Why Intellectual Properties Outpace Originals

By Neil Turitz

What used to be a preponderance of movies created from original concepts, ideas, and stories has turned into a majority of films based on books, comics and graphic novels, video games, magazine articles, and other established intellectual properties (IPs). In the process, studios have unilaterally changed the way movies are made and the entire development process.

The Numbers Speak For Themselves

In 2003, the six major studios and their subsidiaries released 138 films that all opened on at least several hundred screens each. Of those, 86 were based on original ideas, with 52 coming from IPs. Fourteen of those 86 original films were sequels, but sequels based on films that had been original ideas. Either way, there were far more of the former than the latter.

 

Flash forward five years to 2008, and the ratios begin to shift. Of 147 movies released, 81 were based on original concepts (with six sequels in that bunch), and 66 came from IPs. Go forward five more years to 2013, and it’s a completely different story: 115 movies, 57 of which are based on original ideas, the first time that number has ever been below 50 percent. Throw in nine original concept sequels and the numbers get even worse.

And the trend shows no signs of reversal.

“It’s pretty clear that the studios figured out that going with established, pre-proven brands is the way to go,” says journalist Anne Thompson, editor-in-chief and founder of “Thompson on Hollywood” at Indiewire, and author of The $11 Billion Year: From Sundance to the Oscars, an Inside Look at the Changing Hollywood System. “There have been enough examples over the years that they have refined and refined their tent pole strategy to the degree that we have this very stratified structure and the studios are constricting. They are not as big as they used to be, they do not have the huge development and slates they used to have, they are developing a much narrower range of projects.”

That the studios are making fewer movies is no secret. It’s been an obvious trend for years. From 2008 to 2013, the number of films in wide release dropped by 22 percent. That’s more than one-fifth of studio output that was simply shut down.

Where Does the Money Go?

Looking at those figures, the initial read might be that the studios, by making fewer movies, are spending less money. On the contrary. The number of tent poles has risen, as has the average price per studio film, while smaller and mid-range movies have decreased. The money that used to be spent on a series of films is now being spent on a select few; instead of putting $500 million into the creation of eight, ten, or a dozen movies, the studios are pouring it all into just two or three at a time.

Rich Green, the head of the media rights department at Resolution, explains. “The $40, $50, $60 million dramas that we grew up loving are no longer films the studios can afford to make, literally or figuratively. So studios are much more comfortable making a movie for $120, $150 million. It takes just as much time, manpower, and money to sell a movie that costs $20 million as it does one that costs $150 million, and the upside for the first one is so marginal, it makes no sense to make that $20 million movie anymore.”

A Shorter Window of Judgment

 

Likewise, the method of judging a film’s success has undergone drastic change. If the average cost for a studio film is now roughly $80 million, and the average for marketing costs is another $80 million (according to industry estimates), that means a studio has an average of $160 million riding on any given release. Studios used to have a few weeks to see if a movie could make that money back. Now, they have but a scant few hours.

A motion picture lit agent at one of the larger agencies, speaking on background, pointed out that, while a movie might have had several weeks to find an audience 10 or 15 years ago, soon they had just the opening weekend, and now, thanks to social media, a single day. When you consider how much attention is paid to midnight screenings and Friday grosses, it’s clear that he’s right on the money.

Word of mouth travels far faster than it ever has, and bad word of mouth can cripple a movie before it even gets started. Or, as Thompson explains, “a company can no longer get away with marketing bad movies.”

With so much at stake, studio executives are less and less willing to take chances. The new name of the game is branded entertainment and the adaptation of IPs to fill out release slates. While the importance of franchise properties has been covered at great length in the trades, business journals, and even on this site, studios have now gone even further, focusing specifically on name brands to draw in bigger crowds at the box office.

The Billion Dollar Club

Consider this: since 1993, when Jurassic Park became the first movie in history to surpass the billion dollar mark in worldwide grosses, 17 other films have joined it in the Billion Dollar Club. Of those 18, exactly three are original ideas. Granted, they are ranked first (Avatar), second (Titanic), and sixth (Frozen) overall, but that’s still just one-sixth of the total (it could be argued that Frozen is actually based on a Hans Christian Andersen story, but we’re giving it the benefit of the doubt).

 

Even when you factor in that two other films are sequels of original ideas—Toy Story 3 and Star Wars: Episode I – The Phantom Menace—still, more than two-thirds of the highest-grossing movies ever made having been adapted from other material. That’s a telling statistic, and one that studios clearly haven’t missed.

Not that all properties thrive, of course. Plenty of known entities have not only failed miserably at the box office, but have also been responsible for some of the biggest flops of the last half-decade. Last year, there was The Lone Ranger; John Carter and R.I.P.D. the year before; as well as the likes of Battleship, Cowboys and Aliens, and Green Lantern, just to name a few.

All came from IPs, and all were major write downs for the studios that made them. Even so, the inherent risks attached to any film mean that studios are going to want to mitigate those risks as best they can. More and more, that means betting on properties that have some kind of name recognition.

The Biggest Losers

The biggest victim in the transition from original ideas to IP adaptations has been the spec script market. The once-thriving business, which put millions upon millions of dollars into the pockets of screenwriters (and their agents and managers alike), and filled to bursting the development rolls of every studio in town, took an enormous hit, the overall number of screenplays sold and dollars spent tumbling to record lows.

Starting with the writers strike in 2007, and continuing through the economic downturn of ‘08, the studios took a step back to reexamine how they did business. It became clear to everyone in the executive suites that they were simply purchasing more movies than they would ever make, and spending untold amounts of dollars on projects that would never see the light of day.

 

In the end, executives made cuts to their development and story departments. An ironic decision, since that’s where they spent less money than anywhere else. Still, it was an attempt to save millions of dollars, and more to the point, an attempt to save millions of dollars in a very visible way, by no longer paying large sums for projects that could end up stuck in the purgatory of never-ending development.

“It’s odd that studios have chosen development as a place to cut budgets, because the cost of development is so much smaller in comparison to production and marketing costs, which are the number one and number two highest expenditures,” explains David Kramer, a motion picture lit agent and managing director at UTA. “It’s ultimately a false economy because, without buying original ideas, working closely with writers and having a broad development strategy, it’s harder to attract certain talent and filmmakers to the studios.”

As fewer movies were made, there was less need for new material. Studios phased out producing deals and consolidated their power, which cast a chill on the overall spec market. As producers had less juice and the number of potential buyers shrunk, even fewer specs sold, and the whole thing became a downward spiral of falling numbers on the one hand, and increased expenditures for tent poles in an attempt to try and rake in greater box office on the other.

There’s nothing wrong with a business model that involves betting big to win big, as long as that model works. If it doesn’t, you’ll go broke awfully quickly. Since each of the six major studios is owned by a larger corporation, there’s no danger of that happening any time soon, but costs have definitely been cut, even as budgets for some films climb higher than ever.

Everyone who works in the industry knows how difficult it is to actually get a movie made, and with economic and strategic paradigms shifting, it’s become exponentially harder. Ask any agent who works in the lit world and they’ll agree, as will those who work in media rights, which is the closest thing the film business has to a growth industry these days. Well, besides tent poles, which are more popular than ever with no let up in sight.

How to Draw That A-List Talent

In fact, it’s the overwhelming success of these tent poles that’s forced studios to obtain more and more IPs to better attract top-flight filmmakers. A-list writers and directors, who may have broken into the business by selling a spec script or by making eye-catching indie fare, are finding that there are fewer and fewer of these meaty projects to attract them. As Resolution lit agent Rich Green says, “Underlying material is the best way for a studio to get into business with that top-drawer talent they all want to be in business with. If you are a top-flight screenwriter, it’s probably not time efficient for you to write a spec screenplay.”

Green, who is the head of Resolution’s media rights department, is right on. Those writers know, as does every other well-established industry player, that it’s a far better use of their time to work for hire, and studios know this, too. “It’s still,” Green continues, “the most expedient way to own a slot for one of those writers. There was a studio head, right after the Academy Awards, who said to his staff, ‘I don’t have anything to call an A-list filmmaker about. Bring me stuff. I need books, articles, any IPs that will allow me to pick up the phone and call writer X and director Y. Find them.’”

While plenty of directors continue to exclusively make original ideas, you’d be hard-pressed to find anyone firmly entrenched in the studio system who does. Just about every great filmmaker has at least one adaptation or remake on their résumé (besides Woody Allen, who hasn’t made a studio film in years). Quentin Tarantino, Paul Thomas Anderson, the Coen Brothers, Wes Anderson, and Spike Jonze, for example, have all taken a dip in the IP pool at one time or another.

A Catch-22

It’s a bit of a vicious circle, studios not making the kinds of movies they used to make. They spend so much money on tent poles and sequels, then lament that they can’t draw the best filmmakers, so they try and find the IPs to attract them, even though most got their start doing original work that drew studio attention in the first place.

 

“The problem is, they’re not letting filmmakers rise up through the ranks and train to make these bigger films,” says Anne Thompson, editor-in-chief of “Thompson on Hollywood” at Indiewire. “Instead, they’re sending those writers who are really good at their craft, who know what they’re doing, and who want to write for adults in a wide range of genres, who maybe don’t want to write tent poles or comic book movies; they’re sending those people to television, and to the web, and Amazon Studios, or Netflix, or the cable networks.”

That’s certainly one aspect of it, and a reason why many believe we’re experiencing a golden age of television. But what’s more germane to these proceedings is how the industry is reacting to these changes and adapting accordingly. Studios still look for material and hope to land the best talent. Writers and directors try to get work, while their agents and managers try to get it for them.

Attacking the Problem

For those not on the A-list, there’s an insane amount of competition for a shrinking pool of employment. Writers can still write spec scripts to get attention—even if they don’t necessarily sell—and directors can work in an increasingly wide array of areas, including web series and short films. The question is, what are agencies doing to ensure that they properly represent their clients and get their fingers in the right pies?

“There’s a deep desire by studios to get pre-branded IP, and we have to take advantage of it,” says David Kramer, managing director at UTA and a motion picture literary agent. “We have a department that reps books and magazine articles, graphic novels and comic books, a video game department, a digital group—anything that exists prior to writing a script. This has all become more alluring to the studios over the past several years than an original piece of material.”

This line of thinking has translated to a lesser extend to the indie world and even Broadway. Producer J. Todd Harris and partners recently debuted Heathers: The Musical, Off-Broadway to huge acclaim, and he’s formed the privately-funded Branded Pictures Entertainment to acquire and develop branded IPs. “I’ve made a lot of independent films and I love them,” he says. “That said, my stint producing for an intellectual property company, where we made Piranha 3-D, demonstrated the power of the brand. I realized that controlling the IP is key, and that brands are driving the box office. So I’ve turned my focus to brands and put together a fund to acquire and develop them for exploitation in every medium.”

Not All Source Material Is Created Equal

But in the world of IPs, there are lines of division. Even with the rise of multimedia content as adaptive material—video games, digital fare, comic books, and so on—the vast majority of adaptations still come from books. Which is not to say it’s easier to get a book sold. If anything, it’s harder than ever, for similar reasons as the slowing of the spec market: there are fewer slots to fill.

 

“When I first started doing this,” says Green, “people bought books off of galleys. Then things changed. If a buyer was reading it in galley form, they thought something was wrong with it, it meant everybody had picked over it. And that’s when the rush to get your hands on something was so competitive, people started making evaluations earlier and earlier. Sometimes I would sell books for seven figures based solely on a partial manuscript and a synopsis of the balance, because studios wanted to get things as early as possible. Not anymore.”

What’s ironic about the number of books that are adapted and why, is that to a great degree, they allow for the most imaginative storytelling. A novelist or non-fiction writer is not handicapped by a three-act structure; don’t have to think about a four-quadrant audience; don’t have to limit size and scope for budgetary concerns; or worry about input from executives who are trying to cover their butts. A properly-adapted book will have a built-in audience that further mitigates the risk that studios so loathe.

Numbers tend to back that up. Three of the top 10-grossing films of 2013, and four of the nine Best Picture nominations, were based on books. The year before, it was four of 10, and five of nine. Plenty of book adaptations have cleared $300 million domestically, including The Hobbit: An Unexpected Journey, Forrest Gump, Alice in Wonderland, Twilight Saga: Eclipse, a trio of Harry Potter flicks, and all three Lord of the Rings movies, just to name a few. Jurassic Park and the first two Hunger Games movies cleared $400 million. Fully one-third of the 18 films that have passed the billion dollar mark in international grosses have come from books. That’s twice as many as the number of original ideas on that list.

What About Video Games? And Comics?

Video games don’t always translate to big box office, as the highest-grossing adaptation ever is still Lara Croft: Tomb Raider, which was released in 2001 to a domestic gross of a little over $131 million. Despite the fact that not a single video game adaptation has opened with a $50 million weekend, there are at least three big-budget video game adaptations coming in the next two years: Assassin’s Creed in August 2015, Warcraft and Angry Birds a year later.

 

Beyond that, plays, magazine articles, remakes of foreign films, short films, and digital entities don’t tend to break records. Before February’s The Lego Movie, there wasn’t a  history of successful movies based on non-Transformers toy properties, which leads us to comic books.

With a few notable exceptions (Marvel movies, several Batman, Superman, and X-Men films, and all of the Spider-Man properties), the truth is, while studios think a certain demographic will flock to comic book adaptations simply because of the source material, audiences just aren’t that interested, especially in lesser-known indie books.

Green points out that this is nothing new, though. “If I had a quarter for everyone who said, ‘We’re developing this graphic novel for a film. It wasn’t a very good graphic novel, but it’s a great idea for a movie,’ I’d have a mansion made of quarters.”

The pure reality is that of the top 30-grossing comic book adaptations of all time, exactly four are based on characters from somewhere other than DC or Marvel—the Men in Black trilogy, and 300.

Wither the Spec Market?

One thing that’s clear, and with which every single person consulted for this story readily agrees, is that the glory days of the spec market are over and unlikely to return. That said, there’s plenty of evidence to suggest that the outlook is not as bearish as originally thought. On the contrary, many think real progress is on the horizon.

Jason Scoggins, founder of specscout.com and author of the monthly Scoggins Report, which keeps close tabs on the spec market, is quick to point out that it’s not just that fewer specs are selling, it’s that fewer specs are being put on the market to begin with. “Through the first quarter of 2014,” he says, “there have been 54 specs sent out. That’s akin to last year’s number, which was 57. The two years before that, though, the numbers were 93 and 89. Go back to 2009, and it was 166.”

 

In 2009, a combination of the writers strike, economic crisis, and threat of a SAG strike combined to build up an enormous backlog of scripts. Once the smoke cleared, the market suddenly became flooded and just 25 of those 166 sold—a disastrous 15 percent. If a line in the sand exists when studios saw their collective future and made a decisive move, this would be it.

Comparatively, this year’s first-quarter numbers—23 sales of 54 projects, or 43 percent—is almost three times as high as five years ago. That’s enough to bring some hope to those doing the selling, though it’s deceptive, as scripts sent out in 2009 were just that—scripts. Nowadays, agencies almost never send out material without some talent attached. It’s no longer practical to put a new piece on the market completely on its own. Pitches are different and, generally speaking, a tad healthier than the spec market, but most of them are sold by established writers who have history with the studio in question.

“One of the reasons there are fewer pieces of material on the market,” Scoggins continues, “is because people are taking time to package things. It’s next to impossible to sell something without at least a producer or director attached. And the packaging process is an enormous undertaking in and of itself.”

Going After It

It’s that kind of thinking that’s led every agency in town to be more proactive. Once it was clear that the market was going south, people hustled to find other ways to make sales. That meant thinking outside the box and attaching as many facets to a script as humanly possible. Bringing on talent and putting together a budget was suddenly being handled by agencies in an effort to find buyers for their clients’ projects, in essence becoming de facto producers.

 

David Kramer, managing director at UTA, agrees. “We spend a massive amount of time internally putting projects together. And it doesn’t even have to be just with our clients. If there’s a director we want for a project who’s represented elsewhere, we try to get them. It’s been going on for many years among all the agencies, and we’ve had a tremendous amount of success doing it.”

Since only so many directors and actors can get a film green-lit simply by attaching themselves to a project, agencies are getting around the depression of the spec market by buying into the concept of branding and name recognition by putting together a combination of players to which it becomes exceedingly difficult to say no, thus keeping clients working and studios buying.

Not only that, but UTA has hired what it calls a “global distribution strategist” to give clients more control over their projects through newly-available forms of distribution, both cinematic and digital. Alex Fragen, formerly of Summit Entertainment and consultancy firm Question Media Group, was appointed to UTA’s newly-created position, the first of its kind at any agency, in order to give clients more options when studio windows are closed.

When a Sale Isn’t Necessarily the Most Important Thing

It used to be that the primary focus of sending out a spec was to sell the screenplay, but now it’s just as important to sell the writer. More often than not, if a spec is going out completely free of attachments, it’s precisely because an agent or manager wants to introduce their writer to Hollywood as much as they want to make a sale.

 

“I like to tell my clients that the best thing that can happen is we sell it,” says Rich Green, lit agent at Resolution, where he is also in charge of the media rights department. “The second best thing is that we don’t sell it, but people are going to recognize the writing and say, ‘it’s stupendous. Let’s meet with the writer about something else.’ If the spec generates a job, it will pay for itself.”

The benefits then become multi-pronged. As writers get studio jobs, those studios save money by testing out new writers in the kind of low risk/high reward fashion they prefer, while still maintaining an overall strategy that focuses on IPs. The writer gets to hold on to the property that got them in the door in the first place, which allows them to maintain control of a property with no real expiration date.

“If a client tells me an idea and asks if he should write the spec, if I like [it] I say absolutely,” says Kramer. “I really believe that the spec market is heating up, because everything is cyclical. If you write a spec and control it and own it, it never goes away. Whether it’s made a year from now or ten, it’s material you can use in so many different ways as long as you retain ownership.”

That material could, in theory, be packaged a few years down the road after said writer has raised his or her profile, thereby making it easier to attach the necessary talent to make the sale. It all comes full circle.

The Loophole

There’s a down side to this, of course; something that’s grown in frequency since the writers strike. It used to be that studios would hire writers on so-called step deals, which guaranteed payment for a first draft, at least one rewrite, and often more than that. Now, payment is only guaranteed for just one step, or a single draft. This development already has agents and writers in an uproar, but it gets worse: despite WGA rules that stipulate otherwise, it’s become more common for studios to ask writers to turn in several passes of a treatment for free, just to have a shot at getting the job. 

What began as a trickle six years ago turned into a torrent once studios realized there was little need to pay out loads on guarantees when there were plenty of writers willing to audition with actual written work. And it isn’t just studios who do this—producers and production companies can demand weeks or months of free work from writers before script-writing actually begins.

A motion picture lit agent at one of the bigger agencies, speaking under conditions of anonymity, agrees that it’s a major issue, one there’s little he, or anyone else, can do anything about. As studios and producers tell writers they must go above and beyond the norm in order to get a job, this agent admits he might advise a newer writer to play ball, because it may very well lead to more work.

The End of the Tunnel

While the situation is far from great, it’s not as bad as it was. There are still plenty of bumps in the road ahead, but numbers suggest that things are getting better. Higher percentages of spec sales, for one, and the growing number of films financed outside of, but in concert with, the studio system, for another.

 

“I think this is an exciting time,” Kramer says. “Writers can retain much more control. They can write something that’s unique and interesting, attach talent, and find great producers in the indie space. There are many financiers making movies like that; [and not] just $5 million movies, they’re making $20, $30, and $40 million dollar movies.” Exactly the kind of movies studios rarely make anymore.

Scoggins agrees. “My gut tells me the low hanging fruit of the IP world has been picked. There are only so many other options, yet there are new franchises out there, just waiting to be created, and they live in specs and pitches.”

Studios will continue to flog existing franchises to death because the alternative is to actually take risks. While evidence suggests that some are more readily willing to do that than others, it’s eminently clear, when looking at the overall picture, that studio business has become as much about avoiding risk as it is about making money.

The alternative is to take chances, and there’s no question that scares the bejeezus out of everybody. After all, that’s pretty much how all this started in the first place.