Entertainment

David Hutkin: Turning a Profit in the Film Industry

David Hutkin is the chief financial officer of The Weinstein Company (“TWC”), an independent multimedia production and distribution company. The Weinstein Company has helped create movies such as “Django Unchained,” “The Imitation Game” and “Silver Linings Playbook.” TWC also operates a television division which produces “Project Runway” and “Marco Polo.”

As the new CFO for The Weinstein Company, what is at the top of the agenda?

Decisions based on sound data points and market movements are now necessary strategies, not options. I believe that new metrics need to be created with new marketing methods, and picking and choosing projects that will create revenue streams that are profitable on a timely basis are my priorities.

The time value of money is key. Say you’re aiming to create a 30 percent return on a film or television series. While the number looks good, if it takes six years to wait for that return, then you actually lose money. You’ve got to discount the numbers and calculate how long it actually took you to get there and, frankly, you have to assess what the risk is to make money. Time is a risk premium that not many companies take into account. I mean, you could have taken that same $30 million dollars and put it somewhere else that could have either created money quicker or had less risk of loss. Not many people take that into account. So, in my role, I want to institute more of a narrowly focused approach on return, and analyze what we’re really making and where we’re going to be taking risks.

Looking at content and costs differently, while watching the changing market and audience behavior, will have a big impact on profitability. It’s no longer just about, “oh, I think my film will do $70 million at the box office.” Now there are a lot of different choices, and instead of creating bigger films, there are so many other options. You could say to yourself, "well, maybe I should focus more on television for the same dollars," or focus on a certain type or film, or make a deal with Amazon, or whatever it is that will yield a bigger profit. As CFO, the main focus is to identify which projects to take on and decide which outlets to distribute the content. I think the risks today in the entertainment industry are higher, and you just have to be more cautious and prepare things smartly.

The rise of multiple channels and video outlets has raised competition across the entertainment industry. Average box office revenues are still increasing year on year, but with an increasingly segmented audience, and growing niche content and outlet options, what are the opportunities for the box office moving forward?

There’s still a lot of opportunity in the box office. You just need to decide if your film will be on a large budget or a small budget. The middle is now dying faster than ever, so you just have to be conscious of your spending. Bigger production companies such as Warner Bros. and Pixar can spend copious amounts of money on film promotions, but smaller productions are going to have to find ways to use more cost-effective digital and word-of-mouth marketing tactics. If you’re just going to shoot for $8 million dollars, no one’s going to want it, and, eventually, you’re going to just wind up sizing everything down. But, whatever the market will bear, it all comes down to the story.

With so many outlets, pilots, and new stories being generated every day, the movie business has its competition cut out. The film industry used to own the audience, and the entertainment world used to be segmented into either watching TV or watching film. Now, there’s more competition, from mobile to TV, and it’s creating a bigger need for a reason to get people intrigued enough to actually go watch a movie. In short: the movie industry has to try harder.

Is TV the future of entertainment?

I don’t know if TV is the future, per se, but I do think that the audience is already there. You finally have good content makers with a solid background in film who are willing to participate in TV. To name a few, Peter Berg, Antoine Fuqua, and Quentin Tarantino are some major filmmakers who are edging into the TV space. Now you’ve got a mix of strong television showrunners, casts, and film directors who are willing to be in the TV arena. Then, you’ve got the money factor, which is a major part of that change. Producers and directors are seeing the value of television episodes, as most are paid a per-episode fee, which rivals in total to what they would make from a film. Other motivating factors, such as the freedom to develop stories over a longer viewing period, also adds to the appeal. In a nutshell, I believe that the audience is there, the money is good, and there are a lot of distribution platforms that create choices—and there’s a huge appetite for good content.

Really we’ve already had a presence in this realm going back a number of years with shows such as “Marco Polo” that East West Bank helped finance. Our most recent co-production deal with Amazon Studios and Mathew Weiner, most famously known for the creation of “Mad Men,” is in the early stages of script writing and at an exciting point of development.

How is The Weinstein Company engaging international audiences, and what trends are being found overseas?

Well, let’s start with China. We’re hoping to create content through our channels with our Chinese partners to eventually distribute on major Chinese viewing platforms. We’re currently not creating content specifically catered to Chinese audiences, but, with that said, I think that some of our content will travel, especially as we bring Chinese partners into our company. We’ve done stuff with Wanda and Pegasus Media Group, along with other media companies.

Mobile has been around in the Chinese market a lot longer than in the American markets, and it dominates everything—I mean, look at the market share WeChat and Weibo have! As we continue to explore the Chinese market, we’ll hear more of the audience’s needs. It’s a big market, so we’ll cater some of our content to Chinese consumers and eventually make it more internationally than what we currently have.

In terms of other parts of Asia, every U.S. company is still trying to figure out how to engage with the mass audience. I mean, look at this YouTube video—it’s not even seven minutes long and it has more than two million views. How can we get this audience to watch our long-form content? I think that’s the part that everyone in the industry is trying to figure out. And the answer, for the most part, is about creating a lot of strong stories with good characters that feature complex connections. But short-form content isn’t going to last forever. Eventually, this younger generation will mature and so will the market. The trend is going to become apathetic to short-form content eventually, and the audience will want to watch something where they can lose themselves for an hour or two through good TV or films that have a really solid storyline, instead of watching a cat dribble a ball down the street.

Our company also sources most of its content from Europe, and a lot of it’s done with the BBC. A lot of our movie titles and content revolve around London and Paris to engage with European storytelling, so almost all of our content is either cast as international or has stories that originated in Europe—like "The Untouchables.”

In terms of an international trend, we’re on the forefront of capturing this mass audience. We’re now seeing that people are looking for something with more substance. Those short-form videos derive a lot of temporary enjoyment, but I think that people want to be tested intellectually. Once that happens, companies like mine will be there to offer content that has better narratives and higher quality through those distribution platforms. With major players like Amazon and Alibaba entering the entertainment market, I’m also optimistic about upcoming opportunities for partnerships, trend developments and distribution plans.

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