Rational entertainment industry?

by rwallace1 min read10th Dec 201026 comments


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By "the industry" in this post, I refer to that part of the entertainment industry which:

1. Produces movies, TV and video games (as opposed to books, comics etc.)

2. Is motivated by profit (as opposed to fun, politics etc.)

3. Consists of companies (as opposed to lone developers, student teams etc.)

It seems to me that the industry has two characteristics:


Most products follow some formula which is known to be workable.

Under what circumstances is this rational? (I'm not commenting on whether it's artistically good or bad; again, I'm only discussing entertainment as a commercial enterprise motivated by profit.) It seems to me following a proven formula is rational if your priority is to not lose, to go for the sure thing, i.e. the chance of a big hit is not worth the risk of a complete flop.

Hit driven

It's the accepted wisdom that entertainment is a hit driven industry: almost all the profits are generated by a handful of the most successful products, with the rest losing money or barely covering costs.

Now my question: isn't there a contradiction here? If you're selling insurance, following a proven formula may well be the rational thing to do. If you're the owner of one of the handful of franchises that is pulling in big profits, of course you shouldn't mess with a winner. But if you're one of the many also-rans, how is it rational to stick with an almost sure loser? In a hit driven industry, wouldn't it be more rational to concentrate on maximizing your chance of winning big, instead of trying to minimize the risk of a flop?

But I've never worked in the entertainment industry; perhaps my layman's impression of it is inaccurate. Is there something I'm missing, or is a substantial amount of expected profit really being left on the table?

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The highest-grossing films of all time appear to be almost all either sequels or adaptations of ultra-bestselling books. The ones that aren't, in descending order of gross:

Avatar (formulaic as all hell) Titanic (somewhat formulaic) Jurassic Park (somewhat innovative) Finding Nemo (somewhat formulaic) Inception (very innovative) Independence Day (formulaic as all hell) E.T. (very innovative, I think) The Lion King (somewhat formulaic) 2012 (haven't seen it, hear it's formulaic) Up (somewhat innovative) Forrest Gump (very innovative) The Sixth Sense (very innovative) Pirates of the Caribbean (somewhat innovative) Kung Fu Panda (haven't seen it, sounds somewhat innovative) The Incredibles (somewhat innovative)

I'm not really confident in my ratings, but it does look like big-budget innovative films have a good chance of blowing up (and often creating a franchise).

My theory: a producer who greenlights a big-budget, innovative flop looks like an idiot. A producer who greenlights a big-budget, formulaic flop looks unlucky.

That list needs some serious inflation adjustment; I'm pretty sure Gone with the Wind is still the number 1 in ticket sales.

I'm pretty sure it's not, but it should certainly be on the list.

I remember hearing about some movie displacing it, though I don't remember what movie. Maybe it was Avatar and I'm just blocking it out because I don't want that to be true. Back to the Litanies for me...

Avatar's huge box office grosses were achieved, at least in part, because tickets for 3-D showings cost more.

Have ticket prices kept up with inflation?

They've actually grown faster than inflation.

The ones that aren't [sequels or adaptations of ultra-bestselling books], in descending order of gross: .... Jurassic Park ... Forrest Gump

Jurassic Park was originally a book by Michael Crichton, who was already a fairly well known author at the time. Wikipedia says that a bidding war for the movie rights started before the novel was even published. Forrest Gump was also originally a book, although the article on its author, Groom, indicates that it wasn't a bestseller when first released, and I've heard it's a very loose adaptation anyway.

Is Avatar really formulaic?

To me, it seems that Avatar could be taken as a "noble savage" dances with wolves trope on a surface viewing, for sure. But a second viewing really shows it as a post singularity society. Every entity on the planet has a neural up-link as a part of it's organism. The Na'vi venerate a tree called "Eywa" (AI-wa?) that seems to be able to control most of the planet, and even aggressively "seed tags" a known invader only to later invite the invader into a situation that allows for the AI tree to upload the brain of an invader and seek a solution for the problem of the invasion.

For me, it seems that Avatar could be a good example of what a post-singularity AI might look like if the organism that initiated the singularity relied on a biological technology and symbiosis rather than a non carbon system for artificial intelligence.

the problem presented by the evolution of an up-link like ponytail and the seemingly godlike intelligence of the trees is what lead me to this line of thought, and i think when it is explored to it's conclusion it satisfies Avatar's formula better than "Dances with Wolves in Space".

Kung Fu Panda is formulaic as all hell.

this post could use some update with tv tropes. Even formulaic stories were innovative at one point or another.

Good analysis (and on the whole I agree with your ratings -- not that I didn't like Independence Day, but it is certainly formulaic).

And that theory strikes me as having a lot of truth in it.

I've been in and around the music industry for a few decades. (As someone who actually likes music, Omega help me.) Whatever it runs on, it's not rationality and only occasionally seems to be business. There's lots of ape politics and towering mountains of BS.

We're talking about something where the product for sale is a subjective feeling in the mind of the listener, so being a skilled enough rhetorician to convince someone else that enough customers will feel the right subjective feeling is enough to get you a very long way, even with a terrible track record (because there's always an excuse, and 10 years' failure is 10 years' experience on your resume).

Rational business practice in the entertainment industry seems in short supply. I have only just-so surmises on why precisely it comes out this way, but it does seem to be the case, suggesting the possibility of an underlying more generally applicable reason or theory.

We're talking about something where the product for sale is a subjective feeling in the mind of the listener

I suspect the problem is that being good at that, i.e., having artistic talent and/or having a feel for artistic talent, tends to be inversely correlated with rationality.

It's notoriously a field full of marks ripe for the exploiting.

Who exploits who how?

Typically the supply of those who don't have any business sense is farmed or mined by those who do.

Ah, so I'm not just imagining things then. Of course, exploiting whatever market inefficiency is thus produced probably wouldn't be easy (or more people would be doing that already), but it's interesting to note the existence of the phenomenon as the first step.

There are enough people on the small levels who are very good at the microeconomics of business that there's not a lot of fat left for the exploitation. The jawdropping inefficiencies happen in the large companies, which is why the major labels are floundering now that the Internet has dropped the marginal cost of music to zero - as gatekeepers of distribution, they used to form an oligopoly, got really lardy, and they aren't coping well with not being gatekeepers. There used to be six majors, there are now four and EMI's looking pretty shaky.

Why are formulaic productions less likely to be the mega-hits than the high-risk productions?

The two most successful movies I can think of in the past few years are Avatar and Dark Knight. Avatar, as people have pointed out, is basically identical to Pocahontas or Fern Gully in space. Dark Knight is a standard, albeit very well done, Batman movie.

"High-risk, high-reward versus certainty of small reward" is a common payoff matrix, but it might not be the one at work in the movie industry.

The important rule is Goldman's Law: "Nobody knows anything." Nobody but nobody can accurately predict just how a movie will actually do before greenlighting the funding. Trying to do so has preoccupied executives since the movie industry moved to Hollywood. There are all sorts of hypotheses as to why this seems to hold.

Random thoughts:

I suspect that there's a lot more ways to make a bad movie than a good one.

In video games, at least, some of the biggest hits come from simply executing a formula really well.

When it comes to movies, it's really hard to predict revenues, but it's a lot easier to predict costs. If you can make movies cheaply, they don't need to be smash hits in order to make money - and if they do become hits, so much the better. Roger Corman is an example of someone who made money not by making extremely popular movies, but by making extremely cheap ones.

Roger Corman's strategy may be a good one for an individual, but it doesn't scale well and thus won't tell you how the industry is organized. When you have little money, it is good to control costs and maximize percentage return, but if you do this very well, you'll end up with a lot of money. Investing it all in small films would be too many to manage. So you either have to hire people to manage these small films and run into principle-agent problems or you have to aim for larger grosses.

This might be a bit obvious, but is it a safe assumption that in modern Western culture the appearance of originality is an advantage as far as sales are concerned?

Could the also rans function as a sort of practice playground for the actors, producers etc. who are not yet big names? I mean, the only way to learn to make movies is to make movies. But it's not worth investing billions into people, who have no (or at least very little) on their resume. Best to invest a small amount and let them develop their skills. And if, against the odds, the movie turns out to be a block buster, all the better.

Of course, this does not really answer the question why all the plots seem so alike and very few come up with anything fresh. One could try to explain this with making mainstream movies for the sake of practising making them, but somehow I don't even buy that myself.

the also ran's are funded by the same publishers that publish the mega hits. the few smaller publishers do take risks.

Okay, but why don't the big publishers take (encourage the also-ran studios they own to take) more risks?