Inside the Sony hack; Spotify preps public offering; Indie Spirit Awards

Most of [the documents] were boring, but some of them were really fascinating and the thing I really got out of it was how much the movie business is not so much about, Is this movie going to be successful on its own terms? It's all about, Is this movie going to contribute enough profits that, added up to our other movies, we're going to reach this target of X hundred million dollars? They're always chasing to reach a goal. And then whenever a movie flops and they fall behind, they're desperate to catch up and see if they can scramble the other movies to reach this overall target that will make the earnings for their parent company happy, that will make Wall Street happy. All the studios are driven by these big profit targets because they're all part of major public companies and that's what they're always chasing. It's so easy to fall behind and then the pressure is just on in this intense way where there really is no winning, there really is only losing.

There was a model that worked in the '90s and the 2000s that was all about having the best talent working at your studio. Every movie might not be a hit, but overall they [had] strong talent and they had a strong batting average. If you made them happy and your studio was their home, you would all benefit from it. During that period in the early 2000s, Adam Sandler and Will Smith, for example, made a lot of successful movies. They made so much money, the Sony executives used to joke that Adam and Will bought [their] houses. That was a really common refrain amongst Sony and it was true. Those guys made so much profit. And being loyal made sense until suddenly their movies weren't working. And then Sony stuck with them for way too long. They believed in those guys and didn't want to let go. They stuck with talent at a time when, for better or worse, talent is by-and-large not what drives the movie business now. It's brands that drive the movie business. 

Back in the late '90s, Marvel was just coming out of bankruptcy, they were desperate for cash. At the same time Sony, due to some various crazy deals earlier, has the home video rights to Spider-Man but they don't have the theatrical rights. And they want to make a Spider-Man movie. So a Sony executive goes to Marvel around 1998 says, Hey, can we get these theatrical rights? The guys running Marvel at the time say, Forget about Spider-Man, we'll give you the rights to all of our characters, virtually every character. We're talking Captain America, Thor, Ironman, Black Panther. For $25 million you can have it all. Just to flash forward — Disney paid $4 billion for Marvel about 12 years later. The Sony executive that got that offer, he went back to his bosses at the studio at the time and said, Hey we have this offer, and their response to him was, Who gives  a [expletive] about all these other Marvel characters? All we care about is Spider-Man. The other ones are worthless. Who possibly would be interested in Black Panther? It's such a worthless character, just go back and get Spider-Man. So he did go back, he got Spider-Man, those movies were successful, but Sony could've had them all.

The major studios — your Sonys, your Warner Brothers, your Universals — make very few original adult dramas anymore. Those used to be part of their slate. You used to see them every year. It's amazing to imagine that in 1988, "Rain Man" was the number one movie in America. And you know, today 'Rain Man' is a movie that probably wouldn't get made by a studio. The economics don't make sense for these studios anymore. People would rather stay at home and watch that kind of content on television. And those movies don't work internationally, the studio is really a global business now.



So companies like Netflix and Amazon have entirely different business models. They don't care as much if one movie in-and-of-itself is profitable. They have these overall subscription services. I think Netflix cares if you pay your 10 or 12 bucks a month for streaming services and Amazon cares if you pay for Prime and use it to buy your Echo, your groceries, your books, and all the other stuff that you need in your life. If the movies keep you engaged in the Amazon universe then they're happy. They will make original films for adults that appeal to just a certain audience. There's a certain audience that likes them. There may not be as many of them anymore, but there are some of them. They really care about passion, they care that a smaller number of people love the film. So, in that sense, making more original movies for adults makes sense. And that's why you see Amazon and Netflix making these kinds of movies. "The Big Sick" and "Manchester by the Sea," which are both original movies for adults, were acclaimed and successful on their own terms, but not movies that made profits that are relevant for a Warner Brothers or a Universal.  

It needs to show some path to profitability that goes beyond the system that they have right now, which is that nearly 90 percent of their content is owned by four other companies: the three major labels and then Merlin, which represents the independent labels. So, yes, the margins are razor thin because they don't really own the content. They need to find other ways in. Advertising is one way. Another way to do it is by selling its data. That's something that I think the music industry has kind of been waiting for. That they would be able to offer analyses to record companies, to publishers, to artists directly, that show them who's listening to their music, when, which parts of the world, how often, what are the most popular songs and companies can use this to better a career, whether that means rerouting a tour or doing special initiatives or campaigns in certain territories. So those are the two obvious things.



Less obvious, and hinted about in other ways, is that Spotify could make a hardware play. They could get into literally creating a product. That's something we've only learned about recently through job listings the company has posted. It seems like these sort of three prongs are the way they are going at it. In terms of how much money they stand to make when a single Drake song is played on the service, it's very little. 

They're very interesting because they're somewhat mysterious. They're asking for people who have experience within hardware production and engineering. And it says in the public offering that about 40 percent of their staff, which is nearly 3,000 people, work in engineering. It also says Spotify is on its way to creating its first physical products and setting up an operational organization for manufacturing, supply chains, sales and marketing. That's from another job listing. There's clearly something physical coming. I think the music industry is incredibly curious, obviously since the iPod and the iPhone, nothing has been a giant disrupter on the hardware side. I can't even tell you exactly what this is, but I'm sure it's going to be competing with Amazon's Echo, and Alexa, and HomePod and everything else that's coming our way.

This is kind of what we've expected for a long time. This public offering has been talked about and buzzed about for the better part of a year-and-a-half. The part that interested me the most is that Spotify sort of threw up its hands when it comes to explaining the complexities of rights management in the U.S., and the way performance loyalties and copyright and all of those rates are determined.



To see a company with such smart individuals as [co-founder] Daniel Ek and [Netflix chief content officer] Ted Sarandos on the board, to see a company say, You know what? This is really complicated, we can't really explain it, we can barely get our heads around it but we're going to keep pressing on, getting as many licenses and clearing as many songs as we can. That was kind of interesting. The U.S. does have a problem when it comes to royalties and the way that songwriters get compensated. And Spotify, weirdly, is in the middle of it. 

To quality, a film needs to have come out theatrically in the last calendar year or played one of a very small handful of festivals. The budget needs to be under $20 million and we're looking for films that have an original, provocative subject matter, a unique point of view and really an author's voice– as opposed to films that feel perhaps more made by committee or what you get from bigger budget fare.

"Film Independent has not yet been served with papers in this matter so I can’t comment in detail. What I can say, emphatically, is that Film Independent is now and has always been committed to treating its employees, members, and volunteers with gratitude and respect, and we adhere to all applicable labor laws regarding hiring and utilizing volunteer services.  Over the years we've been fortunate to work with thousands of volunteers and we are deeply appreciative of their contributions to our programs and mission.  I myself began as a volunteer at the organization, as have several other staff members. Many of our volunteers come back year after year, and to my knowledge not one has ever filed a complaint like this one."