Here is the full transcript of director Steven Soderbergh‘s keynote at the 56th San Francisco International Film Festival delivered Saturday. At first he requested the festival ensure no still photographs, audio, or video of his talk at the Kabuki Theater. But instead it was tweeted, blogged, recorded, and put online. Soderbergh promised in advance to “drop some grenades” and he opined about studio executives, indie filmmaking, and cinema vs movies. He did not detail his own retirement:

A few months ago I was on this Jet Blue flight from New York to Burbank. And I like Jet Blue, not just because of the prices. They have this terminal at JFK that I think is really nice. I think it might be the nicest terminal in the country although if you want to see some good airports you’ve got to go to a major city in another part of the world like Europe or Asia. They’re amazing airports. They’re incredible and quiet. You’re not being assaulted by all this music. I don’t know when it was decided we all need a soundtrack everywhere we go. I was just in the bathroom upstairs and there was a soundtrack accompanying me at the urinal, I don’t understand. So I’m getting comfortable in my seat. I spent the extra $60 to get the extra leg room so I’m trying to get comfortable and we make altitude. And there’s a guy on the other side of the aisle in front of me and he pulls out his iPad to start watching stuff. I’m curious to see what he’s going to watch – he’s a white guy in his mid-30s. And I begin to realize what he’s done is he’s loaded in half a dozen action sort of extravaganzas and he’s watching each of the action sequences – he’s skipping over all the dialogue and the narrative. This guy’s flight is going to be five and a half hours of just mayhem porn.

I get this wave of – not panic, it’s not like my heart started fluttering – but I had this sense of, am I going insane? Or is the world going insane – or both? Now I start with the circular thinking again. Maybe it’s me. Maybe it’s generational and I’m getting old, I’m in the back nine professionally. And maybe my 22-year-old daughter doesn’t feel this way at all. I should ask her. But then I think, no: Something is going on – something that can be measured is happening, and there has to be. When people are more outraged by the ambiguous ending of The Sopranos than some young girl being stoned to death, then there’s something wrong. We have people walking around who think the government stages these terrorist attacks. And anybody with a brain bigger than a walnut knows that our government is not nearly competent enough to stage a terrorist attack and then keep it a secret because, as we know, in this day and age you cannot keep a secret.

So I think that life is sort of like a drumbeat. It has a rhythm and sometimes it’s fast and sometimes it’s slower, and maybe what’s happening is this drumbeat is just accelerating and it’s gotten to the point where I can’t hear between the beats anymore and it’s just a hum. Again, I thought maybe that’s my generation, every generation feels that way, maybe I should ask my daughter. But then I remember somebody did this experiment where if you’re in a car and you’re going more than 20 miles an hour it becomes impossible to distinguish individual features on a human being’s face. I thought that’s another good analogy for this sensation. It’s a very weird experiment for someone to come up with.

So that was my Jet Blue flight. But the circular thinking didn’t really stop and I got my hands on a book by a guy named Douglas Rushkoff and I realized I’m suffering from something called Present Shock which is the name of his book. This quote made me feel a little less insane: “When there’s no linear tie, how is a person supposed to figure out what’s going on? There’s no story, no narrative to explain why things are the way things are. Previously distinct causes and effects collapse into one another. There’s no time between doing something and seeing the result. Instead the results begin accumulating and influencing us before we’ve even completed an action. And there’s so much information coming in at once from so many different sources that there’s simply no way to trace the plot over time”. That’s the hum I’m talking about. And I mention this because I think it’s having an effect on all of us. I think it’s having an effect on our culture, and I think it’s having an effect on movies. How they’re made, how they’re sold, how they perform.

But before we talk about movies we should talk about art in general, if that’s possible. Given all the incredible suffering in the world I wonder, what is art for, really? If the collected works of Shakespeare can’t prevent genocide then really, what is it for? Shouldn’t we be spending the time and resources alleviating suffering and helping other people instead of going to the movies and plays and art installations? When we did Ocean’s Thirteen the casino set used $60,000 of electricity every week. How do you justify that? Do you justify that by saying, the people who could’ve had that electricity are going to watch the movie for two hours and be entertained – except they probably can’t, because they don’t have any electricity, because we used it. Then I think, what about all the resources spent on all the pieces of entertainment? What about the carbon footprint of getting me here? Then I think, why are you even thinking that way and worrying about how many miles per gallon my car gets, when we have NASCAR, and monster truck pulls on TV? So what I finally decided was, art is simply inevitable. It was on the wall of a cave in France 30,000 years ago, and it’s because we are a species that’s driven by narrative. Art is storytelling, and we need to tell stories to pass along ideas and information, and to try and make sense out of all this chaos. And sometimes when you get a really good artist and a compelling story, you can almost achieve that thing that’s impossible which is entering the consciousness of another human being – literally seeing the world the way they see it. Then, if you have a really good piece of art and a really good artist, you are altered in some way, and so the experience is transformative and in the minute you’re experiencing that piece of art, you’re not alone. You’re connected to the arts. So I feel like that can’t be too bad.

Art is also about problem solving, and it’s obvious from the news, we have a little bit of a problem with problem solving. In my experience, the main obstacle to problem solving is an entrenched ideology. The great thing about making a movie or a piece of art is that that never comes into play. All the ideas are on the table. All the ideas and everything is open for discussion, and it turns out everybody succeeds by submitting to what the thing needs to be. Art, in my view, is a very elegant problem-solving model.

Now we finally arrive at the subject of this rant, which is the state of cinema. First of all, is there a difference between cinema and movies? Yeah. If I were on Team America, I’d say Fuck yeah! The simplest way that I can describe it is that a movie is something you see, and cinema is something that’s made. It has nothing to do with the captured medium, it doesn’t have anything to do with where the screen is, if it’s in your bedroom, your iPad, it doesn’t even really have to be a movie. It could be a commercial, it could be something on YouTube. Cinema is a specificity of vision. It’s an approach in which everything matters. It’s the polar opposite of generic or arbitrary and the result is as unique as a signature or a fingerprint. It isn’t made by a committee, and it isn’t made by a company, and it isn’t made by the audience. It means that if this filmmaker didn’t do it, it either wouldn’t exist at all, or it wouldn’t exist in anything like this form.

So, that means you can take a perfectly solid, successful and acclaimed movie and it may not qualify as cinema. It also means you can take a piece of cinema and it may not qualify as a movie, and it may actually be an unwatchable piece of shit. But as long as you have filmmakers out there who have that specific point of view, then cinema is never going to disappear completely. Because it’s not about money, it’s about good ideas followed up by a well-developed aesthetic. I love all this new technology, it’s great. It’s smaller, lighter, faster. You can make a really good-looking movie for not a lot of money, and when people start to get weepy about celluloid, I think of this quote by Orson Welles when somebody was talking to him about new technology, which he tended to embrace, and he said, “I don’t want to wait on the tool, I want the tool to wait for me”, which I thought was a good way to put it. But the problem is that cinema as I define it, and as something that inspired me, is under assault by the studios and, from what I can tell, with the full support of the audience. The reasons for this, in my opinion, are more economic than philosophical, but when you add an ample amount of fear and a lack of vision, and a lack of leadership, you’ve got a trajectory that I think is pretty difficult to reverse.

Now, of course, it’s very subjective; there are going to be exceptions to everything I’m going to say, and I’m just saying that so no one thinks I’m talking about them. I want to be clear: The idea of cinema as I’m defining it is not on the radar in the studios. This is not a conversation anybody’s having; it’s not a word you would ever want to use in a meeting. Speaking of meetings, the meetings have gotten pretty weird. There are fewer and fewer executives who are in the business because they love movies. There are fewer and fewer executives that know movies. So it can become a very strange situation. I mean, I know how to drive a car, but I wouldn’t presume to sit in a meeting with an engineer and tell him how to build one, and that’s kind of what you feel like when you’re in these meetings. You’ve got people who don’t know movies and don’t watch movies for pleasure deciding what movie you’re going to be allowed to make. That’s one reason studio movies aren’t better than they are, and that’s one reason that cinema, as I’m defining it, is shrinking.

Well, how does a studio decide what movies get made? One thing they take into consideration is the foreign market, obviously. It’s become very big. So that means, you know, things that travel best are going to be action-adventure, science fiction, fantasy, spectacle, some animation thrown in there. Obviously the bigger the budget, the more people this thing is going to have to appeal to, the more homogenized it’s got to be, the more simplified it’s got to be. So things like cultural specificity and narrative complexity, and, god forbid, ambiguity, those become real obstacles to the success of the film here and abroad.

Speaking of ambiguity, we had a test screening of Contagion once and a guy in the focus group stood up and he said, “I really hate the Jude Law character. I don’t know if he’s a hero or an asshole”. And I thought well, here we go. There’s another thing, a process known as running the numbers, and for a filmmaker this is kind of the equivalent of a doctor showing you a chest x-ray and saying there’s a shadow on it. It’s a kind of fungible algorithm that’s used when they want say no without, really, saying no. I could tell you a really good story of how I got pushed off a movie because of the way the numbers ran, but if I did, I’d probably get shot in the street, and I really like my cats.

So then there’s the expense of putting a movie out, which is a big problem. Point of entry for a mainstream, wide-release movie: $30 million. That’s where you start. Now you add another 30 for overseas. Now you’ve got to remember, the exhibitors pay half of the gross, so to make that 60 back you need to gross 120. So you don’t even know what your movie is yet, and you’re already looking at 120. That ended up being part of the reason why the Liberace movie didn’t happen at a studio. We only needed $5 million from a domestic partner, but when you add the cost of putting a movie out, now you’ve got to gross $75 million to get that 35 back, and the feeling amongst the studios was that this material was too “special” to gross $70 million. So the obstacle here isn’t just that special subject matter, but that nobody has figured out how to reduce the cost of putting a movie out. There have been some attempts to analyze it, but one of the mysteries is that this analysis doesn’t really reveal any kind of linear predictive behavior, it’s still mysterious the process whereby people decide if they’re either going to go to a movie or not go to a movie. Sometimes you don’t even know how you reach them. Like on Magic Mike for instance, the movie opened to $38 million, and the tracking said we were going to open to 19. So the tracking was 100% wrong. It’s really nice when the surprise goes in that direction, but it’s hard not to sit there and go how did we miss that? If this is our tracking, how do you miss by that much?

I know one person who works in marketing at a studio suggested, on a modestly budgeted film that had some sort of brand identity and some A-list talent attached, she suggested, “Look, why don’t we not do any tracking at all, and just spend 15 and we’ll just put it out”. They wouldn’t do it. They were afraid it would fail, when they fail doing the other thing all the time. Maybe they were afraid it was going to work. The other thing that mystifies me is that you would think, in terms of spending, if you have one of these big franchise sequels that you would say oh, we don’t have to spend as much money because is there anyone in the galaxy that doesn’t know Iron Man’s opening on Friday? So you would think, oh, we can stop carpet-bombing with TV commercials. It’s exactly the opposite. They spend more. They spend more. Their attitude is: You know, it’s a sequel, and it’s the third one, and we really want to make sure people really want to go. We want to make sure that opening night number is big so there’s the perception of the movie is that it’s a huge success. There’s that, and if you’ve ever wondered why every poster and every trailer and every TV spot looks exactly the same, it’s because of testing. It’s because anything interesting scores poorly and gets kicked out. Now I’ve tried to argue that the methodology of this testing doesn’t work. If you take a poster or a trailer and you show it to somebody in isolation, that’s not really an accurate reflection of whether it’s working because we don’t see them in isolation, we see them in groups. We see a trailer in the middle of five other trailers, we see a poster in the middle of eight other posters, and I’ve tried to argue that maybe the thing that’s making it distinctive and score poorly actually would stick out if you presented it to these people the way the real world presents it. And I’ve never won that argument.

You know, we had a trailer for Side Effects that we did in London and the filmmaking team really, really liked it. But the problem was that it was not testing well, and it was really not testing as well as this domestic trailer that we had. The point spread was so significant that I really couldn’t justify trying to jam this thing down distributor’s throats, so we had to abandon it. Now look, not all testing is bad. Sometimes you have to, especially on a comedy. There’s nothing like 400 people who are not your friends to tell you when something’s wrong. I just don’t think you can use it as the last word on a movie’s playability, or its quality. Magic Mike tested poorly. Really poorly. And fortunately Warner Brothers just ignored the test scores, and stuck with their plan to open the movie wide during the summer.

But let’s go back to Side Effects for a second. This is a movie that didn’t perform as well as any of us wanted it to. So, why? What happened? It can’t be the campaign because all the materials that we had, the trailers, the posters, the TV spots, all that stuff tested well above average. February 8th, maybe it was the date, was that a bad day? As it turns out that was the Friday after the Oscar nominations are announced, and this year there was an atypically large bump to all the films that got nominated, so that was a factor. Then there was a storm in the Northeast, which is sort of our core audience. Nemo came in, so God, obviously, is getting me back for my comments about monotheism. Was it the concept? There was a very active decision early on to sell the movie as kind of a pure thriller and kind of disconnect it from this larger social issue of everybody taking pills. Did that make the movie seem more commercial, or did it make it seem more generic? We don’t know. What about the cast? Four attractive white people… this is usually not an obstacle. The exit polls were very good, the reviews were good. How do we figure out what went wrong? The answer is: We don’t. Because everybody’s already moved on to the next movie they have to release.

Now, I’m going to attempt to show how a certain kind of rodent might be smarter than a studio when it comes to picking projects. If you give a certain kind of rodent the option of hitting two buttons, and one of the buttons, when you touch it, dispenses food 40% of the time, and one of the buttons when you touch it dispenses food 60% percent of the time, this certain kind of rodent very quickly figures out never to touch the 40% button ever again. So when a studio is attempting to determine on a project-by-project basis what will work, instead of backing a talented filmmaker over the long haul, they’re actually increasing their chances of choosing wrong. Because in my view, in this business which is totally talent-driven, it’s about horses, not races. I think if I were going to run a studio I’d just be gathering the best filmmakers I could find and sort of let them do their thing within certain economic parameters. So I would call Shane Carruth, or Barry Jenkins or Amy Seimetz and I’d bring them in and go, ok, what do you want to do? What are the things you’re interested in doing? What do we have here that you might be interested in doing? If there was some sort of point of intersection I’d go: Ok, look, I’m going to let you make three movies over five years, I’m going to give you this much money in production costs, I’m going to dedicate this much money on marketing. You can sort of proportion it how you want, you can spend it all on one and none on the other two, but go make something.

Now, that only works if you are very, very good at identifying talent. Real talent, the kind of talent that sustains. And you can’t be judging strictly on commercial performance, or hype, or hipness, but I don’t think it’s unreasonable to expect someone running a multi-billion dollar business to be able to identify talent. I get it, it’s the studio, you need all kinds of movies. You need comedies, you need horror films, you need action films, you need animated films, I get it. But the point is, can’t some of these be cinema also? This is kind of what we tried to do with Section 8 is we tried to bring interesting filmmakers into the studio system and protect them. But unfortunately the only way a studio is going to allow that kind of freedom to a young filmmaker is if the budgets are low. And unfortunately the most profitable movies for the studios are going to be the big movies, the home runs. They don’t look at the singles or the doubles as being worth the money or the man hours. Psychologically, it’s more comforting to spend $60 million promoting a movie that costs 100, than it does to spend $60 million for a movie that costs 10. I know what you’re thinking: If it costs 10 you’re going to be in profit sooner. Maybe not. Here’s why: OK. $10 million movie, 60 million to promote it, that’s 70, so you’ve got to gross 140 to get out. Now you’ve got $100 million movie, you’re going spend 60 to promote it. You’ve got to get 320 to get out. How many $10 million movies make 140 million dollars? Not many. How many $100 million movies make 320? A pretty good number, and there’s this sort of domino effect that happens too. Bigger home video sales, bigger TV sales, so you can see the forces that are sort of draining in one direction in the business. So, here’s a thought… maybe nothing’s wrong. Maybe I’m a clown. Maybe the audiences are happy, and the studio is happy, and look at this from Variety:

“Shrinking release slates that focus on tentpoles and the emergence of a new normal in the home vid market has allowed the largest media congloms to boost the financial performance of their movie divisions, according to Nomura Equity research analyst Michael Nathanson”.

So, according to Mr. Nathanson, the studios are successfully cutting costs, the decline in home videos have plateaued, and the international box office, which used to be 50% of revenue is now 70%. With one exception in that all the stock prices of all the companies that own these studios are up. It would appear that all these companies are flush. So maybe nothing’s wrong, and I’ve got to tell you, this is the only arena in history in which trickle-down economics actually works, because when a studio is flush, they spend more money to make more money, because their stock price is all about market share. And you know, there’s no other business that’s this big, that’s actually this financially transparent. You have a situation here in which there is an objective economic value given to an asset. It’s not like that derivatives mortgage bullshit that just brought the world to its knees, you can’t say a movie made more money than it actually made, and internally, you can’t say that you didn’t spend what you spent on it. It’s contractual that you have to make these numbers available.

Now don’t get me wrong, there is a lot of waste. I think there are too many layers of executives, I don’t know why you should be having a lot of phone calls with people that can’t actually make decisions. They’ll violate their own rules on a whim, while they make you adhere to them. They get simple things wrong sometimes, like remakes. I mean, why are you always remaking the famous movies? Why aren’t you looking back into your catalog and finding some sort of programmer that was made 50 years ago that has a really good idea in it, that if you put some fresh talent on it, it could be really great. Of course, in order to do that you need to have someone at the studio that actually knows those movies. Even if you don’t have that person you could hire one. The sort of executive ecosystem is distorted, because executives don’t get punished for making bombs the way that filmmakers do, and the result is there’s no turnover of new ideas, there’s no new ideas about how to approach the business or how to deal with talent or material. But, again, economically, it’s a pretty straightforward business. Hell, it’s the third-biggest export that we have. It’s one of the few things that we do that the world actually likes.

I’ve stopped being embarrassed about being in the film business, I really have. I’m not spending my days trying to make a weapon that kills people more efficiently. It’s an interesting business. But again, taking the 30,000 foot view, maybe nothing’s wrong, and maybe my feeling that the studios are kind of like Detroit before the bailout is totally insupportable. I mean, I’m wrong a lot. I’m wrong so much, it doesn’t even raise my blood pressure anymore. Maybe everything is just fine. But… Admissions, this is the number of bodies that go through the turnstile, ten years ago: 1.52 billion. Last year: 1.36 billion. That’s a ten and a half percent drop. Why are admissions dropping? Nobody knows, not even Nate Silver. Probably a combination of things: Ticket prices, maybe, a lot of competition for eyeballs. There’s a lot of good TV out there. Theft is a big problem. I know this is a really controversial subject, but for people who think everything on the internet should just be totally free all I can say is, good luck. When you try to have a life and raise a family living off something you create…

There’s a great quote from Steve Jobs:

“From the earliest days of Apple I realized that we thrived when we created intellectual property. If people copied or stole our software we’d be out of business. If it weren’t protected there’d be no incentive for us to make new software or product designs. If protection of intellectual property begins to disappear creative companies will disappear or never get started. But there’s a simpler reason: It’s wrong to steal. It hurts other people, and it hurts your own character”.

I agree with him. I think that what people go to the movies for has changed since 9/11. I still think the country is in some form of PTSD about that event, and that we haven’t really healed in any sort of complete way, and that people are, as a result, looking more toward escapist entertainment. And look, I get it. There’s a very good argument to be made that only somebody who has it really good would want to make a movie that makes you feel really bad. People are working longer hours for less money these days, and maybe when they get in a movie, they want a break. I get it.

But let’s sex this up with some more numbers. In 2003, 455 films were released. 275 of those were independent, 180 were studio films. Last year 677 films were released. So you’re not imagining things, there are a lot of movies that open every weekend. 549 of those were independent, 128 were studio films. So, a 100% increase in independent films, and a 28% drop in studio films, and yet, ten years ago: Studio market share 69%, last year 76%. You’ve got fewer studio movies now taking up a bigger piece of the pie and you’ve got twice as many independent films scrambling for a smaller piece of the pie. That’s hard. That’s really hard.

When I was coming up, making an independent film and trying to reach an audience I thought was like, trying to hit a thrown baseball. This is like trying to hit a thrown baseball – but with another thrown baseball. That’s why I’m spending so much time talking to you about the business and the money, because this is the force that is pushing cinema out of mainstream movies. I’ve been in meetings where I can feel it slipping away, where I can feel that the ideas I’m tossing out, they’re too scary or too weird, and I can feel the thing. I can tell: It’s not going to happen, I’m not going to be able to convince them to do this the way I think it should be done. I want to jump up on the table and scream, “Do you know how lucky we are to be doing this? Do you understand that the only way to repay that karmic debt is to make something good, is to make something ambitious, something beautiful, something memorable?” But I didn’t do that. I just sat there, and I smiled.

Maybe the ideas I had don’t work, and the only way they’ll find out is that someone’s got to give me half a billion dollars, to see if it’ll work. That seems like a lot of money, but actually in point of fact there are a couple movies coming down the pike that represent, in terms of their budgets and their marketing campaigns, individually, a half a billion dollars. Just one movie. Just give me one of these big movies. No? Kickstarter!

I don’t want to bring this to a conclusion on a down note. A few years back, I got a call from an agent and he said, “Will you come see this film? It’s a small, independent film a client made. It’s been making the festival circuit and it’s getting a really good response but no distributor will pick it up, and I really want you to take a look at it and tell me what you think.” The film was called Memento. So the lights come up and I think, It’s over. It’s over. Nobody will buy this film? This is just insane. The movie business is over. It was really upsetting. Well fortunately, the people who financed the movie loved the movie so much that they formed their own distribution company and put the movie out and made $25 million. So whenever I despair I think, OK, somebody out there somewhere, while we’re sitting right here, somebody out there somewhere is making something cool that we’re going to love, and that keeps me going. The other thing I tell young filmmakers is when you get going and you try to get money, when you’re going into one of those rooms to try and convince somebody to make it, I don’t care who you’re pitching, I don’t care what you’re pitching – it can be about genocide, it can be about child killers, it can be about the worst kind of criminal injustice that you can imagine – but as you’re sort of in the process of telling this story, stop yourself in the middle of a sentence and act like you’re having an epiphany, and say: You know what, at the end of this day, this is a movie about hope.

Thank you.