Sleepless in Hollywood: Tales From the New Abnormal in the Movie Business (31 page)

At dinner one night with Patrick and Jordan at the Chateau Marmont, I shared my good fortune. Patrick gave me lots of advice—for instance, we should delay our production to make sure we wouldn’t be casting at the same time as the networks and competing for the same pool of actors. At one point I asked him how to keep a show like ours going—a show without a precinct, a hospital or a spaceship chasing Cylons, in which the bad guy keeps mutating. As ever, he had fascinating things to say, and used
Revenge
as a departure point for our discussion.

Patrick explained that
Revenge
was the soap descendent of a different kind of show called the “Brightly Burning Show.” The model was different from that of a normal show in that it was not picked up because it could obviously generate a hundred episodes. It was called a brightly burning show because it burned through story so fast and generated a lot of heat. He pinpointed
24
as the prime example of this genre. Perhaps our show too could be a brightly burning show, and if we hit the bull’s-eye with story, we could burn just as bright and fast as the virus could consume the facility.

“I remember when
24
launched I was working at UPN [United Paramount Network] at the time,” Patrick said. “My boss thought it was ridiculous. He said, ‘How is that ever going to work? They’ll be lucky to get through a season.’

“I said, ‘But that’s what’s fun about
24
—how can they up this?’ And that’s what made for water-cooler talk and compulsive viewing.

“At that time the business shifted slightly, and that show became such an asset to the studio because the DVD sales were enormous. The success of those early adrenaline shows coincided with the success of the DVD market, which has since gone away,” Patrick recalled.

Boy, did that sound familiar.

“People were buying DVDs and watching them in these marathon sittings. They burn through five or six episodes at a time. Suddenly a different paradigm was born. The question was not only can you keep the series going for seven years, but also what is the value for the series outside of that? So we talked about shows that would burn very bright and very fast. You think about them slightly differently. The network was no longer hung up on having to sustain it for a hundred episodes if you could create a sensation behind a show.”

Digital outlets are now starting to make a huge financial impact on critically acclaimed shows with cultural cachet and devoted followings, but with a fraction of the viewers that a traditional hit once had. AMC’s
Mad Men
sold exclusive online streaming rights to Netflix as a way for Netflix to garner more subscribers. Netflix paid $75 million for those rights; that’s $1 million an episode. This is a whole new universe for hotly burning cable shows.

Nextino. Just as I learn something, it changes.

•  •  •

But here’s the other crucial thing I learned, not for my network meetings but for the business: These shows are streaming online
now, and the studios that create them are making online deals with all kinds of new providers. In general, they are not yet generating as much profit as DVDs did, but the studios are starting to make some profits on exclusive sales of their shows to venues like Netflix. TV writers are starting to see that Internet profit model they were looking for.

The profit models are changing because the platforms are changing. These shows that sell new platforms generate buzz.

Patrick says, “If a show seems to hold people’s attention—even if it feels like it might burn fast but bright—if it pops, it’s still meaningful, because it helps you to cut through the clutter.”

Ahh, getting the signal through the noise. And, to come full circle, we return to the way the movie business thinks.

If an idea pops, if it gets through the clutter, then the television studios will find a way to monetize it, even if it doesn’t follow the network model of one hundred episodes for syndication. Nothing has yet come out to replace the DVD bundle for those marathon sittings, but the
appetite
for shows we watch in that manner has been created, and we watch them now on our tablets (and maybe soon on our phones) without it yet making up for what was once significant revenue. Packaging multiple seasons of beloved “hot-burning series” and selling them online will be a business, especially as we find a foolproof firewall from piracy and a cloud for storage. Then it will be something worth WGA striking for. And you can be sure it will be worth the AMPTP fighting to hold on to as well.

•  •  •

Every day, new venues for creating original programming emerge: Amazon, Hulu, Apple, Google, Netflix, YouTube, Facebook, Microsoft and many more are all creating new scripted and reality shows for your computers or devices, or to be distributed on their own platforms. And these are just the well-known corporate players. Facebook is becoming a distributor for TV and films. Funny
or Die, a venue born during the strike that creates product for its own Web site, just formed a strategic partnership with Turner Broadcasting System (TBS and Adult Swim). It also just created its own experiment in iPad publishing:
The Occasional,
a new iPad magazine. Soon webisodes moving to cable will be as common as cable being watched on the Web.

The icing on the cake of this changing menu was applied in 2012, when Microsoft lured Nancy Tellem, longtime number two to Les Moonves at CBS and among the most highly respected network executives in the business, to head its digital and media production studio, overseeing the launch of new “interactive and linear content” to turn its Xbox gaming console into a leading entertainment platform. That means you will be watching exclusive series, which she knows how to develop as well as anyone, on your (or your child’s) Xbox. It is to be a destination as well for interactive movies and music. Xbox is aiming to be a total entertainment experience, and has the means, talent and distribution channel into every household with a boy to do it.

I had to turn my television into a computer this week because I sold a show to Amazon and I want to be able to watch it. The speed of change is alarming, exciting—you’re panicking and galloping along with a headless horseman looking for a buck that’s hidden in the house like the matzo at Passover. Everyone is looking to replace the revenue that once came from DVDs.

Someone will soon be making money on the Net somewhere. At the very least, it means work for writers, more niche programming, and more opportunities for a multitude of voices. Each venue is looking for an identity to single itself out. With so many alternative venues, so many shots for every idea, they can drown each other out. No wonder ideas have to pop.

Nextino.

After my drama meeting, I met with Sony’s head of international television. That’s an arena where profits are being made, as TV shows are sold (and cofinanced) overseas to various markets, though it’s not driving what gets produced. Hopefully, our SyFy series will do well for Sony overseas. For years our shows have been seen in syndication off network in America and around the world. It is a huge revenue stream for the financiers of the shows, the studios. Now, in the way we are buying foreign formats like
Homeland
(Israel) and
American Idol
(Britain) to remake as ours, the rest of the world is also now buying our formats and remaking them in indigenous versions, as they do with our movies: Turkey has its own
Desperate Housewives;
Sony has remade
Married . . . with Children
a dozen times around the world;
Gossip Girl
is getting an international do-over; and on and on. All this is a new source of vital international revenue. It’s beginning to sound very much like one giant global entertainment ecosystem, transforming like Gaia, the living earth, in response to attacks on its existence.

But television is thriving, outpacing movies in profits on a scale that no one would have believed twenty years ago, when the movie divisions of entertainment companies were their profit engines and television was treated as a stepchild. Now movie divisions look like the specialty-art divisions of their respective entertainment conglomerates, and the two media have reversed positions. For example, at Time Warner, the movie division made $600 million in profits last year, and the television division $5.5 billion (see chart). It’s a similar ratio at the other entertainment conglomerates, where movie divisions generate revenue in the hundreds of millions while the TV divisions generate billions. It’s a different world than the one my dad was born into, or the one I joined during the Old Abnormal. It is clear which bank Willie Sutton has chosen to rob.

Source:
thewrap.com
.

My conversation with Rick, below, explains the source of these enormous profits.

BILLION-DOLLAR BABIES: TELEVISION

I was, of course, inclined to do cable when I started television. It was the most movielike and had the most creative freedom. Most of the writers I first had access to wanted to do cable too. I loved
Mad Men, Breaking Bad
and
Big Love,
and now, of course,
Homeland.
I was thinking movie-think. But subtly I felt my studio, Sony, and my agency pushing me toward network-think. Not being entirely stupid, I gradually got the joke. Network was the bull’s-eye. Cable might make the most money for its carriers, but network makes the most money for its producers.

This is how it works: Studios finance and own the shows that they sell to cable and the networks. Cablers like HBO and AMC
finance their own shows, but they like to share the risk, so they buy from studios too.

Studios sell to networks and cable stations
⁶
and make their money through the successful run of the shows and through selling the syndication rights domestically and internationally. WME and the other television agencies get packaging fees on each episode. We producers have our deals—a fee for each episode and a portion of the profits, depending on our track record—negotiated up front as we sell the pitch to the studio or the network directly through our agent.

As I came to understand all this, it became clear why the networks all eventually started their own studios. They needed rating points for advertising, which is where they make their money.
⁷
By owning their own studios, the networks can develop the shows that they think will work on air and get them the rating points they need. Plus, if they own the studios that make the shows, they can earn money even when the shows are syndicated to other networks. The studio-network conglomerates are positioned to make money at every level. I asked Rick to describe how television’s
Billion-Dollar Babies amass so much wealth for their studio owners (and showrunners).

RICK:
In the television pyramid, the most valuable commodity is a multicamera sitcom that can be played off the network [on local affiliates] at six o’clock and eleven o’clock:
Friends, Malcolm in the Middle, Two and a Half Men,
etc.

LYNDA:
What makes them so valuable? That they can be syndicated domestically?

RICK:
Yes, and internationally. And they can play on the stations at two different times, early and late night.

LYNDA:
Give me examples.

RICK:
It’s
Big Bang,
it’s
Two and a Half Men
—these are each billion-dollar babies. And it goes on for ten to fifteen years. The money just keeps coming in. Listen; when we merged with William Morris, I saw that there was still money coming in from
I Love Lucy
from all around the world. Now, it’s not millions of dollars, but it’s still hundreds of thousands of dollars coming from a show made over fifty years ago. These shows are still playing all over the world in large and small territories, in tiny territories in Africa and Asia.

LYNDA:
Interesting. [Dawn comes to Mohammed.] Those kinds of domestic hits that play in syndication are your billion-dollar babies.

RICK:
Not mine, but the studio’s. We get our commission.

LYNDA:
And the studio gets
all
that money?

RICK:
Except what they pay to participants, after they recoup their cost.

LYNDA:
Why doesn’t ABC buy only from ABC Studios, and CBS from their studios, etc.?

RICK:
Because most new shows fail. The networks don’t want to take all the risk, so they spread it around by buying from other studio providers.

LYNDA:
So how do networks make money?

RICK:
Networks derive their revenue from advertising. That’s it. And the big disparity, the big fight between broadcast and cable, is that there is a dual revenue stream in cable. In other words, the cable networks—even basic cable, like Lifetime—have dual revenue streams: subscription [per-person subscription fees] and advertising. HBO doesn’t make advertising money, but Lifetime, for example, makes money from advertising
and
from subscriptions.

LYNDA:
I never felt bad for networks before.