The Hollywood Stock Exchange (HSX) recently launched a site redesign.  I have to hand it to them, it is visually appealing.  Advertising has been all but eliminated.  There is an ad or two on the inside, but nothing overwhelming. It is clear that HSX is reinventing itself in preparation for a new revenue scheme.  The next phase in its plan is to legalize real-money trading on its platform.

First some comments about some of the functionality on the new site.  Some features are groundbreaking within social media practice.  I really like the “Trader Watchlist” idea, for example, a good way to follow traders on a roll.  What is missing in this feature, however, are live links to view the watched trader’s activity and, more importantly, a reason to follow these folks.  It’s one thing to see a trader with a large percentage gain, and yet another to get people to care.

Under the tab “Community” you will find “HSX Fan Sites”.  This is a nice way to give link-backs to the organic community that have supported HSX over the years.  There is also a forum — an often forgotten, but highly-used section of many social media sites.  What is conspicuously absent, however, is user blogging capability.   There are blogs (under the “Calendar” tab) but apparently the bloggers have been carefully selected along party lines.  HSX must be stinging from its accidental launch of its social network some months back — a launch it had to reverse after fan outcry.  In any event, proprietary blog writing is becoming more and more obsolete and maybe HSX should tap into a WordPress format like the rest of us.

So what about the move to legalize futures trading on the site?  Cantor Fitzgerald, the parent of HSX,  announced it had applied to the Commodities Future Trade Commission (CFTC) for permission to turn the site into real-money trading.  My friend Chris Masse summarized this in his blog on Midas Oracle.  Maybe it is just me, but I think in this economic environment, this proposal has a snowball’s chance in hell of being approved.   Max Keiser, the founder of HSX, commented that this would be bad for the film industry because it would allow studios to short a competitor’s future contracts and influence a film’s market potential.  I happen to agree.

Everybody knows the best way to make money on HSX is to play in the IPO market.  Problem is, there is no transparency with respect to pricing IPO shares.  Hopefully, this is something that FlickOptions will address (I need beta testers, by the way).  Forget about making money trying to predict the marketing potential of the great oligopoly we call Hollywood.  How fun is it to play?

The Wall Street Journal published an article a few weeks back about the emergence of the download channel as a preferred way to distribute movie entertainment on demand.  The article noted the at the emergence of the the download market has signaled the beginning of the end for DVD distribution.  In 2008, DVD sales accounted for 43% of film revenue.  Downloads and streaming movies accounted for a less than 5% of revenue.  But DVD revenue was down  15% year-over-year.   DVD sales represent a high-margin product for studios and the loss of revenue from that product will change how download content is distributed.

So far the strategy seems to be to charge ala carte, for digital distribution, with no package deals.  The CEO of Netflix was interviewed recently and jumped on the studio bashing bandwagon — albeit, with a smile.  He said:  “If the studios had it their way we would probably pay them two or three times.”  He made this comment in reference to his observation that the margins on DVD’s are lower than the margins on downloads (on a percentage basis) but that the cost of licensing download content for mass distribution, reduces this advantage, or at least redistributes the cost.  He noted that Netflix routinely sits on excess DVD content.  He went on to say that Netflix is paying the studios for digital distribution rather than the Postal Service for circulating the excess inventory.  Sounds like Netflix is stocked up on some gas-guzzler cars.

My friend, Max Keiser, believes that digital distribution foreshadows a whole new age of mass piracy.  He is starting a company called “Pirate My Film” based on the premise that there will be alternative ways to reap revenue from the download market and it doesn’t involve sending the armada to thwart the digital pirates.  He believes that folks will be willing to pay a reasonable subscription fee to have free and open access to film entertainment.  Alternatively, he predicts that filmmakers are willing to sell futures on downloads even before the movie is ever made.  With the loss of corporate lending capital, his idea seems strangely plausable.

Creating futures on film entertainment is what FlickOptions is all about.  We believe that movie buffs already want to buy movie tickets well in advance of the 45-day advance sale option offered by Fandango and Movietickets.com.  Why shouldn’t fans be able to buy a ticket a year in advance?  And if they can, why shouldn’t they be able to trade futures on those tickets?

So as we fade through our own capital  issues (how to get the start-up funds) get ready.  We think your romance with the download will give you some exciting new alternatives.

Reality shows are pushing the envelope  - especially in this age of new media.  Those of us who watched the  finalee of the Celebrity Apprentice, this year, can testify that we were definitely roosted at the edge.   The showdown between Joan Rivers and Annie Duke was not so much a battle of who should win, but who should not lose.  What a mess.  The disparaging remarks, the baby tantrums, the behind the scenes back-stabbing — all entertaining to some degree, but in a preverse way.

Two years ago. Tump wisely reformatted the show so that participants would not reap financial reward, but instead promote a charity.  This is part of a new movement in marketing called “cause marketing“.  So far, it is proving to only timely, but effective.

Cause marketing uses the forces of mass selling to promote the transfer of wealth to the less fortunate while at the same time leveraging publicity and goodwill to sell product and build brand.  Joan Rivers did not benefit financially from her win on the apprentice.  Her charity, God’s Love, We Deliver, did.  The Apprentice ended up demonstrating the cause-marketing proof of concept.  It generated big ratings, healthy advertising revenue and a sustainable business model.  Who can deny the power of celebrity (uncorked) as a money producer?  And who can deny the power of charitable giving as a marketing force?

Live Long and Prosper

Burger King announced a deal with Paramount Pictures that will leverage promotional dollars across three big films: “Star Trek”, “Transformers: Revenge of the Fallen” and G.I Joe: The Rise of the Cobra”.  The idea is to use brand and theme and maybe a few action figures to promote movie ticket sales and fast food consumption at a similar clip.

First of all, you have to hand it to Paramount for pulling this off with with a three-film deal.  Disney recently ended a ten-year deal with McDonalds which set the stage for these new kinds of integrated promotions.

In my experience, promotional partnerships have been a nightmare to manage and balance.  When it comes to a  marriage of PR folks and agency creatives across two companies, one party always seems to end up slightly more equal in the relationship.  That can throw a wrench into the works.  But this deal could actually work.  Burger King was first out of the gate with a press release touting its concept of “Kingons” — Burger King characters intent on stealing your collectible glass.  Yes, there is a dedicated Web site.

The promotion goes deep.  Burger King will create special items on the menu that tie into the movies including bolt-shaped Chicken Tenders (related to Star Trek) and the BBQ Stackticon Sandwich (Transformers).  Top movie industry talent will direct the commercials and the star ship bridge set from the movie was used to shoot the commercial.  Action figures in the kid’s meals will round-out the promotion nicely.

I think that this is a win-win promotion on the part of Paramount and Burger King.  There is not much innovation in the execution and I feel that there is a cause marketing element missing (why not allow customers to beam some good will to places in the world where a decent meal is ten times more valuable than an action figure).  Also an online ticket provider tie-in would have covered the alternative ticketing channel.

Having said that, I look forward to a serious discussion over whether Star Trek will ever find its way home to the Gene Roddenberry cheesy, cool, character-driven inventiveness that put it on the map (classic “To Tell the Truth”).  In the meantime, I am going to take steps to keep my collectible glass away from those nasty Kingons, although, they do have the best fries.

Lycos Cinema calls it quits

TechCrunch reported that Lycos Cinema would be closing its doors April 29th.  Two years, no foothold… time to close the doors.

Lycos Cinema wanted to recreate the group viewing experience online by providing the tools and the content.  Feature films could be watched simultaneously by a single viewer (30 days to watch, 24 hours to finish) for about $4.  But the real hook was that, for a few cents more, you could get a group of your friends to watch with you — all from different locations.  A social network linked the group together in what was essentially a virtual theater experience.

According to Techcrunch, the lack of content killed it.  Users never heard of 70% of the films featured on the site. This is a problem.  As entrepreneurs explore new methods for distributing and monetizing film, they must weigh supplier support for new distribution channels against the quality of content supported by these channels.  Hollywood studios have the highest quality, at least in terms of box office potential, and also the lowest need for alternative channels of distribution. So how will producers of high-quality content ever get involved?

Two scenarios are possible for companies intent on revolutionizing film distribution and exhibition:

• Come up with an idea that is revolutionary — forcing the industry to adapt to a new distribution channel supported by an exploding fan base.

• Start with the support of a premium content provider and leverage that support to establish a foothold in the industry.

Whereas, many of us want to see technology “stick it to the man”, I think the latter case is the more realistic scenario.

There are a couple of interesting points in this article.  First, it was clear that the term  “indie” referred to films that require less than $50 million to make.  That is a pretty high bar.  I guess every indie filmmaker must have two cars in the garage and their kids go to college.  Second, that pre-selling revenues is an alternative means of financing that has experienced a rise, and now, a fall.  Most of the film producers interviewed doubted that it would come back anytime soon.  The implication was that pre-selling has been a form of financing relied upon when conventional financing was not available, or assessible.  And finally, even though the piracy angle was used to sell newspapers, the story’s writer brought up another root cause for the drop-off in pre-sold foreign film distribution — the rise in the overall quality of foreign films.

I guess the rest of the world still wants to see Ben Affleck in all his $100 Hollywood glory, but perhaps some of those indie films made abroad are actually good.  Must be pirates.

As a regular Sundance film fest attendee, I feel the filmmaker’s pain.   Not only do they have to create a brilliant script, hire superb actors and assemble an experienced team of professionals, but somehow they have to raise enough cash to make it happen.  That is a clear business problem — one few filmmakers can tackle alone.

Max takes a new-age view of copyright laws.  What good are copyright laws, he says,  in a day and age when technology has created new distribution channels for electronic media that cannot fit the old printing press economy?  Max talks about the emerging power of Bittorrent exchanges which double and re-double in size within a few month’s time.  He proposes a new model for monetizing film distribution.

This from his latest letter to registrants to his site:

PirateMyFilm sounds like exactly what the “industry” of film making needs — a swift kick in the deteriorating wall to free up the creativity and lower the ridiculously overinflated costs, salaries and power the Hollywood Studio Cartel has over creativity and movie production.

Tough to argue with that.

]]> http://flickoptions.wordpress.com/2009/04/18/pirate-my-film/feed/ 0 flickoptions pirate1 http://flickoptions.wordpress.com/2009/04/05/exhibition-past/ http://flickoptions.wordpress.com/2009/04/05/exhibition-past/#comments Sun, 05 Apr 2009 14:33:32 +0000 flickoptions http://flickoptions.wordpress.com/?p=22 ]]> Sumner Redstone’s family holding company, National Amusements Inc. wants to sell big chunks of its movie-theater properties.  On the block are 54 U.S. properties and 21 U.K. properties.  Not on the block are theaters in Russia and Latin America.   National amusements needs to sell some assets in order to restructure about $1.5 billion in debt.  Not much TARP money for movie theaters, I’m afraid.

Redstone is a power guy in the entertainment business.  His family are majority owners of  CBS Corporation, Viacom, and MTV Networks, BET, and movie production and distribution Paramount Pictures and DreamWorks movie studios, and are equal partners in MovieTickets.com. Of note: he survived a hotel fire in 1979 by hanging from one arm from the window.  Since then, he has supported philanthropic efforts to help burn victims.

Redstone’s famous business quote is: “Content is King”.

One prospective buyer might be Entertainment Properties Trust (Symbol: EPR) — a REIT company based in Kansas City.  EPR holds theater complexes, wineries, amusement parks and  ski areas and its interest would likely be restricted to select “cherry-picked” properties.  But the best prospects remain Regal and AMC.

Hedge funds have made a hasty retreat from film financing.  Not by choice.  The market meltdown — the black swan event of the year — has taken assets out of the marketplace and studios and independent film producers alike are scaling back budgets, or in some cases, postponing projects altogether.  So what does that mean for the emergence of socialized film financing?

One company, IndieVest, is on a roll.  Its latest film production, funded by high-net worth investors, was selected to be in the premier position in the CineVegas film festival.  The film stars Steve Buscemi as an ex-gambler-turned fraud investigator who experiences the wild side of Las Vegas when he investigates a stripper’s  bazaar insurance claim.  Sarah Silverman is also in the film — coming off a YouTube classic starring Matt Damon who apparently she was “effing”.  (Funny stuff).

IndieVest is putting one on the board.  What makes this a milestone pic is that is was financed by high-net-worth investors who ponied up $50,000 or more to finance a star-powered flick.  Distribution is limited, but is guaranteed along with a substantial marketing budget.  IndieVest takes a 10% commission for raising the capital and investors shoot for 15% return with additional profit sharing upside.  They had a nice article in Fast Company.

I predict that socialized film financing will gain ground in 2009.

The newest trend in the film exhibition market is 3-D.

In case you haven’t heard, the Hannah Montana/Miley Cyrus “Best of Both Worlds” concert film (shown in 3-D) grossed $31 million opening weekend and is well on its way to doing $80 million at the domestic box office. What enabled this film to do well was digital projection – and also better 3-D technology. Digital projection is the new frontier – offering cheaper distribution and new opportunities for live event projection. It also takes 3-D technology from the blue-red, headache-producing 3-D glasses (circa 1950) to a new “I felt like I was there” theater experience. Wikipedia has an interesting history of 3-D film.

Popularization of 3-D depends on two things – 3-D technology and digital projection. There has been progress on both fronts. The Polar Express 3-D used circular polarized light, a process where the light is polarized in a clockwise pattern for the left eye and a counter-clockwise pattern for the right eye, greatly diminishing the head-ache producing spillage effect of older 3-D technology.

Digitalization of theaters is crankin’ even as theaters are wrestling with the change-over costs. Without it, no 3-D Hanna. The changeover cost is around $75,000, per screen, and despite studio incentives of up to $1,000 a film, that is a big nut to swallow.

One technology company leading the march to digital cinema is Access Integrated Technologies, Inc. (AIXD). It has a bunch of cash, despite some consistent burn, and has done deals with a solid block of major studios. Check out the latest press release from AIXD. AIXD got a jump on many competitors by bypassing beta testing of its equipment and going right to rollout. That business decision was aggressive, but it looks like there have a big piece of the market as a result.

What I noticed on AccessIT’s press release was that the major theaters, Regal and AMC, are not on their client list. That could spell trouble. But tough to deny that theaters want 3-D capability – now. Check out this Q4 2007 earnings call transcript with the Regal Entertainment Group. Lots of chatter about 3-D.