This is Epstein sequel to
The Big Picture: Money and Power in Hollywood released in 2003. Unfortunately, it adds little new information. Here are some of the main themes that are repeated from the previous book:
1) The history of Hollywood with the Studio era (stars are just studio employees; and box office captures 100% of the business) from 1929 to 1950 and the new Studio era (stars make the real bucks, and movies account for just 20% of revenues).
2) Movie financing considerations including cast insurance, completion bonds, pre-sales distribution contracts as collateral for bank loans, and investors ready to lose their shirt to make the whole thing work.
3) The pop corn economy where movie theaters make more money from pop corn and sodas than movie tickets.
4) Hollywood's focus on male-teenagers because they go to the movies and buy the merchandising follow ups (DVDs, video games, toys).
5) The Hollywood formula for blockbusters: a PG rating, a vulnerable character turning into a hero who will vanquish evil forces, etc...
6) Arnold Schwarzeneger's lucrative success in the Terminator movies.
7) The financial fiasco of "Gone in 60 Seconds" even though it grossed several hundred millions.
8) The emergence of VHS and DVDs that first threatens Hollywood business model. Ultimately, Hollywood will learn how to make more money from videos than from movie tickets.
9) The difference between studio produced moronic blockbusters with sequels, prequels, and merchandising follow ups, etc... aimed at male teenagers vs intelligent independent movies doomed for commercial failures but often reaping Oscar awards.
10) Big stars demand tens of millions to work in a studio produced movie, but will work for little to work in an independent movie. This is to have a chance to work with Woody Allen.
11) Stars are not worth their money. It is more about advertising, distribution budget and release date.
If you read "The Big Picture" you already know all that. So, what is new? Here are two themes I found pretty interesting.
The first one is the death of the independent movies. This is because foreign distributors pre-sales contracts are disappearing (this was the main source of collateral for bank financing). With the advent of broadband the availability of pirated movies are undercutting the stream of revenues from theaters and DVDs overseas. A French executive stated: "Why should we buy in advance the exclusive rights to a movie when our potential customers can download it before we can release it?" Many banks have left the movie financing business. This includes John Miller formerly from JP Morgan who resigned in 2008 after being the lead banker in for the past two decades. In 2008 five major independent film distributors announced they were closing.
The second theme is the emergence of movie downloads. Download is the cheapest and fastest way to distribute a movie worldwide. The studios could easily make a lot of money facilitating the download of movies for only a dollar or two just like ITunes did for the music world. But, this cannibalizes their sales of DVDs and would upset their biggest customer, Wal-Mart. So, the studios would have to defer the download of the movie well after its DVD release. When it comes to illegitimate piracy this is obviously a loss. There are now pass protected websites where subscribers already trade movie downloads (the Napsters of the movie world) that are impenetrable to outsiders. How will the studios deal with that?
Otherwise, the book has other flaws. It repeats itself. The history of Hollywood, movie financing, and Hollywood's formulaic approach are all covered numerous times ultimately confusing the reader.
Another flaw is that on certain topics the author is as clear as mud. When talking about movie financing, it is unclear if Epstein is talking about studio movies or independent movies. And, he does not spell the differences between the two. Yet, studio financing is not dead; While, independent movie financing is.
Another ambiguous topic is how much do the studios make. In one passage, they supposedly reap internal rate of return (IRR) of 15% even on unsuccessful movies because of their distribution fees of 30% of gross. And, such IRRs can go up to 60% when they produce a blockbuster. But, outside this passage the book invariably portrays the stars as making the money and the studios struggling to breakeven. Also, whenever Epstein shows an income statement or budget for specific movies, it shows staggering losses even after all auxiliary revenues are taken into account a decade down the road. In such situations, it is unclear how the studios would earn a positive IRR. Also, in "The Big Picture" Epstein showed a movie business that was not viable on a stand alone basis as all major studio companies became subsidiaries of larger diversified conglomerates. So, what about those IRRs of 15% to 60%?
