I was speaking at Screen’s Maximising Digital Rights Value conference about a month ago. Surrounded by layers of lawyers (including the lovely James Kay, slingshot’s very own shyster) as well as by Revolver’s Justin Maccacio, who feels like a bit a kindred spirit, I was asked what I thought was holding up the pace of innovation and digital revolution in the UK. My answer had surprising amounts to do with goats. Then a few weeks later, I was an after - actually during - dinner speaker at a Breakthrough Brits event, and was asked a similar question.
Between the two events, I had the chance to start to articulate a theory that’s been growing in me for a while about innovation in an established industry. Here, in 4 brief bullet points it is. I call it the Theory of the Goat People.

• Innovation in a hybrid world, part analogue, part digital is tough. Because as long as you are still dependent on the traditional, analogue gate-keepers to generate revenue for you; you have to play by their rules.
• One case in point: windows. If you are reliant on cinemas to show your film, you have to accept their exclusivity window. So any type of innovation - be it VOD previews; or premium VOD etc is severely constrained. So despite the widespread acceptance - and indeed evidence from the IFCs First Take experiment in the US - that this method of release does better for the films without hurting cinemas attendances. Whilst I’m using windows as the example,a nd its one of the biggest ones, the theory hold through across the whole spectrum of digital innovation: DRM, free to consumer content, re-faishoning,
• So most of the innovation happens by people who don’t care about pissing of traditional analogue gate-keepers. That means that they are people who are either so powerful that they can afford to piss of traditional gate keepers, i.e. the studios who can say, take my product whatever the terms OR they are people so far on the fringes that they don’t really need the traditional gate-keepers, because their product is made so cheaply, and appeals so directly to a niche audience that they can bypass the gate-keepers altogether. This latter category, I’ve christened ‘goat-people’ because one category of them are people making very special interest documentaries, like on goat-rearing, or Vespa Enthusiasts, or New Age Beliefs, or Sports Heroes, or Cult Artists etc - which can reach out to their audiences directly via the net and sell directly both physically or by downloads.

So innovation happens at the fringe and at the center. But not where the vast majority of the British Film industry lives - in the middle. This presents all sorts of problems - it means Slingshot and all our peers, who want to be innovating, are structurally inhibited from doing so because we ARE reliant on the status quo so can’t shake the boat.

That kind of sucks. We are looking at some ways to worry less about the boat and more about goats. We’ve just applied to take part in NESTA’s digital film innovation program, which on the face of it is a thoughtful way to instigate innovation in the middle. Watch this space to see how we do.

ps - Just in case you think I am kidding about the goat people, here are some examples: documentaries about Fainting Goats, Pygmy Goats,  Socially Relevant Goats.
 Goat Movie 1, Goat Movie 2, Goat Movie 3

Check it here:

The recent ho-hah in German about 20th Century Fox’s attempt to shorten the theatrical window on a couple of block-buster movies has now spread to our fair shores, with Exhibitors closing ranks in a way reminiscent of a drug cartel, and pulling a slew of high grossing fox movies from their cinemas in “retaliation”. Everyone expects Fox to cave here, as it did in Germany, and in self-flagellating shame, re-affirm the sanctity of the 16 week theatrical window.

Christian Grass, President of Fox EMEA, and a thoroughly good guy (disclosure: we share a gym and have debated the issues around window crashing both in public and in private) hasn’t done that yet, describing the whole incident as a “storm in a tea-cup“.
In my view, it’s worse than that. It is a missed opportunity for an industry which is breaking down to try and heal itself, and a classic case of what game theorists call “The Prisoner’s Dilemma“: a situation where two parties (represented by two police prisoners accused of the same crime based on circumstantial evidence are being interrogated in separate rooms). If they act in each other’s interest by both denying the other was involved in the crime) they would both benefit. But because they choose to betray the other and work for their individual interests (he did it, nothing to do with me), both end up loosing and going to jail, condemned by the other’s betrayal.
Game Theorists use the Prisoner’s Dilemma to show that situations that appear Zero-Sum when viewed from a single perspective, are in fact win-win when parties take into account each other’s interests.

I think both Fox and the Exhibitors are acting like idiot prisoners over this one.

Now before I get my house picketed by Cinema owners and Rupert Murdoch alike, give me a minute to explain.

1. I don’t dispute the fairly clear evidence that shrinking the theatrical window has, in a lot of instances, the effect of depressing box-office returns. Which in a context of steadily decreasing cinema audience numbers (particularly in Germany where exhibitors are under real threat)
2. But neither is it possible to dispute that releasing the DVD early during a key shopping season (Fox wanted to be able to get the DVDs into shops in time for Easter break) would have provided significant uplift to DVD sales.
3. So the key question would appear to be, what’s the net gain in revenue. Do the gained DVD sales more than make up for the lost theatrical revenue. Right? Surely Fox having done the calculation had decided that more DVDs more than made up for lost theatrical revenue, and that should have been the end of it.

Wrong. Because the math works out differently if you are Fox or if you are the Cinema chains. The interests are not fully aligned.

Because of the way the deal terms between studios-exhibitors and studios - retailers are structured, and because DVDs cost more than cinema tickets; Fox earns more per DVD sold than per ticket sold. Cinema owners on the other hand don’t earn a penny from DVDs, where else for each ticket sold, they earn not only 50% or more of the ticket price, but 2-3 times as much again from concession sales and advertising. And the loss of that would be so painful that they are willing to yank high grossing movies out of their chains rather than contemplate a set precedent for a shortened window.

The prisoners, in their separate rooms, come to different conclusions as to what is best for them personally, and end up screwing each other.

The obvious question might be, why doesn’t Fox offer the cinema’s a piece of the DVD action to compensate them for lost theatrical revenue? Everyone in the industry knows that DVD success is intrinsically linked to the hype and awareness created by a theatrical success - why not acknowledge that in the deal.

Such an obvious question that there is no good answer to it. In theory, its the obvious thing to do. So obvious, that when, in June last year, I put a group of industry execs (including people from studios and exhibitors) to work on a hypothtical case study on the best release pattern for a DVD friendly block-buster, the vast majority proposed a strategy that combined some crashing of windows and some non-conventional sharing of revenue between exhibitors and studios.

But no matter how sensible they are in theory. In practice, entrenched habits and vested interests mean they keep acting like prisoners and keep screwing each other.

By contrast, this path of action has been tried, on a smaller scale, by niche distributors in the US such as Magnolia and IFC, both of whom have been doing “day and date” or crashed window releasing of small films for several years now - and presumably find it is working out rather well for them - using the theatrical buzz to drive DVD sales and maximising their marketing spend. How come they can do it? Because they are vertically integrated - Magnolia is owned by Cuban / Wagner companies, which also own the Landmark Theatre Group, and IFC owns a handful of its own cinemas. They are in a position to stop acting like two separate prisoners with competing interests, and act in concert.

I bet a lot of studios are wishing that anti-competitive laws didn’t prohibit them from buying up cinemas right now. Is that the only way? I hope not. Watch this space.

Somthing that has been occupying me this week is how much a movie going audience values “newness”. That extra value that we impart to something, because it is so NOW, so JUST OUT, so the FIRST.
Three very different contexts for thinking about this:

1. First, in the release-windows. Do you remember the days that VHS used to be premium priced on release, in the early 90s a VHS of a block-buster could cost as much as 40 quid when it first came out. Why? because people value new-ness. In all the debate (not all of it civil or sensible) about day and date, VOD and collapsing the DVD window, people should remember some basic economic theory about premium pricing - there is almost certainly a way to still capture the value that people place on “newness” whilst catering to the reality that not all of them will be able to get to the cinema to experience that newness on the big screen.
2. Another example that demonstrates the value of newness is the current consternation about Infamous the 2nd movie in as many years to investigate Truman Capote and the writing of In Cold Blood. Despite the excellent pedigree and advanced notices that the movie is getting, it is received wisdom everywhere that it won’t come close to achieving the audiences that Capote did. Why? Because its second. Despite the convicing arguments made here that “We do not write off this year’s “Hamlet” because we enjoyed last year’s”
3. Finally, an example of our own. We released a photograph of the Sugarhouse Lane logo this week on the production blog to immediate excitement. Despite the fact that its not necessarily the logo that the film will have, but a tag done by graffiti artists that we like. Why? Cause its new and they saw it there first.