The Fall (and Rise?) of Hollywood

Steven Spielberg is one of the only major directors who still refuses to shoot in digital. His friend George Lucas, a perennial pioneer, has been trying to wear him down, but Spielberg's getting old and has become pretty set in his ways. But that's the way of the modern world, isn't it? You either embrace the new ways and learn how to profit from them, or you stick to the old ones and risk becoming obsolete.

The problem with going to digital is that almost everyone sees how great it could be—to view a theatrical film digitally would save everyone millions of dollars and no one disputes this—but the cost of upgrading everyone involved is simply so large, and so spread out over distributors and producers, that no one is willing to flip the bill. The weakest link in the chain has always been cost, or rather the lack of willpower to incur the costs to upgrade. Thus the reason why great achievements are usually led by entrepreneurs with enough clout to stand at temple's altar and demand, This must be done.

Yesterday Disney bought Pixar, which suddenly makes Steve Jobs the largest individual shareholder of Disney shares on the planet. His vision is to make Disney the forerunner of digital entertainment and after reading the below Macworld article, I believe this Disney-Pixar deal, when we look back on it years from now, will be considered the crucible upon which Hollywood was reborn.

(If you're saying, "Reborn?" then you haven't yet heard by diatribe about Hollywood's demise. Keep reading. Also, the articles in this post are fairly long, and not really crucial to catch my drift, so I'd suggest skipping straight to my comments.)

Jobs will put the 'd for digital' in Disney
By Macworld staff

The Pixar-Disney deal could drive Hollywood to a digital dawn, reports claim.

The deal also means Apple CEO Steve Jobs - who becomes Disney's biggest individual shareholder - now has a bigger stake in Disney than anybody else on the planet.

Business Week predicts a modern Pixar touch will be applied to Disney's established characters, such as Mickey Mouse or Donald Duck, "putting new life into the mouse-house", the report states.

More intriguingly, Apple's leader will set the tone for Disney's digital plans, and the deals are done between the two firms may become a template for similar deals between Hollywood and digital firms.

"Could it be that everything that has happened so far in Jobs's professional life has been a mere prologue to the creation of the 21st Century's first real media giant?" Business Week concludes.

Analysts agree the possibility is there. Investors Business Daily states: "Jobs can influence Disney to take forward-moving steps where others aren't yet and set the bar higher," according to Ben Bajarin, an analyst at research firm Creative Strategies.

The day before the deal, CBS launched a digital arm called CBS Vision, to be led by David Poltrack: "The media business is in a state of transition to a digital, nonlinear model," Poltrack said.

BBC chairman Michael Grade belileves a shift to video online is inevitable: "I am as sure as I can be that on demand is the future," he said this week.

Apple will use its CEO's position to broker significant deals to drive video to iTunes, and to help it sell Macs.

Hollywood in Decline
As some of you know, I've started to feel like we're witnessing the middle of a trend towards Hollywood's decline. (Curtis & Dave, forgive me if paste in my emails to you about this, but they are terribly a propro)... not that this decline can't be reversed—it can—but it will take a lot of skull sweat to turn the tables back again. Joel Silver's comment is especially enlightening:

"I'm looking at big buildings and soundstages [here in L.A.] and all the things you need to make a movie, but what do I have to do? Get on a plane and fly thousands of miles so I can look at big buildings and soundstages and all the things you need to make a movie. And why? Because of costs. It all comes down to costs."

If our ex-actor Governor gets tax credits for the Hollywood studios, California might be able to reverse the trend and compete again with other film studios, but producers have already tasted what other states can do for their purse strings, so it might only be a matter of time now. The Punisher, for instance, was shot in Miami because of Florida's favorable tax credits—otherwise, that film might never have been made. Those who remember Michael Moore's Roger & Me know that GM abandoned its Michigan plant because it was cheaper to set up a similar plant in Mexico. It is, as Silver says, all about costs. It is always about costs. Costs are the ultimate Darwinian juggernaut which keep a species alive or which make a species go extinct.

With the proliferation of reality TV shows and Hi-Def, it could get even worse for Hollywood. Still, everyone said TV would kill radio and it didn't, so Hollywood will simply have to slim down to compete with out-of-state filmmakers. That just means the non-Hollywood filmmakers have a better chance now than ever to compete with the big boys.

Here's the entire Yahoo article about Hollywood's decline. (Skip to the end for even more commentary.)

Hollywood's New Backlot? The U.S.
By John Horn Times Staff Writer
Wed Aug 17, 2005 7:55 AM ET

NEW ORLEANS — Danny Retz has been a Hollywood film editor for nearly three decades. His 50 features include "RoboCop," "Cutthroat Island" and "Collateral Damage." For the last several years, though, steady work has proven elusive.

He longed for a place where work was plentiful and life was affordable.

"I don't have any more wiggle room left," Retz said a few days before he boarded a plane for Louisiana, where he was born 57 years ago. "I was bleeding money."
Retz wasn't returning to New Orleans just to be close to good food and extended family. He was chasing Hollywood.

For an increasing number of people working in the movie industry, some of the best jobs no longer carry the "Made in California" label. Over the last two decades, scores of movies have left town in search of the cheapest labor, weakest currencies and best financial incentives. At first, producers fled to Canada. Then they set off for more distant lands, such as Australia, England and, more recently, Eastern Europe.

But the hottest front in the production wars these days is much closer to home, as California finds itself competing with almost every state in the union. Thanks to an array of tax incentives offered from Rhode Island to New Mexico, screenwriters are recasting their plots to accommodate new locales, producers are learning new math to stretch budgets and Hollywood has settled into a multiple-time-zone way of life.

Hollywood remains the place where most movies are conceived and financed. And the economic and emotional effect of so-called runaway production has been blunted by a fresh wave of television shows made in town — TV production has surged 64% since 2000, as local movie filming fell 8%.

But there's no masking the fact that moviemaking has turned into part of the national economy. The Hollywoodization of America, according to the U.S. Census, has turned into an industry that generates $9.3 billion in American salaries each year.

"I'm sitting here at my office at Warner Bros.," said Joel Silver, who produced the "Matrix" movies. "And I'm looking at big buildings and soundstages and all the things you need to make a movie, but what do I have to do? Get on a plane and fly thousands of miles so I can look at big buildings and soundstages and all the things you need to make a movie. And why? Because of costs. It all comes down to costs."

One of Silver's upcoming movies, the Hilary Swank thriller "The Reaping," is being filmed in Louisiana.

The drive to lure Hollywood across state lines is tearing down ideological boundaries: Louisiana's popular incentives were drafted by a conservative Republican state legislator, and were being hawked to the industry by a liberal lieutenant governor.

Even within California, a push for similar incentives is being supported by both the studios and the Hollywood labor unions, who on almost every other issue sit on opposite sides of the table.
The profusion of incentives across the country, which have even more value with the fall of Canadian exchange rates, has created a politically prickly challenge for Gov. Arnold Schwarzenegger. Having made a fortune in the movies, the $20-million-a-movie actor must now convince the state's lawmakers and taxpayers that Hollywood needs — and deserves — a financial handout.

"People say, 'Why should I give a tax credit to these rich studios?' I hear that all the time," said Amy Lemisch, film commissioner for California, which has virtually no financial incentives. She has been lobbying for a bill that would mimic other state incentives, which could surface in the current legislative session. The bill's chances could be helped by a new study due soon that tracks how much tax revenue and jobs a TV show or movie generates. That effect, Lemisch says, is not always easy to see.

But it's highly visible in the Deep South.

Louisiana has been home to Zydeco music, Cajun spices and po-boy sandwiches. Now it's also where you'll find Manhattan, Milwaukee and Orange County.
The story line for "Just My Luck" unfolds in New York City, but the movie was filmed almost entirely in Louisiana. The movie "Mr. 3000" is about a Milwaukee Brewers baseball player. It, too, was largely made in Louisiana. Although the plot for "Big Momma's House 2" develops in Orange County, the movie was shot for only three weeks in Southern California, with the other eight weeks in and around New Orleans.

The upcoming Denzel Washington thriller "Déjà Vu" was originally set in New York. But in the current screenplay revisions, Long Island Sound has been replaced by the Mississippi River, and a bomber hiding out in the Long Island Pine Barrens is now holing up in the Louisiana bayou.
Director Donald Petrie estimated "Just My Luck" saved about 20% on its budget by relocating to the state. The Louisiana incentives helped movie production spending soar to more than $125 million last year, up from $3.9 million in 2002, the state says. Along the way, an estimated 3,000 jobs were created.

"It's been wildly successful," said Louisiana Lt. Gov. Mitchell Landrieu on a recent visit to Los Angeles to drum up more business, his third trip to Southern California this year.
Other states offering new incentives are reporting similar results.

The New York Mayor's Office for Film, Theatre and Broadcasting says that since the start of this year, the state and city incentives have attracted $325 million in new film and TV production spending, creating jobs for about 6,000 New Yorkers. Among the bigger fish the state's incentives have landed: Martin Scorsese's "The Departed," even though the story is set in Boston.

The Illinois Film Office estimates that its tax incentives helped secure the movies "Roll Bounce," "Ice Harvest," "The Amityville Horror" and "The Weather Man," bringing $77 million to the state's economy in 2004, up from $25 million in 2003. The incentives offer a tax credit of 25% for wages paid to state residents working on Illinois sets, with an additional 10% for producers hiring from economically disadvantaged neighborhoods.

To lure production to its state, New Mexico offers tax rebates of up to 20% on local spending, dollar-for-dollar salary matches for job training and promotion, and no-interest loans of as much as $15 million a production. Since the incentives were introduced in 2002, 30 movies have been filmed in New Mexico, and the New Mexico Film Office says those productions directly contributed about $133 million to the state economy over the last three years.

Few states have gone from zero to hero faster than Louisiana. Introduced in July 2002, its production incentives have generated a surge in film and TV movie production that are creating a new moviemaking entrepreneurial class.

In 2004, 27 feature films and TV movies were made in the state, up from five features in 2003. By the end of this year, the state will have hosted Washington's "Déjà Vu," Ashley Judd's "Bug," Sarah Jessica Parker's "Failure to Launch," Martin Lawrence's "Big Momma's House 2," Kevin Costner's "The Guardian" and the television series "Thief."

For movie producers, the Louisiana deal was almost too good to be true because it didn't rigidly distinguish between money spent in or out of the state (that loophole was recently closed). Universal Pictures filmed only about 30% of its new thriller "Skeleton Key" in Louisiana, but nevertheless earned about $3.4 million in state tax credits on the film's $43-million budget.

Louisiana last year paid out $67 million in tax credits to movie and TV productions, and has dispensed about $40 million already in 2005. The state estimates that 2004 productions generated $39.4 million in production-related payroll to state residents and a total of $125.9 million into the economy.

Steve Scalise is a tax-cutting conservative in the Louisiana House of Representatives. He does not consider show business a leftist blight. Instead, the Republican legislator sees Hollywood as part of his state's economic fabric and a spigot for job growth.

"I don't know much about the film industry outside of going to the movies," Scalise said. But what he does understand is that tax policy can drive economic development, which the state sorely needed when he was first sworn into office nine years ago.

Several years into that first term, a Scalise constituent from the New Orleans suburb of Harahan named Alex Middleton complained that he couldn't make ends meet with his New Orleans Studios, particularly because Canada offered production incentives and a weak currency compared with the U.S. dollar.

"He said, 'They are filming French Quarter scenes in Vancouver. What can you do to help?' " Scalise recalled Middleton telling him. Movie production in Louisiana had slumped from about $70 million in good years to about $20 million in lean ones.

The state was losing more than movie shoots. From 1995 to 2000, Louisiana had a net population loss of 76,000, the only Southeast state to see more people leave than arrive.

"We used to be just oil and gas," Scalise said. "And I saw [Hollywood] as an industry that just fit really well." So Scalise wrote a group of bills offering tax credits to Hollywood.
Scalise's first attempt went down in flames — "I got slaughtered in committee," he said — but the next bill passed in 2002. Although the bill was too late to save Middleton's studio (which is now running under a new owner), it immediately started attracting Hollywood scouts.

"My goal was to get $100 million in the first three years," Scalise said. "Now we think this can be a $1-billion industry."

New Orleans is famous for its Mardi Gras baubles, and Dan Kelly's Beads by the Dozen has helped adorn many drunken revelers. But now Dan and his brother Kevin have found a business that's even more fun than making Mardi Gras necklaces: converting commercial warehouses into movie soundstages. The brothers operate 28 warehouses, and space that recently housed coffee beans and copper is being used for "Big Momma's House 2" and "Déjà Vu."

"It's great business," said Kevin Kelly. "And when products just sit in buildings, it's not very exciting."

Inside a converted Kelly warehouse in New Orleans' Elmwood Industrial Park portable air conditioners burn through $1,500 of fuel a day, pumping additional frigid air across the sets for the "Big Momma's House" sequel, trying to keep pace with Louisiana's oppressive summer weather.
"We shed about 17% on our budget" by coming to Louisiana, said the film's producer, David T. Friendly. "And that was the difference between development hell and a green light. That's amazing."

As Friendly spoke, director John Whitesell was rehearsing a scene in which Big Momma (Lawrence) visits a luxurious spa. The spa was filled with a dozen beautiful women wearing little more than a towel, yet the Louisiana talent pool was so thin that the film's casting director had to hire women from Texas and Tennessee.

Filmmakers say that's part of the downside of relocating to the state: There aren't enough qualified people to go around.

"I've done a lot of movies in Canada and the trades are built up," said "Big Momma" production designer Craig Stearns. "It's hard to find people here. They're new, and there's a lot of competition."

It's not just personnel that's in short supply. "Big Momma's House 2" costume designer Debrae Little said she had to import everything from buttons to bluejeans from California.

The state's infamous heat and humidity means working outside can be unbearable, and thunderstorms can create ear-splitting rackets inside the uninsulated warehouses. "Glory Road" star Josh Lucas said that while filming the upcoming basketball movie in a gym, interior temperatures reached 135 degrees. "Things," Lucas said, "were starting to melt."

Adrian Staton is following the money. The actress just moved to New Orleans, convinced it was the best place to establish her career. A USC graduate, Staton had been living in South Carolina, making mostly TV commercials for local businesses such as King's Grant Golf Course in Fayetteville, N.C.

"I was thinking about moving to Los Angeles," Staton said. "But when my agent told me she was going to open a New Orleans branch, I thought it would really help me build my resume. And it's much cheaper to live here than in Los Angeles."

Since moving to Louisiana this year, Staton still has to take jobs on the side to make ends meet but has been cast in one feature film and one TV movie — work that she previously couldn't get in Los Angeles and South Carolina. The very day she returned to New Orleans from a summer vacation, she was back on the audition circuit.

The push for tax incentives may be anchored in job creation, but civic pride has played a crucial role in putting the issue on the map. Illinois jump-started its incentive legislation soon after 2002's "Chicago" was filmed in Canada. "The embarrassment of 'Chicago' being made in Toronto brought [incentives] to everyone's attention," said Brenda Sexton, managing director of the Illinois Film Office.

New York similarly didn't get its incentive bills signed until after 2004's "New York Minute" was made in Toronto and the 2003 television movie "Rudy: The Rudy Giuliani Story" was filmed in Montreal.

"They never gave us a chance," Katherine Oliver, commissioner of the New York City Mayor's Office of Film, Theatre and Broadcasting, said of the Giuliani movie. She also said the Ashley and Mary-Kate Olsen movie "New York Minute" left the state for Canada in "a New York minute. People wouldn't even consider New York because there wasn't a tax credit."

It's the same reason so many movies are leaving California: Even factoring in travel and hotel costs, it's often cheaper to leave the state. A June analysis conducted by the Independent Film & Television Alliance showed that a hypothetical movie that would cost $19.24 million to produce in Los Angeles would cost $17.8 million in New Mexico and $18 million in Louisiana.

"I've been trying for years to try to get [California legislators] to do something for us. And they don't seem interested," said Jim Brubaker, president of physical production for Universal Pictures. "They say they can't afford it. If California had any kind of incentive, you would never have to leave the state."

Said Silver, who produced Schwarzenegger's "Predator" and "Commando": "They are driving the industry out of the state. You have a governor who was a movie star. It doesn't make any sense. They could fix it in one minute if they wanted to — but no one seems to want to."

(Times staff writer Mary McNamara contributed to this report.)

After reading this article, my filmmaker friend Curtis said:

It reminds me a lot of what Walter Murch once wrote in his essay, comparing big budget films shot on celluloid to frescos. Digital represents the artist moving to the canvas. Sure, it won't be as impressive as a fresco, but every now and then you'll get a Picasso. The fat little girl in Indiana who makes the next Lawrence of Arabia on video.

As for movies moving out of state - it's not just limited to other states. They're moving to other countries. Shooting in Canada and Romania because of cheaper costs. Everything is being outsourced. It's a sign of a shifting economy and we should see it as a wake-up call, not just a small crack in the dam. The dam will burst one day and we'd better be ready to move with the times.

Totally. You either embrace the new ways and learn how to profit from them, or you stick to the old ones and risk becoming obsolete.