Fall 2014

Don't Look Back

Lionsgate CEO Jon Feltheimer is not pining for the way the business used to be. Instead, he’s energized by the prospects of new content, new markets, and new media.

DGA Quarterly Magazine 10 Questions Jon Feltheimer1. What effect have new media and the fragmentation of the marketplace had on creative decisions and the kind of programming you pursue?

We like that it’s given us a number of new buyers. We’re doing a show right now for Hulu called Deadbeat, which we’re doing for about a third as much as we normally would have done it for a network. The key thing is, always put the right content on the right network, on the right platform, make it great, and then figure out how to monetize it. That’s the excitement of the business that we’re in right now. I don’t think anybody yearns for the old days. They’re gone. As executives, we have to adapt to a changing world, and I think it’s a greater world than existed before—we’re turning the golden age of television into platinum. We can now do more kinds of content. Where you used to say [about a project], ‘Oh, that’s not television, it’s edgy, it’s different, it’s quirky, that’s a feature film.’ Now there’s a place for virtually every kind of content as long as it’s good, especially in this world where there are so many different ways to monetize a show. So I would say at the end of the day, we’d rather do five really great shows than 20 mediocre ones.

2. How did that work for Mad Men, a show that was a critical and cultural success but never really attracted what you would call a huge audience?

We were able to create a very favorable model for Mad Men in the international and domestic markets. It was a great partnership with Netflix and AMC, and really it was everybody putting their heads together to say, ‘How do we do this show that has high production value and is fairly expensive for a newer network?’ Mad Men was one of the first shows where Netflix was the first syndication window. Ultimately it comes down to, How do you aggregate eyeballs across a lot of very diverse group of platforms?

3. Can pay-per-view, streaming, and new platforms replace what’s been lost by DVD and traditional revenue sources?

We’ve been saying for a number of years that this higher margin digitally distributed revenue is ultimately more than just replacement margin, it is incremental margin. Overall, I would say home entertainment is starting to go back on the upswing again. It’s not yet at the heyday of the DVD business, but I think it’s coming on strong, and ultimately, very possibly, we will get there.

4. What opportunities does this expansion of markets present for directors?

For a director to really benefit from this emerging world, I think they have to operate the same way executives do. Which is, they have to be open to doing things differently. There are so many different ways to shoot content right now—different cameras, different editing. And it’s going to be delivered so many different ways direct to the television set through broadband. My feeling is that the creators have to be flexible, to think outside of the box, and to make it an iterative process with all of the participants in the process. If they do, I think they will flourish in this environment, as I think we are flourishing. But I do think people have to be open to change.

5. Lionsgate started out producing and distributing specialty product and now is responsible for one of the biggest franchises in movie history with The Hunger Games. Does that mean tentpole movies are squeezing midrange films out of the picture?

Some of the most successful and profitable pictures we’ve ever had have been lower budget pictures, from Saw, to Monster’s Ball, to Precious, and Crash. We certainly don’t look down our noses at moderate-priced pictures. We own almost 50 percent of Roadside Attractions, so it’s an opportunity to funnel some of what you would call more moderate movies—
Arbitrage, Margin Call, All Is Lost, Mud—and come up with a sort of hybrid distribution model. So we still absolutely think that there’s a place for them.

6. Is the traditional broadcast television business model still relevant, and will it remain so?

We just saw the syndication of [NBC’s] The Blacklist on Netflix. What an incredible merging of two very different worlds, two very different models. One a big broadcast network, the other a digitally delivered subscription service. And yet both felt that they can serve their community of viewers with the same content. I think there’s no question that these different kinds of entities can exist in the world. Broadcast is still a great business. There’s nowhere you can aggregate more people in one fell swoop than a broadcast network; there’s no place you can build a star quicker than you can on a broadcast network. And I believe that watercooler effect still is there, and there still is audience flow on a schedule. So I think there’s a tremendous amount of value still in the broadcast networks.

7. How will we be watching movies in 10 years? Is the theatrical window essential?

For a number of our movies the model is actually day and date video-on-demand [VOD] at the same time as the theatrical release. It was interesting what we found out when we did Margin Call—about 85 to 90 percent of the audience that went to see it in the theaters didn’t know it was available on pay-per-view. And folks that watched it on VOD didn’t know that it was in theaters. So we were reaching two disparate audiences. And that was very effective for us. Look, we’re consuming movies on multiple devices right now, on multiple platforms. This is going to continue. What’s great about our business is people like to watch things more than once. So is the theatrical experience essential? I think it’s a huge enhancement. It’s a huge driver. It’s a marketing locomotive. The exhibitors are really stepping up right now to make it a great experience, to make it an event, and I think it’s going to continue to be a very important part of the food chain.

8. What can be done to combat Internet theft in the emerging Asian markets?

I don’t think it’s fair to pinpoint Asia in terms of piracy. It’s a worldwide problem. With The Expendables 3, piracy extended everywhere, and over 10 percent of it was in the United States. So I don’t want to put my hands over my eyes. It’s a shame there is no DVD business in a lot of Asia, certainly China and India. So some of the secondary sources of revenue have gone down. Again, this is about changing our models and thinking it through. We have to continue to give consumers things they want, make them accessible, and make them affordable. The value proposition for content right now is still fantastic. You see people spending a fair amount of their disposable income on it, because we’re giving them a really good product. But we have to be diligent about it, and, frankly, we have to do a better marketing job letting them know, No. 1, that piracy is bad, and No. 2, that this content is readily available, and then make sure they know how to get it.

9. How do you see the role of executives in the creative process?

It depends on what project, who the creative forces are, where it’s for. When it’s an important project, I’ll probably look at the first week of dailies just to see: Are there any surprises? Did we make the right choices in terms of casting? Is this overall look and feel what we expected? I don’t do that on every movie, but I certainly do that on the important movies. And we have people here who are watching dailies every single day. Because it’s a very expensive business, and we put up a lot of money. We don’t micromanage, but we like to know where our shareholders’ money is going. But at the end of the day, I think we have figured out the right line to walk between letting the creatives create and managing the enterprise of film- and television-making.

10. So where do you see the industry going from here?

It’s just going to continue to be a lot more of the same. Hits are going to come from all kinds of people. Lots of folks in the short-form online-content world are going to be expanding into long form. That’ll be exciting for companies that can figure out how to do things on different business models, on different platforms, who aren’t afraid of change. The second thing, obviously, is the globalization. No question that’s going to continue. The fact that Orange Is the New Black plays the very next day on an online platform in China indicates that the world is becoming a very small place. If you understand that you can’t make all of these other cultures accommodate your content but you can make your content accommodate other cultures, then you’re going to have a huge playing field.

10 Questions

Question and answer sessions with prominent figures outside the Guild about current creative and business issues.

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