More King Kong

Mike Masnick offers another answer to the King Kong question:

Last month, at the CATO Institute conference on copyrights, someone from NBC Universal asked both Professor David Levine and me how NBC could keep making $200 million movies like King Kong without super strong copyright regulations. We each gave our answers that didn’t satisfy some. However, as I noted in the recap to the event, the guy from NBC Universal was asking the wrong question. It’s like going back to the early days of the PC and asking how IBM would keep making mainframes. The point is that $200 million movies may mostly be a thing of the past. The near immediate response from NBC Universal and other stronger copyright supporters is that this is a “loss” to society–since we want these movies. However, that shows a misunderstanding of the answer. No one is saying to make worse movies–but to recognize that it should no longer cost so much to make a movie. The same economics professor, David Levine, who was asked the question is now highlighting exactly this point on his blog. Last week there was a lot of publicity around a group of Finns who created a Star Trek spoof and are trying to help others make and promote inexpensive, high quality movies as well. Levine notes that the quality of the spoof movie is astounding–not all that far off from what you’d expect from a huge blockbuster sci-fi picture, but was done with almost no budget at all. Given the advances in technology, the quality is only going to improve. So, again, it would appear that a big part of the answer to the $200 million movie question is simply that anyone spending $200 million on a movie these days is doing an awful job containing costs.

This is a good argument, but I still don’t entirely buy it. Certainly, this gives us a reason to think the optimal price for movies in the future will not be $200 million, as better technology allows us to cut the costs of the expensive special effects and film-based recording technologies that contribute to the cost of Hollywood movies. Certainly, that will bring down the cost of blockbuster movies somewhat.

But I don’t think it gets you down to the point where you could fund movies entirely through indirect means like advertising and a first-mover advantage. I’m no expert on the economics of the film industry, but it seems to me that technology is not the dominant, and probably not even the most important, cost driver for the typical Hollywood film. Rather, I have the impression (please correct me if I’m wrong) that much of the cost is driven by the immense amount of labor required to create a top-quality film. You’ve got lighting crews, camera crews, makeup crews, set crews, sound crews, post-production crews, and on and on. Another major cost is the environment in which actors act. Either you have to move your cast and crew to a new location, which involves a lot of travel costs, or you have to construct sets, which requires considerable materials and labor for their construction.

Even costs that are primarily technological have a major labor component. For example, a lot of special effects require people to build computer models, design textures for the models, set up and run complex motion-capture software, and tweak and polish the finished product to make sure it looks realistic, etc. Even if the cost of the hardware and software drops to zero, salaries for the artists and technicians who run all that equipment are likely to be significant. Video game companies have become dominated less and less by programmers and more by creative types who take the models built by the programmers and bring them to life with artwork and stories.

In short, movies in the future may not cost $200 million, but it seems likely to me that there will be movies for which (say) a $50 million budget is entirely justified. I remain skeptical that studios could recoup that kind of investment absent some help from copyright law. And I’m not willing to shrug my shoulders and accept that those kinds of movies simply wouldn’t be made any more.

So I remain pro-copyright. The world would be a much simpler place if we didn’t have to bother with intellectual property rights, but unfortunately, the world seems to be a complicated place.

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