THE BIG PICTURE
The New Logic of Money and Power in Hollywood
By Edward Jay Epstein. Random House. 396 pp. $25.95
Edward Jay Epstein is here to tell us that when it comes to Hollywood these days, we've got it all wrong. Each week the box-office grosses rung up by the big new movies are published, and each week it is near universally assumed, reflexively and reverentially, that they represent not merely an accurate ranking of current films but also an accurate record of how much they are making for the studios that produced them. Tommyrot, says Epstein. These seemingly huge earnings are wildly misleading, as the cost of making, distributing and showing new movies almost always far exceeds what they earn in theaters. Hollywood's highly imaginative accounting practices disguise this reality, but more to the point, theaters aren't where movies make money any more.
"The massive moviegoing audience that had nurtured the [old] studio system simply no longer exists," Epstein writes. "In contrast to the 4.7 billion movie tickets sold in America in 1947, there were only 1.57 billion tickets sold in 2003. So, even though the population had almost doubled, movie theaters sold 3.1 billion fewer tickets than they had in 1947." In the years immediately after World War II, theatrical releases accounted for 100 percent of the studios' worldwide revenues; in 2003 they accounted for a mere 18 percent. Where do the movie companies make their money now? From what lawyers call "intellectual properties" -- "licensing their filmed entertainment for home viewing" on DVDs, videotapes, broadcast and cable television programs, and selling spin-offs (dolls, games, books and the like) from movies aimed primarily at children, such as the Disney animated films and the "Lord of the Rings" trilogy.
Epstein argues, and most persuasively, that we persist in thinking about Hollywood in terms that no longer exist: the "dream factories" that were the old studios -- MGM, RKO, Paramount, Columbia, Fox, Universal and Warner Bros -- where movies were the only products, stars and lesser actors were bound to studios by rigid contracts, and theaters were owned by the studios that supplied them. Now, he says, the old Big Seven have been replaced by the new Big Six: Time Warner, Viacom, Fox, Sony, NBC Universal and Disney, "global entertainment companies . . . that collude and cooperate at different levels to dominate filmed entertainment." Movies earn a very small percentage of their total revenue, but are "their principal source of prestige and satisfaction in Hollywood."
The grasp of the Big Six is astonishing. They "own all six broadcast networks in America," as well as "64 cable networks whose reach accounts for most of the remainder of the prime-time television audience," a combination that enables them to "control over 96 percent of the programs that carry commercial advertising during prime time." They "control the television networks depended on by advertisers to reach children under 12 . . . and those designed for younger teens." They "dominate the worldwide distribution of movies, a studio business [the late] Steve Ross once described, with considerable justification, as a 'money machine,' " and they "control a large part of the entertainment media, including magazines . . . TV and radio interview shows . . . and cable channels that publicize movies." All of which is to say that they control "one of the largest consumer-based industries in America: home entertainment," and they bear only glancing resemblance to the studios of old:
"The main task of today's studio is to collect fees for the use of the intellectual properties they control in one form or another and then to allocate those fees among the parties -- including themselves -- who create, develop, and finance the properties. It is now essentially a service organization, a dream clearinghouse rather than a dream factory. As clearinghouses, they are very different creatures from their predecessors, and this difference is as apparent from looking at their financial reporting as it is from looking at their products."
At this point Epstein launches into a detailed examination of their accounting practices, the essence of which is that "what is central to the clearinghouse is not the art of the film but the art of the deal." Filmmaking now divides essentially into two broad categories: blockbusters (no, I didn't know that the word is "a term coined in the 1920s to denote a movie whose long line of customers could not be contained on a single city block") or would-be blockbusters, and more serious films made by "independent subsidiaries" to earn Big Six corporations and their ranking executives "the awards, media recognition, artistic bragging rights and other non-economic rewards they sought in Hollywood."
The blockbusters are aimed at children and teenagers and are scripted according to "the Midas formula," the ingredients of which include "a child or adolescent protagonist," a "fairy-tale plot in which a weak or ineffectual youth is transformed into a powerful and purposeful hero," "bizarre-looking and eccentric supporting characters that are appropriate for toy and game licensing," a happy ending "with the hero prevailing over powerful villains and supernatural forces" and "conventional or digital animation to artificially create action sequences, supernatural forces . . . and elaborate settings." In two words: "Harry Potter." In four: "Lord of the Rings."
The blockbusters do well enough in American theaters -- the first "Harry Potter" pulled in more than $317 million -- but ticket sales are a drop in the bucket: That film's total earnings as of last year were $1,249 billion, the biggest chunk of which ($436 million) came from worldwide DVD sales. In effect, as Epstein persistently argues, theatrical release now exists not to make money but to open the way for "intellectual property" income to be earned over the long term from other sources. As the "Midas formula" makes plain, these movies are strictly product; they may win the occasional award, since Hollywood reveres success, but they have little if anything to do with cinematic art.
Such art as does still emerge from Hollywood can be found in the comparatively modest productions from the "specialty film units -- Miramax Pictures, Sony Classics, Fox Searchlight, Paramount Classics and Warner Independent Pictures," which are a return "not so much to the studio system as to the art-house system, which had at one time coexisted alongside the Hollywood studios." These movies are modest only by Hollywood standards: Their average cost was "an astounding $61.6 million in 2003, nearly two thirds that of studio movies," and "since many of the more adult films produced by the independent subsidiaries did not appeal to the youth-oriented toy, game, and other ancillary markets, they often resulted in huge losses for the studios."
The Big Six swallow these losses not because they're suicidal but because "studio executives seek, along with strictly commercial projects, projects that are likely to attract the sort of actors, directors, awards and media response that will help them maintain both their standing in the community and their own morale." As Epstein says, "as persuasive as the [Midas] formula is from a moneymaking standpoint, it doesn't satisfy the community members' appetite for prestige, recognition, and creative expression. These are among the needs that drive the less visible but surprisingly powerful non-economic logic of Hollywood."
Epstein laments much of what comes out of Hollywood these days and fears for its future as computerized imaging assumes an ever more central role, but he does Hollywood the courtesy -- as too many of us here in the effete East do not -- of taking it seriously. He points out that the "celebritized star" whose face we see in the supermarket checkout line is likely to be a man or woman who rose from unprepossessing roots, worked hard to get to the top and works hard to stay there. To wit, "Reese Witherspoon, who began her acting career when she was 15, prided herself on arriving on the set of 'Legally Blonde' at 6 a.m. to give makeup crews two and a half hours to prepare her look and remaining, if necessary, late into the night."
As the phrase "celebritized star" suggests, Epstein isn't always the most felicitous of prose stylists, and at times reading The Big Picture can be a bit of a slog; it doesn't help that he seems to be almost completely humor-challenged. But he's a bulldog researcher, he's brought a great deal of interesting material together and he has interesting things to say about it. His account of the grueling, amazingly expensive and time-consuming process by which movies are now made is an eye-opener; for an actor, who has "a more distant relationship to his product than his counterpart on the stage," it can be "frustrating, unsatisfactory and exhausting." It is remarkable, in fact, that so many good performances get onto film -- I think, for example, of "Mystic River" and "Lost in Translation" -- in such circumstances.
How much longer this will last is in doubt. Epstein worries that "Hollywood's traditional culture will . . . find itself replaced by the computer culture," and he has good reason to. Much evidence suggests that the geeks are taking over. Whatever their considerable skills and expertise, they're technicians, not moviemakers. The respect of the Hollywood community almost certainly means nothing to them, and they almost certainly have little or no interest in serious filmmaking. No one who loves movies can regard the potential implications of this with pleasure.
Jonathan Yardley's e-mail address is firstname.lastname@example.org.