Movie Life Lessons: 12 O’Clock High: Leadership

Question: What is the only movie to ever be taught and studied in the Harvard Business School?

Answer: 12 O’Clock High starring Gregory Peck.

The movie was released in 1949 and focuses on an Air Force squadron, the 918th, which is conducting daylight bombing runs during World War 2. The movie is taught at the Harvard Business School as a case study in leadership, and how to effect change in organizations. This film is also studied by the US Navy as an example of leadership styles in its Leadership and Management Training School.

Which is why it is the focus of today’s Movie Life Lessons blog post.

THE 10 MOVIE LIFE LESSONS ON LEADERSHIP FROM 12 O’CLOCK HIGH

1. OFFER SOLUTIONS NOT EXCUSES

“We could have. If it hadn’t been for our stinking luck.”

“We’re talking about luck. I don’t believe in it. I believe a man makes his own luck.”

When the movie begins the current commander of the 918th Squadron is Colonel Keith Davenport. Davenport is beloved by his men and returns the feeling. To the detriment of the whole squadron and the larger mission. Davenport makes excuses for the high number of losses his squadron experiences.

The problem as Frank Savage understands it is Davenport’s loyalty is to his men. He is holding on way too tight. The loss of life on each mission is getting to him.

However, in making excuses for his men, in chalking it up to rotten luck, Davenport fails to require the effort of them as individuals. Instead, he explains to his commanding officers why it wasn’t this airman’s fault for missing the target, or that a pilot’s mistake was because they’re tired or because of where they're from, or whatever the reason.

In the end, they are all excuses Davenport makes for his men. This is his mistake.

And it leads to the next Movie Life Lesson:

2. HAVE HIGH STANDARDS AND MAINTAIN THEM.

“I have to ask you to take nice kids and fly them until they can't take no more. Then put them back in and fly them some more. “We've got to try to find out just what a maximum effort is and how much a man can take and get it all.”

Gregory Peck’s General Frank Savage doesn’t waste time making his new style of leadership felt among the base. When the gate guard doesn’t check his credentials and doesn’t salute him Savage chews the man out. He makes it known from the moment he sets foot on the base that he is in charge, and that he expects the rules to be followed. Something that has been missing for too long. The effects of this change in the style of leadership are immediately felt by the men. Like when he closes the base canteen.

It’s more than just what he says. It’s how he looks. His uniform is crisp. He is buttoned down. He carries himself like a man in charge. Which he is.

3. TAKE RESPONSIBILITY FOR YOURSELF AND YOUR ACTIONS

“You met that responsibility the same way you met his need. You ran out on it.”

Savage, memorably chews out Lieutenant Gately for his failure to support his commanding officer, Colonel Davenport, in achieving the mission and sharing some of his burden. But, even with a soldier like Lieutenant Gatley who he considers to be a coward, Savage doesn’t pass the buck. He doesn’t relieve Gately of command and transfer him to another unit. No. He forces him to take responsibility. He demotes Lt. Gately. He has him change the name of his plane to “The Leper Colony.” He tells him that he is going to get every airmen on base who can’t hit his target, who can’t find the mens room…

Why? What’s the point?

To remind him that no one man is more special than the rest. And that regardless of connections or legacy (Gately’s father and grandfather are both war heroes), each of us is responsible for our actions as individuals no matter what circumstances we might be saddled with or how unfair we think they are. We live in a world that currently thinks that when the standards set become to high for a particular group the answer is to obliterate the standards. Frank Savage proves why that thinking is incorrect. It is the standards we hold ourselves to that make it possible for us each to achieve our missions as individuals.

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How to accomplish that leads to the next Movie Life Lesson:

4. GET BACK TO FUNDAMENTALS (TO OVERCOME FEAR AND DOUBT)

“Tell them to put their requests in through proper channels. Meanwhile, they fly.”

General Savage gets his men back to fundamentals; he gets them flying. No more medical exemptions for his airmen. He keeps sending them up. He reviews the missions even on days when the men aren’t going on a bombing run. When people face failure in life, they find themselves at a fork in the road; they have a choice. They can either choose to persist in the mission. Or they can quit. A smart way to bounce back is to get back to basics.

In Top Gun after Goose’s death when Maverick refuses to engage what does his commanding officer (Tom Skerrit) do? He keeps sending Maverick up. Getting him back in the cockpit.

In Rocky III after Rocky loses to Clubber Lang (because he didn’t train properly) what is Apollo Creed’s solution? He takes Rocky back to the basics. He trains him in the basics. He learns to fight again.

In 12 O’Clock High Frank Savage takes the same tactic. In doing so he stops the men from feeling sorry for themselves (or at the very least he doesn’t give them the time to wallow in their self-pity. He doesn’t let them think they are special. He keeps them busy with the basics. The fundamentals. Then he builds on that. No one person’s hide is worth saving more than another. No one man is more important than the mission.

Which leads to the next Movie Life Lesson.

5. PROMOTE EXCELLENCE

“I better practice saluting you first. It goes with the metal. It was a privilege to add my name to that recommendation.”

Savage’s focus on excellence involves demoting aircrew who make mistakes to The Leper Colony; those who prove themselves get promoted out of it.



5. MAINTAIN YOUR DISTANCE

“You’ve gotta find a way to save yourself a little. You can’t carry all the load. It’s too big.”

“He’s going to bust wide open. And he’s going to do it to himself. Why? Because he is a first-rate guy.”

Over the course of the movie despite his stoicism in dealing with the strain of leading men into combat, General Frank Savage begins to succumb to the same tendencies of his predecessor. Flying with his men he has grown close to them. Too close. He is holding on too tight. When one of the other planes is shot down, Savage calls over the radio for the pilots to bail out. But, it is too late. Afterward, we see he is clearly affected by the loss.

In Saving Private Ryan we see another character who employs this tactic in leadership. Tom Hanks’s Captain serves alongside his men but does not forget that his role as their leader necessitates that he maintain a separation from them. There are certain facts about his life he won’t share. When it comes to complaining as he explains to one of the soldiers under his command, “Gripes go up.”

6. BUILD SUPPORT

Major Stovall: “He'll never feel things about the group the way that made her Davenport dead. And nothing is going to start eating holes through him. He's too tough for it.

Joe:“There’s also such a thing as being human.”

Major Stovall: You know something, Joe, the only difference between Keith Davenport and Frank Savage…is Frank Savage is about that much taller.”

At the start of the film Keith Davenport and Frank Savage seem like entirely different men. Which calls to mind, Lt. Stovall’s remark about Frank Savage and Colonel Davenport.

Major Stovall (Dean Jagger, who won an Oscar for his portrayal) at first does not like Peck’s, General Frank Savage. Initially, Stovall longs for the personal connection of the former commanding officer, Colonel Davenport who has close personal connections with all of his men. By contrast, Stovall views Savage as cold, unsympathetic, and tough.

A hard ass.

Major Stovall comes to understand that Savage and Davenport are both good men who want the same thing: Victory. They both care about their men. That there is no difference between them.

When the pilots threaten to transfer it is Stovall who agrees to stall the pilots’ requests to give the general’s approach time to take effect.

7. INSPIRE OTHERS IN THE MISSION

“But right now the deal is to hang on….We’re in a shooting war,” -Frank Savage

With his pilots on the verge of transferring, Savage calls a trusted young officer, Bishop, into his office to hear his concerns. Bishop explains that he can’t see the point of their attacks. Savage explains why their missions are so important, convincing Bishop to stay. In turn, Bishop convinces the other pilots to stay as well.

Be clear about your mission goals and why they are important to achieve. Following orders is all well and good, but in a larger sense, the team needs to be inspired to complete their objectives. The way to make this happen is to instill a sense of purpose in your people. To inspire them. Doing so makes the sacrifices that will no doubt be necessary along the way seem worthwhile for everyone involved.

Tony Robbins refers to this as the “must.” The idea is that people are properly motivated by things that are most necessary to them in their lives. Therefore, people will do what they “must do” to maintain, protect, and keep, those things in their lives that are most valuable

8. SACRIFICE

“I guess a man only has so much to give and you’ve given it.”

Anything worth doing requires sacrifice. This is at the heart of what the movie is about. The young airmen who are sent on dangerous bombing runs by their commanding officers, who give their lives for the sake of the greater mission.

Which sounds good but is easier said than done. For example, everyone knows they should eat healthily. However, many of us are not willing to make the necessary sacrifices (giving up sweets, foods we love, and eating certain meals at certain times). The reason being we are often not properly motivated or inspired in our missions. We don’t have the right “must.”

For example, if a person is overweight or out of shape they might know they need to work out and eat healthier. But until a doctor tells that person they’re going to have a heart attack (or serious health problems) if they don’t change their ways, they very often don’t. But once they understand why they must do things for the greater good, they will make the necessary sacrifices.

Of course, that begs the question of what should be sacrificed, and how much to sacrifice.

This leads to the next Movie Life Lesson:

9. BUILD LEADERS

“And while you're at it tell ‘em we're going to work now to try and build some leadership around here. And when it comes to counting on me, tell him you're gonna be the next one. And it better be good. And tell Bishop he's gonna lead one and find out what it feels like to carry the load.”

Savage insists that every man must carry the load. Every man must learn to lead. That way the squadron/team is not reliant on one man. They can each rely on themselves and on the men on their team. The lesson is to organize your squadron/team/company in such a way that every man or woman pulls their weight.

In this way, the mission carries on beyond just one man.

In my experience in Hollywood, there are essentially two ways to run a writer’s room/production. The first is the way Matt Weiner ran Mad Men. Every single decision rested with him. Most of the production was forced to wait for Matt to weigh in on whatever decision was being made. One time filming stopped for hours over a decision about whether a character should wear a hat in a scene until Weiner could be reached and render his decision.

Contrarily, on Breaking Bad, Showrunner Vince Gilligan broke stories in the writers room in such a way that any of the writers in the room could write any episode, not only the one they were assigned. If Vince Gilligan were unavailable to handle one aspect of the writing/production, he knew and the organization (AMC) knew that there were others on the team who could step up and lead.

The History of Hollywood Stunts

Stunts have been an integral part of Hollywood movies since the early days of cinema. In the early days, stunts were performed by the actors themselves, but as movies became more complex and dangerous stunts became more common, the need for professional stunt performers grew.

My new book, The Double coming out next month is about a Hollywood stuntman on the backend of his career who is accused of murder. To clear his name he has to catch the people responsible for them. To do this he will have to make use of all his skills. Skills that allow him to gain access to otherwise inaccessible areas, and to escape from close calls. Not to mention the best stuntman are all trained fighters. I wrote the book in part out of my love for the action movies I watched endlessly growing up and the stuntmen who pulled off the daring feats that made those movies so memorable.

Some of the stunts that I remember watching when I was a kid that had my mouth agape was Sylvester Stallone leaping from the cliff in the first “Rambo: First Blood.” I remember watching him make the jump and then falling through a forest of trees. Later, I found out Stallone really made the jump himself. If you watch the movie you can actually see Stallone hit the branch that broke his rib.

Another big stunt at the time was the opening scene to “Goldeneye” which rebooted the 007 franchise with Pierce Brosnan as the British secret agent. The movie opens with a bungee jump from the top of a dam Bond performs to gain access to the bad guys’ compound. Bungee jumping was all the rage of the time. Having bungee jumped once myself I can tell you it’s pretty insane if not exhilarating. The thing to remember is after you fall, the bungee cord goes taut and then pulls you back up. Which means you fall again. Now, Goldeneye used what’s called a descender. Which is wire where the distance can be set which allows for the wire to slow the fall of the stuntman as they reach the full distance.

Wire work is now a staple of stunt work in Hollywood. Marvel has made great use of wire work to make the superheroes more hero. Or allows martial artists the ability to pull off high flying kicks, flips, and fights. Crouching Tiger Hidden Dragon being one of the first big movies to make use of this technique.

I still remember watching movies like Point Break and Drop Zone about skydiving adrenaline junkies using their high-flying skills to pull off heists. At the time I couldn’t understand why Point Break looked so much better and chalked it up to the skill of the filmmakers behind each movie (both of which are good but I love Point Break). I later learned that the reason the skydiving scenes in Point Break look so much better is because Patrick Swayze actually did them. That’s him jumping out of places and doing aerial flips.

“Amazing. F’ing amazing!”

The thing about Hollywood stunts is it’s not just about the danger level or how elaborate the stunt is. Sure, that’s part of it. But you can go on YouTube and watch “People Are Amazing” videos to see people doing unbelievable things on camera.

But when yelling a story, action can’t be just for action sake. The best stunts are the ones where the action informs the character. As with Crouching Tiger, or Rambo.

Speaking of Stalone, another big stunt I remember was from the movie Cliffhanger. It didn’t involve Stallone, but one of the bad guys. The stunt was in a scene that sees the bad guy pull off a mid-air heist by zip lining from a crashing cargo plane to a private jet. The stunt was performed by famed Hollywood stuntman, Simon Crane, who was paid a million dollars to pull that off.

One of the earliest and most famous stunts in Hollywood history was performed in the 1923 movie "Safety Last!" starring Harold Lloyd. In the film, Lloyd climbs the side of a building and hangs from the hands of a clock high above the street. The scene has become an iconic image of silent film comedy.

Another famous stunt was performed by Buster Keaton in the 1928 movie "Steamboat Bill, Jr." In the film, Keaton stands in the middle of a street as a building facade falls on him. Keaton was positioned in a specific spot so that the window frame fell perfectly around him, leaving him unharmed.

In the 1960s and 1970s, the popularity of action movies led to more elaborate stunts. One of the most famous stuntmen of this era was Hal Needham, who worked on movies such as "Smokey and the Bandit" and "Hooper." Needham was known for his daring car chases and jumps.

Then, there was another Burt Reynolds classic, “Hooper” which is a movie that pays tribute to Hollywood stuntmen in general, in particular to well-known stuntman Jock Mahoney. Mahoney is the stepfather of co-star Sally Field.

In more recent years, the "Mission: Impossible" series has become famous for its elaborate stunts. In the “Mission: Impossible franchise, Tom Cruise has redefined what it means to be a Hollywood leading man by incorporating incredible stunts into each movie.

In MI:Ghost Protocol, Tom Cruise scales the outside of the world’s tallest building Burj Khalifa, ending with an incredible fulcrum swing and jump into an open window.

In MI: Rogue Nation he hangs off a plane.

In MI:Fallout," performed a HALO jump, in which he jumped out of a plane at a high altitude and free-fell before opening his parachute.

Other famous stunts include Evel Knievel's motorcycle jumps and Jackie Chan's acrobatic fight scenes. Stunt performers such as Dar Robinson, who performed the record-breaking 220-foot freefall in the 1980 movie "The Cannonball Run," and Yakima Canutt, who invented many of the techniques still used in stunt work today, have also made significant contributions to the history of stunts in Hollywood movies.

For a list of some of the best stunts ever performed in Hollywood movies check out this list from Cinefix

One of the best YouTube channels for checking out the best and worst fo Hollywood stunts is Corridor Crew.

Top Gun training/stunts

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The best-laid plans of mice and men oft go astray."

The best-laid plans of mice and men oft go astray."

-proverb

“Der mentsh trakht un got lakht” is an old Yiddish adage that translates to Man plans and God laughs.

I mention these because it’s been a week since I posted.  I want this blog to be a frequent bts look at life as a writer and producer and consistency is a key part of that. Unfortunately, the universe had other ideas.

On Sunday I went down hard with a 24-hour bug. It wasn’t that I felt so terrible (tho I didn’t feel great), but I was very tired.  Ask anyone who knows me and I am rarely tired and don’t need quite as much sleep as most.

But sleep is what I did, most of Sunday and half of Monday, MLK Day.

By the afternoon I started to feel better tho by then my stomach was a little topsy turvy. I did what work I could editing one chapter in “The Double” (Eddie Ankin Book One). Then, editing a couple of videos for YouTube and social media that I had previously shot.  I got those posted and called it a day.

Unfortunately, that night my middle daughter caught what I had and woke up sick on Tuesday. So, what I planned  to be a full day spent working while watching my son, was also spent caring for my under-the-weather little girl.  To paraphrase Maxamillian Schell from The Freshman, “Carmine said one….but there are two.”

At least I avoided the Komodo dragon.

By this morning the middle child was on the road to wellville, but not surprisingly my eldest and my youngest were now sick with the same cold.

So, rather than much writing, editing, or filming, I’ve been hopping to and fro taking care of the whole family today.

Which…while thankless at times…is the greatest job in the world (hard and exhausting…but great)

On the writing front, I am revising a few chapters of “The Double” leading up to the final showdown to be sure the story flows and the tension is ratcheted up before the climax. So I worked on that in fits and starts throughout the day.

Late last night,  I spent a couple of hours revising the outline for a horror film I am writing on spec. Then I watched The Last of Us and went to bed

The Last of Us pilot episode is really really good.

I wrote a script a couple of years ago for a producer at Netflix called HIDE BEHINDS based on a camp ghost story I heard while a camper at Camp Winaukee (yes, Winaukee like the ship gunner who gave Christopher Walken the watch in Pulp Fiction which Walken wore up his ass all those years before giving it to young Butch (Bruce Willis). Or maybe the camp was named after an American Indian tribe. One or the other. But I digress…)

Nothing came of that script but I also never shopped it anywhere else because I was busy at the time with other projects. But, I figure that HIDE BEHINDS, along with this new script, will hopefully be a double barrel blast of terror when sent to Hollywood producers, directors, and actors.

As for today, the only real thing I’ve gotten to is this blog post which I started writing about 28 minutes ago when all three children blessedly fell asleep for much needed naps.

Going forward, I plan to bring a production mindset to all my work and responsibilities. Rather than trying to multitask writing, filming, editing, or marketing, never mind advertising, developing, producing, plus family time, I am going to dedicate each day fully to one thing (okay two things because apparently it is illegal in some states to neglect your children…What’s that? It’s illegal in all states?  Good to know.)

Next week, I am shifting to a full-on batch mentality:

-Writing days.

-Production days (shoot and edit).

-Marketing days

In television production when you shoot more than one episode at a time (to save time, money, or for logistics) it’s called double-boarding episodes. 

The schedule is broken down by scenes that can be shot at the same time, even if they may appear in different episodes. 

Often, a single director will double-board episodes so that there isn’t the same time spent transitioning between episodic directors.

In Game of Thrones for instance a director who shot the big battle sequence that spans two or three episodes may not be the credited director on all three. However, they (along with second-unit directors) did shoot scenes that appeared in other episodes.

Batching is kinda the online video equivalent and has become something of a mentality in the “rise-and-grind” world we all supposedly live in. Personally, the only rising and grinding I do is for coffee.

With that said, I hope all of you are healthy and remain so throughout 2023 (with wealthy and wise soon to follow). More to come this week.

Kicking off 2023 BTS style

Starting the year off with a behind-the-scenes look at my day

Happy 2023!

The new year is well underway and it’s time to get going telling some good stories. The ones we love to read or watch in our favorite movies books and shows. Or for some of us, it’s the stories we dream up and commit to the page or the screen. And for all of us as each day we write the story of our lives.

I’ve always found inspiration reading the stories of other people going about the business of their everyday lives while at the same time attempting to climb their professional “mountains”, whether as a writer, a filmmaker, an athlete, an entrepreneur, whatever!

PROCESS.

I am interested in process. How people accomplish the things they do in life amid all the distractions all of us have to deal with in our lives.

I am currently finishing up final revisions for my next novel, The Double, which is the first in a crime thriller series.

At the same time, I am beginning to write book two. An outline exists for book 2 but requires some revisions before plunging into the writing of the novel Itself.

I still work as a Hollywood writer-producer, though now my home base is New York. This is an invigorating way to start the year since I am originally from New York but I have been living in Los Angeles for 20 years. But this summer, my wife, our three kids, and our tiny dog departed LA to ‘head east young man’ (okay, middle-aged man). Here’s to beginning a new chapter.

Given that, I thought it might interesting to record the chaos of my everyday as I work on the next couple of novels as well as try to get my next tv show or movie made. All with a WGA writers strike looming in May.

All of which should make a weekly newsletter blog from that point of view at least mildly interesting.

Doing this in blog form serves a few functions.

Writing warm up:

When Steinbeck wrote the grapes of wrath he began each day by writing briefly in his journal about the day’s work — and its inevitable distractions — before beginning the composition of the day.

Next, the blog/newsletter will be a consistent record of my efforts in the publishing game as well as in Hollywood, offering a behind-the-scenes look at the journey over the course of this year as I attempt to write more books, and produce shows and movies in Hollywood.

Lastly, it is a chance to connect with all of you out there who also love a good story, and who appreciate this kind of candid look at what goes into writing a book or creating a tv show or producing a movie.

Hopefully, this will prove interesting to those who enjoy this kind of stuff.

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So here goes…

6:47a woke up. Did some stretches. Have been feeling very tight from sitting for long stretches in my desk chair doing revisions.

7:15a Made breakfast for the kids. Prepared school lunches for my two daughters while my son, the youngest of the troika, doesn’t pack a lunch to school. He only goes for half a day.

8:45: wife took last kid to school. I clean up after breakfast.

Then I go and say my morning prayers.

9:15: Review the day’s work. Emails.

9:45: Revisions on The Double, which is the first novel in The Eddie Ankin series about a former Marine, Hollywood stuntman turned crime solver. The book needs to be finished this week to goto an editor in January.

10:45: switch the Book 2 which I’ve just begun. Crank out 2100 words in 90 minutes. This is the quietest the house has been since my son was born and the pandemic hit. Today at least, that quiet and concentrations seems to have given me a productive start to the day.

12:30: lunch.call with author friend whose books I am trying to get produced as either a feature or a series.

1:35: My wife comes home with my son around 1pm. I make lunch for everyone.

1:45: write script for some social media posts I am filming tomorrow.

2:35: meet my sister and walk together to our kids’ school

3pm: pick up my daughters and my niece and walk home.

3:30pm: review reports on previous AMS (amazon) and Facebook ads for the relaunch of my first novel “The Strange Crimes of Beatrice Clover.” I schedule a promotion for the ebook for the end of January. The paperback edition was just published so I am going to run some ads to make the people who still love a physical copy of a book (like me) aware they can now pick up a copy. I am trying to glean some insight into the best keywords to convert sales so I can better target the ads for the paperback which begin running later this week.

While I reviewed that, my wife and I helped our eldest daughter with her homework. It was a little frustrating which I chalk up to the post-holiday blues, and getting back to the normal school routine.

Hey kid, I remember that feeling well.

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415p: begin cooking dinner. We are trying to get our children to all eat the same meal so as to avoid the confusion my kids seem to have about the fact they do not live in a restaurant.

5:30p: dinner. Burritos. Mac n cheese for the kids. Plus chicken for my eldest. And chicken nuggets for my middle and youngest. So much for our attempt to get them to eat the same meal. But the battle rages on and we love to fight another day!

6-8p: family time and get ready for bed.

I glance at some emails. Start to plan tomorrow.

8:30p kids to bed. I fall asleep on the couch.

8:45pm: My middle child wakes me and wants help falling asleep. So I go to her room and run her back until she falls asleep. I nod off again for another 45 minutes.

9:30p: upstairs with my wife who is watching a show for work (she is a tv publicist). We discuss the show while I finish writing some of the social media scripts from earlier that I plan to film tomorrow.

11p: read for a bit. Can’t sleep. Open this post and write these last few entries to my day before I drift off to sleep around midnight.

More to come tomorrow…

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Media money: Snapchat crashing. Stock Down 40%.

CEO Evan Spiegel’s warning sends shock across digital advertising as investors flee social media stocks

Courtesy of @lauren_feiner

• Snap CEO Evan Spiegel warned of slowing growth in a note to employees made public on Monday.

• His message sent a chill across the digital advertising industry.

• Analysts pointed to macroeconomic trends that could extend far beyond Snap.

That was all before Snap CEO Evan Spiegel warned late Monday of an environment that’s worsened since his company reported quarterly results in April, when guidance was already disappointing.

In telling employees and Wall Street that “the macro environment has deteriorated further and faster than we anticipated when we issued our quarterly guidance last month,” Spiegel sent a shock across the digital ad industry and sent investors running for the exits.

Snap, which had previously projected second-quarter growth of 20% to 25%, lost an astounding 40% of its market cap on Monday. Beyond that, Pinterest plunged 23%, Facebook parent Meta dropped 8%, Google lost 6% and Twitter sank almost 4%.

MEDIA MONEY: INFLATION STILL A PROBLEM AS PRICES CONTINUE TO RISE.

CPI Increased .3% again that beat expectations. Almost all the forecast were for either .4 or .5. This is one of the lowest increases in CPI in recent months but obviously still an increase. To get a number like 8.3% only slightly lower than last month’s unbelievably high inflation numbers, is not exactly something to write home about.

Which means settle in for some more 50 BP rate hikes.

Looking a little closer at the numbers the real problem is this slight drop in the number is largely due to the lower gas prices we got last month. To quote a popular movie, “information that would have been useful to me yesterday. That’s because gas prices (as an impact on inflation) is based on where prices were a few weeks ago when gas prices dipped slightly. Since then gas prices have risen again and now sit at their highest price. This means inflation has likely not peaked as some people have been speculating.

Why is this relevant?

Because when everything costs more due to inflation (because the purchasing power of each dollar doesn’t go as far) it means that businesses cannot invest in growth the way they might have otherwise.

This means less hiring. It means less expansion. And from a very Hollywood perspective, it means every film and tv production is now that much more expensive.

To quote the Dude, “that’s a bummer, man.”

For some additional context, along with falling (now rising) gas prices, air travel appears to be the driver of the bad 8.3% inflation number. Last summer was the original Covid peak and then we actually started seeing CPI go down briefly but now when we look at the number as a breakdown we see that are crazy increases in the cost of things.

(All of the numbers are weighted by the Fed according to the impact on the overall CPI.)

Food index increased .9% which is technically outside of core CPI but that’s a significant increase for families. It’s worth reminding everyone reading this that CPI or Core consumer prices, excludes volatile food and energy items. Of course, consumers don't eat or drive based on “core” prices, and food prices are up 9.4% over the last year.

Major grocery store groups increase in to see increase in this increase of the month

The price of eggs up 10.3% month over month. Margarine up 7.1%. Those are some high numbers for goods outside of core CPI.

Men’s and boys apparel down slightly. Women’s apparel down slightly. Toddler apparel down 2.74%. Sewing machines and fabric supplies down 4.6% Guess that’s good for the costume departments. In travel: Hotels are up 3.4%. Car and truck rental 2.4%. Airline fares went up 21.9% in a month! That’s a huge increase! I wonder if that’s due to the riding gas prices? I know airlines tend to lock in future prices on jet fuel futures months out, but I’m guessing that is part of the impact. Along with a return to travel by people around the world, and a desire to get out and go places after two years of lockdowns. The prices of air travel is starting to reflect some of that demand. That’s going to cost each out-of-town production (which most are) a pretty penny to the budget bottom line.

Perhaps had California’s Governor Gavin Newsom done more to increase the tax credits in his home state of California at the beginning of the pandemic it would have resulted in more shows and movies being filmed here in California. Which, given the recent call by the WGA to not have productions in states that have laws that the unions/guilds apparently disagree with (I must have missed the consensus votes), also create complications, considering over half the states in the union likely have laws that the Hollywood guilds and some of their more vocal members disagree with. But again, this is just one more example of the shortsightedness of the rhetoric that results in so many of these flawed policies which have a direct impact on so many of California’s core industries, and the people who work in them.

Polling data that inflation and rising prices is what people are most concerned with. Not a bad time for some Hollywood escapism. But looking at the Oscars this past year, you have to wonder if Hollywood is still in the escapism business.

Had there been a stronger focus on the fiscal integrity of the state, along with support for one of America’s most important industries based here in Cali from our Governor and elected leaders, then perhaps we’d be better situated than we are now on all fronts. Bringing film and television production closer to home which would’ve maybe made it easier to keep productions going at full steam during the pandemic, instead of having to endure on-and-off shut-downs (one or two at least prompted by mistaken PCR test results, according to one studio head and one producer I spoke with). But I guess all that would be asking too much of Newsom. Instead, all that good gov stimulus cash (which is what largely kept California from defaulting on its liabilities) went to all manner of frivolous expenditures led by Newsom’s wildly progressive policies, leaving one of California’s major homegrown industries out in the cold.

So, now what we’re looking at is yet another year of what amounts to an added “tax” on every single production that the past two years came in the form of the additional Covid safety measure costs, and now in the form of skyrocketing inflation.

Looking at these numbers I wonder about the old adage that show business is recession-proof.

For a while, at the start of the pandemic with the spike in streaming numbers and the increase in our spending on home entertainment, I thought it looked like that might still be the case albeit in a different form. Instead of going to the movies for escapism, people we’re staying home watching Netflix and chilling. However, since the release of Netflix’s 200,000 subscriber loss and the tanking of their share price (their earnings call was yesterday; more to come on that), I’m not so sure that we can still say that Hollywood is recession-proof.

But back to the rising inflation — what will it mean for an industry looking to recover from the past two years of Covid? Well, for one thing, it means that on top of the Covid “tax” on productions last two years in the form of safety measures, amounting to roughly a 20-25% increase in budgets, plus the dollars falling purchasing power due to rising inflation, this poses yet another challenge for Hollywood.

MEDIA MONEY: TWITTER, NETFLIX, and CNN+…OH MY!

News:

Obviously the big news is that Elon musk is buying Twitter. He paid $54.20 a share for a valuation $44 billion. That means Musk is paying more than 3x the average eps for the company.

(At the time of this writing Twitter is trading at 51.69)

This means that Musk is paying 75.2x 2022. eps. Thats compared with industry average of about 20x earnings.

Amazon trades at 46 times earnings

Microsoft trades at 26 times earnings

Meta trades at 35x earnings

That means Musk is paying more than roughly 3x the average eps for the company. So, what are Musk’s intentions for Twitter?

Twitter

What we know about Musk’s plan so far is that he intends to take the company private because he claims that is the only way that he can make the changes to return the company to profitability and make it competitive within its industry.

Of course Jack Dorsey 2% stake will see him net a $980mm payday thanks to Elon. Perhaps that’s the reason for all the “light and consciousness.”

He talked about making the twitter algorithm open source as a way of showing how the AI works. This not only offers much needed transparency in this company, but if the algorithm can be shown to work more effectively then that is a boon for all algo-driven industries and businesses.

Twitter founder and former CEO, Jack Dorsey had this to say:

“In principle, I don’t believe anyone should own or run Twitter. It wants to be a public good at a protocol level, not a company. Solving for the problem of it being a company however, Elon is the singular solution I trust. I trust his mission to extend the light of consciousness.”

Of course Jack Dorsey 2% stake will see him net a $980mm payday thanks to Elon. Perhaps that’s the reason for all the “light and consciousness.”

Never minding that silliness, what Dorsey muses is worth pondering. Is Twitter “a public good?” And, “not a company”? If so, it begs the question: is twitter a utility? Twitter punches well above its weight in terms of its influence in the public square and public discourse relative to its overall valuation, profitability, compared to other tech companies in the sector. In that case, dows Twitter have obligations beyond its bottom line? If so, is there a way for an individual like Musk to unlock that? It used to be that the news divisions of major media companies were not required to turn a profit. The understanding was that this ensured an independent, strong fourth estate, which is — or was — seen as integral to maintaining a strong democracy. Public discourse and the freedom of speech of course is even more integral, and even more central to the foundations of this country and its core principles. So, as a platform is Twitter responsible to living up to those ideals or is its only obligation to its investors and its bottom line? The answer to those questions and many others will determine what Twitter looks like going forward, its place in our society as a the “digital town square,” as well as its profitability over the long term.

One thing that is overwhelmingly clear is that most people are against censorship. However there is a contingent of Twitter’s more left-leaning employees and users who claim they will be leaving Twitter (over 99% of piolitical donations from employees were to Democrats; that’s beyond group think. That’s cultish). If they do, this could impact the company’s ability to evolve... but I seriouly doubt most will. Anymore than people moved to Canada after the 2004 election after George Bush won re-election. As for the ones that do….good riddance. They are the ones who have run this company into the ground.Whatever this means for the company’s future or its bottom line, this is a win for democracy. All the politicians claiming this is dangerous for democracy are ridiculous.

Almost as ridiculous as the idea that the current CEO, Prag Agarwal, is set to receive $42mm if terminated by Musk. Talk about a golden parachute. I thought we did away with those? Apparently not. Apparently failure in corporate America is still rewarded. Ah well, the rhetoric sounded good.

One thing that is overwhelmingly clear is that most people are against censorship.

In related news, President Trump’s new social media platform, Truth Social, was down 12% in market trading.

CNN+

Speaking of going down, the failed experiment that was CNN+ has come to an ignomouus end. The streaming service CNN+ closes after being on the market for a month. You have to look to Quibi for that spectacular of a failure that fast. A $300 million dollar investment down the drain. I suspect David Zaslav took a whole six seconds to make the decision to shutter that turd. Despite all the supposed overlaps and synergies, it still seems as if Hollywood is flailing in the tech world. And Big Tech appears to be struggling to unlock value in Hollywood. Going forward, what does this mean for traditional media companies like Warner Bros-Discovery?

Another business asking those same kinds of questions these days is the reigning streaming king, Netflix the stock dumped 35% on Monday.

Netflix

It is important to remember that last Octoner the company was at its highest share price. That may be because the market is in a bubble and we are now seeing a correction or it may be that Netflix was overvalued given the trends of competition within the industry, specifically among other streamers, as well as rising costs Given all that, I would expect that their fourth quarter earnings will not likely to be much better.

Netflix spent $17 billion on programming

So where is all this headed?

Netflix has already said it intends to cut expenses. Okay. Makes sense. Where? How much? Does that mean production? Programming? Netflix spent $17 billion on programming in 2022. Even for someone whohas worked in the industry for a couple of decades now, that number is a bit mind-boggling. Still, production and programming is the lifeblood of streamers, of Hollywood. That said, WB-Discovery just anounced thatt the TNT and TBS divisions are out of the originl scripted business. Obviously, that’s not in the cards for Netflix, but as Hastings indicated, they will cut waste. Writer and producer Deals not earning out. Probably going away. Overpaid, egomaniacal, useless (marketing) executives…probably going away. And good riddance. At this point its good money after bad. They’re not getting it done. Has there been a Netflix show in the past 5 years thats really captured the zeitgeist? Squid Game. That’s about it. And they didn’t know what they had there, so its still a fluke. Let’s see how Season 2 fares.

The bigger question is will there be a change in management? Ted Sarandos is the top dog when it comes to content at the company. Will he see a change in his day-to-day duties? Or will blame fall to one of his other lieutenants? Bela Bajaria is the Global Head of Content for the past two years, having succeeded Cindy Holland who was the chief programming executive since Netflix’s initial foray into original programming. However given the average development and production cycle, we won’t really begin to see Bajaria’s slate until some time the end of this year. But, this is Hollywood kids and when it comes to heads rolling, all bets are off.

Other changes coming to Netflix….Ads.

Yup. You read that right. The original ad-free, built-for-binging, streaming service, is claiming that advertising may be the only way to unlock the future value of the company. That is a major reversal from Netflix’s core strategy since it began mass producing original programming. Will users accept an ad-supported version? How will this affect other streamers in the industry. After all, it is largely based on the success of Netflix’s streaming model that led most trad media companies to launch their own versions from Disney+ to HBOMax to Peacock. They all got in on the action, and now the industry leader is potentially changing course. Is this the death of the binge model?

Finally, if Netflix’s share price keeps falling will they become a takeover target? Whatever happens, it will have implications for the entire industry.

YouTube

Speaking of ad-supported, a platforms, let’s take a moment to talk YouTube. The Alphabet owned video sharing platform seems much better poised to exploit advertising than even vanguard streaming companies like Netflix. Why? Well, the past several years have seen YouTube grow into a robust platform with tons of programming offerings, primarily in the form of user-generated content. Users are used to the ad-supported format. They’ve accepted it and it is lready factored into how they consume content on the platfom. This has led to higher CPM rates for popular content creators, which in turn has made advertisers feel more comfortable spending their ad dollars on the site. Additionally, YouTube, likem Netflix also offers a premium paid version of the service that is ad-free. One of the major costs to the company is the $17billion they’ve spent on programming. It’s hard to correlate the ROI for any one show since Netflix has always been based on a subscription model. Regardless, that is a lot of cash out the door. Now compare that to YouTube that shoulders none of those costs as the content on their platform is 99.99% user generated. Consumer-generated content versus hollywood scripted series and movies on a cost-comparison basis strictly in terms of production expenses gives YouTube a competitve advantage over its industry peers. Now that Netflix (and Disney) are stumbling does that mean we will see the emergence of YouTube as the dominant streaming platform?. Also, because of the ad-supported nature of the platform any increasing costs (of production) do not have to be passed on to the customer. The same cannot be said of streamers like Netflix which is raising its monthly fees, passing its rising costs onto its subscribers. (Netflix and Disney+ have both raised subscription fees).

Tech stock prices (as of this writing):

Twitter 51.83

Meta 185.78

Snap 29. 77

Pinterest 19. 95

Netflix 208.91

Amazon 2,910.00

Google alphabet 2454.56

Apple 162.20

Earnings calls today:

Microsoft

Alphabet (Google)

As we head into the market open, the Dow futures is at 33, 768.00 trending down 197.00.