This is in response to the excellent Y Combinator "Kill Hollywood" request for startups.
I think it’s simple (though not easy): beat them at their own game by starting a new studio. A kind of studio that has never existed. A kind that could not have existed before. We are now at a moment in time where the internet, home theater, and mobile devices have coalesced into a ubiquitous media experience for a critical mass of people. The nascent ubiquity of web-enabled media devices provides an unprecedented opportunity to completely disrupt the traditional cinematic distribution model.
Our new studio will work like this:
1) Every movie production will be funded and executed like a tech startup. Terms for new productions will be transparent and consistent. The studio will operate like an angel investor: writers/directors will pitch production ideas to the studio through a well-defined (and primarily web-based) process and the best ideas will receive a term sheet. Terms will vary based on the talent involved and budget requirements, but will be consistent within these dimensions (for example, the studio will usually get x% equity stake when backing a brand new director, a bit less with a mid-tier director, and the smallest stake with a top-tier director).
2) In exchange for such transparency and equitable terms, directors/producers for each production must manage budgets extremely tightly. In fact, budgets will be doled out on a recurring basis and any excess budget needs must be raised independently of the original term sheet. For example:
- The studio green lights a 4-month, $10M production. Funds for the production will be disbursed on a pre-determined timetable (say, $4M the first month, $2M per month for the next three months). The disbursement timetable is set forth in the initial term sheet. The director/crew must therefore be very mindful of monthly spend and do careful planning up front. Say that, at the end of the four months, the production still needs 4 weeks of post-production work, estimated to cost an addition $2M. The production stakeholders (including the writers/director) will have to raise this money, very likely not from the studio itself. The expectation is that they will raise this money by shopping around the unfinished product and selling a portion of their equity stake to outside investors.
4) Cast and crew will be compensated normally, but writers/directors will be expected to act as equity stakeholders alongside the studio investors. They will typically receive a personal stipend during production, but their real payday will not come until after the film’s release and revenues are generated. Basically, every writer/director gets “points” and significantly more than the Hollywood studio system typically provides. Also, no “creative accounting” on the studio’s part. Accounting methods for calculating and paying out rev share will be agreed to at the outset, as part of the original term sheet.
5) Online/mobile streaming only. $0.99 per viewing. That’s it. You click “watch now”, we charge you $0.99. “What if it’s a short?” you ask. “What if it’s a 3-hour epic?” you ask. Doesn’t matter — $0.99 per viewing.
6) An open source API will be provided, so that 3rd-party platforms can easily make the studio’s productions available for viewing anytime, anywhere, on any device (for $0.99 per viewing).
7) Merchandising will be managed by the studio, primarily e-commerce driven, and revenue sharing terms worked out ahead of time as part of the original term sheet.
The portfolio of productions that the studio creates will be carefully curated (as part of the pitch/vetting process) in order to maintain profitability. In other words, certain types of productions can actually be quite profitable with very low production budgets. We have 100 years of Hollywood box office numbers from which we can easily deduce what types of productions these are. Think of it as “Moneyball for movies” — that is, what types of successful film productions does Hollywood tend to undervalue in favor of large, expensive (and tremendously risky) blockbuster attempts?
Experience suggests that such “sleeper” productions that slip through the current studio system tend to be intelligent, well-written, well-directed films that focus primarily on storytelling rather than eye candy or star appeal, are enjoyable to watch, and can typically be consumed in 90 minutes or less. How awesome does that sound?
I suspect that Harvey Weinstein would grok this pretty well.