Why is Hollywood Restructuring?
Why have three of the five major US studios announced restructuring this week?
“Every question is easy when you know the only winning answer is: Give the audience what they most want,” says John J. Lee, Jr., who has provided business, funding or distribution services for twenty-three studio released motion pictures, television network series and specials, with combined production costs of over $470 million and global rights earnings exceeding $4 billion—and successfully led the vision, launch or expansion of five entertainment and media entities.
“You make it sound easy,” I say, knowing a little about current entertainment industry frenetic changes, sometimes multiple times per day.
“Why did Bob Chapek (Disney’s CEO) reshuffle his media and entertainment group and crown the reigning prince someone (Kareem Daniel) that was not in line to lead that group under the prior structure?”
“That’s what the audience wanted?” I ask.
“The audience spoke in the way every chief executive wants to hear them,” replies Lee. “Disney set the hotly branded Mulan in front of its target audiences and invited them to PPV (pay per view) it for $30 a pop.” He flashes me a broad expectant smile. “This was more than streaming. This was ‘Are you up for seeing this outside the theater and pay about a couple’s theater ticket price?’ Their response could bring big changes.”
“But Disney didn’t share the data,” I smirked.
“They immediately had the information, though smartly kept it quiet,” Lee shoots back, not missing a beat. “Finally, there was a leak that in the first ten days there had been nine million PPV transactions—about a $270 million gross! This is massive, but even bigger is that this is DTC (direct to consumer) revenue. Theatrical earnings would need to be $540 million to reach this same return to Disney!”
“This week Disney officially provided information that Mulan’s Friday, Saturday, Sunday opening was about $135 million—so a comparative $270 million box office gross! Everyone is shifting their focus.” John pauses and sips his water. “Theatrical is still viable. Yet the audience appetite for PPV coupled with its direct cash and data to the studio, renders PPV the new platinum earnings window. Theatrical’s release window will surely precede PPV, though likely for a shorter time with overlap between the two windows.”
I asked him if this changes how he finances his company’s projects.
“Development’s low seven figures (USD) per project will still come from private or internal sources. Even our typical mid-eight-figure production financing will still come from banks. Yet this brawny new PPV window expands our collateral architecture options.”
I pushed him, “So what’s the most exciting project you presently have?”
“Putting audiences first, five of our six projects are franchises that feeds their voracious appetite for high-quality episodic series that put a positive bounce in their step. Our strongest is about a bright, resilient young woman protagonist from an action-adventure novel franchise. This is being developed as a streaming series that may begin with a motion picture budgeted pilot starting with its theatrical release, followed by 1 hour episodes.”
I plied, “With a PPV release beginning the second or third week?”
Another broad smile, “If it’s what the audience wants—how could we deny them?”
John Lee is the lead author of The Producer’s Business Handbook, an entertainment industry reference and text in its fourth edition, is co-managing partner of One Door Studios, and Executive Chairman of MyStreme. He lives in Santa Barbara, California.