In 2012, the movie John Carter , a science fiction movie released by Walt Disney Studios, became shorthand for a box office disaster as the company reported losing $200 million on the film (Mendelson 2015; Nakashima 2012). Conversely, Paranormal Activity, which was released in 2009, had a production budget of only $15,000 yet earned $194 million at the box office, becoming the most profitable movie ever made (Avila 2010; Frankel 2009; The Numbers 2019).
What accounts for these dramatically different outcomes at the box office?
John Carter had all of the elements of a Hollywood blockbuster. It was based on a popular book entitled A Princess of Mars by Edgar Rice Burroughs, the renowned author of the Tarzan series (Meslow 2012). It was produced by Andrew Stanton, the Academy Award-winning director of Wall-E and Finding Nemo . It starred Taylor Kitsch and featured Willem Dafoe as one of the leading characters. And, it had the financial backing of Walt Disney Studios.
Paranormal Activity was written, directed, produced and edited by Oren Peli, a former software designer, and was filmed over seven days and nights in his San Diego house (Raphael 2009). It also featured newcomers Katie Featherson and Micah Sloat. Prior to the film, Katie was a waitress at Buca di Beppo at the Universal CityWalk and Micah was a computer programmer (Villarreal 2009).
Some of the reasons for John Carter’s challenges have been attributed to an ineffective marketing campaign, which is evident in the fact that the film only earned $30 million on its domestic opening weekend (Mendelson 2015). And, some of the credit for Paranormal Activity’s success has been attributed to the marketing campaign by Paramount Pictures, the film’s eventual distributor. This campaign featured a “Demand It” option on Facebook and Twitter to allow fans to bring the film to their local cinemas and a “Tweet your scream” social media campaign (Raphael 2009).
But if marketing was the only significant variable in determining a movie’s success, you would imagine that there wouldn’t be as much risk involved. After all, marketing is certainly something you can test and measure. But there are many Hollywood box office disasters other than John Carter.
In fact, shortly after the release of John Carter , a New York Times headline proclaimed “‘Ishtar’ Lands on Mars” (Barnes 2012). The headline is a reference to the movie Ishtar , the 1987 comedy directed by Elaine May that starred Warren Beatty and Dustin Hoffman (Bramesco 2017). The movie is about two untalented singer-songwriters who go to Morocco to break into show business but get embroiled in a plot to overthrow the Emir of the fictitious country of Ishtar. The film earned just $14 million on a $51 million budget, and is widely hailed as one of the worst movies of all time (Bramesco 2017).
Other movies have experienced similarly dire financial consequences. For example, the 1980 movie Heaven’s Gate nearly bankrupted United Artists, which was chronicled in the documentary “Final Cut: The Making of ‘Heaven’s Gate’ and the Unmaking of a Movie Studio.” The film cost $36 million to produce at a time when the average budget was $12.5 million and would go on to make only $3.5 million at the box office (Welkos 2004; Barber 2015).
Among the other commonly cited box office misses is The Adventures of Pluto Nash. This movie from 2002, which is about a nightclub owner on the moon starring Eddie Murphy, cost close to $100 million to produce and only generated $7.1 million worldwide (Eller 2017).
The fact is, even in an era of big data, making movies is not without risk. That’s why the adage “Nobody knows anything” is still a common refrain in Hollywood. It’s a quote from the book Adventures in the Screen Trade by the Academy Award-winning screenwriter William Goldman and in some circles has become known as the Goldman Rule. In his book, Goldman argues that no one really knows for certain what’s going to work and that, at best, every time is based on an educated guess (Goldman 1989).
Goldman’s assertion was later quantified in a study conducted by Arthur De Vany of the University of California at Irvine and David Walls of the University of Hong Kong (Cassidy 1997). De Vany and Walls analyzed 300 movies released between May 1985 and January 1986 and found that audiences were attracted to a small number of films. For example, as mentioned earlier, they found a sort of Pareto Principle which states that 80 percent of the consequences are generated by 20 percent of the causes. In this case, 80 percent of the revenue was generated by 20 percent of the films. However, there was no way to determine why audiences were attracted to some films and not to others—not the genre, the cast or the budget. The best predictor they found was how the movie performed the previous week (Cassidy 1997).
That is, because people won’t know if they like a movie until they see it, many rely on the recommendations of others. These recommendations, in turn, can have a positive or negative effect on a film. In fact, De Vany and Walls argued that word of mouth could not only determine whether a movie was a hit but that it could kill a film as well (Cassidy 1997).
Moreover, movies are susceptible to information cascades upon their release. Information cascades generally occur when people observe the behaviors of others and make decisions based on those observations while ignoring their own personal information (Palmer 2019). There is no direct communication between individuals but, in addition to observations, they can occur through an assortment of communication channels such as earned, paid and social media. Therefore, this book explores the effects of both word of mouth and information cascades on movies.
However, in the process of doing so, we will first explore the enduring appeal of movies. That is, why has going to the cinema been, and why does it continue to be, so popular? While Netflix and other streaming services persist in their efforts to disrupt the movie industry, why has the appeal of going to the movies endured? Will this appeal remain in light of current trends?
Next, we’ll look at why movies are so unpredictable based on the experiences of some of the most notable producers and experts in the field. For instance, what are the differences between blockbusters and bombs? Is there a rule to making a successful movie? What is their response to William Goldman’s assertion that “Nobody knows anything”?
We’ll then discuss ways of mitigating these risks through an interview with Bruce Nash, the Founder and President of Nash Information Services, a leading provider of movie data and research. The abundance of data that is now available can help us understand industry trends, and the profits and losses for different types of movies. We’ll also discuss the importance of conducting a financial analysis and the value that his company can provide by interpreting this data.
From there, we’ll examine the role of film festivals for filmmakers. We’ll consult with organizers of successful film festivals and offer some perspectives from industry research. That is, what do film festivals have in common and what makes them unique? What predictive value do the largest film festivals have on the Academy Award for Best Picture and...