Ben Fritz covers Hollywood and recently wrote "The Big Picture: The Fight for the Future of Movies." In it, he questions what the future of Hollywood will look like facing the pressures from Amazon, Netflix and Apple.
I spoke to him recently about how Hollywood is reshaping itself to compete against Netflix, which studios are best positioned to compete, how the Fox/Disney merger will play out, and the importance of brands and intellectual property going forward to stand out in an increasingly saturated marketplace of attention.
Our original interview (here in podcast form) has been edited down for clarity.
Eric: Boil down the key takeaways from The Big Picture.
Ben: It's really about the transformation of Hollywood and the movie business over the last decade and how did we go from one where movies were being made for all types of people to almost exclusively franchises, superhero movies, sequels, reboots, branded films. Other types of films, especially original dramas for adults, have become an endangered species. And I talk about the economic forces behind it, and I try to give the story behind it. And the way I do that is in large part by using the hack of Sony Pictures, and I read all of those tens of thousands of documents and supplement that with a few dozen interviews that I did.
Eric: How well do the American and Japanese cultures at Sony Pictures get along?
Ben: I think they get along reasonably well, but I think they had to admit after twenty five plus years of trying that the presumed synergies behind Sony's acquisition of [Columbia] Pictures failed. The synergies of hardware and software and content never materialized. There's very little relevance in the movies and television shows that Sony produces and iPhone chips and video games that Sony makes, as much as they tried to connect those businesses.
Eric: One of the most interesting stories in the book is the opportunity, when Marvel was coming out of bankruptcy. Sony could have bought the entire IP catalog from Marvel for $25 million. Sony management wasn't interested. [Marvel – now owned by Disney — owns the rights to "Spiderman", as well as "Iron Man", "Black Panther", "Guardians of the Galaxy", "X Men", and others. However, Sony only struck a deal to license the rights to make "Spiderman" movies, instead of renting — or buying — the rights to the rest of the Marvel catalog.]
Was that a Japanese or US decision?
Ben: That was a US decision. The Sony Pictures' execs couldn't see any value in any characters other than Spiderman, which was the only character with awareness beyond the comic book crowd. Who would ever want to see a movie with Captain America, or the Black Panther, or Guardians of the Galaxy? Those seemed like worthless characters, so they said no way. They told their lawyer to go back and get Spiderman rights only, because all anyone cared about was Spiderman.
Eric: With Spiderman, they now have those rights to produce these movies in perpetuity?
Ben: They essentially do. They have to make a new movie I believe every 5 years and 9 months, which is a very easy schedule and they've never had a problem meeting that.
Eric: Do you think Sony is going to be an acquirer over the next several years, or are they more likely to be consolidated?
Ben: I think there's no question that they would probably love it if someone came to them and offered a premium price for Sony Pictures. It's hard to imagine another end game that lets them really compete with Netflix or Apple or Comcast/NBC Universal.
Eric: And so, "Jumanji" is probably one of the best things that could have happened to Sony, in the sense that it sort of is re-launching a new franchise based on Sony intellectual property.
Ben: That is a huge success for them. Just financially, this is a movie that cost about $100 million and grossed close to $1 billion. And, unlike "Spiderman", Sony 100% owns the rights to "Jumanji". They're not renting them from someone else. It was based on a book, but they own those movie rights. It's not a new franchise, it's a 20-year old movie, but it's been revitalized for the 21st century. It's booked a lot of profits in the short term and is a good sign that there's more to come. Any acquirer would now get that IP.
Eric: When you look at the other big studios, who are the strongest?
Ben: There's no question that Disney is not just the strongest but in a whole other stratosphere. Their profits are consistently and significantly higher than those of the other studios in Hollywood. They own more franchises than anyone else, and the strategy they pursued is the one everyone else is trying to emulate. Now they're in the forefront of studios launching a service to compete with Netflix.
The next strongest one without a doubt is Universal since Comcast bought them and really invested in some very strong franchises like "Fast and Furious" and "Jurassic World", as well as animation like "Despicable Me". They've been very smart about exploiting a lot of synergies with Comcast's theme parks, which puts them not quite at the same level as Netflix but close. You can see them being well-positioned in the future to compete against the digital players. And a strength they have that Disney doesn't have is they've built a very strong low-budget horror business. Those movies are very profitable for them, and the Blumhouse brand is core to them now.
You have Warner Brothers, which I'd put in the middle there. They've traditionally been the biggest studio and made the most number of movies. They have a strong set of franchises like "Harry Potter", "Fantastic Beasts", "DC", and "Lego". But they haven't executed as well as they should.
There's a lot of questions about Fox, but they're probably not going to be an independent studio much longer. The few big franchises that Fox has — "Avatar" and "X Men" — are getting rolled into Disney. Maybe they'll still make Fox Searchlight films, but those are primarily going to be for Disney's streaming platforms like Hulu.
Eric: Do you like the Disney/Fox merger?
Ben: Fundamentally, it gets them two things:
(1) After years of cutting back on the content it produces, Disney's realizing that to get into streaming they need more content. And they want to actually expand their brand a little bit beyond just the family stuff they've been so successful with. The Fox brands like Searchlight and FX might let them do that.
(2) Hulu, which they'll take control of, will give them a streaming platform that they intend to target more at adults. The Disney brand is really valuable. But it doesn't mean mature content. Hulu can do that.
Eric: Bob Iger acquired Pixar, Marvel, and Lucasfilm. Are there any other deals left to do?
Ben: It sure doesn't seem like there's anything obvious. The notable exception is the somewhat complicated rights to James Bond, which are not owned by any major studio. Many would like to get their hands on those, of course.
Eric: One of the interesting stories over the last month has been the big Roseanne ratings on television. The revival of franchises applies to television as well as to film.
Ben: Absolutely. Familiar brands break through in a very crowded media environment. People can say they want originality, but, when you have new things coming at you all the time, the familiar appeals to people. Roseanne is the perfect example of a brand you know, but you don't want the exact same thing. You want to mix nostalgia with some smart updates for the 21st century. It's been a formula for success in movie theaters and increasingly in television. We saw Will and Grace earlier this year, which has been very successful. The traditional broadcast networks are desperate for any advantage they can find over HBO and Netflix these days, and one thing they have is classic shows as those other platforms weren't around 25 years ago. There's a new Murphy Brown for example. Star Trek is back on CBS's streaming service. They're going to mine their IP for all they're worth because they have not been very successful at producing new hit shows that have been produced by broadcast networks in the last few years. Maybe one or two every year instead of ten or twenty.
[Disclosure: Affiliates controlled by Eric Jackson hold long positions in Disney, Apple, Netflix and Sony]
Disclosure: Comcast is the owner of NBCUniversal, parent company of CNBC and CNBC.com.