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Hollywood by the numbers

It’s perhaps fitting that an industry that produces illusions is in itself an illusion. The absence of public scrutiny of its finances and business model leads to a lot of myths or misconceptions. Some of these are discussed anecdotally in books and other works[1], but the absence of data makes the anecdotal evidence unsatisfying to an analyst.

What if we could find patterns in data about the industry to confirm or deny these oral histories? Fortunately some data actually exists. There are collections of data about movies released and some of the attributes of these releases such as box office receipts, theaters opening, budgets (sparsely), and distributors. This data is typically used for marketing purposes to celebrate the “hits” and thus entice more people to see the movies.

However, other information can also be obtained through analysis of the data. In fact, a rather compelling story can be told. That’s the purpose of this post. Our story will be expanded over time but this first draft should be enough to allow a discussion to begin. The story is built in four sub-stories:

  1. Drama / Comedy vs. Adventure / Fantasy: Why the Ancient Greeks had it all wrong.
  2. The magic of summertime: Market access and school schedules
  3. The perpetual incumbency: What happens to Hollywood startups
  4. The Popcorn economy: The peculiar power of theaters in an age of television

These stories were the result of observations in data alone. We have no first-hand knowledge of the industry and have only used basic software tools to seek out patterns in public data[1].

The data set includes approximately 12,000 titles released between 1975 and present with various degree of completeness. Some of these years are not completely populated and some data is undoubtedly in error. However the large sample should offer enough substance for patterns to emerge in spite of this.

Drama / Comedy vs. Adventure / Fantasy: Why the Ancient Greeks had it all wrong

Storytelling has not changed throughout history. The same types of stories affect audiences the same way since stories were first told. The earliest known “genres” were tragedy and comedy and they are still seen as the bedrock of theater today. The same is true for movies. The following bar chart shows the distribution of genres as cited by movies over our data set. Drama and comedy are about 50% of all movies made. If we add romance they are 60% of cited genres. This is understandable given the history of theater. However the profitability (or revenue potential) of those genres is not as strong as Action, Adventure and Fantasy. The following chart shows the same count of genre citation but only for movies grossing over $200 million (which we chose to call “blockbusters”). Action, adventure and fantasy handily beat Comedy and even SciFi beats drama. Romance, musicals and and mystery genres typically associated with female audiences are very rarely successful as blockbusters. The overall data is shown in the following table. The rows represent gross revenues and the columns genres cited ranked in order of frequency. One can easily observe the density of low earning drama and comedy (grey colored) vs. the more lucrative instances of fantasy and adventure. These male-dominated genres have consistent success into middle, high and very high revenue tiers.

The reason for this blockbuster attention to action and adventure is probably the prevailing theater-going audience demographic: adolescent males. The industry still produces the classic genres but less profitably than what the current targeted markets.

Indeed, these genres were very uncommon in eras predating the late 1970s. More “adult-oriented” movies like romance (Gone with the Wind), musicals (The Sound of Music) and epic movies (Ben Hur, The Ten Comandments) were common in the “golden age” of Hollywood. As we’ll see in the next section, the age of the audience is a now driving more than just genre selection.

The magic of summertime: Market access and school schedules

Using the word “Summer” before “Blockbuster” has become almost redundant. What is less understood is that watching movies in the summer is rather a new idea. It started effectively with Jaws in 1975  and ever since major film studios have planned their annual marketing around a summer schedule. There is clear evidence for this in the data. Here is a table showing the blockbuster release months since 1975. (The number of titles grossing over $200 million and the months in which they were released).

The same pattern repeats for the next tier of highly successful movies–those grossing between $100 and $200 million.

But what about the less successful movies? Those earning less than $50 million actually show a counter-success pattern.

To contrast this further, here is a stacked bar chart comparison between frequency of release by month for the most successful tier vs. the least successful tier (colors represent years with oldest at the bottom).

It would seem that summer and success are in a causal relationship. There is a clear pattern with the only non-summer months having blockbuster releases being November and December.

But there is more to this pattern.

The blockbuster schedule happens to coincide with the school holiday schedule in the US. This again points to the “profitable” audience being school-age children, and mostly male.

The perpetual incumbency: Where are the Hollywood startups?

The third observation has to do with the  major film studios. We took the box office revenues and allocated them to the studios over time. The following chart shows the share of those revenues for the top 30 studios. The top five were earning 64% of revenues in 1975 and the top five were earning 60% in 2011. One of the top five from 1975 is no longer in the running this year (MGM) and one new major was added (Buena Vista, owned by Disney).

There has been one other notable change: Columbia was acquired by Sony but stayed out of the top 5. Beside Disney there is one new significant entrant in Dreamworks gaining share in the last decade.

But the prevailing impression from the data is that the incumbents remained as such during the last four decades. There are many small studios but they have not “disrupted” the market by shifting significant revenues out of the hands of the majors. Indeed the typical strategy seems to be to start a studio with the hope of it being acquired by a major.

Even the entrants are industry insiders: Disney and Dreamworks are not asymmetric in their business models in any way. In fact, when viewing the data by blockbuster creation, the majors feature prominently. There are only a handful of blockbusters from the smaller companies.

When looking at overall production rates, again the majors (and their subsidiaries) dominate. Here are the top 75 distributors of movies showing nearly 9000 movies (click image for full-size):

The conclusion from this data might be that Hollywood does not change all that much in terms of who makes the money. But that itself is a symptom of a deeper reality: that there is little that changes at all.

We can even perhaps hypothesize that there is no business model innovation taking place. Any such innovation is usually manifested in a reversal of fortunes for incumbents.

But technological change is happening. The following section describes how this appears in the data.

The Popcorn economy: The peculiar power of theaters in an age of television

The data we are sampling (box office gross revenues) is actually a small and shrinking subset of what movies generate. In addition, there are international revenues, media sales (DVD, video tape), TV rights, and merchandise to name a few. But theaters are still an important part of the picture.

Although they make up less than 20% of gross, their importance is disproportionate due to the signal they send other markets about the popularity of a movie. In other words, a movie must first be proven in a US theater before its value is priced by the other channels.

However, this essential theatrical release has changed in one fundamental way. Releases are now geared for larger initial scopes with shorter runs and less dependency on “word of mouth” to increase sales.

Consider the following view of release breadth (how many theaters are in an opening) by openings over time. The columns represent the number of theaters used in the opening of a movie in increments of 100. The rows are years. The cells contain the number of movies opening with that size footprint.

The pattern shows the number of theaters used in openings increasing steadily. the mean number of releases is shifting to the right. Part of the reason is that theaters shrank in size over time, but there is also the factor of needing to create a large audience at the outset of a release. The increase in “footprint” at launch (a factor of 10) is in excess of the slicing of theater sizes (a factor of two)

This broadening of launch is coincident with a decrease in viewers. As a result the notion of how movies are marketed has changed. The idea that a movie could start small and gain a following gradually through word of mouth is obsolete. That low cost approach to marketing (called “earned media exposure” in marketing) is unreliable and completely discounted.

Instead, studios manufacture an audience through paid advertising and promotion. This initial burst of viewers is essential not just for generating revenues. It’s essential to driving long-term revenues.

The reason is that technology now allows the movie to be “monetized” through multiple channels. Recorded media, broadcast rights and even in-flight entertainment are all there to milk a franchise. But there is a need to get that initial vote of confidence from one crucial audience. That happens to come only from theatrical release.

So with the scheduling pressures, the narrow window of purchased release buzz, the onus is on a broad release as quickly as possible. This holds especially true if we filter out only the blockbusters. Note how the release has increased steadily as well and that since 2000 all blockbusters released to over 3000 theaters. Compare that to Star Wars in 1977 releasing to only 30 theaters.   Notes:

  1. See Jay Epstien’s The Hollywood Economist.
  2. Tools used include Excel, Numbers and our own App
  3. Data sources: Coolector, Imdb, BoxOfficeMojo, The-numbers.com
  4. Many thanks to David McCandless and the Information is Beautiful  folks (http://www.informationisbeautiful.net) for setting up the Hollywood Budgets Award that provided us with much motivation for researching this topic.
  • Anonymous

    Fantastic stuff Horace. Going to take a little while to digest………….

  • http://thetorg.com Bill Torgerson

    Ready to attend a lecture (or listen to a podcast) where I can be walked through some of this.  Wow!

  • http://www.facebook.com/people/Stephen-Reed/100001163456851 Stephen Reed

    Great presentation of the data to set up some provocative points that I think you will later make!

    In a 1948 antitrust decision, the motion picture studios had to divest their owned movie theater chains. This was the beginning of the end of the Golden Age of Hollywood. On the other hand we are now observing what might be the Golden Age of Subscription (i.e. Cable) TV video production. I believe these phenomena suggest a way for technology and intellectual property rights to disrupt the industry.

    Ownership of theaters permitted studios to operate on a sort of subscription basis – allowed by vertical integration. Suppose that (1) Apple, Amazon or another media-consuming device manufacturer vertically integrates from studio content production all the way to providing the exclusive content consumption device and that (2) the video content is solely provided on a subscription basis.

    The disruptive studio could operate using state-of-the-art digital technologies, and reduce talent costs by reimposing the old Studio System where talent is subject to long-term contracts and studio facilities are optimally reused. Piracy is minimized by streaming encryption to trusted devices, and by pricing the subscription low enough such that consuming pirated content is not worth the effort. Having subscribers reduces risk and marketing costs of each production. What is sold is the studio brand, not each particular production. The need for blockbusters is reduced. Exclusive distribution of compelling subscription content to the studio/manufacturer’s devices drives consumers to purchase those devices.

    The key idea is to create content for subscribers employing total vertical integration permitted by digital and internet technologies. The idea can be elaborated by establishing subscription channels by genre.  Certain genres can be relatively inexpensively produced yet very profitable – which is evidenced by the success of the Western genre in US cinema during the Golden Age of Hollywood.

    Apple has a hundred billion dollars. Imagine if Apple were to buy some existing Hollywood Studios, or create their own. Apple could lock up some talent with long term contracts, then create movie after movie within select genres for subscribers on Apple devices.

    The Golden Age of Hollywood – total vertical integration – is a model for disrupting current Hollywood, substituting studio-manufactured digital consumption devices for theaters.

    • Martin KK

      Well done Horace. This is the next battlefield, and the studios are the main obstacles to disruption. A worthy reason to hang on to $100 billion.

      Did you find a data source which would allow us to look at trends in studio revenues by distribution channel, and how these have changed over the last decade ?? I believe that’s the next area for data mining and discussion.

      Again, you’ve taken the lead in creating the next great conversation.

      Martin

    • Anonymous

      “Suppose that (1) Apple, Amazon or another media-consuming device manufacturer vertically integrates from studio content production all the way to providing the exclusive content consumption device and that (2) the video content is solely provided on a subscription basis.”

      I’m pretty sure this is called Hulu Plus.  There’s leaks in the exclusivity but the subscription revenues fly straight up the chain.  The incumbents are already aware of this strategy and are pressing it, and keeping all the hardware guys from getting too much of the chain under their own umbrella.

      “The disruptive studio could operate using state-of-the-art digital technologies, and reduce talent costs by reimposing the old Studio System where talent is subject to long-term contracts and studio facilities are optimally reused.”
      The challenge with “locking up talent” is that you have to identify it before it’s become a market commodity — once someone is a “star” they stick to free agency like paint.  Identifying talent is extremely difficult and intensive, but a lot of people have already recognized this and the old-school talent agencies have rooms full of interns trolling Youtube.

      Also I don’t think “inefficient use of studio facilities” is a significant problem — physical studio space is shared be theatrical, television and new media product (I can walk down my hall and see theatrical films, network TV, syndicated TV, and sometimes even people doing net exclusive content in the same building.)  Much of the equipment of filmmaking isn’t owned by the companies on Horace’s chart, they’re owned by specialists and rental houses, because it only stays state-of-the-art for about a year and studios find it more efficient to sub out “upgrade risk.”  And the equipment that the studios do own can again be allocated to a title reaching any medium

      The danger of repeating the business model of the first golden age is that the new operators will cause all the problems the old operators did — they locked out independent producers, people specifically like Walt Disney, who had to partner with Columbia and sign away a lot of revenue just to get access to the big dark rooms.

      Which is not to say we shouldn’t do it, but the tradeoffs are touchy — vertically-integrated entertainment had the well-earned reputation for being deeply conservative and stuffy.  To someone of, say, Hal Ashby’s generation, vertically integrated entertainment was the institution THEY were trying to disrupt.  I mean like, in film school we were taught that the “old” method made great films but was rank with abusive labor practices, self-censorship and arbitrary creative restrictions —  the cultural change required to make people go against all that “common sense” will be extraordinary, and most people, the people who are still on the make, wouldn’t go quietly.

      • http://www.facebook.com/people/Stephen-Reed/100001163456851 Stephen Reed

        I see that Hulu Plus is owned by production studios and is a streaming distribution channel. The model I describe goes further by exclusive content distribution solely to studio-manufactured devices.

        In a hypothetical race to achieve the vertically integrated model described, I speculate that its easier for Apple (or Amazon) to build or buy a studio production capability than it is for current studios to manufacture content consuming devices.

        Thanks for shedding light on the own vs rent trade-offs performed by production studios. Thanks also for understanding and critiquing the analogy to the Golden Age of Hollywood.  The 1948 antitrust decision than ended it was agreeably best for everyone else but the studios and possibly audiences, but I am setting aside socialistic concerns for (say) Apple’s potential behavior, and rather modelling what might be done commercially near the edges of antitrust/monopoly limits.

        Your last point about “the cultural change required” is stereotypical disruption.

      • Anonymous

        “The model I describe goes further by exclusive content distribution solely to studio-manufactured devices.”

        See my earlier point about variety.  Recently I suspect we saw an example of this in action when Netlfix refused to pass-through a premium for Starz content.  I suspect that they (correctly) saw that if they did what Starz specifically wanted, and were to offer movies on Instant Queue and then gun people to pay the Starz premium before having access to them, it would antagonize their customers and scare them away from the service altogether. 

        A studio-run box is going to be in a situation a lot like Netflix, in that people will be aware of movies by way of marketing, and their only option will to be buy a second box to see it.  Boxes such as these will suffer from a bad rep, because people have normative expectations, after decades of a basically open technology market where any DVD or VHS plays on any player, will be “crippled.”  What you’re describing is basically the Nintendo Seal of Approval model, where killer franchises drive box sales which drive self-published titles. 

        I do think things are basically going to shake out the way you describe, but I suspect that devices manufacturers are simply going to partner with distribution channels, in the manner of Apple or Roku with Hulu and Crackle and Netflix — not so much to protect their incumbency as to prevent copyright infringement, which is why none of these internet STBs run Bittorrent, or full browsers, or have the internal storage required to make illicit copies.

        Also I just can’t emphasize how messy and risky production is, how much specialized knowledge is required and how arcane the process can get, just on the legal and political side, before you even start shooting.  I just don’t see an Apple buying into those sorts of risks, they don’t even deal directly with filmmakers on the iTunes store, filmmakers usually have to cut in an aggregation partner unless they’re already very well established — if they aren’t willing to risk a marginally profitable headache for someone that is giving them their movie for zero sunk cost on Apple’s part, why would they start making these things. Jobs himself was by all accounts aloof from Pixar and didn’t exercise any leadership or decisionmaking. It’d be interesting development if Apple hired a producer or studio exec into the management team, however.

      • Anonymous

        As if they’re replying to our point, just saw it now on DF:

        Rogers, BCE vying for a bite of Apple’s iTV

        “While the iTV product remains cloaked in secrecy, sources say Cupertino, Calif.-based Apple has approached Rogers and Bell as it actively pursues partnerships with Canadian carriers.”

        Apple isn’t going to partner with producers, it’s going to partner with ISPs and derive revenue from a split of cable subscriptions, in exchange giving selected ISP partners exclusive access to iTV and its capacity to increase dumb-pipe broadband consumption and monetization.

        I have no doubt that Apple’s negotiations with the content providers will involve splits of this revenue as well.

      • http://www.facebook.com/people/Stephen-Reed/100001163456851 Stephen Reed

        Understood. Reminds me of Apple’s negotiations with AT&T over the iPhone in the US.

    • http://twitter.com/handleym99 Maynard Handley

      “The disruptive studio could operate using state-of-the-art digital technologies, and reduce talent costs by reimposing the old Studio System where talent is subject to long-term contracts and studio facilities are optimally reused. Piracy is minimized by streaming encryption to trusted devices, and by pricing the subscription low enough such that consuming pirated content is not worth the effort. Having subscribers reduces risk and marketing costs of each production. What is sold is the studio brand, not each particular production. The need for blockbusters is reduced”

      Uhh, doesn’t this already exist? It’s called TV.

      The movie business has the problem that it exudes a continual stream of new items, and most adults have neither the time nor the inclination to bother watching anything on the off chance that it just might be good — we’ve be burned before enough times. So what you have is that most adults only bother going to a theater for spectacle movies which they know are going to deliver — something like Avatar. 

      The movie business has tried to cope with this by switching to a stream of sequels and sequel-wannabes; but they don’t seem to understand that this hardly solves the issue. On the one hand, having the same characters is no guarantee that the experience will gel the way it did the last time; on the other hand, a stream of sequels once a year does not allow for the long-arc character development and growth of serious TV. 
      Part of the problem is that TV is  a writer’s medium whereas movies are a “star”‘s medium (actors or directors, sometimes producers) but always with contempt for writers. Part of the problem is that movies require so much money to be spent in one burst that there is terror of taking risks, whereas every TV show worth watching takes risks and does something strange every season — some like Community doing so multiple times in one season.

      Personally I think movies are largely obsolete in a world of so much content. There is a place for extremely well done event movies — maybe ten or fifteen a year — and the rest are just wasting everyone’s time. If you love small movies and don’t think good TV is an adequate substitute, well, I’m sorry. The western is obsolete, vaudeville is gone, and I believe your types of movies are headed to join them.

  • http://www.informationworkshop.org Mark Hernandez

    I didn’t understand why animation was separated out in the first charts.  Does that represent animated versions of all the other categories such as drama, comedy, scifi, action, romance, adventure, fantasy, etc? 

    • http://www.igencorp.com/ farshad

      Each movie was associated with multiple “genre” tags, such as animation. For example, Wall-E would be tagged scifi, animation, adventure, and romance. So Wall-E would count against each of these. This is why you see animation as a separate bar in the chart.

  • Steve Setzer

    Stephen Reed notes the old Studio System and how talent was locked up through long term contracts. Talent can include not only actors but also directors and other people. As I understand things, most studios have very few movie-making personnel “on the payroll” — even the set carpenters are hired per movie.

    I would suggest that Pixar puts forth an interesting model. Nearly all of the talent, including the directors, is on the payroll. (The actors are hired per movie.) In effect, by setting themselves up as a Silicon Valley type company in both location and business structure, Pixar re-created the Studio System. That’s not the only reason for their success both artistically and financially, but it is suggestive.

    • http://www.facebook.com/people/Stephen-Reed/100001163456851 Stephen Reed

      Agreed.

      Interesting that the market capitalization of Walt Disney (owner of Buena Vista & Pixar) is about 73 billion $US. Apple could conceivably buy enough to control it.

      • Luis Masanti

        Steve Jobs was the greatest shareholder of Disney with ~6% of the shares. That was the reason why he was in the board.

      • Troy DePauw

        Conceivably yes.  In Reality? No.  Don’t forget that most likely there are millions of stock options out there.

    • Anonymous

      “As I understand things, most studios have very few movie-making personnel “on the payroll” — even the set carpenters are hired per movie.”

      There are these stories from the old-timers, many of them are dead now but you can read it in books*, where some studio would hire them and they’d sit at a bench reading a paper for three weeks before there was a project that needed them.  For some trades, like early sound people, there was a legit talent gold rush in the late 1920s and studios were writing huge checks and shipping radio techs from all over the English-speaking world to just get a core of knowledge.  The collective wisdom is that most of the hiring practices from before Paramount were deeply inefficient, egged on by nasty hiring wars (no no-poaching contracts back then!) and featherbedding on the part of the early unions.

      The main issue with tying the distribution company to the lot is it really restricts what they can offer.  For example, Sony releases all of the 007 movies in many film markets, and you simply can’t shoot those movies on a Culver City, California sound stage; the same would apply to all of Fincher’s films, or an independent production like District 9,  again distributed by Sony.  In terms of personnel, someone like a David Fincher or a Peter Jackson doesn’t want to work with someone just because the studio head ordered it– they have their team, their team makes their movies the way they want them, and if Fincher had to use a studio DP instead of Jeff Cronenwith, that’d be a dealbreaker, because without Jeff, the movie probably wouldn’t look like a Fincher movie.  Fincher probably doesn’t make enough movies to keep his team employed, so they’re all freelancers, and that’s the norm all the way down, for better or worse.

      Keeping people off the payroll = artistic control and freedom.

      * I’m thinking particularly of Edward Berndt’s memoirs as a sound man at UA and later a Three Stooges director

      • http://www.facebook.com/people/Stephen-Reed/100001163456851 Stephen Reed

        “The main issue with tying the distribution company to the lot is it really restricts what they can offer. ”

        A disruptive, vertically integrated model might not be affected so much by this point if they produced genre movies. Or the studio could operate a multiple lots, each dedicated to a branded genre. Your example of 007 movies could be re-imagined as a studio lot dedicated to a long series of spy/action movies with an ensemble cast and crew subject to long term contracts – consumed by subscribers for whom this genre is compelling.

      • Anonymous

        “Or the studio could operate a multiple lots, each dedicated to a branded genre. ”

        Sweet jesus, you’ve just built a backlot circa 1936 :)  The dark secret behind these is they cost stupendous amounts of money to keep maintained, and as styles changed and the audience became more demanding and cosmopolitan, the studio owners became so desperate to use the lots to justify the expense, you’d have episodes of “Star Trek” where the whole cast would “go to the old western town” for an episode, or “go to 1930s Chicago.”  (I mean they were good episodes and all, but…)  What you’re describing is huge capital investments with 30-year horizons, and nobody wants to make a bet on what people will buy tickets for 30 years from now.
        Let’s call that the Sigaba Criteria: “Insofar as an entrepreneur can make a 30 year bet, said entrepreneur’s business model does not involve entertainment.”

        You make a good point about subscription for genre, but I think there are serious issues with people willing to pay sustaining funds to to such concerns on an a la carte basis.  I would argue most of the premium in distribution comes from variety and not having to commit to enjoy something.  I generally support the idea of a la carte cable channels, for instance, but there’s no doubt in my mind that an “All Mystery!” cable channel probably wouldn’t be able to pay its bills while a TBS or HBO, with a diverse portfolio appealing to many genres and demographics, would fare much better.

    • Anonymous

      Lucas is also setup deliberately in the San Francisco Bay Area instead of Hollywood.

    • Anonymous

      Lucas is also setup deliberately in the San Francisco Bay Area instead of Hollywood.

  • Luis Masanti

    Two comments:
    1) I see a kind of “who’s first, the egg or the chicken” with regards to the “summer blockbuster.”
    It would be wonderful to be able to release a movie in different times to see if a summer blockbuster is also a winter blockbuster or viceversa. We should be able to get a “similarity” between movies and then do this kind of analysis.

    2) As for theaters and audiences (other than the already mentioned “impulse” to other channels) it would be interesting to mark the start (or the dominance) of multiplex-kind of thither over stand-alone ones. Also, to mark the decrease in capacity of each one. Other than the (almost) ridiculous differences in Star Wars 70 to actual 3000 theaters, the real quantities of viewers could be less than spectacular.

  • Anonymous

    Horace have you looked at diving more into the different revenue streams ie domestic vs international, post-theatrical, DVD, VOD, TV rights etc…?

    The fact of the matter is that for US studios they make most of their money and profits outside of the US in non-domestic as well as in post-theatrical revenues.

    The domestic North American market is almost a loss leader for them.  The numbers for International and post-theatrical revenues are extremely interesting in their own right.

    • Anonymous

      The reason why I make specific note of that – and I know that you point it out as well Horace – is not just that domestic theatrical revenues is a smaller part of the pie, but that there are different characteristics to the revenues outside of domestic revenues.  For example, the success of certain kinds of domestic movies don’t translate to foreign revenues – eg. Adam Sandler comedies which are successful in the US but are far less successful overseas, or certain types of CG action movies which often are far more successful overseas than in the US (like Terminator Salvation). Also post theatrical revenues like DVD sales are more successful relatively in the US vs outside etc…

  • Bruce McL

    “The Popcorn Economy” reminds me a little bit of the pricing of US Football players. Their “performance” on the day that they are drafted has a big influence on their future pay, perhaps bigger than their subsequent performance on the playing field.

  • http://twitter.com/WaltFrench Walt French

    “So with the scheduling pressures, the narrow window of purchased release buzz, the onus is on a broad release as quickly as possible.”

    Wow: the technological advances in viewership have been completely captured by the incumbents, not disruptors. A crowdsourced or YouTube or Amazon-type startup needs to create not only the content but make an end run around the buzz/distribution networks’ money.

    I guess that part of what we “hire” movies to do is to provide a community experience, something to talk over with friends or even see together. That places a premium on the buzz — maybe, that’s a big part of the product.

  • Anonymous

    Exactly what data set are you using?  Why is Columbia shown as distributing at the same time as Sony, when Sony bought Columbia from Coca-Cola in 1990?  Why is New Line shown as distributing in the 2000s when it was owned by AOL-Time Warner? And why are we only looking at North America?

    The “incumbency” isn’t an incumbency of people, corporations or even necessarily business models.  They’re incumbency of brands.  Successful startups like New Line or Live Entertainment release a few good films, burn through their capital and are bought out by more recognizable names, who can then integrate the specialist product into a larger overall market startegy; sounds familiar doesn’t it?

    When New Line made “The Lord of the Rings” movies, that was the filmmaking equivalent of Palm finishing WebOS before getting acquired by HP — one last losing expenditure to make them as valuable a purchase as possible to a larger company.

    And even by the standards you’re using to assign distribution, non-majors now hold about 20% of the market, seems like raging success to me.  If I ran a DreamworksWebSearch.com web site and I managed to get 5% of the market from Google-Yahoo I’d count that as a raging success.  It’s not “disruption,” but I remember you originally talking about budgets and creative compensation, and how that could be disrupted, and you made a good case. This is all theatrical distribution, however, and this is a severable concern from production.

    (edited for politeness)

    • Anonymous

      Oh I see, at the bottom.  In that case, I don’t think this info has been normalized properly to come to any conclusions about revenue market share.

      Also the basis for assignment of a title or revenue to a “genre” is extremely messy, ask anyone that tried to find “Sideways” at Blockbuster.

      • http://www.igencorp.com/ farshad

        True, it is hard to assign a single genre to a movie. This is why we assigned multiple genre tags per movie, so the numbers in the charts reflect this. For example, revenue for Sideways would count under: drama, comedy, and romance.

      • Anonymous

        The more bases you cover the less useful a conclusion you can draw.

        I just don’t think these are empirical.  What about mapping them to demographic appeal, instead?  You’d get a lot of the same information, it’d be deeper and you’d have a proper statistical dataset, and it wouldn’t be so subjective.

        Or warped by fashion, for that matter: in 1970 “Sideways” probably wouldn’t have been classed “romance” and it would have been attached to “counterculture,” which was definitely a true genre but has no modern equivalent.  Horace’s methodology for genre analysis is reductive and deeply ignorant of the literature; his comedy/tragedy/adventure/fantasy system is basically three thousand years old and has reams of argument on all sides of the issue, argument he doesn’t want to go into because he can’t graph it in Numbers.app. It’s unsubstantiated and it’s the weakest part of his analysis in my opinion.

    • http://www.igencorp.com/ farshad

      In the “tech” world successful disruptor entrants end up being independent, assuming they have a proper business model. 

      • Anonymous

        What is the criteria for “independent” here?  In film there are different definitions:

        * An independent producer is a producer who isn’t working for a Major studio.  Kevin Smith, the Weinsteins and producers like Gale Ann Hurd, Joel Silver and J.J. Abrams have generally, at various times in their careers, met the criteria of “independent producer.”  They obtain their funding independently and have no fixed relationship with any one production operation or distributor. They find their own money, make their own deals and sell the content to the highest bidder.

        * An independent distributor is a distributor that isn’t O&O by a Major studio.  Freestyle Releasing, Summit Entertainment and Lionsgate would be independent distributors.

        On the tech side, if someone takes $50 million in stock options from Facebook, starts their own media/content site, and sells the site back to Facebook, or Yahoo or whatever, do we call that “independent?”  Because that’s basically what people like Spielberg and James Cameron did through the 1990s when they were independent labels operating as “Amblin Entertainment” and “Lightstorm Entertainment” respectively.

  • rodbert

    Thanks for posting this. It is cool to play around with data like this.

    I wondered, are the revenues inflation corrected? I guess so, but it is not written down explicitly. Can the summer block busters be related to how people are reached? On television the summer season usually consists of repeats of old material while talk shows (where the movies can be promoted) are on hiatus. The only way to attract people is to have lots of famous stars in the movie and a high-budget advertisement campaign. This idea is reinforced when looking at the chart with the low budget movies (shouldn’t that be low-grossing movies?), which shows a significant dent in the summer months (about 300 movies less released). So there are less movies released, but the ones that are released are making more money. Regarding the number of theaters at opening, it seems as if more movies open small nowadays. In 1979 only 18 out of 89 (less than a quarter) opened in <100 theaters while in 2011 430 out of 610 movies (about three-quarters) opened in <100 theaters. The movies that opened big opened much bigger, but most movies opened smaller. 
    Again, really cool, keep up the good work!

    • Gordon Shephard

      I also was looking for an explicit statement, one way or another, as to whether the values where inflation adjusted.  It becomes a very different article if they are (or are not) – so it’s a pretty important point.

      • http://www.asymco.com Horace Dediu

        They are not inflation adjusted but the conclusions (in the form of the four section headings) do not depend on a comparison between the past and present.

    • http://www.igencorp.com/ farshad

      Re: why non-blockbusters in the summer, Another (untested) explanation for the reduction of non-blockbuster movies may be that the lower-revenue movies have to compete for the same resources (theater screens, promotional channels, etc.)

      Re: low-budget vs. low-grossing, Yes, you are correct, the term is being used informally. We did not depend on budget data in our analysis.Re: low-theater openings, even if a movie is going to be primarily DVD distribution it needs the box office open as a promotional way to kick off its lifecycle. (Again, this hypothesis has to be tested against the data.) 

  • Anonymous

    Excellent article Horace.

    I’m sure you are saving this for a follow up article, but I believe the reason for the large proportion of Drama & romances produced is due to the relatively cheap cost & short production schedules needed to make them.

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  • Glimmerman

    I’m a bit surprised you can’t see fingerprints of the Harry Potter movies or the Pixar releases in the revenue data. Maybe the Pixar peaks would be sharper if looked at independently.

    • Anonymous

      It’d be tough to see a modern Warner Bros. release in the data; Warner Bros. is presently the most prolific distributor– they released 39 movies last year, and they alternate in such a way that when HP doesn’t have a movie on the burner, a Dark Knight movie is ready to go, like this year.

      The huge spike in indies in 1976 is almost completely attributable to “Rocky” which I find fascinating, and really says more about the shallowness of the market back then than anything else.  You can definitely see a trace of “Star Wars”‘s activity in Fox’s bar.  The collapse of BV/Disney in this visualization in 1997 (due to the previous year’s “Toy Story” and “101 Dalmations”) also sorta obscures the fact that “Titanic” came out that year, to two studios that split the revenue.  If “Titanic” had been distributed by an entity called “Titantic Distribution Inc.” that company’s one bar would be the second or third biggest one that year.

      • Anonymous

        Pixar and Star Wars are not Hollywood, though. They’re northern California.

      • Anonymous

        Pixar and Star Wars are not Hollywood, though. They’re northern California.

      • Anonymous

        Pixar was always distributed by Disney and totes up to them either as Disney or Buena Vista.

        Calling Star Wars “Northern California” is a bit like calling Oracle “Delaware”– the first Star Wars was written in LA and up north, cast from a pool of LA and Brit actors, shot in North Africa and the UK, edited and mixed in Los Angeles, funded and distributed by a Los Angeles studio nominally based in New York.

      • Anonymous

        And ILM on the first movie was strictly based in Van Nuys ;)

      • http://www.asymco.com Horace Dediu

        I ascribe to Hollywood whatever uses Hollywood’s market model (i.e. distribution, channels, market definition).

      • David

        Hollywood is not just the name of a city. It is the name of a business. The business of Hollywood. It represents the studio system of film. Even if that studio was based in Idaho. It is like saying, Silicon Valley for reference to the Software/Computer Industry, and Wall Street for the Finance Business and Washington for Government. Did you know that many US Government “Washington” jobs are not in DC? So, yes, Pixar and Lucas Films are Hollywood.

  • Anonymous

    I would push back on one point, and that is the profitability or revenue potential of comedies.  You say “However the profitability (or revenue potential) of those genres is not as strong as Action, Adventure and Fantasy.”  

    While this may be the case in absolute dollars, it is typically not the case on a % scale.  For example, a movie like the Wedding Crashers, with big salaries for its stars, still only cost $40M to make (http://simple.wikipedia.org/wiki/Wedding_Crashers), but grossed $285M.  Now, that movie is an outlier from a revenue point of view, but studios know that if they throw Vince Vaughn, Will Farrell, Jennifer Aniston or the Jud Apatow mainstays on the screen, that the chance of a positive ROI increases.  

    So, I think another point of view that should be considered is on the breakdown of film budgets over time.  Anecdotally, it seems budgets are going from something a bit smoother distribution, to either $200M for action movies.  And that both can be very profitable.

    • Troy DePauw

      Just so you know…don’t believe everything you read about Hollywood accounting.  Wedding Crashers only cost 40M including all of the development costs.  For instance, and I’m too lazy too look it up, let’s say that they worked on the script for a year, and the production leased space from the studio…and the studio was DreamWorks…(again too lazy to look it up).  Dreamworks itselfs lease the land and building from another company.  Then when the movie is ready to be developed they may actually shoot in their studios, incurring another lease.  Then once the movie is complete, the studio “sells” adspace on it networks (WB owns (half of) the CW, plus other stuff).  Disney (inc Touchstone, Buena Vista, Hollywood Pictures, etc) owns ABC, ESPN etc…
      and therefore sell Advertising to “itself” at a PREMIUM.  

      All of this creates “writeoffs” to the corporation’s taxes.  Which the execs can take as bonuses or stock options, etc…
      My cousin has a degree in film from USC and was an production assistant to a producer for about 7 years before her “career ended”.  Hollywood does that a lot too, as you have to agree to “play the game”.  

      Also, I have had some drinks with a showrunner on TV, and he told me how little he (and the cast and crew) got from DVD sales, as opposed to 1 ratings point which was over 500% more).

      Also, I own stock in WB, and know that I’m still not getting the full information, but I’m secure in knowing that they are making money every year, so my money is “safe”.

    • http://www.igencorp.com/ farshad

      The term “profitability” was being used a bit less formally as in “how much money can the movie make” or simply “revenue potential” as qualified in the excerpt. We did not use movie budget data (as we considered this data unreliable), thus we have no way of computing profitability in its pure meaning of the word.

    • http://www.asymco.com Horace Dediu

      I understand. The distinction should be more subtle. Drama and comedy are potentially profitable but they are no longer “blockbuster” material. The tendency to slot fantasy themes into the massive investment (or green-lighting) slots is what the data seems to be highlighting.

  • cairns magoo
    • http://twitter.com/PaulMaxime Paul Franceus

      We don’t need this racist crap on here. Who cares?

      • Troy DePauw

        I venture to say that every minority cares (which is NOT me).  I’m a Catholic White Male.  I’m pretty screwed.

        But I’m not trying to break in in the business either.

    • http://www.facebook.com/people/Stephen-Reed/100001163456851 Stephen Reed

      Yah, so what? And not at all relevant to the business case.

      • Troy DePauw

        Actually it is.  I’m not an Anti Semite, but please recognize that the ethnocentric Jewish community tends to promote people that are Jewish over people that are not.  

        Many people will tell you that talent itself is not a measure of success in Hollywood.  Yet look at most of the people who “last” in the business.

        I’d probably do the same if I was in the same position.  That doesn’t make it racist.  

        But how lese do you explain Steve Gutenberg’s career?  (Not to pick on Mahoney)

      • http://www.facebook.com/people/Stephen-Reed/100001163456851 Stephen Reed

        A disrupter does not necessarily want to join the community before overturning it. 

        Clanishness, or an old-boys network, simply makes the victim industry more vulnerable to disruption – if one were to agree with the questionable assumption that Hollywood does not promote on merit alone.

        For example: George Lucas sold Pixar to Steve Jobs who disrupted Disney.

      • Anonymous

        Did Jobs disrupt Disney?  Most folks would chalk that feat up to Michael Eisner — he’s the one who started the cable channel, developed the anciliary and theme park interests, and diversified Disney’s motion picture strategy by creating the Touchstone Pictures and Hollywood Pictures labels, giving Disney a way of making PG-13 and R-rated films without interfering with the classic Disney brand.

        Jobs did compel Disney to accept the digital animation workflow, but by the early aughts every production outfit had seen the writing on the wall and they were all founding digital animation divisions based on the Pixar model; even Disney had a separate digital animation department out of Burbank, completely separate from Pixar, that turned out a few films prior to the Pixar acquisition.

      • Anonymous

        Not to give this thread any more credence than it deserves, which is very little, but I’ve read Gabler, cited above, and his thesis was NOT that Jews control Hollywood, it was that eastern european Jewish refugees, who, being excluded from commercial interests in the east, found that the only avenue available to them was American film industry, and that forces both without the community and within, both religious and cultural, caused them to deal with each other and cooperate to an unusual degree, and caused outside interests to leave them alone.  The whole “Protocols of the Elders of Fairfax” aspect is only a very small part of the story, the fact that they were foreign immigrants with funny-sounding names and non-WASPy pedigrees is much more important; many early Hollywood movers were Irish Catholic: Google “Winfield Sheehan” or “Mack Sennet” sometime. Also, the book has nothing to say about the way modern Hollywood works.

        (As everyone knows, modern Hollywood is actually run by a cabal of Scientologists.)

        “But how lese do you explain Steve Gutenberg’s career?”
        Stonecutters.

  • Desrever

    Great article, Horace! From what I’ve understood, the reason for the summer blockbuster months is not only because of the availability of the main demographic (young males), but also because a movie theater gives people a 2-3 hour break in a comfortable, air conditioned premise in the middle of hot summer days. Not sure if this is fact, but it’s something I’ve been told by people who should know.

  • mysterio

    Just great data and analysis. You put Forrester, IDC, Gartner, Nielsen, etc. to shame, Horace. Keep up the good work.

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  • Tatil

    Based on your recommendation in your podcast, I bought Epstein’s book. In it, the author shows that most studio revenue comes from non-theatrical releases, yet the projects being green lighted and their marketing plans are geared to maximize the success of theatrical release. 

    If the theater going public and DVD buying, pay per view watching, cable subscribing, plane flying public were part of the same demographic or cultural group, that would make sense. However, theater going group is mainly under-25 males nowadays, while the other groups are a lot more evenly distributed in non-theatrical market. Actually, over-25 customers are probably more numerous. Now Hollywood is confused about why DVD sales are going down dramatically, by about 30% since 2008? Guess what, they are selling products designed for under-25 males, while their customers are anything, but. If these guys were in charge of clothing companies, they would blame Caribbean pirates for the low volume of winter coat sales in Florida. 

    • http://www.asymco.com Horace Dediu

      I noted this discrepancy myself. It’s something of a paradox but the economics of the business today implies the current content choices don’t match the market. It’s symptomatic of a deeper reality. Audiences are fragmented and the content is designed for the largest minority.

  • http://www.affenstunde.com James Barnes

    On the subject of wider releases how much of this growth has been driven by changes in distribution?

    In particular, has the impact of the multiplex been as great (or greater) in improving revenues as ‘new packaging’ technologies such as video tape and DVD?

  • berult

    As the movie theater shrinks in terms of seating capacity to better corral a segmented, rather dwindling number of moviegoers, the Apple store expands its ‘standing-room-only’ floor area to facilitate access to an exploding number of action-driven ‘day-dreamers’. An omen for new entertainment arenas …wrought in the architectural elasticity of the social network era.

    Participative entertainment is creeping in on Tinseltown, with the App/Apple stores homing in on the prize money as stealthy vanguards for an action-plotted revolution.

    After all, aren’t killer-product launches patterned after high profile movie-launching events, the subsequent harvesting of long-seeded parabolic previews, the hyperbolic hands-on reviews, the carpet bombing ‘word-of-mouth’ overviews…

    ‘liberation’ technology, circa ‘Twenty-first Century knocks’.

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  • Watcher

    I saw this http://www.informationisbeautiful.net/2012/hollywood-budgets-a-data-viz-challenge/ a few days after listening to ‘The Critical Path’ #20. I assume it is not unknown to you, or is it?

    • http://www.igencorp.com/ farshad

      The InformationIsBeautiful Movie data set covers about 600 or so titles for 2007- 2011.  Our data set has ~12,000 titles for 1975-2011. I am sure there are some commonalities, but were hoping for better statistical significance with the larger data set.

    • http://www.asymco.com Horace Dediu

      I added a fourth footnote. This post was part of a submission to that challenge.

  • Wesley Hsu

    Having worked in Hollywood (as a scrub, but still) I can tell you it’s a terribly inefficient industry. I used to have to skip lunch and sit in the empty office of our management/production company and make phone calls on behalf of our Big Boss to people she didn’t want to talk to, knowing that between 1pm and 2pm only another scrub like me would answer the phone, thus noting the call-back. My Big Boss wasn’t even with me. She knew no Hollywood player was willing to answer his/her own office phone between 1-2pm, because it meant he/she had no Important Lunch Meetings, which was the same as being nobody. These games of phone tag would continue for weeks, or months, until the other person gave up or acquired new clout, at which point that person would start returning our calls between 1-2pm, when of course our Big Boss was out to lunch, in reality or perception. 

    If ever an industry was ripe for disruption, this is it…. 

    • Anonymous

      You’re right, Hollywood should really be emulating the dot-com startup model.  Burning millions of VC dollars on Sand Hill Road office space, razor scooters for all, and pinball machines in the free lunchroom staffed by michelin starred chefs, while paying $200 million in stock options to the guy who paints graffiti on the walls of your office is so much more efficient.

      • Chiralfox

        Because the dot com business model is the only other one in existence, right? Obviously, you disagree, but why not present something a little more constructive instead of presenting a clearly absurd alternative as the only option?

      • Anonymous

        Well, Horace’s pretty consistently presents the tech startup as his disruption change agent, it’s plainly his contrasting or alternative case.

        The fact that the modern Tech Startup is the most breathtakingly inefficient, self-dealing, and chummy form of entrepreneurship ever devised is something that needs to be remembered and asserted, over and over. I wish I had made up the factoids I stated above, and that, for instance, the guy who painted graffiti on Mark Zuckerberg’s walls did not in fact make $200 million for what in any real business would be $25k of work, but I did not.

        I think the idea that Disruption naturally distributes talent and wealth, eliminates middlemen and always devolves benefits to the greater share of people is something that requires constant inquiry, I don’t accept it and if we go by the objective evidence the jury is out.  From my perspective, it really looks like nothing more than con artists taking old scams and sticking a “.com” at the end, and using “disruption” as some sort of moralistic fig leaf, a way of claiming you deserve a bigger piece of the pie while you actively work to shrink it.

  • Anonymous

    Horace – I wonder what you make of companies like NCM Fathom, which markets live performances and sporting events to theater exhibitors to show on their digital screens, along with independently-distributed films, docs, family and animated features, as a “broadcast” service instead of as media rental.

    • http://www.asymco.com Horace Dediu

      I’ll have to learn more about it.

  • http://twitter.com/handleym99 Maynard Handley

    “Drama / Comedy vs. Adventure / Fantasy: Why the Ancient Greeks had it all wrong.”
    “The earliest known “genres” were tragedy and comedy”
    “Indeed, these genres were very uncommon in eras predating the late 1970s. ”
    I don’t want to be a dick, but it is a commonly accepted banality, not even a radical statement, among those who study story-telling, that action/adventure & fantasy/SF are simply Greek myths in modern guise. 
    And I suspect that even back in 500BCE, Achilles, Odysseus and Hercules were rather more popular (in terms of times told, retold, requested, etc) than Sophocles and Euripides. It has always been thus; it’s just that most popular entertainment has left less of footprint in history than highbrow material.

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  • anonymous

    If multiple genre tags can be applied to a single film, I’m afraid I’d have to take issue with the accounting of films for family and children. For me these are basically the same and include any film suitable for young children. Most animation films would fall into this category, as would many other successful films in the adventure and sic-fi genres. I’d suggest doing a breakdown on MPAA ratings versus box office performance to get an understanding on how well kid-friendly fare compares more mature fare. The release window patterns would be the same, however, I think your analysis gives short shrift to the second (or possibly first) highest-grossing market segment.

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  • http://twitter.com/DanielDickey Daniel Dickey

    So when’s the best month to upload my youtube videos?