Hollywood Goes Bankrupt

Netflix killed the DVD star.

hgbLynda Obst, producer of blockbusters including Sleepless in Seattle and The Fisher King, says Hollywood is in serious trouble. In her new book, Sleepless in Hollywood, Obst says that thanks to the crash and burn of the DVD industry, the entire Hollywood profit model is at risk. She says an industry leader told her, “The DVD business represented fifty percent of their profits … Fifty percent. The decline of that business means their entire profit could come down between forty and fifty percent for new movies.”

Major actors and actresses are seeing their pay slashed. Directors and writers are watching jobs go down the tubes. One studio head told Obst about “famous players who regularly came to [a studio head] begging for favors – a picture, a handout, anything.” According to the studio head, these stars

“have extremely high overheads … They have multiple houses, wives, and families to support. They’ve made movies for years, they were on top of the world and had no reason to think it would end. And then suddenly it did. They’ve gone through whatever savings they had. They can’t sell their real estate … It’s a tragedy.”

Meanwhile, it is more and more difficult to get film financing. Years ago, Hollywood could finance its films through foreign presales – foreign distribution companies paying early for the right to distribute, providing the cash flow necessary to finance film. Now, with foreign economies in the tank, that funding has dried up. One of the only countries that continues to pour money into films is communist China, which is why so many of today’s films take a soft approach to the repressive state.

Because the business model of film is changing, the only way to make money is to cash in theatrically. That’s why we’ve seen an uptick in the number of 3D movies, no matter how poorly made – they allow theaters to charge in excess of $15 per ticket in major metropolitan areas. That’s why we’ve seen a huge number of high price blockbusters hitting the theaters – why bother spending $50 million on a mid-price flick that could clock in anywhere from $30 million to $70 million in box office, rather than going for broke with a $100 million special effects-laden extravaganza? It’s why dramas are now budgeted lower and cheapie horror flicks are budgeted slightly higher.

Everyone in Hollywood is liberal, until it comes time for them to work without pay. Then they’re downright Reaganesque. As less and less pictures get made, and more and more talented people go without work, the pool of labor gets ever larger. That means that actors who used to cost $500,000 per pictures will work for one tenth that. It means that writers with Oscars on their resumes can be had for a song. And it means that the liberal monopoly that controls Hollywood may be crashing down.

There is only one element of Hollywood that prevents this collapse: a monopoly on distribution. The distribution system in Hollywood is still upside-down, with distributors acting as gatekeepers for films. Most of these distributors are liberally-inclined politically, which means that they have no interest in conservative films. They’re profit-drive, sure, but they’re also used to working with a select clique of producers and directors and studios. They aren’t willing to take a risk.

But they can be paid to take a risk. And that’s where conservatives come in. With the means of production becoming ever-cheaper – it’s possible to make a movie that looks like a million bucks for about $100,000 – conservatives don’t have to expend tons of cash to get active in the artistic space. What’s more, they don’t have to build ground up – they can hire the same writers and directors who have been so successful in leveraging liberalism into great films.

Now is a horrible time to be the head of a movie studio. But it’s a great time to be a conservative looking to enter the movie market. All it requires for conservatives to make a serious play for the culture is a level of seriousness about the culture. Rather than sitting on the sidelines condemning the new flicks, it’s important to get involved in making flicks of our own – good movies, rather than politically-driven biopics. The market is shifting. And if conservatives have shown they are good at one thing, it’s taking advantage of market inefficiencies.

Freedom Center pamphlets now available on Kindle: Click here.