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This is a somewhat misleading analysis, as the costs of Hollywood movies are not implicit relative to their production values.

Movies do not have a typical accounting structure and that impacts their budgeted "costs".

In a typical collaborative venture with some degree of risk one might expect for most of the principals (director, actors, etc.) to take most of their compensation in the form of profit sharing. However, this is untenable in Hollywood because the standard is to use a fucked up accounting structure which results in most movies showing no profit on paper. Instead, a small number of people end up taking home a percentage of the gross revenues of the movie and most of the earnings for everyone else are upfront in cash.

This has several negative effects. For one it makes any movie staring a big star very much more expensive because you have to pay them $x million out of pocket. Also, because it raises the budget floor for making a top tier feature film it forces the industry to take fewer perceived risks, because a financial loss would be more devastating.

But this is only Hollywood's poisonous culture, not a fundamental aspect for making films. A production company that was founded on firmer and more ethical financial ground could implement proper profit sharing for actors, directors, other creatives, and even effects houses. It would allow movies to operate on lower budgets and embrace higher risk projects.

That's the problem. We can't aim to make $200 M movies from the start.

But I think it is pretty much possible to build a platform where we can finance a TV series like The Big Bang Theory, by charging only $1 per episode to the subscriber. Just cutting the middle man and setting a deal with a dumb pipe channel like Google (YouTube), where they can make money from ads, and paying the creators some more money... That would be only $4 a month for a series you REALLY love. [1]

And of course, the public wins A LOT, by avoiding unexpected cancellations, time slot changes, etc!

I'd definitely pay for series like Battlestar Galactica, TBBT, MacGyver (lol! how would it be today)...

And of course, if you make it GLOBAL, erasing regional restrictions, you can increase your audience at an enormous level!

I see this model as something ABSOLUTELY plausible today. Why are we still paying to the middle men?!?! Let's make this happen.

[1] http://www.tvguide.com/News/Top-TV-Earners-1021717.aspx

Think in a disruptive way. Actors don't have to be paid $10 million. Special effects don't have to cost tens of millions. Equipment doesn't have to cost millions either.

Make the movies the way you would build a lean start-up. And bank on innovation in the movies and scripts, rather than recycling popular content and make it very flashy.

But as I mentioned in another comment, I think to kill Hollywood you need incubators like YCombinator to seed the initial team and script, and attract young talent, and then help them find investors who would put a few millions into the movie, and also build a platform for distribution, like a Youtube for these movies, and a good business model to monetize them.

Some kind of news/community sites would help too, not only to share information about the projects, but also get feedback and build a group of "early adopters" who will evangelize your movie later.

This could work, but how good is YCombinator at judging an initial team & script ? The investors YC knows and work with, invest primarily in tech not entertainment. Will the investors be willing to take risk in a different sector ? Not every great talent has a hit on his/her first or even second try.

The problem with movies is that even when the argument may seem very interesting at first, the realization can make it a disaster. That's what differentiates an awesome director from a bad one.

That's why I see hard to visualize crowd-financing to movies. The risk may be just too high.

What you describe is largely how things work right now.

Independent production companies, which represent the origin of most non-blockbuster films, work just like incubators now.

They have a development budget which they use to find and develop scripts in what might as well be an early seed round. They then shop this developed project around to financing sources, of which there are a great number that are not tied to studios. These financing sources may require additional development or even "pivoting" of the project.

Once financing is secured and the people providing the funding are happy, production can proceed. At this point, you're still wholly outside the studio system. You can completely finish your film outside the studios. This happens now, all the time, and it happens not just with Sundance style films, but with mainstream films with pretty substantial budgets.

Sundance, as an aside, is not just a festival, but also a market for these independent productions. Festivals such as Cannes and Toronto are much the same. You'll see a number of stories over the next week about films acquired at Sundance. What this means is that distribution deals were signed for films that were produced using means independent of the studios. The distributors are often, but not always, arms of the studios.

Someone mentioned Brad Pitt. He stars in independently financed projects all the time. In fact, he himself is often the indie producer, via his company Plan B which arranges for the financing through other entities.

The problem you have is that you might build a great movie startup and find some great young talent but sooner or later they are going to realise that they can make more money elsewhere once the big hollywood companies start waving their chequebooks around.

Make the movies the way you would build a lean start-up. And bank on innovation in the movies and scripts, rather than recycling popular content and make it very flashy.

Problem is that this is very high risk and the public are fickle, if your innovative idea does not take off then you have lost money. If it does take off then you will be very tempted to milk that one idea for as long as you can.

Honestly, what do you think YCombinator can bring to the table that isn't already there? How exactly do you propose to disrupt something you know nothing about? It's the equivalent of the head of the MPAA saying 'Fuck it, we'll build our own search engine'. I know the tech scene is full of very smart people, but guess what - the film industry is full of very smart people too!

The thing you have to understand is that smart, talented people are making films right now with innovative scripts and low budgets. And most of them will lose money, because nobody wants to see them. People genuinely prefer watching 'flashy' films with lots of VFX and actors who they've heard of.

Just because you want it to work differently doesn't mean it will.

"Honestly, what do you think YCombinator can bring to the table that isn't already there?"

The attitude that things are wrong with the industry, and it can/should be done better.

That's already there in droves: that's basically the mantra of every indie film director, iFilm, most film schools, alternative distributors and theaters, and just about everyone else connected to movies who isn't the big studios. They even have substantial seed funding for that kind of thing (much larger than YCombinator's typical seed funding) through a large number of directors, actors, grant agencies, universities, and rich film fans who regularly fund "not Hollywood" experimentation (sort of that industry's version of angel investors and incubators).

You pretty much nailed it. YC don't understand entertainment, just like the entertainment industry refuse to understand web technology. Transformers is really an edge case, many hollywood films can be made for half of that[1]. Not your typical YC type of investment, but still doable by tech industry, after all we have tech startups like color getting 40 million for an app. The question is will the Tech industry be willing to make investment in an industry it really does not understand. Contrary to some misconception being a great entertainer does require some kind of discipline and experience like being hacker. It takes time, many entertainers start young and spend many hours working on their craft, just like hackers. The stereotypical drugs and alcohol abuse come after. Hollywood type talent is not something you can just whip up. An interesting note, Mark Susters is a tech VC investing in entertainment[2] to disrupt the market. But Mark is working on the low end of the scale, with very low budget productions (compared to hollywood) and average actors and directors. This too is not enough. If YC is seriously going to attempt to kill Hollywood it's going to have to take on risk it never did before. The entertainment crowd is much different from the tech crowd.

[1] The average cost as of 2008 is 106.6 million http://articles.latimes.com/2008/mar/06/business/fi-boxoffic... in 2009 MPAA, the organization compiling and reporting the figures stopped. http://latimesblogs.latimes.com/entertainmentnewsbuzz/2009/0...

[2] http://www.bothsidesofthetable.com/2011/11/03/the-future-of-... In his presentation Mark Suster made some correct but to obvious observation, what I disagree is his take on talent, namely he thinks the cost of talent is going up. He's not completely wrong, in that the cost of mediocre talent has gone done, but talent that people want to see, the talent that can sell tickets and drive views, their pay is going up.

I think you missed a level of indirection: YC does not want to revolutionize entertainment. YC just wants to fund a company that would revolutionize entertainment. I imagine that YC is not exactly full of healthcare or education experts, but they are perfectly happy to fund companies working in those fields; this is the same.

You have to ponder the inefficiencies of an ecosystem that supports a $200 million movie.

I'm reminded of Firefly. Such a great show, with lots of loyal fans. I guess it just wasn't a big enough fan base for Fox. I thought at the time that the producers should go independent and distribute straight to the consumer. Maybe that was too risky in 2002. I don't think it would be today.

Not risky, it's just that back in 2002 there were less people watching videos online, many people still had dialup.

I was thinking DVD distribution at the time. I had used Netflix for a while by that point and could imagine subscribing to get a DVD in the mail from Joss Whedon every week.

Don't forget that this was the era when Fox also cancelled Family Guy and Futurama. Both of these series were able to be resurrected due to their DVD sales and syndication numbers. Fox made a lot of mistakes during that time, but were just learning about the secondary sales potential for their shows. I'd like to think that a similar set of shows would be able to stick around longer now. Those shows were able to be resurrected easily because they are animated. Firefly, not so much. But another show (Arrested Development) cancelled by Fox in that era is getting resurrected by Netflix, which while not straight to consumer is more direct than through the studios.

Also, Joss Whedon (and the rest of Hollywood) I think learned a lot about distributing directly to the consumer with Dr. Horrible's Sing-along Blog. I think that this grand experiment was a good template for future direct-to-consumer productions.

Unfortunately, you still have to deal with the problems of initially funding large movies. I can imagine a system where instead of having dedicated studios, you have smaller one-off production companies. These companies would then be funded VC style by funds that seek to mitigate their risk by diversifying their pool of movies. You could fund a few flops, so long as every now and again an Avatar comes along.

The line is blurring.

Zynga and Hollywood are much closer in terms of their provision of value to consumers than ebay and hollywood.

What I'm trying to say is, that VCs are getting closer to cannibalizing the entertainment investment business, online and iOS gaming is a good gateway drug.

>I think most of us (unfortunately) are still going to want to watch movies like Transformers 3 at a $200 million budget than a $1million dollar indie flick.

At some point special effects are going to peak and the 1 million dollar indie flick will look exactly like the 200 million dollar one.

There will still be other differences, but technology is going to go a long way towards leveling the playing field.

"Peak" in popularity or in terms of return on expenditure?

With cost reduction of special effects, I agree that the playing field will gradually level...

...but to contradict myself a bit, perhaps it won't ever level because new technologies will continue to be introduced to improve the entertainment experience that are proprietary and therefore expensive.

We have tech, cost of tech is going down. But you still need talent to operate the tech, and the best talent are not cheap. The workers have unions and the ones that are not part of union do this full time and want to support at the very least a middle class lifestyle. For a hollywood movie, you don't want to use just any crew. You want the best film crew, the best makeup, wardrobe, casting, post & pre production. All the above cost money, lots of money.

That's all true for now. But eventually you'll be able to throw some actors in front of a green screen and do everything--makeup, wardrobe, special effects in post production, with one guy.

Hell, when computers can generate photo real actors, actors will just be people in mocap suits (except that we won't need mocap suits by then), and they won't even need to be attractive. Eventually one person will be able to create the equivalent of a Hollywood blockbuster.

Video games are there today -- computers and mocap rigs all the way down. Still they are approaching hollywood movies in terms of budget. Tangled and Avatar are some of the most expensive movies of all time.

There are no shortcuts to that level of polish. Doesn't matter how advanced your rendering is, you still need an army of 3D artists. Makeup isn't going to be much cheaper just because you do it in Maya.

Avatar and Tangled were both pioneers of new technology of course they were expensive, but there are amateur fan effects better than those from multi-million dollar movies and TV shows 15-20 years ago. And the games of 10-15 years ago can be made a couple of people on a shoestring budget. I expect that trend to continue.

>Makeup isn't going to be much cheaper just because you do it in Maya.

They won't use Maya. Technology progresses, and tools become easier to use. At some point in the future you'll be able to select an actor, click makeup and adjust some sliders.

>you still need an army of 3D artists

For original creations you do need artists (the tools will continue to improve and make each artist more efficient), but there will come a time when all you'll need to do is take a few photos of tree, or a building to make an ultra high quality 3d model of it.

But to take that photo you still need to find the perfect tree or building, then drag some cameras out and take pictures of it. Then once it's uploaded, set up light and do some manual adjusting because that branch is just a few degrees off. And that's just one tree or building, you need thousands for a movie.

Indie movies will upload their back yard or buy stock trees, and it will show. That's what separates big budget from small budget - perfectionism and meticulous attention to the tiniest details. Computers doesn't understand beauty or emotion, so you need fine grained human control every step of the way.

It's the composition that is expensive and not the ability to perfectly reproduce reality.

Entirely agree, if you watch any artist or musician work, the amount of attention paid to detail is astonishing.

It's the same as when a programmer will constantly re-factor their code to provide better abstractions or improve efficiency. Or when a designer spends hours deciding on how to a lay an interface out.

The tools to create generic copy-paste movies and music are already out there in the same way you can build a website by buying something from template monster and copy pasting a bunch of Javascript and PHP that you found on google around.

Of course tools will get better and make efficiency better but all that will do is raise the bar. People want to see movies that will wow them , either with better special effects than they have seen before or with clever/funny dialogue etc.

The people who have the skills to do this best will want to work for the big media companies because these are the ones who will open their wallets and pay them a good salary to do what they love all day with the best tools available.

>Computers doesn't understand beauty or emotion, so you need fine grained human control every step of the way.

That's were your wrong. Computers don't understand beauty, but given enough processing power, and sample data they can recreate it.

There's already a program that can listen to Beethoven and reproduce something that even experts can't tell he didn't write.

A movie example: In your movie creator you set up a scene with 2 people talking in a room. The computer has been trained with thousands of such scenes, so it automatically selects the best camera angles and allows the operator some manual control. That will happen at some point.

Does voice acting not require talent?

It does, but an actor can come in for a week and bang out an entire script if he's just voice acting.

Also there are computer generated singing voices good enough to fool Japanese audiences.

One guy will never have the talent to do it all at a top level. Even if there's incredible automation, there will still be choices to be made. The choices are of a diverse enough nature that specialization will still trump a jack of all trades.

I'm sure that most of the time it will require a small team instead of one guy.

But, I think you overestimate the quality of a Hollywood blockbuster.

Imagine if you put Steven Spielburg in front of a hypothetical movie machine. A machine that could automate everything down to the actors and voices, so all the director had to do was write the script, place everything, and direct all the action (yes I realize something like this is years away). I'd bet that he could produce a movie at least as good as the average summer blockbuster.

Indeed, film is not just all direction and writing, handed down from above, and the rest falls into place. Directors often work with the same groups of people on their team, and it's not just because of nepotism or working familiarity -- Christopher Doyle brings as much to each Wong Kar Wai film as the director himself; Bela Tarr leaves the music completely up to Mihaly Vig (an integral part of his movies).

Wasn't "Sky Captain and the World Of Tomorrow" filmed like this? I remember hearing that it was a difficult form of acting. Location shooting, or even sets, have side effects on the actors.

That's all true for now. But eventually you'll be able to throw some actors in front of a green screen and do everything--makeup, wardrobe, special effects in post production, with one guy.

There was an interesting interview with Ewan McGregor, where he described working on the Star Wars prequels as a total nightmare. He was in front of a green screen, sat on top of some wooden box (it was supposed to be an animal we was riding). As the box swayed from side to side, George Lucas yelled "Look at the moons!".

To which McGregor said "WHAT MOONS?". As an actor, he was so distanced from the scene that he was unable to perform to the best of his abilities. The output speaks for itself.

TL;DR: focusing solely on technology without thinking of the human factor is a bad idea.

It may not be necessary to compete as directly as that.

Filesharing sites compete against Hollywood in a different way (even though it's illegal) and they manage to grab their attention. What we need is something to give us the same amount of leverage.

You missed the point. File sharing sites don't create content, they exploit Hollywood's archaic and stubborn method of distributing content.

What you're saying is common knowledge.

What I'm trying to say is: Don't compete directly.

Apple didn't compete directly with the music/tv/movie industries but yet they too manage to have a huge leverage over them. And they managed that legally.

There will be a certain metric that matters in competition. We just need to know what that metric is.