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Hollywood loses huge financial backing

PaperclipMoney.jpgHollywood is facing a financial crisis of the proportion that we've seen, and are still seeing, in the financial industry, and it's the financial industry to blame apparently.

Hollywood budgets are heavily funded by money from financial institutions, and as their expenditures are closed off to save on costs and help them weather the industry wide troubles, it means that the money that Hollywood sourced from them is rapidly drying up.

Now that wouldn't normally be too much of a problem, and for any business they would just start looking elsewhere, but the amount of investment totals some 66% of the overall investment of money into Hollywood.

This could be the beginning of a crisis in Hollywood as predictions have begun about the fall in the number of films being made in Hollywood. Now that might be a good thing, because they could save on making a lot of rubbish films, particularly the sequels and remakes that are being churned out for no good reason, and the ones with huge budgets. Except we know those won't be the ones to take the fall.

Speaking through The Guardian, Mark Gill, the head of the Film Department, an independent film financing company, talked about his fears and predicted that the total output of Hollywood last year which stood at six hundred and six films, would fall to fewer than four hundred next year and could continue to fall thereafter.

The article goes on to reveal the startling figures of fund loss, and mainly in those bigger budget films.

...banks that had acted as the main funders of big- and middle-budget films have withdrawn their largesse, sucking $12bn (£7.4bn) out of the $18bn available to the top studios.

The blame though isn't all laid at the door of the financial institutions, no there's someone else to blame too, the digital revolution as so many like to call it. In other words the response to the consumer demand of finding a quicker and easier way to distribute the film to the audience, something Hollywood seems to be struggling to accept and deal with.

The article reveals that DVD sales have plummeted by up to 25% in some companies, and is quick to throw in that that's partly due to piracy.

Now if they just embraced the digital revolution, as it is called, and start exploiting that business model then we could easily see profits increase. The availability of full, legal downloads on the Internet to rival the speed and ease of use of the pirated films would mean there would be no need for them on the scale that there is now - although I remain unconvinced that the scale is as large as Hollywood likes to make out.

Also I'm really not sure if, when mentioning DVD sales above, that this has included Blu-ray, for the rise of Blu-ray in the marketplace has undoubtedly had an effect on the sales of DVD, it has definitely had an effect on the prices of DVD, that's for sure.

The key here though is that the digital marketplace doesn't bring in as much as the DVD did, and that's no wonder. Hollywood double and trippled dipped, charging large profits on the DVD's, and now with no need for packaging and no one really coming up with a digital alternative to multiple packaged offerings, profits will go down with the cost to the consumer.

There's another trend threatening the dominance of Hollywood, and that's the rise of the popularity of foreign films in the foreign marketplace. More audience members are turning to films from their own region, and a buy product of that is that the audience are seeing more smaller and independent made films, films with less huge blockbuster Hollywood budget, films that tend to have less thought and plot and more effects and explosions.

Again the article has some great figures for us, in Japan for example, the box office earnings for its own films were just 5% of the box office takings a few years ago, now that figure is 65%, and that's a mammoth increase.

While this should be seen as good news for the audience and for the film fan, Hollywood is worried. Right now we're seeing MGM struggling, and possibly not going to continue, and people like Francis Ford Coppola are warning that the industry is falling apart - now note that this is the Hollywood industry that they are taking about, not the film industry from any other country in the world.

"...it's a period of incredible change...the cinema as we know it is falling apart..."

Is the quote attributed to the man, a quote which is hugely over exaggerated, and continues to view Hollywood as the be all and end all of film development. Well the rise in audience figures in non-US box offices for non-US films shows it's not a crisis being shared by other markets.

He goes on to predict that three other big Hollywood companies are struggling, Paramount made a loss of almost US $150 million in the first half of the year, and these facts have caused studios to begin changing internally to try and save money and regain that profit and worldwide dominance.

I wonder though if this is all bad news. Certainly it is for Hollywood and the people who earn a living there, but for cinema and the film fan, could a massively reduced budget available to the studios mean that they might stop churning out the big even popcorn films and concentrated on smaller, people and plot focused films, films that are cheaper but more intelligent, independent films.

Well one might hope that, but Hollywood is a business, the studios are a business, and they have to make money. So they'll look at what does make money and make more of that, and that means Harry Potter, superheroes, and so on, but their budgets may well drop and their quality with it too.

However it may also mean that Hollywood studios would start to think more like Independent production companies and find new ways to save money on productions and still produce something innovative. Rather than present the entire world destruction in full plain sight for one film, concentrating on every landmark being destroyed for the camera in CGI, they might look to make a film about the destruction of the world and how it affects on family on a very personal level, concentrating on relationships, characters, and story.

What we may end up seeing is a leaner, more intelligent and more independent Hollywood, with film production mimicking and embracing the successful box offices of non-US film industries.

Of course what it could also mean is a complete cull on these types of films in order to churn out the latest Transformers, Saw, Mad Max, or superhero or video game adaptation.

It's clear though that Hollywood has to change and the big studios with it. Digital distribution has to be embraced and DVD left to die (I do mean DVD and not Blu-ray), and less money has to be spent on soul-less blockbusters that aren't making the impact they were in foreign marketplaces.

With the shrinking, if not quite the predicted fall by some doom-sayers, of Hollywood, we could see a rise in films from other countries, and that would undoubtedly mean a rise in films more focused on plot and characters than explosions and effects. Surely that can't be a bad thing.




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Comments

Look. I'm a capitalist through and through. And far be it for me to hate on the whole of Hollywood for their excess and gratuity and for generally going with the whole bigger is better except when it comes to brains mentality...but here's where I stand.

Free market economy dictates that competition breeds innovation. Innovation breeds invention and invention leads to revolution. The good kind.

This can't be a bad thing. Surely the folks in Hollywood ( a very general generalIZATION ) will find a way to swim. I can't see Copella or any other big names being out of work, only making slightly smaller paychecks. And while i'm not at all for slashing folk's pay simply for the sake of it, if the market deems this to be the need, than that's what i think should happen.

Past all that, man, what I think is how awesome, as you point out, this is for foreign films. If there are, perhapse, fewer big budget blockbuster bombs being distributed, wouldn't it ( hopefully ) open up the playing field so that some smaller, perhapse more interesting smaller films bubble to the top?

Also, I wonder how much of this 60 something percent of their financing pool has dried up simply from the worldwide financial crisis and not by these other factors?

Interesting article.

Mogulus, I agree with you in regards to free market economy, except this isn't really a free market economy when there is somewhat of a monopoly as regards film distribution, not by some conspiracy, just the way the system works.

Films need expensive marketing and distribution to hit the big multiplexes and their multiple screenings of the same film, and that needs big backing, hence big studios, who only tend to only invest heavily in their formulaic approach.

It's not just foreign films that will get a chance though, it's independent films, and more importantly the smaller writers, directors, actors, editors, and other talent involved that will get a chance at bigger projects that wild budgets once kept them clear of.

Good point on your last comment. Who really knows how much of that 60% is down to the financial crisis when it is being used as an excuse across businesses galore just now for many other forms of rationalisation, modernisation, etc.

but what does this ultimately mean for the industry? In my line of thinking, if the monopoly you're speaking of ceases to exist, would it not be a good thing all around?

I know alot of people are looking forward to Transformers 6 and the next big disaster movie, and without the distribution they may end up either floundering or not being made at all, but would it not be worth it to see smaller, more inspired films picking up even marginally bigger distribution?

I don't know how the system works. you're definitely more learned in this than me. But it just seems that this is a short term bad thing and a long term good thing.

In my line of thinking too Mogulus! It's a good idea regardless if Hollywood studios loose their grip on the majority of releases to the majority of screens in the majority of multiplexes.

I wouldn't say I'm more learned, just thought about it a lot!

Definitely agree, short term bad, long term good. If it means less huge accountant and spreadsheet created films that don't control so many screens in so many multiplexes, then that's good for the audience.

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