The Economics of the Movie Biz

Edward Jay Epstein’s book, The Hollywood Economist: The Hidden Financial Reality Behind the Movies, is a real eye-opener. Here are some fascinating facts from the book:

—The principal business of most major Hollywood studios is no longer making movies. It is creating properties—including TV programs, cartoons, videos and games—that can serve as licensing platforms for a multitude of markets. Only about 10% of the billions in revenues of the major studios comes from American movie theaters. The rest of it comes from DVD sales, foreign deals, pay TV, network TV licensing, streaming video fees, etc. We are certainly not the ones driving the bus anymore.

— The film bookers for the 15 largest theater chains decide what the rest of us will see because those chains own two-thirds of the screens in America.

–We have so many movies with car crashes and big bangs because the chains depend on big opening grosses, and the age group most likely to be lured out of their cozy homes and into the theater during the opening weeks is teens, especially young men. Those kids are great snack bar customers and the major target for merchandise tie-ins, DVDs, video-games based on the film, soundtrack albums, etc. Studios are just starting to realize that there are lots of older people with free time and disposable income too—witness the success of films like The Best Exotic Marigold Hotel.

– –Why is there more violence than sex in American movies? Partly it’s our culture. But gun-selling WalMart sells nearly a quarter of all DVDs in the US, and their policies of putting movies containing sex or nudity in the less-trafficked “adult” section puts pressure on the studios to keep that content out of films. Plus nudity is not the draw for the all-important teen viewer that violence is (since they can get porn on the Internet). Sex also complicates TV advertising of films and their later airing.

—In Hollywood you don’t get points for originality. Audience creation is much easier if the potential audience knows what to expect ahead of time—that boosts the opening numbers. Thus so many sequels and spin-offs from TV shows and video games—guaranteed name recognition.

–No matter what the stars say in their interviews in the media, they do not do their own stunts. (I was shocked–shocked!–to discover than Tom Cruise is not the super-hero he claimed to be)  Cast insurance expressly precludes it. Shots are analyzed beforehand by insurance reps to make sure stars are not put in harm’s way, and the insurers are on set to enforce these decisions. Stunts are done by second-unit production teams in a variety of locations, often with no stars around.