By Andrew Robinson

It’s no secret the film industry is hurting these days. While the month-to-month theatrical earnings seem to fluctuate compared to previous years, overall earnings are down. Home video is no different as DVD continues its downward spiral aided by the confusion caused by the introduction of Blu-ray and a shaky economy. Film downloads are on the rise, but they have failed to ignite a firestorm in the manner of their musical counterparts. In response to the growing crisis, small studios or mini-majors have closed their doors and the larger studios and distributors have ceased production and development on future projects for up to two full years, as well as laid off scores of loyal employees.

As a filmmaker, the rapid decline of Hollywood is a bit unnerving, but not wholeheartedly unexpected. Beyond the current economic climate we find ourselves in, which has had a profound effect on seemingly everyone from Hollywood to Joe the Plumber, I can’t help but think all of this, or at least most of it, could’ve been avoided. Hollywood is banking heavily on 3D to pull theatrical sales out of the toilet and, on paper, it appears to be a good strategy. However, this still doesn’t solve Hollywood’s problems with home video and the rise of Internet-based video services such as YouTube and Hulu. For decades, home video has been the bread and butter of just about everything Hollywood has to offer. Home video has been the life’s blood of the film industry since VHS and what home video couldn’t provide, international sales could. With both home video and international sales sinking faster than the Titanic, the studios have begun taking a hard look at the Internet and subscription-based rental services and they don’t like either of them one bit.

Well, allow me to clarify a bit. I’m not certain Hollywood hates the Internet or rental giants like Netflix, I just don’t think they understand them. Or at the very least, they don’t understand why consumers love them so much, because if there is one concept Hollywood can’t wrap their collective brains around, it’s “affordable” or, better yet, “cheap.” The idea of “cheap” scares Hollywood, because for eons, they’ve solved problems by throwing money at them. Bad test screening results? Spend more money on flashy advertising. Poor international sales? Spend more money to get four bankable stars in the sequel, rather than the two who were in the first film, and so on and so forth. The problem with cheap isn’t that Hollywood can’t make money on anything, the problem with cheap is that they can’t make back all of the money they’ve spent.

Case in point: the Tribeca Film Festival ended not to long ago and played host to a number of independent and studio films, many of which were still for sale in some capacity or another. Because of the bad economics plaguing the film industry right now only a handful of films sold at the festival. Magnolia proved to be most eager to acquire content this year, though no film, not even ones with a bit of star power and press behind them, sold for more than low six figures.

While it may seem like Magnolia and a few other mini-majors got the deal of the century, they still have to spend upwards of a million dollars or more, on top of the acquisition cost, to market the film to the consumer. With independent film revenues down both domestically and internationally, it could be years before Magnolia sees a profit, despite the low cost of acquisition compared to that of costlier big-budget films. Never mind the fact that the filmmaker may still be upside down their investors even with a sale to a reputable company such as Magnolia. This is why so many in Hollywood are sleeping with a loaded gun under their pillows at night thinking to themselves, “If it gets any worse …”

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Keywords: 99 Cents the New Free, iTunes, Hollywood, Movie Downloads, Hulu, YouTube, 3D, John Hughes, DRM, Blu-ray, Netflix

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