As new digital production and distribution models disrupt the film business, the differences between traditional and new media companies are becoming less clear.
Legacy content companies and network operators like Walt Disney Co. are expanding their digital offerings, while digital media and technology companies such as Amazon.com Inc. are pursuing more traditional content and distribution assets. The shift could blur the lines between types of content and where that content is distributed as consumers demand access to popular shows and movies at more venues.
Disney's pending acquisition of much of 21st Century Fox Inc.'s media assets, including a stake in over-the-top TV platform Hulu LLC and its aggressive push into direct-to-consumer digital offerings, is one key example of the pressure legacy media companies face to diversify distribution options, film-industry experts say. Meanwhile, the content strategies of Amazon.com Inc., Netflix Inc., Apple Inc. and Hulu now include hiring Hollywood talent and seeking award-season accolades. Amazon is reported to be in the running to acquire independent exhibitor Landmark Theatres as it seeks a wider platform for its original films.
"Those who have a big investment in the current distribution models are probably going to have the toughest time adapting" to the evolving landscape, said East West Bank film financing executive Bennett Pozil in an interview.
On the digital side, Amazon is a leader in the integration of models. The company owns a TV studio, a film studio, a streaming video platform and cloud infrastructure for the storage and distribution of its content. If it takes on a theater chain, Amazon could link the entire chain from production to distribution, controlling almost every window along the video distribution chain. The company also has been holding talks with Hollywood studios about creating films for its platform, according to a report by Deadline Hollywood.
Netflix, which took a less cooperative approach to Hollywood at its outset, has released some of its original films in theaters. The streaming media company premiered six movies at the Venice Film Festival in August, which some are calling an early move toward Oscars season. Netflix won its first Academy Award in 2017 with the documentary short "White Helmets."
On the legacy media side, Disney is moving rapidly toward adopting a digital, direct-to-consumer distribution arm in 2018. The company has already launched a new streaming offering for sports programmer ESPN and is laying the groundwork for a new Disney-branded service in 2019. If the Fox asset deal closes, the company plans to pump more Fox content into its existing digital offerings, including Hulu, which Disney will control with a 60% stake following the deal. Disney's control of Pixar, Marvel, 20th Century Fox, Fox Searchlight and other film studios would give it a greater leverage in negotiating distribution deals with theaters as well.
Amazon's continued expansion into the video distribution space could be a boon for small-budget filmmakers, said independent film producer and investor Justin Begnaud in an interview. The company's Prime Direct Video product already allows filmmakers to distribute directly on Prime, similar to self-publishing for books. The Amazon distribution opportunity remains for independent filmmakers even as streaming media companies, including Amazon, are placing more of their original content investments in the hands of well-connected Hollywood executives, Begnaud said.
"Netflix a few years ago ... I could just go straight to them," Begnaud said. "[Now] the independent producer is getting squeezed out."
He also noted that Netflix now takes global rights to the films it buys, which complicates production loans that typically borrow against foreign distribution revenues.
Even as some opportunities for independent filmmakers are becoming more difficult, others are opening up. Filmmakers now have access to a range of financing and marketing tools that used to be the purview of large Hollywood studios, and social channels are creating new opportunities for a new generation of content creators.
Three YouTube "influencers" made the film "Camp Takota" for about $500,000, for example, marketing it through their social channels and distributing it through Apple's iTunes, where the title collected about $8 million, said film professor and entrepreneur Frank Chindamo in an interview. Much of the profits that would have gone to a studio likely went to the filmmakers in that case, he added.
In terms of distribution, if you can apply a social media aspect to it then you're in much better shape," Chindamo said. "Social media stars are going to be able to command more of their distribution and grow their empires. If Kim Kardashian decided she wanted to make a film, who would not finance that?"
Meanwhile, theater owners are brainstorming ways to expand their content offerings to be less dependent on studio fare amid a trend of declining admissions. Some are beginning to show alternative content like sporting events, short video and series, but that market is so far disorganized. Fathom Events is trying to bring some order to the space. MoviePass Inc. CEO Mitch Lowe believes that theatrical subscription services will drive that business.
MoviePass has faced financial difficulties due to its low subscription pricing and fast growth, but the company's rapid rise also led a groundswell of new theatrical subscription offerings, including from AMC Entertainment Holdings Inc. and Cinemark Holdings Inc.
"There is so much more content — from TV content to YouTube clips to sports to gaming — all those things the theater really needs to reinvent itself as a place where people can see all kinds of great visual content and stop being so reliant on the studio-produced two-hour product," Lowe said in an interview. "With a subscription you take away the obstacle of marketing, because [subscribers] are looking for things to do that are fun and different and social."
This is the second article in a two-part series about the future of film production. Read part one here.