Friday, April 17, 2009

New Media

Here be an article about Wolverine. I mean the new movie Wolverine. It's one of soon-to-be-many X-Men backstory movies coming out and a mini-crisis has erupted over its leakage to the intertubes.

This is my first post on the subject, but it's been long-discussed with anyone willing to listen to me. The current media environment of piracy is not bad. It's new and filled with possibility. But, of course, Fox and all major movie studios have reacted to the Wolverine leak by increasing security and getting more paranoid.

Considering increased security, rampant lawsuits, oppressive laws, widespread and extensive campaign contributions, and about a dozen different forms of control technology has done nothing to stop or even slow the spread of file-sharing, one must really wonder when old media is going to get a clue.

They continue to rage against the darkness even though they are surrounded by unlit candles. Their old business models are dying, and since they insist on tilting against this elephantine windmill, they must ACTUALLY think that they can stop things from changing.

For example, let's say they are 100% successful. We never have a leak like Wolverine, again. Also, let's assume that file-sharing does in fact have a significant detrimental effect on movie revenue. All they will do is stop the effect on opening day. Because after opening day, a camcorder copy will appear online. A week later, a DVD rip from a screener. By the second weekend, hundreds of copies from different sources will be lighting up the interpipes.

Moreover, we are at a point in the development of the movie business where the bulk of a movie's profits are made not in the theater, but from EVERYTHING ELSE. For example, Spiderman 3 took in $336 million, but cost so much Sony wouldn't even say. Estimates ranged from $250 to $350 million. puts the price at $258m, but Radar Magazine and Rotten Tomatoes put total cost at over $500m. Worldwide gross for Spidey 3 WAS $890m. But from that, you have to deduct the cost of marketing for each territory.

Now I can understand the studios are scared, since that opening weekend is critical to them. As The Economics of the Movie Theater over at the Movie Blog discussed, for big releases, the studio can take upwards of 100% of ticket sales for that first week. But over half of Spidey 3's take was after the first weekend, with around 30% happening between weeks 3 and 16, where the studio's take of ticket sales decreases to a point below 50/50. Which all means that, even though the studio makes buckets on opening week, we can only guess that around 70% of the total gross eventually goes to the studio, meaning that for costs possibly in excess of $500m, they earned $623m globally.

Basically, Spidey 3 broke even in the box office. Perhaps turning a profit in the single percentages. But Spidey earned buckets with merchandise, and $120m in DVD sales in its first four months on sale. Importantly, the "collectors set" of Spidey 3, and the Spiderman Trilogy collectors set both hit the top 10. If "the movie" was all that mattered, people wouldn't have bothered buying these.

What I'm saying is that studios have been kinda/sorta using theater showings as an advertisement for later sales for years, even this NY Times article from 1987, over 20 years ago, talks about how studios never make profit from the theatrical release.

The world is changing, and honestly, for a media company the future couldn't be brighter. If they stopped looking at this situation as an enemy, they'd see that it's fantastic marketing that's a whole lot less expensive than releasing a movie theatrically. Especially with a movie like Wolverine, they could release it theatrically, where it will be best experienced; release it free with toys, games, and other merchandise; engage the consumer with live discussions about the movie's production and with new, downloadable content; use the free movie to advertise package deals that people can buy that include dinner, the movie, and light, easily-produced Wolverine-related media like shorts, cartoons, or character backstories.

This new world breaks the chains of the old business model, and the fact that the studios aren't drooling over the possibility does nothing more than evince their short-sighted incompetence. When they die and allow better, smarter companies to move in, the world will be better off.

In An Alternate Universe, How 20th Century Fox Could Have Responded To Wolverine Leak (

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