Netflix

This Time it's Different by Chris Weigl

I read a lot of criticism of Hollywood.  It’s my job to stay on top of that stuff.  After all this is my business.  We are in the entertainment industry and it is our job to entertain, but that’s not our only job.  Studios spend a ton of money to develop, produce and market films and other media to mass audiences.  Some do a good job.  There are about ten movies a year that are worth seeing and if you have a lot of friends who watch a ton of Netflix you can probably keep your Netflix queue full most of the time.  If you’re like most people though you have to weed through all the poor quality stuff to get to the stuff that’s worth watching.  I get asked a lot about why that stuff is even put out there.  It’s something that I refer to as polluting the market.  There are a lot of reasons that studios produce media that is not very good and sometimes they produce it because they don’t think it’s bad.  Most of the time however studios are either a part of or trying to perpetuate an idea known as the sunk cost fallacy.

The sunk cost fallacy basically says that you’re going to keep doing something because you’ve already invested too much time and effort into it to quit.  I see this a lot in life and I see it even more in business.  People don’t want to quit on bad ideas.  Say you’ve started watching something on Netflix and it wasn’t very good, but you’ve spent so much time watching it that you don’t want to turn it off.  This is the sunk cost fallacy at work.  Your time would be better spent simply by turning it off, but because we have an initial investment we don’t want to turn it off.  The same thing happens with studios and projects that once upon a time seemed like a great idea.  Take the latest Robin Hood movie for example.  The script for that film was the most expensive script ever sold (and it was a very good script.)  The film however, like most films mind you, went through multiple writers and directors, production companies and actors before Ridley Scott or Russell Crowe got involved.  Eventually, the script had gone through so many re-writes that it no longer bore any resemblance to the original script that was sold.  The film at that point simply should not have been made.  The studio however spent a great deal of money to acquire the script, the director and actors, so rather than cut their losses they invested even more money on a product that they knew was bad and they knew would fail and guess what?  It did.

These kinds of decisions obviously don’t make any sense to the outside observer, but this stuff happens all the time and it seems to happen the most often in places where people aren’t held accountable like Hollywood and Wall St.  Part of the issue is that studios are running a business that only makes sense to them.  Every year there’s a new theory as to what magic bullet is going to save Hollywood, but the fact of the matter is that Hollywood has adopted the music industry’s guiding principle in the 1990’s.  Before they know it films will be available on streaming services the day that they are set to release in theaters because going to the movies is no longer worth the cost.  What’s worse for theaters is the fact that the mediums in which people consume media is changing faster than they can adapt and let’s face it: wouldn’t we all rather watch a film with our friends in the comfort of our own homes than in a movie theater where you have to keep quiet and you can’t pause the movie to go to the bathroom?  It’s not even close.  The other day a friend of mine in another state watched a movie with me.  We texted each other as we watched it.  She lives in Louisiana, but because of a service like Netflix we’re able to stream the same film at the same time and comment to each other about it in real time.  This is the future of film.

We talk a lot here at LH Productions about the change that is hitting Hollywood.  What we don’t spend a lot of time doing is talking about how we’re going to change Hollywood.  That’s because we can’t change Hollywood.  Hollywood is like that grandparent you have that is convinced that computers are a fad and refuses to learn them.  It’s difficult for them to adjust therefore they simply don’t adjust.  This was the music industry’s response to iTunes and the outcome for the film industry will be largely the same.  There will be a new market however for new independent artists that pool their talents to create truly original and innovative entertainment and this is where we are carving our niche.  Someone is going to have to pay for all this new content that streaming services need and waiting until post-production to recoup your costs is simply a bad business strategy.  What we’re doing is creating high concept ideas and bringing the talent necessary to turn these ideas into realities together.  Everyone has value.  The challenge that we and every other production company out there faces is uniting the people with the vision and value to produce the content that people want to consume.

What makes us different is that we don’t believe in what’s known as Lowest Common Denominator television.  We refuse to dumb down our content.  You can and should compromise in life, but some things like core ideas and beliefs cannot be compromised if the structural integrity of the project is going to remain intact.  Yet this is what we see happen all the time in Hollywood.  Look at the Robin Hood movie.  There were good ideas there.  The script was fantastic, but then execs decided to get involved and pollute it with unnecessary and frankly bad ideas until the product was totally unrecognizable.  We believe in a world where anyone can create art.  We don’t want to dumb everyone down, we want to lift everyone up and the only way to do that is by creating the best content possible. 

Over the next few weeks and months we’ll be unveiling a series of How-to guides designed to help you become a part of the coming media revolution.  Do you want to write a script?  Great, I’ll tell you how.  Want to start creating media yourself?  That’s fantastic.  We’ll show you how to do it.  The revolution in media can go one of two ways.  It can be a top down revolution where those in power maintain the status quo or it can be a bottom up revolution where everyday people learn the skills necessary to produce high end material that can compete in a free market.  Will it be fair?  Of course not.  But the idea that you should be writing your script for a studio reader disgusts me.  You should be writing your script so that it is the best possible script it can be.  When you write with the sale at the front of your mind your artistic genius goes down the drain because your number one priority is no longer to write the best film you can it’s to sell your script to a studio who can destroy it.  That’s not how we believe the entertainment industry should work and we hope that you’ll join us in our fight to change the way content is created.

Flooding the Market by Chris Weigl

I spent a little time on Hulu this weekend trying to find Shipping Wars so I could watch the episodes from seasons two, three and four that Netflix doesn’t have.  I was amazed at how many shows Hulu actually has, but I was absolutely flabbergasted by the quantity of low budget shows they had from networks I had never heard of.  This is a growing trend.  On Wall Street this is known as “flooding the market.”  Before the subprime mortgage crisis became a crisis stockbrokers were building up massive funds filled with bad debt that even bankers knew would never get repaid.  The big money managers, the mutual fund companies, even the ratings agencies had no understanding of what was in these things.  Most people didn’t know what a collateralized debt obligation was and many still don’t.  But these CDOs hit the market and were given a AAA credit rating by the ratings agencies because they didn’t know how much bad debt was loaded into these things.  Once big companies like AIG went under some people started to notice and many realized in 2008 that unless someone stepped in and guaranteed the bad loans that the banks should have never offered in the first place that the entire banking system in the US and around the world would be crippled.

The crisis was pretty bad and the United States underwent the largest peacetime recession since the 1930’s.  Now, I’m not trying to compare services like Hulu with the banks and credit lenders that screwed millions of people out of their homes, but the principle of flooding the market is the same.  Almost every streaming service that I know of does this.  They advertise the wealth and diversity of content that they offer as if a wide selection makes up for not locking up the rights to the shows everyone wants to watch.  Hulu can’t stream Shipping Wars on my TV because they have a web only license for the show.  This is great for Hulu, but bad for everyone who doesn’t watch television on their computer.  It really is brilliant marketing because Hulu can claim they have the show without actually providing the show to the customer.  If you are not a Hulu customer you wouldn’t know that you can only access a variety of shows from the internet and not over TV or mobile devices (which is where most people use Hulu.)  It’s not false advertising because they do have the show they just have certain stipulations as to how and where you can watch it.  This is the case with Shipping Wars as I found out much to my dismay.

The logical question that came across my mind as I was filtering through all of these shows that even on a macro level seemed like terrible programming choices was: why didn’t some of these studios just work together to put together a better product?  If you have something you’re going to do you might as well do it well.  Making a TV show is a lot of work.  It requires a lot of man hours, a lot of technical know how, a lot of people and if it’s good; a lot of publicity.  None of this is the case if you’re making a show that no one knows is even out there and when the production quality is as bad as it is on many of these shows it is a good thing that more people don’t watch this material as they would understand just how bad of condition the state of entertainment is in.  Seriously, if you think what’s on the network is bad go on Hulu, pick a random letter and watch the first show that comes up.  The odds are pretty good that whatever you land on will make you very happy that you make the programming choices that you do.  And maybe that’s part of why they do this as well.  If you think about it it makes sense for a company like Hulu to put so much bad programming in with their A-list stuff because it makes that stuff stick out as really high quality.  You, in turn, probably have a higher opinion of Hulu because of this and don’t mind shuffling through the bad stuff to get at the stuff you want.

The great tragedy in all of this is that production companies are going to continue making bad television and bad movies because they simply don’t want to put one project aside to help another company make their project better.  This is where competition in free market economics results in a far poorer product.  If the incentive system for studios were to turn out high quality entertainment they would churn out high quality entertainment, but the truth is that everyone needs to help flood the airwaves.  If you put out too much quality content people will start having expectations of you that are far too high for anyone to reasonably meet.  This doesn’t mean that quality should be something that we work for on some projects and not on others however.  If anything this should force us to re-evaluate how we allocate our resources. 

Rather than making five bad shows for instance, I’d urge a new studio like Amazon to churn out one good show.  There’s a reason that staff writers make more than $64,000 over the lifetime of their deals ($64,000 is the payment Amazon gives first-time writers IN TOTAL for their creative ideas.)  You can’t pay someone a lousy salary and still expect a superior product.  This is where free market capitalism works.  With the right incentives people can and often do produce the highest quality product possible.  The incentives need to be right though and the product has to have a reasonable chance at success.  It is because no one can guarantee these things that some studios don’t even try and make stuff worth watching.  For these companies just putting out something, anything is good enough to keep them in business.  We should be working together to put these slackers out of business by flooding the market with so much quality content that no one would even bother to look at content that didn’t meet a standard of excellence that customers have set for their entertainment.