms provided they get a good service (something the file sharers cannot provide, or have no interest in providing). That means reliable delivery, high quality product and a user interface that makes purchasing or consuming as straightforward as possible.

There was broad agreement across the panel for points 1 and 2, but less consensus about the solution outlined in point 3.

Steve Purdham was the most vocal advocate of the new approach. His company offers users free music through a streaming and download service supported by advertising (although Purdham is bankrolling the service at present, as he builds the subscriber base). Users have to listen to an advertisement ‘grafted’ onto the start of the free stream, and then they are offered the option of buying the track to download.

Purdham is confident that advertising-led services can flourish, and he made a convincing case for the potential of such a model. By asking users to register for the free service, the door is opened to selling and marketing to them in more conventional ways. Peer-to-peer transactions are anonymous, but there’s an opportunity for legitimate business to build a marketing database on a global scale.

Yet as Stephen Garrett noted, this model may work well for music but the cost of making top quality TV or film content is too high to be carried by advertising-based models alone. He described the situation in the indie TV sector, where companies like Kudos finance production on the strength of future income- and that includes the lucrative DVD and pay-TV markets. The big question is whether online revenues will ever provide the sort of income stream offered by existing ancillaries.

But the matter need not, of course, boil down to an ‘either / or’ option. Looking around at the legitimate online services currently being offered, there are encouraging signs of a mixed economy of services developing. For example, Danny King, writing last week in Video Business, reports growth in Netflix’s first-quarter profit and subscriber numbers. Netflix straddles the physical, packaged media market (DVD rental by post) and has moved into online distribution with its streaming service.

The company saw net income rise by 68% to $22.4 million, as sales rose 21% to $394.1 million. The Netflix subscriber base grew by 920,000 during the quarter, up 25% from a year earlier to 10.31 million, making it the biggest movie-rental service via mail company in the US.

Netflix’s video-streaming service now has 11.5 million customers, and it appears to be augmenting, rather than cannibalising, the existing DVD business: “While it’s clear that instantly streaming movies … is energizing our growth, our subscribers in total are renting more DVDs and Blu-ray movies than ever,” Reed Hastings, CEO, said. The company anticipates the DVD market will peak between 2013 and 2018, but has ruled out a streaming-only subscription option anytime soon.

New online movie services, like iReel.com in the US, are developing all the time, while existing ones are jazzing up their consumer offer. For example, Amazon.com announced last week it plans to launch HD (high-definition video) content to its on-demand service.  "Our customers have been asking us for two things: HD and the ability to watch movies and TV shows instantly on their television," said Bill Carr, Amazon vice president of music and video.

But for all this activity, there is still no single destination offering the breadth of content, viewing flexibility and the value for money demanded by consumers- a point taken up by LA Times columnist Patrick Goldstein in his The Big Picture blog.

‘Why has Hollywood been so slow to put its movies and TV shows online?’ Goldstein asks. Quoting technology columnist Farhad Manjoo, he offers a plausible explanation, citing lessons to be learned from the pirates:

As Manjoo confesses: "I would gladly pay a hefty monthly fee for [a download service] -- if someone would take my money. In reality, I pay nothing because no company sells such a plan. Instead, I've been getting my programming from the friendly BitTorrent peer-to-peer network. Pirates aren't popular these days, but let's give them this -- they know how to put together a killer on-demand entertainment system."

Neither Netflix, iTunes or any of the other legitimate services offer anything like the variety and accessibility of peer-to-peer networks for one obvious reason: they are hamstrung by ‘a "byzantine set of contractual relationships" among studios, distributors, cable channels and a variety of other parties.’

The studios won't release movies online day and date with their theatrical release, fearing the availability will cannibalize their performance in the theaters, not to mention enraging theater owners. After movies arrive on DVD, they are also becoming available on pay-per-view, then a few months later they go to premium, HBO-style pay-cable channels, which get a 15- to 18-month exclusive window in which to show the film. As Manjoo explains: "That's why you can't get older titles through Apple's rental plan -- once the movie goes to HBO, Apple loses the right to rent it."

Movies then "make a tour" of ad-supported cable and broadcast networks before returning to outlets like Starz for a second run. Only years after its initial release, when a film enters its "library" phase, are companies like Netflix allowed to license it for streaming. There's a growing generation of consumers eager to see studios shorten or do away with all these windows, but the studios are in no rush -- they say these deals are worth billions, so why sacrifice built-in profits for an uncertain future?

Goldstein concludes with a warning: if the business fights to protect its existing revenue streams it risks continuing to lose out to the pirates. Consumers will go where the content is- and unless legitimate alternatives are offered in double quick time, a golden opportunity to grow the business in news ways may be missed:

You have to wonder if by the time Hollywood makes movies easily available online, the dogs will have barked and the caravan will have moved on. In other words, it might be too late.

Digital copy: adding value to DVDs

Writing in last week’s Video Business, Jennifer Netherby reports a US study by the National Consumers League that found the majority of consumers expect DVDs they buy to include a digital copy, which can be saved to a computer. The NCL has been looking into consumer attitudes towards Digital Rights Management (DRM), and the survey adds weight to arguments for loosening restrictions on backing up legal purchases.

The research was conducted by Opinion Research Corporation and involved 1,000 consumers aged 18 to 64. Among the other findings, over half of those surveyed (55%) said they purchased fewer DVDs last year, while two fifths (41%) expect to buy even fewer over the coming year.

That’s an obvious cause for concern for the business, but there is evidence that the inclusion of a digital copy on DVDs may entice consumer to buy more. Two fifths (40%) of the sample said the ability to backup DVDs might convince them to purchase more discs in future.

The survey found that despite overwhelming demand for the option to make a back-up copy of purchased movies, few have actually done so to date. But that could well change as the technology develops and people warm to the idea of uploading their movie collection to portable devices like iPods and the like.

“Consumers’ attitudes towards saving content have been shaped by their ability to freely copy the contents of their CD collections to their computers and iPods”, said National Consumers League Executive Director Sally Greenberg of the findings. “Our survey shows that they are eager to have that same ability with their DVDs and are frustrated that the market has not adapted to meet that desire.”

Will this help preserve the DVD (and packaged media in general) from the onslaught of downloading and streaming content? It's hard to imagine why anyone would want to buy a DVD just so they can store it on their PC when they have the option of downloading it in the first place. But with the studios keen to extend the life of packaged media for as long as possible, perhaps digital copy is the way ahead- for the time being at least.

The full report (in PDF) can be downloaded here.

Find Any Film

FindAnyFilm.com, the ‘Google for films’ database, has been open for business since January, and a press release from the site’s principal backer, the UK Film Council, suggests it’s been doing rather well, clocking up over 1 million views in ten weeks.

We’re not given the number of unique visitors this equates to, but the press release nonetheless offers a tantalising glimpse of the user behaviour data sitting somewhere in the back-end of the database.

For example, the top ten films searched for over this period were:

1. Twilight
2. Slumdog Millionaire
3. Bolt
4. Watchmen
5. Notorious
6. Marley & Me
7. Bronson
8. The Reader
9. Confessions of a Shopaholic
10. The Unborn

And more than 43,000 alerts have been requested for films not yet available in the user’s desired format. The fact that over 60% of these requests are for films to download/watch online suggests users (whose demographic profile we can only guess at, but must surely include a large proportion of 16-34 males) are champing at the bit to get legitimate downloads or streamed content.

The site still has a few teething problems. I brought up the profile for forthcoming UK release Shifty, described on FAF.com as a ‘low budget British thriller chronicling a day in the life of a London crack dealer’. The site then helpfully listed Diana: A Tribute to the People's Princess (1998), Canadian WWI drama Passchendaele (2008) and Steven Soderbergh’s Che parts I and II (2008) as 'Related Titles'. Answers on an e-postcard if you can spot the link.

Making it in the Digital Age

The Digital Age. We’re in it now. It’s great. We can all do lots of cool stuff (time, inclination and wherewithal permitting). Anyone can be creative. Anyone can be an artist, entertainer, opinion former. No need for an agent, publisher, record company, film distributor or whatnot. That’s what we’re told.

But how can anyone find an audience, make a living and build a creative career in the Digital Age, while remaining free of The Man, philistine executives and/or profit-obsessed multinationals? That’s a question that has garnered more pixel time in the blogosphere than probably any other issue facing the indie film community of late.

Scott Kirsner has contributed more to the debate than most, through his blog, talks and appearances at festivals and other events. He’s also just published Fans, Friends and Followers: Building an Audience and a Creative Career in the Digital Age, which promises to give the most up to date airing of the main themes.

The book, which is available, appropriately enough, in PDF form as a paid download, is based on interviews with people at the coalface: filmmakers, writers, musicians and other performers. The chapter that holds most interest for me is entitled 'Exploring the New Business Models'. In October last year I posted about my experience at the Power to the Pixel event, voicing my disappointment at the lack of any compelling evidence of workable business models that can sustain creative enterprises beyond one-off projects. Scott has since commented on the post, and I look forward to reading what he has to say about the models currently being developed and road-tested by his interviewees.

You can check out a 35 page preview of Scott's book on his web site, and an early review by Chuck Tryon, author of Reinventing Cinema: Movies in the Age of Media Convergence, can be found over at the Chutry Experiment.

DVD versus digital distribution revenues

Author and blogger Scott Kirsner moderated a panel discussion at the recent SXSW 2009 event (in Austin, Texas), about how indie filmmakers can maximise their revenues from DVD and digital distribution ('The Future of DVDs and Digital Distribution'). Panellists included executives from New Video, Cinetic Rights Management and SnagFilms, plus filmmakers Gary Hustwit and Morgan Spurlock.

Scott’s entertaining and informative Cinematech blog carries an account of the event, and I was intrigued to learn about the relative value of DVD and digital revenues to indie filmmakers.

According to the Cinematech post, the panellists ‘seemed to agree that there's about a 90/10 breakdown today, in terms of the ratio of DVD revenues to digital.’

Kirsner reports that Hustwit’s documentary 'Helvetica' has earned in the region of $60,000 in digital revenues despite being among the top ten documentary downloads on iTunes.

Meanwhile Spurlock's acclaimed 'Super Size Me' doco earned just $1,200 from SnagFilms over a two-month period (and that includes money from 19 other titles supplied by the filmmaker to the site). That compares with 70,000 ‘Super Size Me’ DVDs sold in the US in the last quarter of 2008 alone.

"If you’re looking to pay your rent [with digital distribution], not so much,” Spurlock told the gathering. “But if you’re looking to pay your phone bill, you have a great chance."

By happy coincidence I recently came across some comparable numbers from a UK indie distributor (Metrodome- which released titles including the extreme sports IMAX documentary ‘Steep’, ‘Fear(s) of the Dark’ and ‘The Warlords’ in 2008).

Metrodome Group plc (to give its full name) is a listed company with an investors’ page offering a preliminary financial statement for the year ended 31 December 2008. There’s plenty one can learn about the state of UK independent distribution from the financial data presented (the subject of a future post, maybe), but in the context of Scott Kirsner’s post I want to draw attention to the breakdown of the Group’s distribution revenue in 2008. As we're talking about distribution revenues not filmmakers' income it's not a like-for-like comparison, but I think it's instructive nonetheless.

According to the figures presented in the statement, Metrodome Group derived a hearty 84.4% of its revenues from DVD sell through in 2008, totalling £5.5 million (up from 76.8% in 2007). DVD rental accounted for only 2.2% of total revenues, and cinema sales generated just 2.3%. Meanwhile Video on Demand, which includes sales through multichannel TV platforms as well as online distribution channels, accounted for 5.5% of revenues (£364,000), up 171.6% on the 2007 total.

So while digital distribution remains a relatively small revenue stream, in line with the experiences recounted by filmmakers at SXSW 2009, it does at least appear to be a growth area for Metrodome. It'll be interesting to see how this trend develops over the next year or so, particulary in view of the uptake of Blu-ray (physical media's last gasp?) and the continued expansion of high speed broadband networks (a key driver for online distribution).

Montage: Dodgy budget numbers; LA production activity; European digital screens

I haven’t written one of these omnibus posts in a while, but since Christmas I’ve come across so many blog-worthy items I need to start getting them out. So here are three disparate stories, beginning with some shrewd insights from LA Times columnist Patrick Goldstein.

In a post on his Big Picture blog entitled ‘Why everyone lies about their movie's budget’, Goldstein sets out some of the reasons behind the wild inaccuracy that characterises publicly available budget numbers.

The problem is one of inflation: numbers that are forever ‘spun by studio executives and producers’ and unquestioningly reported in the media. As Goldstein notes, ‘it is safe to say that no one in the history of Hollywood has ever complained about the press underestimating the cost of his or her movie’.

In short, ‘people in Hollywood lie’:

'The studio chief who made the movie gives you a low-ball number. The head of a rival studio, eager to make a competitor look bad, gives you a wildly inflated number. Most journalists have reported that Baz Luhrmann's recent film, "Australia," cost $130 million. 20th Century Fox insists that it cost less, saying it received a hefty subsidy from the Australian government, knocking $30 or so million off that figure. But every rival studio chief I spoke to about the film said with great authority, as if they'd seen a host of internal Fox documents, that the film cost $170 or $180 or $200 million, just to throw out the three different figures I got from three different executives.'

Goldstein’s solution is to go to the source. ‘In other words, I try not to report a number unless I've gotten it from a top executive at the studio (or financing company) that made the picture or a producer or some other high-level member of the production team’. But even that’s not failsafe. ‘You'd think this would work out pretty smoothly, but even then, I've discovered that budget numbers are a slippery business’.

For example:

'When I was writing about the unknown screenwriter who'd penned Clint Eastwood's "Gran Torino" last month, I reported that the movie (co-financed by Warners and Village Roadshow) cost $35 million. Warners immediately called to complain, saying my number was totally wrong. Rob Lorenz, a delightful guy who's one of the producers of the film -- and has worked with Eastwood for years -- asked how I could have possibly gotten such a wrong figure. Actually, I told him, I got the budget figure from Bill Gerber, who -- ahem -- was the other producer of the film, with Lorenz and Eastwood. Since Gerber had once been a head of production at Warners, I figured he knew what he was talking about. Lorenz told me the film cost closer to $25 million, so I amended the figure, saying the film cost "less than $30 million."'

And here's another:

'I wrote in a recent post that Sam Mendes' "Revolutionary Road," a Paramount film produced by DreamWorks, cost $45 million. I didn't make up the number -- it's what a top executive at Paramount (which then owned DreamWorks) told me the film cost. As soon as the story ran, Stacey Snider, who runs DreamWorks, e-mailed me to say the film only cost $35 million. It seems unlikely that Paramount would inflate the cost of a film it financed and distributed, since if "Revolutionary Road" fails to find an audience, it will look like an ever bigger flop if it cost $45 million instead of $35 million. But I also trust Snider, who has a better track record than most studio chiefs in offering honest numbers. So what does the movie cost? Let's just say -- that's a work in progress.'

Goldstein’s colleague, John Horn, uses a form of triangulation: "Ask three people without axes to grind, or reasons to lie, what a movie's budget is, and the average of those numbers can be a close approximation of the film's true cost."

And the lesson from all of this? Divining budgets is an art not a science, and anyone working with publicly quoted budget numbers (like those given on IMDb, for example) should treat them with caution. As Goldstein concludes, ‘movie budgets, like everything else about the business, are never black and white. In Hollywood, the numbers are a lot like the truth -- they are always subject to interpretation.’

***
Sticking with the LA-theme, some (hopefully reliable) numbers released by FilmLA, which provides film-permit services on location shoots, reveal that film production in the region had fallen to its lowest level in 15 years by the end of 2008.

Film production dropped 1.7% in 2008 (and a massive 8.1% in the fourth quarter). In contrast, TV production rose 8.4% over the year.

Paul Audley, FilmLA President, had this to say in The Hollywood Reporter:

"When viewed by production category, the data reveal a changing production landscape in the region, irrespective of short-term impacts from the writers strike and uncertainty surrounding the actors' contract. The 7,043 productions logged in 2008 are nearly half of the feature film category's peak of 13,980 production days tallied in 1996. Most big-budget features are no longer filmed locally (and) with feature film production days being down 10 of the last 12 years we should stop talking about 'runaway production.' It's ran-away production."

***
And in closing, the European Audiovisual Observatory has released Volume 3 of its respected 2008 Yearbook. The press release quotes figures from the chapter on digital cinema, compiled by the Observatory in co-operation with MEDIA Salles, which show there were 897 digital screens equipped with DLP Cinema and Sony 4K technology in Europe as of December 2007, a rise of 70% on the previous year.

This is equivalent to around 3% of the entire European screen base. In comparison there were 4,576 digital screens in the US (12% of all screens). The UK led the pack in Europe with 284 digital screens, followed by Germany with 151. Together these two countries accounted for almost half of the entire digital screen base in Europe by the end of 2007.

According to the press release, the 2008 Yearbook ‘provides key market data and analysis along the entire film value chain, from production, distribution and exhibition to DVD and VoD. It covers 36 European countries as well as the United States and Japan. A special chapter covers digital cinema allowing the industry to gain a global picture of what could turn out to be the most important development of cinema in recent years.’ Helpfully, the digital cinema chapter provides a comprehensive list of digital screens across Europe by individual exhibitor.

International communications market

Last week the Office of Communications (Ofcom) published its third annual statistical overview of the £876 billion global communications market in 12 established industrial economies (UK, France, Germany, Italy, US, Canada, Japan, Poland, Spain, the Netherlands, Sweden and the Republic of Ireland) plus the fast growing economies of Brazil, India, Russia and China.

The publication (International Communications Market Report) coincided with an international conference hosted by the regulator (Next Generation - Net Generation: Managing competitive communications in a digital age).

I can't do justice to the full breadth of material presented in the report (which weighs in at over 300 pages), so here’s a taster quoted from the press release:

Montage: Converging media; Danish admissions; BFI research guide

This week law firm Olswang published the results of its annual ‘convergence’ survey, examining UK attitudes to different media platforms. Taken together the findings indicate that viewer choice and control are important drivers of consumer satisfaction, which suggests anything impeding easy access to content, like Digital Rights Management or release windows, is a demand-side no-no.

The research is based on a survey of 1,162 respondents (235 children aged 13-15 and 927 adults) conducted by YouGov between 25 September and 3 October 2008. YouGov also hosted a number of focus groups, designed ‘to explore in more detail the effects of convergence on the activities of distinct types of consumer’. These groups include ‘kids’, ‘mainstream’ adults, ‘tech vanguard’ and ‘laggards’. This last category comprises late adopters, rather than Luddites; the survey and focus groups were conducted online, so all respondents had access to the Internet.

Taking solace from quanta

According to enigmax, writing for TorrentFreak, Mr Bond’s 22nd big screen outing (Quantum of Solace) leaked onto the Internet before it bowed in the US last weekend.

That’s despite a massive counter-piracy campaign in the UK (where the film opened two weeks ago) involving cinema staff donning night vision goggles (supplied by Q?) to catch camcorder users in the act.

This news came in the same week that Detica, a business and technology consultancy, urged the Department for Business, Enterprise and Regulatory Reform (BERR) ‘to shift the focus of its consultation process away from enforcement when considering legislative options for addressing illicit peer-to-peer (P2P) file sharing.’

Detica reckons enforcement is too costly and time-consuming so efforts should instead be directed towards giving consumers access to reasonably (and flexibly) priced legal downloads. This sounds like a sensible option given that an army of begoggled cinema ushers still failed to prevent the camcordering of everyone's favourite spy. 

So has peer-to-peer filesharing had any material impact on Bond’s theatrical performance? Yes, probably. But we’ll never know for certain the order of magnitude involved.

Yet the film’s distributors and producers can take some comfort from the early box office results. QoS had a record-breaking opening day in the UK, and went on to amass £15.4 million by the end of the first weekend.

And despite its online availability, QoS had the highest US opening of any previous film in the franchise, grossing around $70 million according to early estimates (Casino Royale managed around $40 million in its opening weekend at about the same time of year).

Which just goes to prove that in times of financial uncertainty, some bonds are a much safer bet than others.