The “Hollywood” Formula

“Every industry has conventional wisdom–ideas that are widely accepted and seldom debated.  In Hollywood, the conventional wisdom is:  Bet on relationships.  You can’t know how a movie will turn out when you green-light it.  So you’re better off trusting people youv’ve worked with before.

But a recent study shows that this seemingly reasonable idea leads some of the biggest names in Hollywood to make mistakes that cost millions of dollars.  And you may be making the same kind of mistake at your workplace.

Two researchers studied more than 5,000 films and counted the number of “ties” between the distributor and the production team.  On average, there was about one tie between the production team and the distributor.

But it turned out that attributing the success to those ties is wrong.  “When distributors have prior relations with the principals involved in a film, they authorize larger budgets, promote these films more intensely, and release them during periods of higher demand.  All three increase sales.”  They ran the statistics and found that doubling the number of ties (roughly 2 relationships) was associated with a 12% larger budget.  Doubling the ties also increased the number of screens a movie opened on by 18%.

The bottom line:  Because you, as the distributor, are confident in your partners, you’re putting more marketing muscle behind them, and it’s your muscle that’s creating the successes, not the quality of their movies.  It’s you, studio executive!  you’re doing it.  You’re so money, and you don’t even know it.

Note that the distributor could have bestowed thee marketing favors—a big budget, more opening screens, and a promising release date–on any movie.  And here’s the zinger:  If you subtract the effect of these marketing decisions, doubling the number of ties reduced expected box office by 42%.  It’s a crazy outcome:  As the distributor, if you’re deciding between a production team with one past ties and a team with two past ties, you can expect to lose about $8 million by betting on the latter…betting on relationships turns out to be expensive.

The above is an excerpt from the article “Success Can Make You Stupid” in the May 2007 edition of Fast Company.

“Betting on relationships”…hmmmm, Hollywood does it…the authors argue against it (or at least the logic behind it).    Where do you stand?  Just some “Food Forethought.”

By Micah Davis

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