The Hollywood Economist

Neither the Power Nor the Glory

Why Hollywood leaves originality to the indies.

Back in the old days of the studio system, the brand of a Hollywood studio meant something to the moviegoing public. Each studio, with its roster of stars under contract, came to be identified with a particular genre of movies: MGM (musicals and romantic comedies); Paramount (historical epics); Warner Bros. (gangster stories); 20th Century Fox (social dramas); Universal (horror movies); Disney (cartoons). Today, the studio names mean little to audiences, but they matter a great deal to the handful of owners who control most of the multiplexes in America and Canada.

These owners know that the six major studios—Disney, Warner Bros., Paramount, Fox, Universal, and Sony—can supply not only a movie, but the publicity campaign capable of driving a herd of moviegoers from their homes to the theater on an opening weekend. The studios have this capacity because, unlike independent film producers, they control when, where, and how the movie will be released, starting from the day it goes into production. With this control, the studios can shape the movie to fit the requisites of the marketing campaign, fusing both product and publicity, like Siamese twins, into a single entity. This carefully calibrated movie product can then be used to recruit multimillion-dollar merchandising tie-ins, such as with McDonald’s. The studios can also insert “teasers” in the coming-attraction reels (which they control) to build audience awareness. Finally, the studios have the resources to commit up to $50 million in prerelease advertising on a single movie. (In 2004, the studios spent, according to the MPA numbers, $34.4 million per movie, on average, on U.S. advertising and prints.)

The marketing campaign has become crucial for theater owners because the names of big stars can no longer be relied on to automatically draw a large audience. Unlike the old days, when just the mention of Clark Gable or Carole Lombard on a marquee was enough to guarantee a big turnout, nowadays a star’s appeal can fall flat unless it is incorporated into a studio-sized marketing campaign. Consider two consecutive romantic comedies with Julia Roberts, today’s highest-paid actress; one an independent release, the other a studio release. The first, Everyone Says I Love You, released by Miramax, brought in $132,000 on its opening weekend. The second, My Best Friend’s Wedding, released by Sony, brought in $21.7 million in its opening weekend. Both films had the same star actress, same genre, same romantic twist—but one film drew 150 times as many people to theaters as the other. Next, consider two consecutive movies starring Mel Gibson. The first, What Women Want, was released by Paramount and brought in $33.6 million in its opening weekend, while the second, Million Dollar Hotel, released three months later by Lion’s Gate, brought in $29,483. A thousand times as many people went to see the opening of the studio product, although both starred Gibson. Even if Roberts’ Everyone Says I Love You and Gibson’s Million Dollar Hotel had been vastly superior movies to their studio counterparts (and I believe they were), the results would have been the same. These films played in only a handful of theaters, while My Best Friend’s Wedding opened on 2,134 screens and What Women Want opened on 3,013 screens. For the independent films to have opened “wide” as their studio counterparts did, the distributors would have had to convince the theater chains that they had the wherewithal to provide the kind of massive marketing campaign that it takes to fill 2000 theaters with popcorn-eating audiences—a next-to-impossible undertaking.

Independent films are a totally different enterprise than studio films. They are typically made before they have U.S. distribution and with independent financing. Therefore, the producer does not know when, if ever, the film will be released in theaters. So, unlike studio films, independent films cannot be conceptually geared to a marketing campaign, or used to recruit merchandising tie-ins. Independent producers therefore have only a singular product: the movie itself. To find a distributor, they often have to show their movies at film festival after film festival. And even after they find a distributor, it can take months, or even years, before the film is released in theaters. At that point, if the film is to succeed, it must create its own audience through reviews, awards, and word of mouth. Such acclaim often proceeds from the originality of the film, such as, for example, Sideways, Lost in Translation, and Eternal Sunshine of the Spotless Mind. So, while studio films are rushed through postproduction editing to meet their release schedule, an independent producer must keep re-editing a film, no matter how long it takes, until the film works perfectly. As a result, independent films win much of the glory and awards—and studio films win most of the gold, taking in well over 80 percent of the box-office proceeds.

But, unlike its movies, the ending is not a happy one for Hollywood. Due to the high cost of worldwide marketing, the cost of the studios’ average product, which in 2004 exceeded $100 million, greatly exceeds what they get back from their share of the box office. Fortunately for the studios, a few films each year perform much better than average, and it’s these Midas-touch movies, such as Spider-Man, Pirates of the Caribbean, and Mission Impossible, on which the studios now earn almost all their profits. Since the publicity campaigns for these mega-blockbusters have proven effective in the popcorn economy, studios recycle their elements into endless sequels, and leave originality, and all the joy that comes from it, to the indies.