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Hollywood Economics: How Extreme Uncertainty Shapes the Film Industry (Routledge Studies in Contemporary Political Economy)

8 customer reviews
ISBN-13: 978-0415312615
ISBN-10: 0415312612
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Editorial Reviews


'If you want an applied exposition of the "wild" type of uncertainty, this is the book. I know of no better text to understand kurtosis, the contribution of the very small to the very large, and the dynamics of rare events. The value of this book lies way beyond the film industry. In addition it is is written with great clarity and does not use anything beyond intuitive mathematics.' — Nassim Nicholas Taleb, PhD, Empirica LLC, Bestselling author of Fooled by Randomness

'A heretical and wise perspective on the economics and consumer patterns of Hollywood. Provocative and eye opening for its depth and intelligent analysis.' — Thom Mount, Producer and former Universal Studios President

'This book provides dramatic evidence that, in comparison with the film industry, normally uncertain things are virtually sure things. Not even popular stars or large first-week audiences are valid predictors of a film's future success. The volume demonstrates what sophisticated analysis can and cannot reveal about an industry in which "no one knows anything". It will be extremely valuable to anyone with an intellectual, financial or other interest in the market for popular films and for anyone concerned with analysis of subjects characterized by extreme uncertainty. Nonspecialists should not be daunted by the demanding technical analysis for there is plenty that will readily be understandable and fascinating to any intelligent reader.' — William J. Baumol, Professor of Economics, New York University and Senior Research Economist at Princeton University, USA

'Professor De Vany has written a seminal work on the risks of film investment, a topic with which Hollywood may be painfully familiar, but which has rarely, if ever, been the subject of such thorough analysis. Through his statistical studies and analyses, Professor De Vany questions many of the assumptions made by Hollywood dealmakers, investors and studio executives.' — Sam Pryor, Partner, Alschuler Grossman Stein & Kahan, Adjunct Professor, Entertainment Law, USC Law School


About the Author

Arthur De Vany is Professor Emeritus of Economics at the University of California, Irvine and President of Arts Analytica, a consulting company specializing in energy, motion pictures and risk-return analysis.

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Product Details

  • Paperback: 328 pages
  • Publisher: Routledge (November 15, 2003)
  • Language: English
  • ISBN-10: 0415312612
  • ISBN-13: 978-0415312615
  • Product Dimensions: 6.1 x 0.7 x 9.2 inches
  • Shipping Weight: 1 pounds (View shipping rates and policies)
  • Average Customer Review: 4.5 out of 5 stars  See all reviews (8 customer reviews)
  • Amazon Best Sellers Rank: #880,797 in Books (See Top 100 in Books)

More About the Author

Arthur De Vany was born in Davenport, Iowa in 1937. He graduated from Montebello High School in 1955 and signed to play professional baseball for the Hollywood Stars. Art was one of the very few pro baseball players to lift weights, a now-universal practice, which led scouts to give him the nickname of Superman in their scouting reports. The name stuck and recently the Times of London called Art Superman's slightly fitter granddad. Dr. De Vany went on to earn his Ph.D. in Economics at UCLA and to become a respected scientist who is known over the world through his articles and books. He is listed in Who's Who in America and Who's Who in the World and is the author of the acclaimed Hollywood Economics. Art is Professor Emeritus of Economics of the University of California, and is a member of their acclaimed Institute for Mathematical Behavioral Sciences and is an affiliate of the Evolution, Complexity and Cognition group of the Free University of Brussels. A lifelong student of metabolism and fitness, Art has lived as a Paleo/Athlete for some 30 years and is called a patriarch of the Paleo movement. He has blogged on the subject since the 1990s and continues to blog on the subject on his Evolutionary Fitness blog at

Customer Reviews

Most Helpful Customer Reviews

17 of 17 people found the following review helpful By William Benzon on August 12, 2005
Format: Paperback Verified Purchase
De Vany presents a profound and imaginative treatment of the economics of the movie business, one that has implications, not only for similar businesses such as publishing and music, but for our understanding of the dynamics of culture. When Richard Dawkins coined the term "meme" he unwittingly paved the way for tons and tons of sexy but shallow commentary on human culture. Though that is not what he set out to do - "meme" never shows up in the book - De Vany has given mathematical form to the behavior of movie memes and has demonstrated that it is the people who are in change, not the memes.

In the words of screen writer William Goldman, "nobody knows anything" about what happens to movies once they are released to the theatres. Most movies don't even break even, much less make a profit - not in theatrical release, which is what De Vany investigates. [These days, movies make money on DVDs and TV, but that's another story, told by Jay Epstein.] That's no way to run a business, but the problems are inherent in the nature of movies as a business venture. The deep and ineradicable condition of the business is that there is no reliable way to find out whether or not your movie has a market other than putting it on screens across the country and seeing if people come to watch.

Does having "bankable" names on the marquee guarantee that the movie will make bank? No. Does opening big on thousands of screens with PR from here to the moon guarantee that the movie will make bank? No. Does a small opening mean the film is doomed? No. Hence Goldman's remark.

But all is not chaos. Or rather it is, but chaos of the mathematical kind.
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8 of 8 people found the following review helpful By Vincent Poirier on May 28, 2007
Format: Paperback Verified Purchase
How can you predict the success or failure of a film? Even if you can't predict with perfect accuracy, can you predict which movies will probably be a hit? For example, does a star guarantee a hit? Do big budgets matter? Do ratings ensure a certain level of profit? Does a movie's gross receipts in its first week predict its total gross over the entire run?

The media clearly shows that movie makers go for big stars in expensive racy or violent films that are widely distributed from the first week they open. This is what Hollywood thinks creates true hits. But think twice about trusting Hollywood instincts: Arthur De Vany looks at the empirical evidence on movie revenue and concludes that this conventional wisdom should be rejected.

De Vany shows that while stars and big budgets do indicate a movie's revenue scale, they do not predict its success. Big stars have made expensive turkeys (e.g. Waterworld starring Kevin Costner) while on the other hand huge hits have been produced without stars (e.g. Home Alone). One of the more interesting conclusions is that the old movie studio system understood implicitly that this business was unpredictable. Until the antitrust laws were used to break them up, the studios contracted stars, script writers, directors, distribution networks and movie theaters in order to own the entire stream of revenues all their movies would generate.

This way the old studio bosses could diversify their risk in what was essentially a portfolio of movies. They knew that they could not predict which of their films would be a hit so they insisted on owning them all and on managing costs so that the hits would pay for the turkeys, while leaving shareholders with a healthy return.
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6 of 6 people found the following review helpful By Peter McCluskey on April 8, 2009
Format: Paperback
This rather dense and scholarly book that contains some good insights into how markets for information differ from markets for physical goods. But few people will want to read the whole book. Much of the book was originally published as papers in economics journals. It's better organized than that suggests, but the style is mostly oriented toward professional economists.

Much of the book can be summed up by the conclusion that nobody knows anything about how successful a movie will be. The typical film loses money, and the expected returns are heavily dominated by rare films that are huge successes.

He says through much of the book that returns on investment in movies have infinite variance, and only at the very end admits that that's not literaly true, and then provides a more credible description of the variance as unstable and generally increasing over time.

His argument that Hollywood makes too many R-rated films takes a good deal of effort to follow. Table 5.3 is confusing, because it shows a mean return on R-rated films as much higher for the returns on PG13 films. This sounds like the opposite of his conclusion. It took 13 more pages before I figured out that that was due to some high rates of return on low budget R-rated films that had little effect on aggregate profits. It appears that his conclusion ought to have been that Hollywood makes too many high-budget R-rated films, and too few low-budget R-rated films.

His description of the antitrust cases that transformed the movie industry provides convincing evidence that the courts were confused and didn't help the independent exhibitors that the lawsuits were allegedly designed to help. The arguments about how they affected consumers are less clear.
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