Hollywood lies on its death bed for a reason. The reason isn’t pretty. To cure any person or system, the truth about what ails it must be shared, and the poisoning factors extracted and replaced by healthy essentials.
The Entertainment Industry cannot return to health if professionals refuse to look the ugly truth in the eye and actually agree they helped kill off their beloved art form. Truth cannot be found by avoiding it. So let’s talk about the ugly truth of Hollywood. We all know the truths if we’ve been entrenched in it for over 20 years. If it is any consolation, there are countless virtuous and ethical people in Hollywood. But their opposite – the greedy corrupt players – sold the good guys out and defaulted to a future that despises Integrity and artistic vision. While it might seem that certain aspects of the Industry are targeted by these chapters (like agencies) they are mentioned only because the broken system wasn’t always broken and can be mended. An exciting and profitable future beckons us if the true ugliness of today is presented fully and honestly.
The writing of the main Creativity First Films book began in 2015, almost exactly 5 years from its planned release. Originally, the book was written exclusively for Singaporean and Chinese film makers, funders, producers, and agencies related to the process of Media and Distribution. Over three decades, the writer, Scott Hadley Morgan, watched how Hollywood abused the trust and relationships it formed with all of the previous nations in the world. These nations included France, Italy, Japan, Germany, Australia, Ireland, U.K., and now China. The author had no doubt that Hollywood agencies, law firms, producers, and Studios would once again form an unholy alliance. Within this Insider Club, the primary goal was to use any promise of deceptive contractual agreement to extract as much money as possible from foreign investors. Acting honorably, educating foreigners, and ensuring the profitability of their investment was the last concern. It was so bad, that while it was good to make a square deal with a foreign investor, it was even better within the Insider Club to dupe a supposed virgin partner. Details on how to con them and maximize their expenses to transfer money into these Hollywood systems were shared.
The extremities of these actions were proven to the author when he sat in on meetings with these systems. Key leaders would openly request ways to use foreign cultural norms as weak spots to exploit. All Hollywood cared about was maximizing the immediate transfer of money. How good the film turned out was secondary. How much the investor lost meant nothing. How much it hurt the creative process of film making and all the creative people that make Media didn’t matter. Honor didn’t matter. Relationships didn’t matter. The future of Hollywood didn’t matter. All that mattered was that year or next, a Christmas bonus, and exploiting shareholders.
Hollywood is full of sycophant legal, production, Red Carpet, and agency trolls and conners. A self-aggrandizing coalition of great betrayers. The financial systems they championed were used on foreigners, and outsider money was spent wildly. Budgets were inflated, advertising faked, and the cost of actors up front rose, while the Producers and Agencies all championed the system called foreign pre-sales. Yes, there was a time when a top actor or actress had an almost guaranteed value overseas in specific markets. But those days are long gone and the “players” knew this. It would take years for foreign investors to realize all the ways they were ripped off and betrayed.
Hollywood is now based upon what Creativity First Films calls “The Three-Year Cycle of Failure” — or for foreigners, “The Three-Year Gambit.” It takes about three years for new projects to be set up, filmed, distributed, and secondary ROI to come in. Once the foreign partner realized that it never got an equitable share, and that sequels were a financial death trap, Hollywood had moved on. Even Hollywood’s most famed and respected Studios bailed out on China in this time frame. So did most high-profile actors that promised to make more films in China after their mega-budget film (sometimes a flop) they financed comes out. In Hollywood, the current reign of a Studio Head of Production in feature films can be as short as three years … when they used to last over ten years, as was the case with Barry London, Michael Eisner, Lew Wasserman, Peter Roth, and Sherry Lansing.
Betrayal was played on all levels. Here are just two out of dozens of true stories about conning foreign investors from the writer. In 2015, while visiting with a high-profile agent at one of the Big 4 Agencies, the meeting was interrupted. Someone in the nearby office knew that I had a lot more knowledge of China than the agency. They said they just got off the phone with a “China investor with $200 million that’s so stupid they’ll fall for any quick con.” They meant delays in development, packaging, and inflated budgets. They wanted to know if I had any megabudget films to tie up money with that were sure to pass the China censors? “We’ll clean out the fund now so that when they find out in two years they got had, it’s too late and the agency has maxed out their profits. And if by chance the film gets made and makes a profit, we win again.” Nice, huh?
A second story happened at a party on the roof of a trendy hotel at the lounge, in about 2011. A Producer that knew a bit about me rushes up and points out two men from India. He tells me that with what I know, we could convince them to move their $250 million to his production company. We can lure them with any script — and they won’t know it’s a loser for years. By then we’ll be rich and gone.
So Hollywood is very brazen about this behind closed doors.
Within agencies there are some really great and honorable people that would contact me secretly to complain about what the agency was doing to China, or to tip me off on some moves. I heard of one project that was a good script that moved through development too fast, and the agency wanted more money made on it, so they removed the actor and put it into rewrites and re-casting on purpose. It turns out they never expected the project to be filmed, and they just burned up development money. I know this happens because I was in an office in Shanghai where they were sharing their concerns and wanted to know why there is a surprise delay. Other agencies use the Pay or Play deal to rip off millions without ever going into production.
And then there is the most recent rip off scheme that could only work with an economy as big as China’s. A company with some fame promises to make several films or television shows, and the cost to the China investors is over $500 million. One time the money promised was over a billion dollars. There are multiple reasons this works. The investment is committed on, publicity spreads, and the stock of the Hollywood company/studio skyrockets. So does the stock of the Asian Studio, unjustly because the movies will never be made. The promise in a few cases was to go out and find 6-12 incredible films and go right into production. It never happened as promised, not once. Out of a ten or twelve project promise maybe 3-4 were released. They usually did not do great. The rest of the projects languished. Executives took their huge payoff and left the company. The owner of the company sells his stock at the peak. The China Studio goes bankrupt. And all the agencies, actors, and production companies knew this was a scam and played whatever little part they needed to play to get some of the money.
In China, the consequence was tragic. Executives, their families, their reputation and future were destroyed by this con job. Stock on the Shanghai Exchange was at one point leveraged 40 times value … then the rug was pulled out from under studios there. The role Huayi Brothers or Bona or Orange Sky Golden Harvest played in raising self-esteem among Chinese people and promote healthy film experiences didn’t matter — and Hollywood didn’t care if these companies got into trouble. It was a burn-all-bridges approach. And the last thing Hollywood wanted was for China to ever get a Studio on the level of Disney. The way to ensure this is prevent the foreign studios to share fairly in I.P. Rights and engage in bad deals.
Fast Forward To 2019
When the writing on this book began, the chapters spelled out the inevitable crisis that was coming. The unhealthy practices that led to the financial ruin of Hollywood, the ecosystem deviation caused by Reality Shows and Streaming Media, and the Guild/Agency war all were spelled out. The chapters talked about the importance of going back to more honest deals made by people that actually know the creative process and did this for the Art of film making.
The chapters predicted the over-investment of agencies, lawsuits within agencies, fights between Guilds, increased financial failures due to fake advertising, reductions of film slates, the rise of Streaming Media to control production and distribution, the negative effects of the covertly allowed sexual side of Hollywood, the deeper politicizing of Hollywood and its celebrities, the failure of tech companies that expand on hype like WeWork, the bankrupting of California forcing increases in taxes on the Industry, and the failure of television to produce shows people watched in large numbers.
Sure enough, Streaming Media began to take over viewership because these Streaming leaders were not chained to a broken and bloated approval system for new projects. Streaming began to win the Emmy’s, Oscars, and Golden Globe awards. This brought them eyeballs, which television gave up.
The Writers Guild got proof of the ways that Agencies betray writers, actors, and producers – this resulted in legal attacks that froze the Industry. While the judge recently threw out the (justified) RICO charges, other evidence supported the claims that will result in major legal cases in court. There were an abundance of writers, actors, and Directors willing to testify against their agents for betraying them in favor of rewarding the agency.
Out of this Guild war came a surprise which is the first sign of the Hollywood system trying to cure itself: Whigham, Bugliari, Cooper, Sullivan left C.A.A. to form a new management company along with Fox, Roussos, Moorhead, McKinnies, Cook, and more to follow Peter Micelli. It is not just the current weight these agents and new company will have: it is their potential to start fresh and reach a visionary goal. This goal delivers to talent the creative and financial opportunities they’ve needed for decades. The fear of leaving C.A.A. and W.M.E. is being vanquished, and as long as the new management company avoids the mistakes that killed the spirit of C.A.A.’s clients and foreign companies, they will be the dominant force restoring the Hollywood Industry. Creativity First Films looks forward to helping them in this future.
Returning to the quagmire of 2018-2020 …
Sex assault charges rocked the news with the MeToo movement. But oddly enough the agency practice of “hip-pocketing” good looking young starlet hopefuls never made headlines. Movies that were purely political statements won the top awards and were never talked about as great films again, while incredible feats of filmmaking got snubbed. Someone should write a book on this and title it, “THIS IS HOW TO KILL A BRAND.”
Paradigm Agency has its own type of sexual allegations in a new lawsuit filed by a former employee. The head of the Agency allegedly spent money on prostitutes and ran it through the agency. But that is small compared to Casting Directors and Agents expecting sexual relationships for auditions and representation. In addition to this, the head of the agency named Gore is accused of hiding the merger with UTA from two U.K. based music companies until the final weeks. This really ends up hurting the stock and investment strength of these U.K. companies (much like how insider deals in Hollywood screwed over China Studios, hurting their stock value.). The deal was called off. The big picture is that this shines a spotlight on how agencies betray partners, clients, and talent on all levels. The outcome will lessen the power agencies have over talent and deals – setting the stage for far better deals with foreign funds.
Several Studios could normally have shut down forever. Paramount, Sony, and Time Warner’s Warner Brothers were struggling until recent deals were announced, deals that saved them for now. But these Studios need to learn from the disastrous decisions that destroyed GM and most airlines: revamp your approval system, cut the dead weight, reduce executive participation in production profits, and win back your core demographics in the U.S.A. and abroad by adjusting what projects get approved. Only Universal and Disney are doing well-with Disney buying out all but the news department of Fox. And then Disney absorbed Hulu, giving Netflix a big problem.
Hollywood is running out of Original Content (sort of.) But the deals rewarding the writers have not improved much. The conflict between the WGA and Agencies includes a process that should be deemed illegal, called “Packaging” television shows, and through this claiming massive payoffs in syndication to the agencies for doing nothing but letting their talent work the show. Now it’s begun investigated for collusion. This is what was explained in the pages following years ago. Finally, it is happening now.
And, before COVID, Studios announced they were cutting their production slates in half or to one third the normal number of films produced. This forces films out of the system, which is good for a fresh and healthier start. A pro would have to study the slow and steady reduction on what percentage of films were funded by a Studio…and then study how the 2007-8 financial collapse reduced the percentage to catastrophic levels. There was a time when everyone needed a big Studio to distribute a film, but now with so many independent distributors, a wise investor would avoid a Studio due to its systems of accounting.
Previously mentioned is the importance of foreign Studios to own an equal percentage of the I.P. Rights, if they fund a film. The reason Universal and Disney are surviving is because of toys and merchandise.
Another factor hurting the profit margins was taxation and union rates. California has possibly picked the wrong fight in 2019 when they declared that actors and Directors could no longer set up LLC’s to save on taxes. This increases the money the talent must be paid. This is bad for films. Productions moved to Georgia and other states that were right-to-work states and charged lower taxes and tax incentives. Georgia was the love of Hollywood until it decided to ban lateterm abortions, and now activists are attacking the last state that offers tax benefits to productions, with as many as 20 films going on at one time. California lost those productions for tax reasons.
The theater chains were going down for years. Wanda overpaid for AMC and other global theater chains right when going to movies became less popular. Now, every major chain from coast-to-coast is on the verge of bankruptcy. And this was before COVID.
Blame three factors for this: Hollywood stopped making films the world wanted to see, Studios stopped funding mid-budget films that tell the stories the make a national culture unite and remember what made them great, and film budgets were approved by the dishonest union of the Studio Heads and stockholders. In short, they removed the experience of sharing a story in a group setting because the values of the films didn’t resonate with the value of the audiences around the world. The hustle of convincing stockholders to sell more stock to fund films added long term losses to Studio balance sheets. But the executives would not be there in a few years so they didn’t care. And, the cost of advertising was inflated to fake amounts, centralizing money in the Studio system.
All this is explained in the following chapters in detail.
Now came COVID. Production shut down. Theaters closed. Hollywood got even more political as the Trump election approaches. This is all bad for Hollywood.
But it also presents the opportunity for Hollywood to be re-built to a more ethical and artistically-motivated Industry. Creativity First Films calls it the Uber-ization of Hollywood. This will create financially healthy systems funding ROI-strong content for Hollywood films, television, and Streaming.
With Blockchain DLT, the fake budgets and advertising will be exposed and it will be ended. Deals set up in Singapore will make the primary investor an equal holder of I.P. Rights, and give them “first right of refusal” in sequels and knock-offs in Chinese. This translates to huge profits on merchandise and rides. Foreign investors will get to choose the most respectful Hollywood partners without Agency strangulation. Finally, foreign Studios will have enough control of the system that made Disney stock so valuable and durable.
A system for fixing why the theaters are losing money is also in the plans for Creativity First Films and its investors.
Because a huge percentage of sources of funding have disappeared, Creativity First Films could get the chance to re-define what constitutes a fair deal. These deals are more sheltered for potential lawsuits or strikes from the WGA, and can deal with a more ethical and equitable management company or Agency. This new deal structure also cuts out middlemen, and Agency/Studio Development Hell that costs foreign investors millions.
A key point to remember while reading and learning all about this is that the founder of Creativity First Films predicted all this years ago, just like he correctly predicted in Blockchain. There are two factors that will draw a huge swell of audience back into the theaters: stories that carry meaning, 2) and the new user experiences from the “Intersection” with A.R., IoT, and V.R. The feature films must begin with tis built into the production and there is not an old-school Studio educated enough in Edge Sciences to launch this evolution.
There is a fantastic future ahead for film and the art of making films. And it is not 3-5 years away. Films and even Streaming Media will begin incorporating enriched viewer experience technology in 2021. The end result will manifest in the next generation of Apps, IoT interfaces, Blockchain services, incredible Games that actually increase brain functions, Augmented Reality experiences that go beyond the Pokeman Go craze, and Virtual Reality that leads to what is called Parallax View. Parallax View experiences might be a couple of years away, but it is the ultimate use of V.R. and A.R. and can begin with immersive sensory overload.
The future will change in the following aspects:
1. More Original Content will be signed in on better financial metrics
2. I.P. Rights to that Original Content will be shared more fairly, honoring the original and largest investors and Singapore more in royalties.
3. There will be fewer middle-men.
4. Approval system will be less top-heavy with Executives participating in profit sharing.
5. Fewer Producers that share in profits.
6. Faster into production due to fewer middlemen and lawyers.
7. Avoidance of traps that delay production by agencies.
8. No foreign pre-sale agreements the lose profits to other nations.
9. Honest budgets reducing the cost of filming.
10. Honest advertising budgets resulting in higher profits.
11. Stronger anti-piracy system.
12. Honest box office receipts.
13. Profit participation for actors and writers from gross profits, which will make actors rush to star in Creativity First Films.
14. Lower taxation on global revenue and long term revenue from theme park rides.
15. Some of the first Content Rights related to a production can be shared with the telecoms spending billions on 5G, that will link Games and Apps related to the projects through IoT and deliver more engaging user experiences, which leads to A.R. and V.R..
16. No worries on WGA lawsuits and strikes due to Agency problems.
17. No Agency packaging fees for television distribution.
18. The huge fees for Syndication payoffs at year 2, 3, and 5 will favor the first and largest investors, regardless of what country they base operations in.
19. More mid-range budget films financed, pleasing actors and Directors.
20. More Academy Award-winning films financed.
21. Creation of many Patents based off of the Blockchain Intersection with Media Distribution and Financing.
22. Investment into Singapore-based companies related to Media, Telecoms, and Blockchain.