Ebert has a good take on this (posted on the Chicago Sun-Times website).
Anyway, the entire film revolves around storytelling and it's obvious that there are Solondz's personal sentiments expressed in them (e.g. the accusations of exploiting and making fun of the characters in one's story like Solondz faced with his other films). Anyway, it's a take on the fine line between fiction and nonfiction and the role of the writer. When Vi reads her story, her class takes it to be fiction and rips it to shreds, attacking the manner of storytelling (that it's a racist story and uses taboo words for shock value as well as the characters (e.g. asking if Jane is stupid for letting the rape happen).
When Marcus reads his story, obviously autobiographical, he elicits a sort of PC phony sympathy from most of the class. When Vi reads her story, also about her personal experiences but less obvious, the class is quick to assign bogus literary terms and accusations (calling it racist, sexist, misogynistic). In the translation from nonfiction real life experience to a "fictionalized" state (that of a short story for a class) the presentation of information is altered.
As viewers, we see the real act and then hear the short story. Our reaction to witnessing Vi's experience with the rape is pitted against the classmates' reactions. Solondz is telling Vi's story - did we react as Vi's classmates did (writing it off as a PC trespassing with ugly characters) or did we, as Vi and Solondz may have hoped, accepted it as true to what happens in reality (albeit a sad one), not a mean-spirited story?
This sentiment is echoed in the "Non-Fiction" segment, when Scooby sees himself on film. Though the documentary footage is taken direct from reality and the only tinkering Toby may have done would be through editing, the audience finds Scooby to be laughable. Having seen Scooby as a character in Solondz's film and then seen him in Toby's film, do we see him as the screening audience sees him - as a ridiculous joke?
I think what Solondz is getting at is the complex relationship between storyteller, subject, and audience. The storytellers in the film are Vi, Marcus, Toby, Scooby, Scooby's family and the other people interviewed for the documentary, and Solondz himself. In telling a story, the storyteller has full control and responsibility over the characters and none over the audience. The film intones that the story is often propelled by things that what we as an audience often fail to hear or see (Solondz's sympathy for his characters was lost on many of his critics much like Toby's was). The storytellers in the film start off with rich material but are slammed based on surface perceptions (e.g. it has the N-word, must be racist, protagonist gets raped, must be misogynistic). Thus, the question of the storyteller's purpose emerges. Is the storyteller supposed to be a vessel through which reality flows or a filter for reality, responsible for delivering it in a nice package for the audience (e.g. so that the class would feel genuine sympathy for Jane or Marcus' character)? Or is the storyteller something else entirely? Though Solondz doesn't offer a solution to this problem, he does manage to subtly undermine the criticism he's received and also challenge the audience to examine the stories more deeply instead of giving them a once-over and applying an established formula for analysis (i.e. treating "Fiction" like Vi's classmates treated her story).
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