Lighting Hollywood's Camera Obscura

Hedy Lamarr

The screenwriter William Goldman famously explained Hollywood this way: nobody knows anything. He is right– up to this point. The decisions of Hollywood studios seem inexplicable to anyone who is not privy to what is perhaps their most carefully guarded secret: the breakdown of the money made from sources other than movie houses. Despite the tsunamis of back-stabbing and self-idolizing anecdotes about mini-moguls that all but drown the entertainment media, there is a Saharan dearth of information about actual cash flows from such after-markets as television networks, cable television, Pay-TV, and DVD sales.

If these numbers are obscure that is not accidental. Studios have no interest in providing a road map to their El Dorado to those who might want to claim a share of the gold, including talent agents, stars, producers, directors, writers, and equity partners. And, as of now, no regulatory agency requires divulging this information. So just as the studios keep their patrons in the dark in movie theaters, they keep their other audiences in the industry– and media– in the dark about the magnitude of these cash flows.


Once the lights go on– and I provide the numbers and breakdowns in The Big Picture– the studios’ decisions not only are explicable but the business model is more relentlessly logical than those of many non-creative industries. They demonstrate that those who ask how the movie industry can possibly make sense are asking the wrong question. There is (no longer) a movie industry, there is an entertainment industry. Consider, for example, Table I, in my book. The ticket sales from theaters, which had provided all the revenues in 1948, provided less than 20 percent of the studios’ revenues in 2003 . Instead, home entertainment in the form of television, Pay-TV, DVD, and videos provided more than 80 percent of the studios' revenues in 2003. This tidal shift reflects this underlying reality: on any given night, less than 2 percent of Americans go to movie theaters while over 95 percent stay home to watch something on TV. Since the advertising and other marketing costs associated with DVD sales and television licensing are minimal, the six big studios earn a veritable ocean of bottom-line profits from this home market. These rich streams, which studios understandably prefer to keep private in their camera obscurae, have transformed the way Hollywood operates. Theatrical releases, despite the blinding allure they hold for the media, now serve essentially as launching platforms for licensing rights, much like the runways at haute couture fashion shows.

Even in the face of this forced march towards home entertainment, there are notable disconnects between the economic and social logic of the Hollywood community. See, for example, the answer to today's Question Of The Day– "Is movie sex an asset or a liability in Hollywood's economy today?"

Logic of Hollywood

My book has finally made it to the book stores. What is it about? The Big Picture is neither pro nor anti Hollywood: it is a demystification of it. The thesis, as perverse as it may sound, is that there is an underlying logic to today’s multibillion-dollar entertainment economy--and that those who run the industry understand it

The gross misunderstanding most people have about Hollywood proceeds from the assumption that the business is about making movies. Once upon a time, it was: as late as 1948, two-thirds of Americans went to the movies every week and the tickets they bought accounted for virtually all of Hollywood's profits. But the lights blinked out in that universe more than half a century ago, obliterated by the bright blue glow of television.


Today, the big picture is very different. On an average night about 4 million Americans go to the movies, while more than 260 million Americans stay home to watch something-- a program, video, DVD-- on television. Hollywood may continue to pay lip service to its ever-diminishing audience of moviegoers, but it now makes its real money from the home audience. To tighten their grip on it, the studios gradually extended their domain over the entire television industry. All six broadcast networks and most of the commercial cable channels are now owned by the corporate parents of the six big studios-- new Hollywood's sexopoly -- and the studios make most, if not all their money, from that captive home audience. As far as the studios are concerned, the main function of the remaining moviegoing audience-- barely ten percent of the population-- is to help establish a movie in the public’s mind for the all-important home market. To get it, they go after that part of it they can most efficiently find. Happily for the studios, the audience that has proved easiest to find (because they’re home watching TV), lasso (with a barrage of 30-seconds ads) and herd to the multiplexes for big opening weekends is also the primary audience for videos, merchandising tie-ins, and character-driven video games: teenagers. As a result, people under 21 now make up over 62 percent of habitual moviegoers.

Not surprisingly, the creative decisions of the sexopoly are largely driven by the economic necessity of capturing the home audience. But that is not the whole story. There is also a social logic involving awards, prestige, star worship, publicity-mongering, power, and even the impulse to make a work of art, which, though less tangible, also informs the Big Picture.

Book reviews

Playing The Reality Card

Leslie Parrish

The political values of today’s Hollywood often surface in its selection of stereotypes for movie heroes and villains. Such choices are particularly clear in remakes of past movies that substitutes new villains for outdated ones. Consider, for example, Paramount’s recent remake of the 1962 classic, The Manchurian Candidate. The original movie, directed by John Frankenheimer and based on a novel by Richard Condon (an ex-Hollywood publicity man), is both a thriller about a hypnotized assassin and a satire of political paranoia. The evil protagonist is the Soviet Union, whose nefarious agents, with the help of the Chinese Communists, abduct an American soldier in Korea and turn him into a sleeper assassin. When Paramount decided in 2004 to remake the movie as a straight psychological thriller, with the military abduction transposed from Korea in 1950 to Kuwait in 1991, it obviously needed a new resident evil to replace the defunct Soviet Union. Even though the U.S. was battling the Iraqi forces of Saddam Hussein in Kuwait at that time, Demme chose not to make the Iraqis or Islamists the villain of his movie because, as he explains in his DVD commentary, he did not want to "negatively stereotype" either Arabs or Muslims. Neither Saddam Hussein nor Iraq is even mentioned in the film.

Whom, then, did Demme enlist to play the heavy in his remake? What evildoer can be safely "negatively stereotyped" as an enemy of America in today’s Hollywood? Answer: hedge-fund managers. These lily-white, impeccably dressed corporate executives man the helm of the Manchurian Global Corporation, a multibillion-dollar equity fund that is planning a "regime change" in America so it can secure more government contracts. Not only do the fund’s technicians rewire the brains of abducted soldiers, but they implant them with false memories of al-Qaeda-type terrorists so that, if caught, they will blame Muslim extremists rather than the fund managers for their crimes.

The challenge for Paramount was in building a "reality envelope" that gave the movie’s demonization of corporate executives a more convincing connection to actual events. Warner Brothers had previously met this challenge by making an arrangement with CNN (which its corporate parent owns) that resulted in the cable network’s news program, such as Moneyline, showing the scene from Oliver Stone’s movie Wall Street in which the immaculately dressed financier Gordon Gekko (Michael Douglas) intones "Greed is good" to illustrate news reports of corporate corruption.

Paramount-- which does not own CNN-- found a more imaginative way to breach the fluid boundary between movies and television news for its resurrected Manchurian Candidate. It created a counterfeit web site for the Manchurian Global Corporation. Since it nowhere identified the site as fabricated (and went so far as to provide a fictional address and phone number to hide its own role in the site’s design), any person who found the site via Google or another search engine would have reason to believe that the Manchurian Global Corporation was a real equity fund with huge biotech investments in such projects as the genetic decoding of Alzheimer's disease.

Although Paramount’s ingenious deception may violate ICANN rules against using false information when registering a domain– a Paramount executive defended the fraud by pointing out that even if it involved "pushing the reality envelope," it is an integral part of show business.
There is indeed a hoary tradition in the movie business of such reality enhancement, as I explain in my book The Big Picture: The New Logic of Money and Power In Hollywood. Throughout the era of the studio system, studios made it a practice to invent off-screen lives– including fictional romances with co-stars –– for the stars they had under contract. They then relied on the fan magazines, newsreels, and gossip columnists they controlled to disseminate these newly burnished images. Even though today's studios no longer own the stars, they enjoy an even greater dominion over the entertainment media. Their corporate parents own all six television broadcast networks, as well as almost all the major cable networks-- a cozy arrangement that further fuses the interests of Hollywood and television.

The new Hollywood’s real-life relationship with the media thus proceeds from a serious commonality of interests. And as Tad Friend insightfully reported in the New Yorker, one of the interests all the players have is in not revealing that commonality. "It is in everyone's interest (except, perhaps, the reader's) to pretend that P.R. consultants are not involved in stories," Friend writes. "It behooves the journalist, because it suggests that he has penetrated a rarefied realm; it behooves the star, because he looks fearless and unattended by handlers; and it behooves the publicist, because it always behooves the publicist if the star is behooved."

Behind this cloak of media invisibility, Hollywood’s armies of publicists are free to plant items that continue to blur the rapidly-eroding line between fact and fiction. One top producer of a national late night talk show observed that "ninety percent of talk show anecdotes are either completely manufactured or improved so significantly that they are basically untrue." Creating fraudulent websites for nonexisting corporations is simply one further stretch of an already-larger-than-life reality envelope.

Culture Of Deception

Charlie's Angels
Nowhere does Hollywood’s culture of deception more clearly manifest itself than on those television talk shows in which stars tell about their movies. The point of this media exercise, at least for the studios releasing the movies, is to fuse the celebrity stars with their fictive movie characters (otherwise the stars might focus interest on themselves instead of the movies being opened.) So carefully-designed PR scripts require that the stars "stay-in-character," as Hollywood calls real life play-acting. When it comes to action movies, the scenario typically calls for stars to tell making-of-movie anecdotes that suggest that they, like the heroes they play on screen, perform death-defying feats. Even if the putative perils are an obvious stretch, they can almost invariably count on a suspension of disbelief on the part of their host-interrogator. Consider, for example, the heroics related on MTV by the three lovely stars of Charlie’s Angels: Full Throttle– Lucy Liu, Drew Barrymore, and Cameron Diaz.


The MTV interviewer, JC Chasez began by asking, "Did you guys do any of your own stunts?"

"We did," Lucy Liu ("Alex") jumps in.

"We get to do all these amazing things," Cameron Diaz ("Natalie") adds, describing by way of example how Drew Barrymore ("Dylan") clung to a speeding car going about "35 miles an hour" while "hitting on the hood of the car"– even after her safety cord came undone.
"She’s literally hanging on to the car," Liu explains.

At this point in the story, with Barrymore precariously holding onto the hood with one hand and banging on it with the other, the interviewer asks her excitedly why she didn’t yell, "Cut"?

Barrymore ("Dylan") explains despite the danger to herself, she persevered with the shot because "you get so into the adrenaline and you want to be tough.... my character, Dylan, was trying to stop the bad guy." In other words, she had morphed into Dylan – at least in the PR script.

Now back to reality. Stars may have license on talk shows to fantasize about performing perilous stunts such as hanging off the hood of a speeding car, but on a movie set, no matter how willing they may be to risk their lives and limbs, studios will not permit them to take such risks for two cogent reasons.

First, stars often do not have an opportunity to perform stunts because action movies are not shot linearly. As I explain in The Big Picture: The New Logic of Money and Power in Hollywood, the work is divided between different units that shoot at the same time in different places. The first unit, "principal photography," shoots the stars and other actors (who do so-called "matching shots" that can be blended into stunts); the "second units" shoot the stunts as well as backgrounds that do not require the presence of the actors. In the James Bond movie Tomorrow Never Dies, for instance, this division of labor had 5 different people playing the James Bond character– Pierce Brosnan, the star, was playing James Bond at the Frogmore Studio outside of London, while four stuntmen at four different locations were playing him in stunts. Similarly, In Charlie’s Angels: Full Throttle, the "Dylan" character, was played by Drew Barrymore and stunt women Heidi Moneymaker, a star gymnast, and Gloria O’Brien. (Lucy Liu’s character had 5 players).

A second, and even more compelling reason, is the cast insurance requisites. Even if stars are physically present during the shooting of perilous stunts, the production’s insurers prohibit them from substituting for the stuntmen. Since Harold Lloyd nearly lost two fingers performing his own stunts in 1920, cast insurance has been a sine qua non requisite for a Hollywood movie. If a star is deemed an essential element in a movie– as Liu, Diaz, and Barrymore are in Charlie’s Angels: Full Throttle– and the star becomes disabled, the insurer must cover the resulting loss – which may be the entire investment in the project, which in the case of Charlie’s Angel: Full Throttle was about $120 million. Before issuing such expensive policies– and no Hollywood movie could be made without one– insurers go to great lengths to make sure that actors do not take any risks that could lead to even a sprained ankle or pulled muscle. Their representatives analyze every shot in the script for potential risks and scrutinize the stars’ prior behavior on and off the screen. (See, for example, the answer to the Question of the Day on my web site.) Once the production starts, they also station hawk-eyed agents on the set to make sure that the stars are not put in harm’s way. They might require, for example, that a star standing on a stationary car be held by two safety men (masked in blue spandex so they can be digitally deleted from the final movie.) Even if a director or producer were willing to risk injuring a star, the insurer would not allow it. So stars, as much as they might enjoy performing their fantasies, cannot do dangerous stunts for movies.

For the most part, stars do not tell these tall tales of daredevil
adventurism on television out of either personal dishonesty, vanity, or egoism. It is their job to play a character in publicity appearances, just as it is the job of studios to hype their movies. Nor do others in these Hollywood productions– even if they were not bound by contractual restrictions on disclosures, or "NDAs"– have reason to demystify such off-screen fictionalizing. The subterfuge is part of the system by which studios, talent agencies, music publishers, licensees, and others create, maintain, and profitably exploit the stars’ public personalities. The more interesting question: why entertainment journalists, instead of challenging these preposterous claims, act as the star’s smiling attendants on this organized flight from reality? The answer: deception is a cooperative enterprise. By suspending their disbelief, the entertainment journalists get the stars on their programs.

The Sexopoly and Antitrust

Rabbit or Duck?
In response to my last web-log entry (January 31) about the six movie studios’ secret revenue data, I received an out-of-the-blue email from an extremely well-respected antitrust economist (a man who, because he once worked for the movie industry, prefers to remain anonymous), who asks, "Has this data-sharing relationship ever been questioned by authorities?" He goes on to note: "US antitrust officials generally look at such scenarios with a suspicious eye. . . . Generally, when competitors share sensitive business data--without disclosing these data to the public (analysts or public at large)--there needs to be some procompetitive purpose, such as enforcing safety standards. Absent such procompetitive justifications, such scenarios are usually investigated for any evidence of cartel behavior."

The secret data about markets is not the only information the six studios share. They also conveniently use the same private market researcher, the National Research Group (NRG), which supplies each of its clients with a weekly "Competitive Positioning" report. As is explained in more detail in my book The Big Picture: The New Logic of Money and Power in Hollywood, from the report’s breakdown of upcoming movies’ relative appeal to different age, sex, and ethnic groups, studios can see how their films are likely to fare against competing films appealing to the same audience groups. Studios can then coordinate their films’ release dates to avoid competing for the same all-important opening-weekend audience.
To be fair, even if, as Adam Smith famously said, "people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public," data sharing is not necessarily anticompetitive. It depends, as the Department of Justice and Federal Trade Commission Antitrust Guidelines for Collaborations Among Competitors assert, on just what kind of information is being shared:

"The Agencies recognize that the sharing of information among competitors may be procompetitive and is often reasonably necessary to achieve the procompetitive benefits of certain collaborations; for example, sharing certain technology, know-how, or other intellectual property may be essential to achieve the procompetitive benefits of an R&D collaboration. Nevertheless, in some cases, the sharing of information related to a market in which the collaboration operates or in which the participants are actual or potential competitors may increase the likelihood of collusion on matters such as price, output, or other competitively sensitive variables. The competitive concern depends on the nature of the information shared" (pp. 15-16).

Anticompetitive collusion or procompetitive collaboration? Like the famous "Rabbit or Duck" illusion, it’s all in the eye of the beholder– and in this case, the Bush Administration is the beholder who counts. Given the current climate of acquiescence to corporate cooperation, it seems extremely unlikely that the sharing of secret data by Hollywood’s sexopoly will be a candidate for investigation anytime soon.

Indeed, in another regard, the six studios may themselves be victims of a restraint of trade by what is today the country’s greatest monopsony: Wal-Mart. Wal-Mart, which writes the single biggest check to Hollywood each year for videos and DVDs (which it both rents and sells), has told the studios, according to one top studio executive, that if they dare to move up the release date of their movies on Pay-Per-View to compete with Wal-Mart’s rental business, they do so at the risk of losing critical shelf space in the giant retailer’s stores. For more on this possible monopsony stranglehold--and the man who might break it– see the answer to the Question of the Day on my website today.