Why the “Buzz Economy” is Not a Sustainable Business Model.
Or: How (Supposedly) Sure Hits are Endangering the Film Industry
“That a movie as rich as “Behind the Candelabra” has been relegated to the small screen is one of the reasons Hollywood is slowly killing itself.”
Sasha Stone, The Wrap
Recently, a lot of people have cited evidence for an artistic crisis in the American film industry. Director Steven Soderbergh has prominently lamented that studios today are producing merely “movies” that lack any artistic vision as opposed to what he calls “cinema,” and has vowed to take a multi-year sabbatical from film-making. His colleague James Cameron has diagnosed a “story crisis” in which films are being degraded by ridiculous brand adaptations, and equally legendary filmmakers Steven Spielberg and George Lucas have even predicted the “implosion” of today’s Hollywood system. As an economist, however, one feels tempted to reply: As long as the dollars, euros, and yuan are rolling in, who cares that the creatives are complaining? Haven’t they always done so? Remember the legendary critic Pauline Kael’s New Yorker essay from 1980 in which she declares films to be lacking in innovation and complexity. And hey, in 2012, the turnover at the box office reached record levels in the U.S. and globally. Thus, economically speaking, everything is perfectly fine. Or is it?
There is, no doubt, an aesthetic process of concentration at work in Hollywood. Cinemas these days are awash with sequels, remakes, blockbusters — mostly post-apocalyptic and action-packed while time and again staffed with an ever increasing number of superheroes. The studios are producing less films, almost all of which are exclusively franchises with extremely high budgets, and pushing them into theaters with almost as much advertising support. Films are green-lit in threes, such as the upcoming Star Wars, Hobbit, and Terminator adventures, with production costs of around half a billion for each new project. Even before the latest Superman adaptation Man of Steel hit the screens, its sequels had already been commissioned. As Mr. Spielberg puts it: Studios are currently happier to invest 250 million dollars for a single “shot at the brass ring” than to spread the money across a portfolio of exciting, creative projects.
This is all happening because Hollywood’s managers believe they have found a way of eliminating risk from a business which has been considered risky since its very beginnings. These days, studio productions are sold through collective pre-release awareness and excitement, aka “buzz” — a kind of buzz which is sparked no longer by the creative people behind the camera (who were never exactly known for being very reliable anyway) or inspired storytelling, but by the studios’ marketing departments. As long as the anticipation generated within the audience is strong enough, the quality of a film becomes systematically irrelevant for its success. Remember that the opening weekend box office is generated when no other consumers have seen a movie and thus cannot warn their friends who are impatiently queuing in front of the theaters (we’ll talk about Twitter and its effect on the opening weekend later).
The studios dominate the market for information about a new movie’s quality at this point, with only critics occasionally getting in their way (but, come on, show me a teenager who cares if the Washington Post calls The Hobbit “a bloated, shockingly tedious trudge that manages to look both overproduced and unforgivably cheesy”). Thus, as no consumer knows whether a much-hyped film is worth its ticket price, buzz almost magically succeeds in paying off the production and marketing costs — or at least a large proportion of them. Disney/Marvel’s Avengers took the cake last summer when it earned 207 million dollars in the three first days after release alone. But that’s not the only good news in terms of what buzz can do for you. The buzz-driven record weekend (which on average accounts for a solid quarter of the total box office revenues) forms the basis for cascading effects where consumers take cues from box office rankings and studios’ promotion of “number 1” films. In other words: The “uninformed” success reinforces itself. If viewers and critics end up actually enjoying the film, this is a nice bonus — it attracts a few more viewers to the theaters and possibly even triggers additional home entertainment sales. But in the buzz economy world, enjoyment is no longer a prerequisite for success. How about that for a coup — film as a creative industry has, thanks to smart managers, rid itself both of creative minds and economic risk. My colleague Anita Elberse is impressed, stating that the “blockbuster-focused strategy is sound.”
She’s right — our own data suggest that buzz-based blockbusters have been outperforming other films in terms of both revenues and risk. The problem is that all that data comes from the past where blockbusters where the exception, not the dominant rule, as they have become in these buzz-economy days. As with every disruption, knowledge from pre-disruption times can be very misleading when the market has changed, as it has over the last years in the film industry. I argue that just a little further down the road, the awe-inspiring buzz strategy poses a major threat to film if it is treated as a general model that leaves no room for alternative strategies. And it’s not the artistic dimension of film I’m talking about, it’s the economics.
The catch with buzz is that it only works under certain conditions, which are met by only a few films. The first condition: in the buzz economy, a new movie has to have a high level of built-in awareness. Such awareness requires a strong brand, be it a successful predecessor on screen (such as the most recent James Bond and Indiana Jones movies) or a bestseller of another media type, like Harry Potter, the novel, Spider-Man, the comic, or Tomb Raider, the video game. Combinations of such branded elements are also highly welcome. To put things into perspective: Avatar, by far the most successful “non-brand” film, grossed a mere third of Avengers’ earnings at the opening weekend box office, taking only rank 50 in terms of opening weekend revenues. And it still had the James Cameron brand and was released when people were most excited about the marvels of 3D!
The second condition: for buzz to be strong, a movie’s storyline and tone has to appeal to a large number of moviegoers, ideally to young and old and to male and female — a film that does so is termed a “four-quadrant” movie by the studios. In today’s world where movies receive day-and-date releases in the U.S., Europe, and China, such segments are defined globally, not just for North America. However, there are very few themes and motifs that everyone on our planet can relate to regardless of differences in cultures and education — don’t try to sell baseball movies to Germans, movies in which the Chinese invade the U.S. (and are defeated by American teens) to Chinese, etc. One of the rare universal four-quadrant keys is to guide people away from their everyday reality, to fulfil their universal desire for escapism. That’s why we have become so used to see characters being chased by giant robots. That’s why our theaters are flooded by superheroes, excessive disaster, and science fiction, fantasy, and animation extravaganzas. They are an essential part of the buzz economy.
Few, if any, of the multifarious other motivations responsible for bringing film to glory are compatible with the buzz economy. Opening weekends of $50 million or above are rare for movies that deal with real-life issues and are not based on brands — hardly any “unbranded” thrillers have ever generated opening revenues over $30 million, regardless of which director and stars were involved. As buzz requires something that already exists, something well-known and expected, the concept is particularly incongruous with consumers’ desire for the novel, the different, for variety and inspiration. Remember that the fascination of film originally stemmed not least from its ability to make statements about our lives and habitat that inspire and motivate us in the here and now — life as the biggest sensation of all, abysses and multiple layers included. The most famous (and some of the most successful) films were those that let us see the world and ourselves in a new light — by letting us revisit the essential concepts of friendship (E.T.), love (Forrest Gump), war (Apocalypse Now), hate (Schindler’s List), and humanity (Blade Runner), to mention just a few. Hollywood studios have abandoned this real-life angle because it is not compatible with the new economy — the abysses of the human soul have very limited buzz potential, and that makes them risky. There is no room for abysses in the universe of superheroes, who “are sucking the life out of motion pictures.” Watchmen tried to add a real-life layer to the superhero genre — and failed, at least business-wise.
This development is dangerous for film, because although the desire for novelty and stimulation is no longer being catered to by the studios, it has anything but disappeared from this world. Rather, consumers have begun to look elsewhere to satisfy their needs. Some of those who wish to experience innovative narrative formats have left film for the immersive spaces of video games — for a large number of teens and young adults, film already has fallen back behind games and social media in terms of media preferences and usage. To cite one of them: “[T]he vast majority of mainstream movies today truly are just sound and fury, signifying nothing… Videogames today, on the other hand, are … striving to give us something we’ve never experienced before, to hook us into a big story, and to reinvent how we absorb that story.”
The TV/computer screen has evolved into another alternative, where sensational, complex, and multiperiodic dramas introduce us to anti-heroes like chemistry teacher Walter White, advertising guru Don Draper, or majority whip Francis Underwood. It is not a coincidence that Steven Soderbergh’s recent telling of Liberace’s life story found its home on HBO, and that his next project is a TV series with cable network operator Cinemax, for which he will be teaming up with movie star Clive Owen. While film is losing its reputation as an exciting medium, TV—or whatever we might want to call multi-episode sagas watched at various times on a variety of devices—is taking its place by offering richly textured sensations. And people are longing for these sensations. As actor Kevin Spacey stresses: “They want stories. They’re dying for them…. [T]hey will… engage with it with a passion and an intimacy that a blockbuster movie could only dream of. And all we have to do is give it to them.” So, while Superman and his superhero friends have made a regular habit of saving the planet on the big screen, their dominance over and suppression of other content has made them complicit in the ongoing assassination of film.
These fundamental problems are aggravated by others that are inherent to the concept of building buzz. Multimillion-dollar investments in formatted blockbusters can only create strong buzz as long as the brands are sufficiently attractive. But branding theory shows that even the strongest brands are characterized by a life cycle that only a few exceptions can successfully escape. Audiences lose interest in them over time, and that’s why the archives of the film business are full of eroding brands. Think of Jurassic Park, Terminator, and Rambo. Not only the horror saga Saw, but even a mega-brand such as Spider-Man loses audience appeal, as demonstrated below.
I hear you saying: But James Bond… You’re right, there are exceptions, in the film industry as well as elsewhere. Coca Cola and McDonald’s are in the same league as the near-immortal 007 — all of them are rare exceptions to the general rule of brand saturation that, due to the hedonic character of movies, applies to them even more than to products that lack hedonic elements. Growth through globalization might stretch the life cycles of some movie brands, but it will not invert the phenomenon as a whole. Similar satiation effects can be expected for storylines focusing on escapism and targeting four quadrants — to quote Lynda Obst, a Hollywood producer who is experiencing increasing difficulties in attracting studios for intelligent mainstream projects: “How many times can you see the same cities destroyed? How many ways are there to destroy them?”
But aren’t there any new brands to take the place of those worn-out ones, as there have been in the past? The answer is yes, but not the extreme level that is required when buzz becomes the dominant logic of the film business. The global body of brands has been pillaged to the bone by the studios. Board games (such as Battleship recently and Hippo Flip in the near future), old TV series (like the upcoming Captain Planet), and toys (such as the 2014 Lego Movie) hardly provide a compelling argument for a theater visit and are “buzz-worthy” only to a very limited degree. James Cameron has called the adaptation of such brands “ridiculous” and the Hasbro-inspired Battleship “pure desperation,” and it’s hard to not agree with him.
A final problem of the buzz economy is that the information asymmetry it relies upon is threatened by new media. Artistically inadequate blockbusters have to achieve success with the help of their brands and pre-release buzz before audiences find out that they are disappointments and stay away. The director has failed? Buzz will fix it. Social networks, however, are proceeding to substantially erode the informational monopoly of the industry, if not to abolish it entirely. Via Facebook and Twitter, it only takes a few hours for a blockbuster of studio-declared brilliance to be exposed as a complete bore — an information cascade which is set to become even more influential as the proliferation of social networking continues. The supposedly “safe” starting weekend, a key element of the buzz economy, will become economically more unpredictable — and so will the refinancing of multimillion-dollar investments. We have found empirical proof that Twitter is reintroducing risk to Hollywood.
A possible answer to all of this would be: Why should we care about tomorrow when we are, after all, earning good money today? The media conglomerates are tailoring their actions to their next press conference on financial statements, and placing more importance on risk prevention than on innovation. If our current approach should actually stop working some day, they will say, we can always go back and start making creative, exciting films again. Economic history, however, shows that attempts of this kind typically fail — to win back customers who have turned their backs on a product is a difficult task. Think of Nokia, who missed out on the demand for smartphones, and the print media who underestimated the appeal of digital information services — today, they are all fighting to survive despite their former market dominance. Perhaps Steven Soderbergh is right when he compared today’s Hollywood to the automotive industry in the U.S. before the bailout.
A more promising strategy would be to reconsider the current business model and to start complementing superhero blockbusters with innovative films that are sold via quality, not buzz, while the tills are still ringing. Please note my intentional use of the term “complementing” rather than “substituting” — brand-based movies will always have their advantages. But these advantages only make sense if the buzz concept is not taken to the extreme, to a point at which it kills everything else. Essentially, the problem of the buzz economy is all about exorbitance and excess.
Soderbergh made a good suggestion before he bowed out: Invest in talent. The craving for short-term results may, however, stall any such efforts, so that it may take the disaster foreshadowed by Spielberg and Lucas — a whole array of multi-million-dollar films gone belly-up — to reopen the door to creativity and bring the film industry back to life. Recently, I came across a speech given by Lionsgate’s CEO Jon Feltheimer who declared that “the greatest magic in our creative arsenal remains our storytellers, actors’ and filmmakers’ gifts,” and for a moment I thought that things would change for the better. Then I saw that he was talking about television.
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In addition to writing essays about the entertainment industry, Thorsten Hennig-Thurau aka ProfTHT is a Professor of Marketing & Media at the Marketing Center of the Westfälische Wilhelms-Universität Münster and a Research Professor of Marketing at the City University London. His scholarly research deals with the entertainment industry and digitalization. You might not be surprised to hear that Thorsten is not only interested in Hollywood’s economics, but is also a big movie enthusiast, with a particular love for the works of Sergio Leone and Clint Eastwood.
