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Movie Studios: Have They Gone the Way of Dinosaurs?

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Ben Silverman, Chairman of multi-media producer Electus recently keynoted a Venture Capital and New Media Summit in Los Angeles.

Ben noted that 100 years ago in order to make a film you needed 50 acres of land in the San Fernando Valley, an army of various craftsmen, sprawling soundstages, expensive specialized cameras, film labs and more.

He went on to say that in order to produce a film today you could likely do it with five dedicated artists, $30,000 worth of equipment and an office in Santa Monica with a green screen.

This got me thinking. A studio's main functions are finance, production, distribution and marketing of content. Considering how technology is greatly expanding the creative community’s access to each of these and the entrance of new well capitalized players to the entertainment game: are motion picture studios becoming irrelevant and what does the future hold for the business of filmed entertainment?

Finance

Money is fungible. You don’t have to be a studio to write a check. Additionally, with the increasingly prevalence of film co-financing deals, the checks written by the studios rarely cover 100% of the costs. Less risk for studios? Yes. But, also less control and less reward.

Tech players such as Netflix ,Amazon and YouTube are now financing original content which provides additional competition to studios.

(More From CNBC.com: Films Embrace Technology to Survive)

Crowdfunding is also putting pressure on the studios’ traditional role as the sole financier of filmed entertainment. The trend is expanding beyond the US. European, sci-fi film “Iron Sky” raised one million dollars of it’s ten million dollar budget from crowdfunding. In Bollywood, the crowd funded film “I Am” was a tremendous hit critically and economically.

Studios are no longer the gatekeepers of financing entertainment content.

Production

Want a high definition theatrical quality motion picture camera? Do you have $5,000? You can get one. Want to edit your film with Apple’s Final Cut Pro? The program that was used to edit “The Social Network,” “True Grit” and “Eat, Pray, Love?” Do you have $300? You can get it.

Studios are no longer the gatekeepers of production resources.

Distribution

Before the landmark 1948 antitrust suit, US v. Paramount Pictures, Inc., a number of studios actually owned the theater chains where their films were exhibited. That’s quite a lock on film distribution.

These days, in order to get your content disseminated, you need two things: a computer and internet access. The democratization of distribution.

Although, there is no substitute for the traditional big screen theatrical experience, people are more and more inclined to consume their content on tablets, internet enabled television and mobile devices. There are a myriad ways (i.e. YouTube, iTunes, etc…) for content creators to get their materials distributed to these devices without getting Louis B. Mayer to sign off.

In a notable example, comedian Louis C.K. self distributed his stand up comedy special at $5 Dollars a download from his website. It was very successful and I’m sure the folks at Comedy Central and Viacom were none too pleased.

Studios are no longer the gatekeepers of distribution.

Marketing

Arguably, the strongest unique core competency studios have developed over the past 100 years is marketing, merchandising and monetizing big budget, tentpole projects. Disney with its worldwide ecosystem of theme parks, licensing infrastructure, television assets and unique brand is particularly powerful in this respect.

Perhaps, this remaining structural advantage is why there is such an emphasis on studios developing big budget tentpole projects. Sony Pictures has Spiderman. Warner Brothers has Batman and Harry Potter. Paramount has Transformers.

Social Media is providing a low cost alternative for content creators to market their projects, but it is very difficult to challenge the studios when they utilize their massive marketing budget and expertise for their next big budget release.

There is a dark side to the blockbuster game though. If studios need huge tentpole franchises to successfully utilize their assets and launching a successful film franchise is about as easy as getting a hole in one at Pebble Beach, how does this bode long term? How many players can survive when the creative equivalent of winning the Power Ball Lottery is necessary for success?

It will be very interesting to see how Disney’s acquisition of Marvel Entertainment will ultimately impact the tentpole landscape in this respect. Studios retain unique competency at marketing and monetizing tentpole projects.

The Way Forward

Technology is empowering a new generation of content creators to produce quality projects with little capital and even less permission. It will be fascinating to see how this democratization of financing, production and distribution impacts the art of filmed entertainment.

Will these factors fundamentally disrupt the economic and power dynamic of the traditionally studio dominated entertainment industry? It already has.

_______________________________________________________

Jeff B. Cohen, Esq. is a partner at the Beverly Hills based law firm of Cohen Gardner LLP which he co-founded in 2002. Cohen Gardner LLP focuses on corporate, technology, media and entertainment transactions.

In 2008, Jeff was named one of the top 35 executives under 35 years of age by “The Hollywood Reporter." Additionally that year, Jeff was profiled by "Variety" in its Dealmakers Impact Issue.

Jeff also has the dubious distinction of being a former child actor, appearing most notably in the Richard Donner/Steven Spielberg film “The Goonies,” but please don’t hold that against him. He's also on Facebook and Twitter.

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