22 Mar Film Fund-amentals: The Sum of Half-Truths

We all believe in a lot of half-truths. Mostly they are little things that help get us through the day. Minor things like “an apple a day keeps the doctor away.” Often these half-truths are harmless. After all, that apple may not do you any real good, but it certainly will not harm you (well, OK, in most cases it won’t – there are some odd exceptions).

The film industry has lots of half-truths. A whole bunch of assumptions that get passed around like precious nuggets of timeless wisdom. Virtually everybody in the film industry will at some point or other repeat these half-truths with the grave conviction of a neighbor telling you a variation of the Choking Doberman.

Unfortunately, two half-truths do not add up to anything. They amount to zip, zero, nothing. A case in point can be found in a popular blog piece by Jeremy Juuso at the Baseline Intelligence website. Entitled “The Three Immutable Laws of the Movie Business,” Juuso’s article does an incredible job of summing up several of the most important (and dominant) bits of wise counsel that can be found anywhere within the movie business. In this simple piece are the three main articles of faith that currently prop up the entire industry. Notice that the operative word is “prop,” for these “immutable laws” are about as substantial as a rickety wooden stick holding up a heavy window sash on a stormy summer day.

Take for example Immutable Law Number One: “You can’t make a living, but you can make a killing.” Actually, what the playwright Robert Anderson said was: “You can make a killing in the theater, but not a living.” The difference is not a mere question of semantics. It is a question of logic. In the first phrase, everything is aimed at the big win with no room for anything else. When stated in this manner, it sounds like a mantra being uttered repeatedly by a compulsive gambler hunched over a craps table. Perhaps this is why Anderson later added, “…You can also make a life in the theater, and I have.” He seemed to have felt a need to correct the false impression.

The point that Anderson was making is that life in the theater is bumpy. It’s extremely hard for many people to make a living just doing theater, and many people will (sooner or later) either move into various side venues (for example, teaching) or find a whole new form of employment. The handful of people who actually do spend a period of time working in the theater are often barely able to make ends meet. But sometimes, one of those very rare sometimes — when all the elements and the fates are matched — a lucky few (and it is indeed a few) will succeed. When this happens, the profits can be enormous. But mostly, everybody is just running at a really basic average level.

Obviously this is true in every form of the entertainment industry, including film. This is also true in almost every other business in existence. The special thing about film is that it really isn’t that special, no matter how many people in the industry would like to think otherwise. Heck, even the pizza business is just as bad. Sure, the pizza business isn’t as “glamorous,” but the risks are about the same. The biggest difference is that Roger Ebert doesn’t waste his time reviewing pizzas.

The only thing this so-called law does is reinforce the notion that the film business is composed of a lot of busts with a few booms and nothing else in between. In reality, most of the industry is based on the average in-between stuff. That is how any business works (or at least how they used to work before they started adopting the Hollywood model). Most of the attention gets focused on the big hits (and the folks involved will make a lot of money). A lot of the rest of the people in the business are running themselves silly on the professional treadmill. Eventually, some will get exhausted from the sheer effort. A few will move into real estate. A couple will do really well at it. Eventually they will get to help with the foreclosure on the expensive mansions of some of the lucky ones who had a huge hit, went crazy, and blew all that money up their nose. Perhaps we should add this as a crucial corrective to Immutable Law Number One.

As for Immutable Law Number Two: Films are entirely unpredictable. This is a logical extension of the all-or-nothing mindset found in Law Number One. Gamblers will tell you that everything is unpredictable. Gamblers believe this because they are hopeless addicts who get their kicks by taking wild risks and will ignore any form of rational counsel in their never-ending pursuit of the next big score. You may not want to take your business advice from these folks.

The flaw to this logic is found right in Juuso’s article. He compares the failure of Ishtar (I can’t believe we’re still kicking this one around; there have been lots of bigger flops since then) to the success of Avatar. Unfortunately, you cannot create a usable average model by using such extreme highs and lows. In fact, you normally have to weed these examples out of your figures in order to get a working model (unless you’re seeking figures designed to collapse the model). His example displays bad methodology and nothing else.

As for his final statement that you can group films by any genre and get the same results…. He is quite simply wrong. OK, maybe he’s right if you go about it in the kind of hare-brained manner that he uses, but having done a lot of this sort of work I can state unequivocally that he simply doesn’t have a clue what he’s talking about. Heck, you can create a base average model out of largely random events, so there is nothing special about doing the same for movies.

Unless you’re fool enough to think that you’re going to create a model that predicts success. That isn’t the way you do it. The base average model will simply tell you what the low end will be. It will tell you what the lowest amount will be that you can potentially make from a production. From that framework you then try to build upwards. No statistical/financial model for any business is designed to predict success (or if it does, then there’s something funny about the model — this was part of the Bernie Madoff scam). These models are designed to create basic foundations. This very simple, even rudimentary, point is the one thing that many people in the film industry are incapable of understanding (and by the way, this is also why some of them were taken in by Bernie Madoff). But the concept I’m referring to is extremely straightforward.

As for Law Number Three: The movie business will never die — Gee, why do I have a funny feeling that some Roman chap was standing in the streets of Pompeii saying the exact same thing about his fine city just before the volcano blew. This is not a law. It is an article of blind faith.

Now excuse me. I think I just heard the distant rumble of the volcano.