Soderbergh's New Film: The End of Movies as We Know Them?

Jan. 24, 2006 — -- Oscar-winning director Steven Soderbergh's new film, "Bubble," is getting a lot of attention in and out of Hollywood. But it's not the film's $1.6 million budget or lack of known stars that has people talking.

Within four days of its release, "Bubble" will not only appear in movie theaters but on DVD and television, challenging the long-standing model the business has operated on for decades.

It's part of Soderbergh's effort to spark change in the industry, particularly in the way films are financed and talent is compensated.

"All this stuff needs to be redesigned, the whole thing from top to bottom," said Soderbergh. "The risk-reward ratio, how people are compensated up front, how they're compensated on the back. In my view, all this needs to be rethought."

The film -- a murder mystery that takes place in a doll factory -- is an experiment of sorts that has generated excitement as well as anxiety in the movie industry. If "Bubble" is a success, it could start a trend that has the potential to cripple the already suffering movie theater industry, and to change the way movies are made forever.

Soderbergh is probably best-known for directing the Julia Roberts blockbuster "Erin Brockovich" and the star-studded "Ocean's Eleven" and "Ocean's Twelve."

But he says the business model that was responsible for those films needs to change.

"There should be a true partnership between those who make the films and the people who finance it," said the director "That means, initially, a lot of people who are being overcompensated up front [before the film is made] would have to be willing to take it on the back [after the film's release]."

The director says that although this will reshape the economics of movie-making, it'll still remain a lucrative business.

Soderbergh goes on to say that he thinks movies should have a salary cap the way some professional sports do. With some actors getting $20 million paychecks before their first day of shooting, he'd like to see that limited to say, $5 million up front and then, based on a film's performance, more after the release.

He says it's still a lot of money, and believes the movies will get better across the board.

"Let's say you had a salary cap of $5 million," he said. "Then you find yourself in the situation where a lot of people could potentially come up with $5 million to pay an A-list actor, then their [the actor's] decision is going to have to be based on 'which is the best of these scripts that I'm going to get paid $5 million to make?'"

Soderbergh said this levels the playing field, giving everyone the same access to talent and the same ability to make a good film.

"I think you may be looking at the future," said Russ Crupnick, an analyst with NPD group.

Crupnick sees this as an opportunity to offer consumers choices while capitalizing on the on-demand, TiVo culture we now live in.

"If you think about not only the release window but the demand window for entertainment content -- at least music and movies -- it's getting more narrow and more narrow," he explained. "So the idea behind this is to be able to give consumers the biggest opportunity to get it as soon as possible."

But theater owners don't see it that way. They see a business model that would cut directly and deeply into their profits.

"I think some theaters have concluded that a simultaneous release model, if it were extended to the entire industry, would basically be the end of the exhibition industry as we know it," said Kendrick Macdowell, general counsel for the National Association of Theatre Owners. "We may not have zero movie theaters in this country, but we'd certain have vastly fewer."

Macdowell says the industry relies on very tight margins, and that any significant cut in admissions would be potentially disastrous to theater chains.

It's a concern that's not lost on Crupnick, but means they'll have to evolve along with the industry.

"The experience itself has to good," he said. "The consumers have to walk out of there saying, 'Hey, I got value for my money, the seats were comfortable' -- it's really basic fundamental things. 'The sound was good the crowds weren't too overwhelming, there was only one cell phone that went off.'"

But Macdowell insists theater owners welcome new ideas and new technology.

The assumption that multiple revenue streams turned into a single revenue stream are good for the industry across the board is one they take issue with.

"There is no inevitability to simultaneous release -- it doesn't have to happen," said Macdowell. "It's not even something consumers would necessarily demand if they understood the consequences."