Blockbusters: Why Big Hits – and Big Risks – are the Future of the Entertainment Business, by Anita Elberse

The economists have discovered – or, more accurately, rediscovered – Hollywood. Over the past decade or so, a number of economists have focused their econometric analysis on show business in an attempt to explain the unusual commodities produced, with a view to figuring out how to make them more consistently successful (read: profitable).

Anita Elberse’s Blockbusters is one of the most recent examples of that renewed scholarly attention. The Harvard Business School professor is certainly interested in the industry’s success and profitability. But she has spared us most of the heavy-duty econometrics (aiming for a blockbuster book?) and instead attempts to wow readers with her access to the business via a bevy of high-level managers and celebrities.

Her main argument is that a blockbuster strategy that focuses on a few mega-budget products, rather than creating a wide range of less pricey productions, is ultimately the way to guarantee profits in the entertainment business. She reinforces this thesis with examples from film, television, music and sport, as well as individual celebrities, repeating over and over that this strategy involves risk, but those who take big risks are ultimately rewarded. The discussion is sometimes reminiscent of a how-to-win-at-gambling guide: follow my newly discovered technique and you can’t lose.

But the picture may be a bit more complicated than Elberse leads us to believe. Many of the major entertainment companies are actually quite accomplished at avoiding risk, relying on smaller companies to provide those sky-rocketing production funds for franchise products. Distribution deals are known to favour distributors, which benefit hugely from successful blockbusters but may not always take the risks involved in huge production costs. Furthermore, the major distributors, such as Disney, Time Warner and others, are diversified conglomerates and thus do not depend on just one activity such as blockbuster film-making. These points seem to be unimportant to economists such as Elberse, who accept the myth that film-making is an inherently risky business. But the consistently escalating profits of the major conglomerates offer an obvious challenge to the risky business thesis.

Moreover, the blockbuster phenomenon itself is not new. The dependence on big budget films has been endlessly analysed, bemoaned and/or celebrated for years. For instance, the writers (mostly academic) in Julian Stringer’s 2003 edited collection, Movie Blockbusters, approach the phenomenon from multiple perspectives. In addition to financial and industrial factors, that book’s contributors offer insights into blockbusters’ social and historical contexts, aesthetics and cultural significance – issues that are not of interest, it appears, to the latest Hollywood economists.

Furthermore, this current crop of economists is not the first to focus on the entertainment business. As early as 1933, another Harvard University scholar, Howard Lewis, presented a useful overview in his book, The Motion Picture Industry. Around the same time, Joseph P. Kennedy gathered business leaders at Harvard to explore the business of film. Kennedy moved to Hollywood in the mid-1920s and was a major participant in the integration of the film industry. He was not only enamoured of the wealth that could be gleaned from the business, but attracted to Hollywood’s glamour.

That glamour continues to draw economists such as Elberse. As long as these entertainment industries remain wedded to a model motivated by profit, it is likely that they will continue to attract economists and management experts keen to offer analysis and advice on how to expand revenues. Whether we will learn much that is really new about these industries from such analysis remains to be seen.