August 14, 2007

Docunomics: The Money, Markets and Business of Nonfiction

Historians often reduce the cause of a seismic event to a single action, such as the bombing of Pearl Harbor, the great stock market crash of 1929 or the destruction of the World Trade Center. We know that this is an over-simplification. The Second World War, the Great Depression and the so-called War on Terrorism were all caused by many factors and were easily a decade in the making. It follows, then, that the massive economic changes that have taken place in documentary production can be traced to a series of technological, entrepreneurial, business and regulatory innovations that came together over time and conveniently overlap the first 10 years of the IDA's 25-year history. A coincidence, to be sure, but one can say the last 25 years, for independent documentary filmmakers, have been the best and worst of times.  

Some of the good:

  • Technology has shifted the power of video-making to the individual, who can now make and distribute works globally with gear that can fit into a backpack and cost less than $10,000.
  • The same technology allows individuals to market and distribute their works within a virtual worldwide theater, without the use of traditional distributors.
  • Global and local capital markets can provide funds to filmmakers who can make a modest living with this new technology, provided they have low overhead.
  • The aggregate box office gross revenue for documentaries this decade has exceeded that of the previous three decades combined.
  • New interpretations of "Fair Use" make it easier than ever to make films using archival footage, images and music.

On the other hand, this business model has had some significant negative effects:

  • Many mid-level filmmakers are being driven out of the field that will no longer support them or their overhead expenses, as backpack video-making is neither labor nor capital intensive.
  • There is almost no way a single documentary work can earn back its budget with home video/DVD sales--under most business models. Wholesale DVD prices are lower than ever and video-on-demand fees will approach pennies per screening. How can a $100 thousand or $1 million-plus investment be recouped?
  • While theatrical releases can be done in more cost-efficient video formats, it is difficult and expensive to book theaters and attract audiences.
  • More broadcast and cable entities mean more product is needed, but these outlets draw smaller audiences and pay smaller fees.
  • High-definition works have become the standard format, but it is expensive to make them, resulting in a competitive disadvantage for a backpack producer.
  • The other side of Fair Use is that independent filmmakers' work can be used without compensation. In the end, this hurts independents more than the big aggregators of stock or archival footage.

Let's look at these past 25 years in terms of four interrelated strands:  Technology, Finance and Funding, Consumption and Gaining Respect.

 

Part 1:  1980s--The Shift from Film to Video Technology

The shift from film to video really started in the 1980s. By 1982, companies began to standardize the 8mm consumer videotape recorder format. A struggling Microsoft released MS-DOS 1.1 for the IBM PC. In 1985, a Supreme Court decision allowed the personal use of video machines to record broadcast television programs for later viewing, and stated that manufacturers of home video recording machines could not be liable for contributory copyright infringement. In 1984, Apple introduced the first Macintosh computer, listing for $2,495, which had a built-in, 400-kilobyte floppy disk, 128K of RAM and no small internal disk drive. It was inconceivable the significance this computer would later play in video history.

Finance and Funding--The Media Arts Program at the National Endowment for the Arts initiated the Regional Fellowship Project in 1983, and the NEA and the American Film Institute also launched video and film fellowship programs. In addition, PBS, the Corporation for Public Broadcasting and the National Endowment for the Humanities were supporting independent production at high levels.

HBO was beginning to produce original documentaries. PBS was still allowing independent filmmakers to keep back-end rights to their works. Emmy Awards went to Body Human: The Living Code, which aired on CBS, and PBS' Great Performances: Dance in America was nominated but did not win. There were no theatrical documentary box office hits like Woodstock (1970), which is estimated to have grossed $50 million worldwide. The IMAX (large format) business was booming; this business model, which allows for much longer runs than in standard theaters, made it possible for documentaries to gross $100 million.

If You Love this Planet, the short film produced by the National Film Board of Canada and directed by Terry Nash, and the Canadian Broadcasting Corporation's Just Another Missing Kid, produced by John Zaritsky, won the Documentary Oscars of 1982. 

A good case study can be found by looking at If You Love This Planet. When the US Justice Department labeled the film as "political propaganda," and my company, Direct Cinema, refused to turn over lists of individuals who had paid to see or rent the film, the film's sales shot up to a massive level. Educational users were buying 16mm copies for $495 each. With the assistance of the ACLU, Senator Edward Kennedy and the American Library Association, the case went to the Supreme Court, generating more press and more sales. But this golden age of educational sales ended almost as it was starting because of the growth of home video and the ability to copy works. Within the decade, this market would be almost gone. 

Consumption--With the PBS broadcasts of Bill Moyers' Joseph Campbell and the Power of Myth (1988) and Ken Burns' The Civil War (1990), the demand for video sets of the series was extraordinary. Broadcasters saw the income stream from the back ends, and within the next decade they would all be demanding as much of this income as they could as part of their deal for funding works. The "sharecropper" filmmaker life would become commonplace. "All rights now known or hereafter devised" became the litany of the contract between filmmaker and funder.

 

Part 2:  1990s--The Shoot It/Tape It/Edit It/Collect It "Revolution"

Technology--The 1990s marked the bulking-up of technology. In 1965 Intel co-founder Gordon Moore coined what is now called "Moore's Law," which states that the number of transistors on a chip doubles about every two years. It would still take a few more cycles for the computer to handle media files with speed, but it was clear that technology was changing rapidly. The Macintosh portable computer, introduced in 1989, was selling for $6,500. A year later the Video Toaster shipped, and the Internet now included 5,000 networks in over three-dozen countries, serving over 700,000 host computers used by over 4 million people. In 1991, Gopher, an early Internet browser, was released out of the University of Minnesota. The portable professional video camera was still a heavy, over-the-shoulder device priced out of the reach of independent filmmakers. Equipment size and complexity was improving, and this decade would make the broadcast and theatrical release of small-format videos possible. The time for anyone with a little money to go out and make a documentary had arrived.

Finance and Funding--Under pressure from groups such as the AIVF, IFP, IDA and others, US Congress passed the Public Telecommunications Act of 1988, which mandated creation of what is now the Independent Television Service, or ITVS. ITVS began funding independent programs in 1991.

But apart from IMAX, the theatrical documentary was not setting the records that would inspire venture capitalists or studios to invest much into creating new product. Even with Michael Moore's hit Roger & Me (1989), the other documentaries in theatrical release during the 1990s did under $100 million in combined box office.

But thanks to the continued infusion of funds from HBO, European broadcasters, the National Film Board, an occasional studio or other broadcaster--and some wealthy filmmakers and investors--high budget films (approaching $1 million) were produced with some regularity. The big money and returns were in the non-theatrical and/or home video and broadcast/cable side of the business.

In the 1990s, NEH and NEA grants for filmmakers became more difficult to obtain. With President Ronald Reagan and the first President George Bush dominating the 1980s and early '90s, and Congress controlled by conservatives over much of Bill Clinton's presidency, the arts and humanities and public television all took hits. Public television wanted more bang for its license fees, including rights to sell videos and DVDs, and the license fee was no longer just a license but a rights deal. This would take some of the back end from the filmmaker and shift income to PBS.

PBS and Pacific Arts battled over their home video deal in 1993, when PBS moved its titles to Warner Home Video. In 1999, Pacific Arts, headed by Michael Nesmith, prevailed: PBS was ordered to pay damages totaling $44 million to Pacific Arts, plus $3 million to Nesmith. The network also lost its claims of unpaid royalties on the PBS logo.

Warner Home Video took over PBS' home video, and with a steady stream of independent and station-funded product going to PBS, some independent distributors began to consolidate and/or go out of the documentary business. With a major studio now distributing high-end documentaries in mass-market home video, the stage was set; documentaries could enter mainstream distribution. PBS pulling the plug on Pacific Arts would alter the marketing of documentaries.

This and similar positions at the commercial networks marked the end of license fees for license rights and the start of license fees for all rights, thereby shifting the business model away from the filmmaker owning the back end, to the filmmakers having to share it as a condition of funding. Within ten years, this would affect the middle-range of professional documentary filmmakers, and the brief "golden age" of the 1970s and 1980s was over. Technology allowed freshly minted college graduates or anyone with a video camera to make films cheaply, and many documentary filmmakers with mortgages, families and overhead would be pushed out. The top filmmakers--high profile, with their awards, records of accomplishments, established businesses--would be better able to compete for big commissions and funding. They could do sponsored works; they would be sought out as directors for hire by HBO and other cablers, or the PBS strands like American Masters and American Experience; they could maintain their companies. While the PBS strands paid flat fees to many filmmakers for their work, or used the license fees to acquire back-end control, PBS was moving to shows whose content would sell DVDs, rather than just shows within the PBS mandate.   

Consumption--By and large, theatrical documentaries in the early 1990s did not generate significant box office heat as they would a decade later. There were exceptions, of course, with Madonna: Truth or Dare (1991), Hoop Dreams (1994), Crumb (1994), Paris Is Burning (1991) and When We Were Kings (1996) among the successes.

Gaining Respect--Documentaries continued to gain respect, and one instigator of this gain was the Sundance Film Festival, whose parent company, Sundance Institute, was set up to actively engage aspiring filmmakers; the festival became a forum for newly unearthed talent and created a reputation for championing independent titles. 

Well-made documentaries such as A Great Day in Harlem, When We Were Kings, Four Little Girls and Buena Vista Social Club received Academy Award nominations, while other critically acclaimed and commercially successful films like Hoop Dreams, Roger & Me, Paris Is Burning and Crumb did not. The Academy's documentary committee either did not relate to the content or form, or, in the case of Roger & Me, just did not like the film's tone. Documentary filmmakers used these omissions to demand change at the Academy. The committee was restructured and filled with members who were involved in documentaries, as opposed to those who were "interested" and "involved." With new "conflict of interest rules," working members of the Academy were now disqualified from the process. The average age of committee members dropped perhaps 10 years to late 50s, and the process of screening submitted works was changed from presenting them in a screening room to mailing them out on VHS cassettes to committee members--to ensure membership from outside of Southern California.

 

Part 3: 2000 and Beyond--Digital Delights, HBO Support for Theatrical Films Pays Off, Academy Creates Doc Branch, "A Golden Age" and VOD

Technology--The shift to high-definition video continued as the technology moved from the lab to the filmmaker to the field. As American broadcasting shifted to hi-def, independent filmmakers again had to deal with the high cost of technology that was reminiscent of the 35mm vs. 16mm production debates of the 1960s. Full digital cinema will still require another decade or so, but for documentaries, few works other than IMAX productions were still being made on film. Avid and Final Cut Pro continued to compete for dominance in the editing field. While the independent filmmaker worked with Final Cut, almost all of the other shows, as well as Hollywood, used the Avid. Similar to the Windows vs. Apple debate, filmmakers dealt with the different software depending on their economic position.

Finance and Funding--Theatrical exhibition of documentaries finally became a business in the new century. Moore's Fahrenheit 9/11 (2004) grossed $119,790,000. Works such as Spellbound (2002), Tupac: Resurrection (2003), Super Size Me (2004), Mad Hot Ballroom (2005), An Inconvenient Truth (2006) and numerous others grossed millions of dollars. With historical records in terms of number of theaters booked, grosses per theater and grosses per film; the success of nature films like Winged Migration (2002) and March of the Penguins (2005); and the continuing stream of IMAX films grossing in the $50 to $100 million range, funding became more available than ever. The golden age of the theatrical documentary had arrived.

Thanks to HBO and its visionary support of independent documentary, the infrastructure is there to handle feature-length works. Under its longtime head Sheila Nevins, HBO was the lone corporate money for over 20 years, funding an amazing array of personal, political, medical and other kinds of documentaries.

Consumption--In television, the low-budget "reality" shows continue to pull high ratings. These manipulated and often staged documentaries have become another model. Even PBS aired the BBC reality series 1900, and then followed with three of its own, set in America.

The PBS strands continued producing high quality works with a new emphasis on music. No Direction Home: Bob Dylan, from American Masters, exemplified the kind of high-profile packages for which PBS has become famous. Other than PBS and HBO/Cinemax, few network and cable entities are programming a lot of "one-off" documentary films by independent filmmakers, but networks like Discovery, National Geographic, TMC, Showtime, Sundance Channel and CNN are producing and programming documentary series and strands.  

Gaining Respect--The Academy Documentary Awards committee, since 1941 made up of members from all branches of the Academy, finally became its own branch in 2001, with about 150 members and with Arnold Schwartzman serving as its first chair. Granting documentary filmmakers their own branch, and the clout of three governors, gave documentary films a permanent home at the Academy. With the large documentary peer sections at the Television Academies in Los Angeles and New York, documentaries and documentary filmmakers are finally getting a lot of respect, as evidenced by their industry-based associations and awards groups.

Concluding Thoughts--The last 25 years of the documentary business saw electronic technology end the 100-year monopoly of images on film, and the ability of individuals and businesses to amass vast libraries of works inexpensively as electronic data. For the first time in history, individuals could inexpensively create, manipulate, edit and distribute moving image works on a global basis almost instantaneously as data files, rather than as physical prints or tapes or discs. It would allow the creation of many new businesses; YouTube, which, for now, offers these images for free, was acquired by Google for more than the 1982 market capitalization of each of the six major studios. This same technology, however, with the expansion of the Fair Use doctrine and changing nature of copyright, decimated the documentary educational film business and devalued the worth of nonfiction films. An independent filmmaker's business model, based on selling a few hundred copies of a work in film, proved to be inelastic, as prices tumbled to less than $10 a copy, from $15 to $20 a minute.

The box keeps changing as the economic forces change the business models for the documentary. We know that high-definition television is here and soon the silver discs will contain more data and the image will be richer, and we will have to consider what to do with our VHS and DVD collections.

We end our very abridged 25-year economic history of documentaries neither sad nor happy--just wiser. We see history repeating itself as new formats struggle to establish themselves, and (Gordon) Moore's rule suggests that the gear will get smaller and cheaper. We see new filmmakers who don't know their documentary film history. More college and university programs are training more students but not very many good films are coming out. The AIVF, the New York-based organization of independent filmmakers, has gone out of business. On the other hand, the IDA and other organizations are going strong. One can expect a mob scene in Park City this January, more documentaries will be shown at Cannes, and HBO, once again, will likely be thanked at the Academy Awards.

 

Mitchell W. Block is an executive producer of CARRIER, a 10-hour documentary series and companion feature, financed by Icon Productions. The series will air on PBS in 2008. His distribution company, Direct Cinema Limited, has handled many documentaries and shorts, including over 60 Oscar nominees and winners. He has been teaching at the USC School of Cinematic Arts Peter Stark Producing Program since 1992. He can be reached at mwblock@aol.com. Thanks to Joan von Herrmann for her many helpful comments and insights. 

©2007 All Rights Reserved, MWB

 

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