How to fix the script
I don't think the script is good, but if I had been asked to work on it these are the points I would change:
* There is no such thing as a 'podcaster,' Smith neither gives us an inside look at how he personally made a living from public appearances, sponsorship of his podcasts, investment in a comic-shop and (maybe) consultant work on scripts nor does he spare us the repeated scenes where Wallace says he is a 'podcaster' and insist that he makes his money from a podcast (anyone fell for that?).
* Wallace personality change (the one Ally talks about) should have been from a self-deprecating stand up comic to someone who makes fun of vulnerable people, basically a bully who uses people for his own personal gain.
* The film should have started with Wallace driving up to Pippy Hill, we follow Wallace's point-of-view: we see what he sees, we don't see anything else.
* When he enters he should make a big fuss about drinking the big cup and go to the toilet. In the toilet he looks around, notices the weird doll but just leaves it.
* Howard should not offer him the tea at the start, Howard is not killing anyone, he only targets people who are inhuman.
* Howard asks him what he want, well here Wallace wants to know if Howard has any worthwhile stories and if so then he'll make a podcast about him (because the advert alone doesn't explain why Wallace drove 2 hours) and he had to stay a night because there were no flight, so didn't lose anything by coming up to see Howard.
* Howard says he won't give his stories freely so they agree to make an exchange: one story for another.
* Wallace now tells about the Kill Bill Kid: we see him making fun of the kid with Ted on the podcast, but afterwards he's all serious and business like, he has the discussion with Ally but no stupid sex (Smith really didn't learn anything from Zack and Miri) and we see him coming up to the funeral with voice-over.
* Only then does Howard offer him tea and start to tell him a story, Wallace goes down after one cup. Cut as Wallace eyes closes, remember he is our POV character.
* When he wakes up and hears the spider story, because we only see what he sees and the drugging of the tea was not made explicit only then does the story with the spider makes sense, because a viewer who knows nothing about the film will question whether it was indeed a spider!
As to the rest of the film it is a big mess, the comedy elements seem out of place with the real horror Wallace is suffering and yet the horror is undermined by the comedy so neither one works. As to the ending it's an even bigger mess and the post-credit thing is just saying: "look at me I am having fun with your ticket-money :p", still here are some points about Ted & Ally's search for Wallace:
* First thing Ted & Ally should do is to visit the police station, not go around showing his photo to people. Then ask around and retrace his steps to the bar next to the station.
* Guy Lapointe should be the one calling them and not the other way around, if the policeman thought this might be a serial-killer incident he would escalate it not put the civilians together and leave them to do their own investigation.
* After they meet Lapointe they go ask the girls in the station, that's a great scene ruined by the fact we hear Wallace talking to Howard on the phone, the girls were not paying attention to him then! The scene should have played from their POV not his and he should have been all business not a clown.
* The scene of the three entering the house is very disjointed because of filming schedule, Kevin Smith talks about how he had to accommodate Depp's schedule but they still could have had a line about splitting up or something and going from different directions instead Ted & Ally just run up to the house and then Lapointe shows up in the end.
The whole thing going on between Ally and Ted is confusing and confused and it seems was only added because at one point Smith wrote a very strong monologue, which makes no sense either in the context of the film or the story.
Putting aside the worth of the story, the script is really weak and needs a lot of work, mainly to bring into one side either horror or comedy. Smith's direction is marginally improved from his early days, but maybe that's just the people working with him. He seems to be back in the writer/director life again and podcasting is just a secondary activity to stay in touch with the fans and provide a line of retreat.
Smith is always self-deprecating about his worth as director, but maybe he's not that good of a writer too, for someone who captured a voice never heard before and put it on film in the early nineties he seems totally incapable of giving up a glimpse of what really goes on in the making of a podcast and how money is made out of it and how one has to be funny on a schedule and sing the praises of sponsors and pander to the fans, etc.
I've heard the podcast of how this film came to be and how it was shot, etc (I don't listen to the podcast, I looked them up when the movie came out) and Smith tries to portray what happened as story of hope and determination, but really it shows how those in the movie business can get $2.3 million to make a movie even though no one thinks it will be good (even the writer/director), the catch of course is that you have to be in the business with an established fan-base. Even though the film made no money, Smith made another movie and imdb lists several up-coming films in pre-production.
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Fire is my Champion