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In your book Sleepless in Hollywood, you sort of answer the question that many of us have had, which is – why are there so few good movies out? And you start by contrasting between the movies from 1991. And you say if you look at the top 10 movies, let’s say seven or eight of them were original screenplays. And if you look at the top 10 movies in 2012, zero have original screenplays. What does that mean? What does that shift tell us?
It tells us that the movie business underwent a fundamental shift in its dynamics and its business model. And my point was to try to figure out why that was. I was experiencing it existentially but I didn’t understand what was it about the business model that made that happen.
What do you mean you were experiencing it existentially?
Well, suddenly, I wasn't able to get the movies that I had always gotten made in the first half of my career made – scripts that were made because they were good, because they were terrific scripts, because movie stars wanted to do them because they were funny, because they were nuanced, because…
Basically, great stories?
Great stories with great characters.
And you found nobody wanted to make these anymore.
I mean, occasionally a miracle slips through. But something new had happened in Hollywood and I wanted to figure out why that was. And if I had to keep now start making movies that all were “sequelizable.”
So the first thing you point out that happens in the 1990s is that the DVD business starts collapsing.
Right. The market completely collapsed because of technology, when all around the world, everybody could download the movies that we were making. Even in America we could download the movies that we were making for free, when our movies were being pirated all over the streets of Hong Kong, Beijing – everywhere. Then suddenly there was no need to buy our DVDs anymore. And the DVDs, and this was astonishing to me, were responsible for 50 percent of the profit margin of the movie business. And we think of the movie business as this grand money making machine that makes profits of billions of dollars. But, in fact, very few movies make that much money. And the rest of them pay for the losses of those movies. But the constant profit, the constant profit stream was the DVD library, buying the movies you used to love and people buying a copy of their favorite movie to watch forever.
And the new model of sort of iTunes. The problem there is we just don't pay enough for them, right?
Exactly. It's a fraction of the cost. Michael Lynton, the head of Sony, said to me if you look at a penny and you look at all of the resources they're now getting from the new technology, it probably amounts to a fifth of a penny, where the full penny was coming in from DVDs.
So that stream of revenue that was supporting a lot of good movies is collapsing. Meanwhile, you point out there's another trend that is rising and increasing at the very same time.
A huge new trend. And, and what it was was globalization and the arrival of a huge foreign market that was developing at an exponential rate during globalization. The most important of those markets became Russia, Brazil and South America and then, ultimately and most importantly, China, which is creating new theaters at 10 theaters a day. It's now the number two market in the world and by 2020, it's going to be the number one market in the world.
So describe what happens in real time with a movie like Ice Age and its sequels.
Well, Jim Gianopulos, who is the head of Fox – and when I met him, he was head of international at Fox – is one of the most wonderful people in the movie business. And he’s really smart. He understands the world. He loves movies. And he tried to explain sequelitis, as I call it, to me, and why it works. And if we look at the example of Ice Age, he showed me this page of profits comparing domestic – North America – and international profit. And the first Ice Age made, I think, $170 million domestically and then $190 million internationally, which is about even.
About the same.
The second one, the domestic went up $20 million but the international doubled, went to $400 million. And the third one flattened domestically, did no additional business, and went up $270 million. By the fourth Ice Age, the domestic went down and the international continued to rise.
Now, what that tells us is another key component of what I call this era of the new abnormal that so changed the way we made movies and which movies we would make, which is pre-awareness. We can’t afford to market a movie, an original movie, the way we do domestically, internationally. When we break a movie the way we broke Sleepless in Seattle or The Fisher King or even Contact or just any great movie, Black Swan or Argo, we buy tons and tons of television advertising, tons and tons of trailers. And we penetrate all of America to create word of mouth. Well, there's no possible way that you can afford to do that around the world. That's just incalculably expensive.
So we need pre-awareness. We need people to know our title, to know the name of the movie, to be familiar with it before it's even marketed. So that means either a movie star’s name. That’s one form of pre-awareness. But increasingly what that means is the name of the title.
Superman, Batman, Pirates of the Caribbean Man. Any man movie, any comic book hero that we've grown up with – Harry Potter, any title with that kind of international recognition – people will go to.
You answer a question I had always wondered, which is why there’s so many movies being made in 3-D, when 3-D doesn’t really work well. Well, it turns out that the answer is China.
China will not let the new 14 movies they allowed in over the quota of 20, that is, now only 34. It was increased from 20 American films can enter China. And they all have to be 3-D and Imax. 3-D is adored overseas while we're completely exhausted with it. So they have to release it in two formats domestically and 3-D overseas.
So as always, the key to the puzzle becomes China.