Want Hollywood’s conventional wisdom? Then read Blockbusters

You can learn a lot from this book. Latin America has a smaller economy than Europe. Big companies can spend more on advertising than small ones. Maria Sharapova is attractive. Given that the book is written in the dullest of academic prose, there may even have been a paragraph I missed about how there is a Tuesday in next week. I’ve often wondered what they taught in business schools and if this book, which has Harvard Business School plastered all over it, is a guide then the main subject is the stunningly obvious.

On 20 June 1975 Universal released Steven Spielberg’s movie Jaws with a spend on television advertising and an opening in hundreds of cinemas, both of which were unprecedented at that time. Thus was the vocabulary of English enriched with the notion of a ‘platform release’ — the method — and a ‘blockbuster’: the hoped for result. One of the reasons that Universal was willing to take this huge financial risk was that the novel on which the film was based had itself been a huge hit. This has set the pattern for Hollywood ever since.

The model is a film drawing on an existing franchise which promises a ready-made audience and which then enjoys huge advertising spends and very wide releases. This trend has been accelerated in the past decade with increased competition from the new digital universe, particularly electronic games, and the ever greater importance of foreign markets, particularly China. The favoured existing franchise is not a best-selling novel but a comic-book character, and the combined effect of these developments means that Hollywood studios have stopped making movies about American life for the first time in their history.

The preceding paragraph gives you more history and context for the film industry in America than you will find in the whole of this puff piece for the current financial titans of the most conservative elements in America’s entertainment economy. The method of Blockbusters is neither quantative research nor economic theory. Instead, Anita Elberse compiles her book by interviewing CEOs of major entertainment companies and then lets them edit the quotes that she wants to use. This could be called the Who’s Who method of academic research. We learn how talented Lady Gaga’s management team is and, in a rather bungled attempt to include sports in the mix, how brilliant was Real Madrid’s management strategy to create the Galacticos. And so on.

It is true that in the ever-more-crowded media market with both content and platforms proliferating, the easiest way to ensure an audience is to buy it through advertising. But what then becomes interesting intellectually, as in all experimental method, is not the successes but the failures. Remarkably, there is not one detailed analysis of a failure in the whole book. John Carter, Disney’s gobbling monster of a turkey, was the latest example of a movie that jumped through all the corporate hoops simply to fall flat on its face. But these failures are many and their stories would be much more revealing about the relation between money and audience than the relentless sycophancy which drives every one of the examples of success that make up this book.

It is true that in one of the few sections when Elberse does use considerable quantitative evidence, she does indeed prove that the advent of the internet has not changed many of the fundamentals established over the past three decades. Many internet enthusiasts had argued that because the cost of bringing entertainment goods to market had plunged dramatically. we were now in for a diverse future in which audiences could pick and choose amongst minority offerings instead of all plumping for the same massive hits. All the evidence shows this theory to be baloney to date.

Elberse’s thesis, repeated ad nauseam, is that there can be no success in the entertainment industry without massive advertising spends. However, the two major developments in American entertainment in the past decade make nonsense of this claim. As Hollywood has retreated from contemporary America as its subject, the cable channels have moved in with a new long fiction form that from The Wire to Breaking Bad has captivated audiences. In the less than one paragraph that she devotes to the cable channels, Elberse suggests that her economic model applies. But the cable channels amass their subscription audience in very different ways and their innovation is in providing content through a writing team model borrowed from American television comedy.

Even more astonishing is that Elberse fails to offer any analysis of Netflix — the most successful entertainment company of the past decade. Netflix streams content to its users and spends its money not on advertising but on using the data it collects from viewers to guide them to the content they really want. To quote a top Hollywood agent: ‘They’re not spending $40 million a show on a marketing campaign. They have a guy in a room who writes an algorithm.’ It probably goes without saying that Netflix’s CEO, Reed Hastings, did not go to Harvard Business School. His degrees are in mathematics and computer science.