Trends:

1.  Squeeze in the middle:

"JOE SWANBERG makes films about the romantic lives of young urbanites. He shoots quickly with a digital camera and asks actors to wear their own clothes. His films, which tend to cost between $30,000 and $50,000 to make, are almost never shown in cinemas. Instead they are available on pay-television as video-on-demand, as downloads from iTunes (Apple’s digital store) or as DVDs. By keeping his costs down and distributing digitally, Mr Swanberg is making a living.

Technology was expected to help young artists like Mr Swanberg. In 2006 Chris Anderson, the author of “The Long Tail”, predicted that the internet would vastly increase the supply of niche media products and bring audiences to them. That has certainly happened. But so has the opposite. In film, music, television and books, blockbusters are tightening their grip on audiences and advertisers (see article). The growth of obscure products has come at the expense of things that are merely quite popular. The loser in a world of almost limitless entertainment choice is not the hit, but the near-miss.  read more from the Economist

Industry Threats

Distribution:   a revolution is coming...

....but, it might take a long, long time...

there was a great analysis of the troubles with movie distribution business models here by TechCrunch:  Hollywood Has A Great Online Distribution Model — If You Hate Selection

basic points:

• the only reason piracy isn’t so rampant in the US is that our broadband speeds, for the most part, suck.
• the content that’s the problem
• Farhad Manjoo had a good article yesterday on Slate outlining some of the major problems.
• One of the biggest ones is that Hollywood’s archaic syndication rules are in play with digital distribution over the web. For example, Hollywood now gives some movies to services like iTunes for rental immediately or soon after they’re released. But because of the deals studios have in place with premium content channels like HBO, after the pay-per-view window closes (iTunes and the other services’ rentals systems are considered pay-per-view), these movies have to be pulled off of the rental services so that the premium channels can get their exclusive rights to broadcast them.

  Those movies then stay exclusive to the premium channels for 15 to 18 months — let me repeat 15 to 18 months! And from there it only gets worse. After the year and a half in premium channel jail, movies then go to the regular cable channels and big networks for airing. As I understand it, some online rentals are again okay during this time, but then, they often go back to the premium channels for a second run. That means they get pulled once again.

  This whole process often lasts for seven years or more, as Manjoo notes. It’s only after that time period that movies are really free to be distributed a bunch of different ways. That includes Netflix’s popular Watch Instantly streaming feature — so now you see why the selection of movies on that service is mostly older films. In fact, basically, the only newer ones they offer is because of their deal with Starz, the premium cable channel. That deal may have been one of the smartest ones Netflix has made yet, because at least it gives us access to some movies this side of 2002.

• things may change when Hollywood starts getting screwed just like the music industry got screwed.

• read more from TechCrunch:  Hollywood Has A Great Online Distribution Model — If You Hate Selection

Rise of Bollywood:

I recently read an article where Indias new money is coming to the rescue of Steven Spielberg's DreamWorks studio (owned by Viacom).  There is a huge conglomerate from india called "Reliance group"  that is talking about funding the famous film business. 

read more

• http://www.economist.com/business/displaystory.cfm?story_id=11580240
• http://www.economist.com/business/displaystory.cfm?story_id=10657215

Venture Capital investments

The film industry is one of the biggest high-risk / high-reward businesses in America, and is on of the USA's top exports around the world...culture, as well as profits. 

More investment going to Hollywood — A new $200 million private equity fund raised by FilmBankers International LLC will invest directly in the production of independent films in the United States. The firm is still fundraising, but plans to use the money for films with a budget range of $10-20 million. FilmBankers bases funding decisions on a “credit score”, which attempts to predict the potential success of a film. The fund is part of a new wave of private capital headed for Hollywood, with hopes of outmaneuvering the time-worn blockbuster model of the big studios. News via TheDeal.com.

Talent Agency

CAA raising $150M to $200M venture fund with DFJ, for entertainment investing

Creative Arts Agency, the large talent agency in Hollywood, is raising a $150 million-$200 million venture capital fund to invest in startups in the digital/entertainment sector, according to PaidContent.

PaidContent said Silicon Valley firm Draper Fisher Jurvetson is working with the CAA to help manage the fund. Tim Draper, a lead partner at DFJ, did not deny the report, but told VentureBeat he couldn’t say anything at this time because of regulations that govern the fund-raising process (fund managers are not supposed to make public solicitations).

The report also said Brian Garrett and Rick Smith, former partners at Palomar Ventures, and Brett Brewer, former president of Intermix, are working with Michael Yanover, head of business development at CAA on the project. The money for the fund is coming from traditional LPs.

The report said that rival agency ICM has also been working on raising a fund, and has been in contact with Paul Jacobs, CEO of Qualcomm about the project.