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Authors: Edward Jay Epstein

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The Hollywood Economist

BOOK: The Hollywood Economist
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PRAISE FOR EDWARD JAY EPSTEIN’S
THE BIG PICTURE
 

 

 

“One of the virtues of
The Big Picture
is Mr. Epstein’s astonishing access to numbers that the movie studios go to great lengths to keep secret. … [A] groundbreaking work that explains the inner workings of the game.”

—The Wall Street Journal

 

“Illuminating. … Startling. … By the time Epstein is through it’s abundantly clear that what we think of as Hollywood is, in accounting terms, a high-stakes hall of mirrors.”

—The New York Times

 

“Edward Jay Epstein is here to tell us that when it comes to Hollywood these days, we’ve got it all wrong. … 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. … [Epstein] is a bulldog researcher, he’s brought a great deal of interesting material together and he has interesting things to say.”

—Jonathan Yardley
,
The Washington Post Book World

 

“In his adroit charting of the confidence flow between the various entities and eras Mr. Epstein kicks up lots of little surprises. … Edward Jay Epstein is quite good.”

—Larry McMurtry
,
The New York Review of Books

 

“Hollywood has needed one of these for a long time—a user’s manual. This one could not be more complete. … [Grade] A. Keep it in your car … and you’ll never get lost in this town again.”

—Entertainment Weekly

 

“I pick no nits with his thesis of a paradigm-dropping shift in the industry.”

—William Safire
,
The New York Times Magazine

 

“Mr. Epstein rightly describes Hollywood as a close-knit community with a stronger hold on its employees’ loyalty than any single company within it.”

—The Economist

 

“… [A] valuable education for those seeking to enter and understand the entertainment industry. … Factually impressive.”

—Joel Hirschhorn
,
Variety

 

“[The Big Picture]
fascinatingly describes the evolution of the modern marketing- and brand-driven global media giants. … For anybody who is a film buff,
The Big Picture
will be a fine adventure. But once you learn what goes on behind the scenes, you may never again look at a movie the same way.”

—BusinessWeek

 

“Epstein peels away the Hollywood facade and gives a nuts-and-bolts view of how the six entertainment empires—Viacom, Fox, NBC/Universal, Time Warner, Sony, and Disney—create and distribute intellectual property today. … [He] presents a fascinating look at the unbelievable efforts that must be coordinated to produce a film.”

—Booklist

 

“In vivid detail, he describes the current process of how a film is made, from the initial pitch to last-minute digital editing. There’s a refreshing absence of moral grandstanding in Epstein’s work. With no apparent ax to grind, he simply and comprehensively presents the industry as it is: the nuts and bolts, the perks and pitfalls and the staggering fortunes that some in the business walk away with. This is the new indispensable text for anyone interested in how Hollywood works.”

—Publishers Weekly

 

“[A] meticulously reported new book.”

—The Baltimore Sun

 

“What one learns from these investigations is that the deepest, darkest secrets in Tinseltown have nothing to do with sex, drugs, blasphemy, or politics, and everything to do with money.”

—The Weekly Standard

 

“Edward Jay Epstein blew the lid off Hollywood’s dirty little open secret.”

—The Washington Times

 

“Compelling. … [Epstein] demystifies the contemporary process of film-making in the digital age.”

—The Pittsburgh Post-Gazette

 
     
ALSO BY EDWARD JAY EPSTEIN
 

Inquest: The Warren Commission and the Establishment of Truth

Counterplot: Garrison vs. the United States

News from Nowhere: Television and the News

Between Fact and Fiction: The Problem of Journalism

Agency of Fear: Opiates and Political Power in America Cartel: A Novel

Legend: The Secret World of Lee Harvey Oswald

The Rise and Fall of Diamonds: The Shattering of a Brilliant Illusion

Who Owns the Corporation?: Management vs. Shareholders

Deception: The Invisible War Between the KGB and the CIA

The Assassination Chronicles: Inquest, Counterplot, and Legend

Dossier: The Secret History of Armand Hammer

The Big Picture: Money and Power in Hollywood

For Susana Duncan

 
CONTENTS
 

INTRODUCTION
Why Journalists Don’t Understand Hollywood

PART I
The Popcorn Economy

Ten Years Ago, I Learned the Real Secret is the Salt

Why Do Most New Movie Theaters Have Fewer than 300 Seats?

Sex in the Cinema: Asset or Liability?

The Vanishing Box Office

The Reel Silver Lining

PART II
Star Culture

The Contract’s the Thing—If Not for Hamlet, for Arnold Schwarzenegger

Movie Stars Come in Two Flavors: $20 Million and Free

The Angst Question in Hollywood: What Is Your Cash Breakeven?

The Sad Lesson of Nicole Kidman’s Knee—Or What a Star Needs to Get a Part

The Starlet’s Dilemma

There Is No Net

The Video Windfall

Nobody Gets Gross

“I Do My Own Stunts”

PART III
Hollywood’s Invisible Money Machine

Why
Lara Croft: Tomb Raider
Is Considered a Masterpiece of Studio Financing

Money-For-Nothing from Germany

How Does a Studio Make a Windfall out of Being on the Losing Side of a Japanese Format War?

Romancing the Hedge Funds

Ever Wonder Why the US Looks Like Canada in the Movies?

Pushing the Pseudo Reality Envelope

The New Civil War among the States

The Rise and Fall of Pay Television

For Whom Does the Movie Business Toll?

PART IV
Hollywood Politics

In the Picture

Paranoia for Fun and Profit: The Saga of
Fahrenheit 9/11

The Saga Continues

Plus Ça Change: Paramount’s Regime Change

Tom Cruise, Inc.

An Expert Witness in Wonderland

PART V
The New Studio System

The Oscar Deception

Teens and Car Crashes Go Together

The Studios—Required Reading

The Midas Formula

You Can’t Make Money on Movies in Theaters

The Foreign Mirage

The Quest for the Digitalized Couch Potato

Unoriginal Sin

The Samurai Embrace

Downloading For Dollars

EPILOGUE
The End of the Beginning—Or the End?

Hollywood: The Movie

Are Indie Movies Dead?

The Rise of the Tube Moguls

Trading Analog Dollars for Digital Pennies

APPENDIX
Warner Bros. Distribution Report #6
Midnight in the Garden of Good and Evil

INTRODUCTION
 
WHY JOURNALISTS DON’T UNDERSTAND HOLLYWOOD

 

 

 

 

There was a time, around the middle of the twentieth century, when the box office numbers that were reported in newspapers were relevant to the fortunes of Hollywood: studios owned the major theater chains and made virtually all their profits from their theater ticket sales. This was a time before television sets became ubiquitous in American
homes, and before movies could be made digital for DVDs and downloads.

Today, Hollywood studios are in a very different business: creating rights that can be licensed, sold, and leveraged over different platforms, including television, DVD, and video games. Box office sales no longer play nearly as important a role. And yet newspapers, as if unable to comprehend the change, continue to breathlessly report these numbers every week, often on their front pages. With few exceptions, this anachronistic ritual is what passes for reporting on the business of Hollywood.

To begin with, these numbers are misleading when used to describe what a film or studio earns. At best, they represent gross income from theater chains’ ticket sales. These chains eventually rebate about 50 percent of the sales to a distributor, which also deducts its outlay for prints and advertising (P&A). In 2007, the most recent year for which the studios have released their budget figures, P&A averaged about $40 million per title—more than was typically received from American theaters for a film in that year. The distributor also deducts a distribution fee, usually between 15 and 33 percent of the total theater receipts. Therefore, no matter how well a movie appears to fare in the
box office race reported by the media, it is usually in the red at that point.

BOOK: The Hollywood Economist
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