TeleMedia Strategy
The Bleeding Edge of Disruption

The casual film follower has always measured a film's success by its box office grosses.  While this may have been an accurate method in 1949, or even 1999, it isn't anymore.  Back in the day, 100% of a film's gross was collected in movie theaters.  Then came television, and the film was sold to the networks.  Later, it was packaged and sold to the consumer on VHS tape, then DVD, and now on Blu-ray, the internet, and iPods.  With each progressive technology, the possibility for sales and revenue exploded.  This is where the film and television markets find themselves today. 

The music industry came crashing down years ago thanks to internet downloading and file copying.  Then came legitimate online sellers such as iTunes, which reduced album sales but allowed single title sales to soar.  The result was an industry that made more money than ever from live performances, and less money than ever through album sales.  Go figure. 

It wasn't that the music industry was dead; it was simply that a new, digitally-minded music economy was needed.  Those who adapted, succeeded.  Those who didn't, hit the unemployment lines.  Due to the complexity of film and video files, it took a few more years to affect the visual medium.  Thanks to advanced technology, however, that tricky time is now upon the film and television industries. 

The formula of making high budget films, releasing them in theaters, and counting one's money is now merely old hat.  Films and TV shows can now be made anywhere in the world, by anyone.  With HD 24p cameras accessible to any middle-class individual, filmmakers now have all they need to make a project.  So, instead of making a $5 million indie film, for the same price, small production companies can make ten films.  Sure, the film may never go to theaters, but, with budgets that small, why do they need to?  

Companies like Magnolia Pictures seem to have mastered this technique.  Combining DVD sales, an HD television network, limited theatrical releases, and other distribution techniques, the company has seen amazing under-the-radar grosses while keeping costs obscenely low.  Take the company's film "Bubble," for example.  The HD Steven Soderbergh flick reportedly grossed only $70,000 or so in theaters during its opening week.  A miss, right?  Think again.  Combining the film's other, digital, sources of revenue, it had a stunning $5 million first week!  Not bad for a film produced for only 20% of that.  Lionsgate made little more than that with their much more expensive bomb, "Punisher: War Zone." 

Even studios can't rely on theater-only releases anymore.  If a film costs $100 million to make, it needs to gross almost twice that in theaters to actually see a profit, thanks to the hefty chunk that exhibitors take out.  Even in this day, there aren't too many $200 million grossers going around.  Add in another $30-50 million in prints and advertising costs and that $100 million film actually has a cost of $150 million, meaning it needs to make $300 million to list a profit at all.  Only three films made $300 million in U.S theaters in 2008, but far more than that cost $100 million or more to make.  So, how in the world do the studios make any money anymore?  While international sales account for a large part of it, more of their revenue comes from digital sales on television, DVD, the internet, etc...  According to some sources, an average of only 10-15% of a film's revenue comes from theaters, meaning $100 million in theaters can turn into $750 million more in digital revenue.  That's hardly chump change.   

Television currently faces its own crisis.  While ABC's "Lost" seems to have hemorrhaged millions of viewers over the last few seasons, several million more have started watching the show at ABC.com.  With recording devices, online episodes, and stellar DVD sales, shows no longer need massive upfront ad buys to make a profit, even if low TV ratings remain the cause for many network execs to get the axe.  It's no coincidence the WGA (and now potentially SAG) hit strike territory over digital residuals, the new bread winner of media revenue.   

With the ability to market projects online in low-cost (and sometimes free) ways, all a company needs is digital and telecommunication knowledge to succeed.  When a film costs $5 million to make, but only brings in $1.5 mil, it's considered a big miss.  But, if that same film can be made for $500,000, it's suddenly considered a huge success.  There is something to be said for a 'quantity' model.  While quality certainly matters, so does quantity.  With digital processes combined with digital distribution, why make one large film when you can make ten small ones for the same price?  Why limit yourself to only one revenue source when you can have several?  Under this low-cost digital model, if seven out of ten of your films are flops, but the other three are hits, you're still looking at major returns. Why force yourself to bat 1.000 when .300 is all you need?   

Get ready for the drudge of mediocre and unprofessional product.  It doesn't take millions of dollars, connections, or years to make films or shows anymore.  From this standpoint, it's a film and video 'de-evolution,' since the common man is now allowed to play the game.  Golf used to be a game of the rich and elite.  Thanks to mid-level and public courses, that's no longer the case.  So, while there are more mediocre golf courses and more hackers on the links than ever, there are also more profits for golf retailers and course owners.  At the end of the day, from a business perspective, that may be all that matters.   

So, plug in your internet, download a few flicks, watch some TV episodes online, and enjoy the dawn of the digital entertainment age.

By J-Michael Cabosky,

J-Michael Cabosky is the creative force behind both Joe's Box Office and Lightning Bear Productions.  With a degree from the prestigious Chapman University's Dodge College of film in Orange County, California, he has been honing his storytelling skills for several years. J-Michael has worked in multiple media formats. Starting in television, he became a writer, director, editor, and host of NIGHTCAP, a late night program aired throughout Orange County, CA. With his work from that program, he was contacted by ABC News to edit a Diane Sawyer piece for a major ABC charity event

In 2005, J-Michael began working with Eclectic Pictures, a Los Angeles based feature film production company. Within a month, he headed down to Mexico to be on set of THE DEATH AND LIFE OF BOBBY Z, a $23 million film starring Paul Walker and Laurence Fishburne. After the film, Eclectic promoted J-Michael to the development board where he has remained since. There, he developed MY MOM’S NEW BOYFRIEND, a $25 million picture starring Antonio Banderas, Meg Ryan, Selma Blair, and Colin Hanks. First Look will release the film nationally. His script, THE CORRESPONDENT, was purchased by Millennium Films (THE BLACK DAHLIA, 16 BLOCKS, RAMBO IV), and will be filmed in late 2009 for a wide 2010 release. George Hickenlooper (FACTORY GIRL) is scheduled to direct.

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