Where the Film Industry is Headed in 2019

Sun Tzu wrote the following in The Art of War:  “The natural formation of the country is the soldier’s best ally; but a power of estimating the adversary, of controlling the forces of victory, and of shrewdly calculating difficulties, dangers, and distances, constitutes the test of a great general.”  While no one can tell what the future holds, there are some trends that many of us have been following that are greatly impacting the way we run our businesses. This blog is one observer’s look at the position of the overall independent film industry, and some level of the economy as a whole.

​The US Economy is heading for a Recession

Now I’m just a guy who helps people make movies.  I’m in no way qualified to give you financial advice, or recommend stocks or bonds.  I’m just a guy who follows these things and is paying enough attention to know that the indicators are there.  So you can choose whether or not to listen to me on this one, but it is something that I’m quite certain will happen by the end of 2019.

I originally thought that the stock market would start to dip significantly around March or April, and then we’d have a fairly widespread crash around the end of October 2019.   There were a lot of things to do with the fiscal year and annual payments made by corporations to make me think that timeline would end up being about right. 

However, the stock market is already more volatile than it should be at this time of year.  I thought the Trump tax cuts that mainly financed stock buybacks would inflate the stock market longer than they seem to be doing right now.  To me, this may indicate that we’re either in for more trouble than I initially thought, or we’re going to be in trouble much sooner than October.  As of scheduling this post to be published, I’m not entirely sure which that’s going to be. 

So you’re probably thinking “great, thanks Ben. I read your blog for insights into the film industry, not for rampant speculation on the state of the entire economy.  I JUST WANT TO MAKE MOVIES!” Well, as I said at the top, if you want to be successful, you must understand the terrain you’re playing in, and that’s why I wrote as much about this impending recession as I did.  Now there’s probably another thing you’re thinking.
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It’s Unlikely the Film Industry is still Mildly Reversely Dependent on the Economy.

Most filmmakers know that the golden age of film was during the great depression.  Most producers believe that the film industry is still mildly reversely dependent on the economy.  I’m going to buck orthodoxy here and say that I don’t think it is any more.  At least not in the way it used to be. 

The film industry USED to be mildly reversely dependent on the economy because it was a comparably cheap way of getting out.  But now ticket prices have risen to the point that a family of 4 going to the movies will cost around 150 bucks once you factor for popcorn, concessions, parking, gas, and more.  Compare this to buying a game like Super Smash Brothers, where all 4 family members could get dozens if not hundreds of hours of entertainment for only 60 bucks.  (Although, I have yet to see a family where that would totally work for Smash.) Due to other forms of entertainment entering the marketplace, movies are no longer the cheap option.

Further, when the last major recession hit in 2008 the independent film markets took a pretty big blow, and have yet to fully recover.  If we see a massive crash next year, it’s likely that the markets are in for another blow just as they were really starting to recover.
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What about the home video/VOD market?

Most people know that the home video market is kind of in the toilet.  Pretty much nobody buys DVDs outside of the midwest and rural areas with poor internet connectivity.  This problem is likely going to get worse when the economy gets rough, as those areas tend to be some of the worst hit by economic crunches.

Regarding Transactional Video on Demand (TVOD) I think we’re going to see those sales figures dropping as well, and they’re already on the way down.  After all, why pay to watch a movie when Netflix has so many of them?

Some platforms may do alright, since they’re primarily used by older people who tend to have more money.  These platforms are ones similar to Comcast inDemand, DirectTV, and Dish Network.  If I had to guess, I’d say that Dish was the most likely to lose subscribers first, as they’re already kind of the budget option, and cord-cutting has become such a viable option that those looking to save money on cable bills may look there first.

Airlines and other ancillary revenue streams are likely to see a drop in passengers, and thus likely have a corresponding drop in their acquisitions budgets for media.  This will probably affect smaller scale projects before bigger ones, because to the average consumer having the Marvel Catalog is significantly more useful than having the Criterion Collection.
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That pretty much just leaves Subscription VOD (SVOD) and Advertising Supported (AVOD). 
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I think that larger SVOD platforms are going to be in a very good position to gobble up more market share.  Since so many forms of distribution such as theatrical, Transactional VOD (TVOD) are likely to see their revenues diminish, I believe it’s logical to assume that the bigger named SVOD platforms will grow to take up their place in the market.  These platforms would include offerings like like Netflix, Amazon Prime, Hulu, HBO NOW, and some of the new ones entering the fray like Disney and potentially Apple.  

To me, it’s only logical that as belts tighten, cord cutting will increase and these platforms are likely to largely take up the air left by the deflation of other sectors of the distribution chain.

That being said, I think that smaller services are in trouble.  Fandor all but went out of business earlier in December, and FilmRise shut its doors recently.  These were two services targeted at bringing eclectic artsy films to cinephiles across the country.  Unfortunately, they just couldn’t make themselves profitable.

This leads to one other piece of this landscape that you should be paying attention to. You should be looking at VOD Service bundles like VRV.  It’s not that dissimilar to a cable package, but much less expensive and all OTT.  It looks like most of the content from FilmRise will end up in something akin to those sorts of packages, or largely absorbed into bigger platforms owned by their parent companies.

Finally, we’re on to Advertising Supported Video on demand.  This one is where I think the biggest boom is going to come from.  People with no money but lots of time will watch ads, and the number of people that’s true for is set to increase substantially in the event of a recession.

Thanks for reading.  I’ll be back next week with my final blog of the year, which will show you how to take the information you learned here and turn it into a functional strategy to building your career in 2019.

In the meantime, make sure you’re on my mailing list, it’s a great bargain at the recession friendly price of FREE.  You also get lots of great stuff, all of it listed on the image above.

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