The Blockbuster Strategy

Lisa Richwine and Ronald Glover published an interesting article yesterday on Hollywood's gamble of making fewer films, with a greater emphasis on "high-risk, high-reward" tentpoles – like this weekend's John Carter.

There is no mystery as to why Hollywood follows this path. The blockbuster, "high concept" strategy has become the standard operating procedure for Big Media as a whole (stodgy old publishing included), and there are especially pressing reasons for the major U.S. studios to adhere to it in film. After all, it is exactly this kind of film that is Hollywood's strength, because other countries' film production has simply lacked the deep pockets to compete in this area with any regularity. Additionally, the spectacle these movies offer is exactly the kind of product that other branches of the media, like television production, cannot match, and capitalizes most fully on the big screens that are the principal draw of the theatrical experience so crucial to a movie's earnings (as well as offering the best justification for the 3-D surcharges which have done so much to pad them these last few years). These films also travel quite well, routinely pulling in enormous grosses in foreign markets, often more than enough to compensate for a disappointing performance in North America (as was the case with the last Pirates of the Caribbean movie) – in contrast with a great many other Hollywood movies (like Will Ferrell comedies).

Yet, as those in business seem to constantly forget (or to have never learned in the first place), effective demand has its limits, and the market has always been crowded enough with this kind of product as to make costly flops routine. Thus far, the hits have proved more than sufficient to keep the studios at the strategy despite the losses. Indeed, Richwine and Glover note that Disney recently halved its film output to focus on "franchise films." However, as the budgets continue to go up (no one is shocked by a $250-300 million production budget anymore), and these movies' traditional target audience (young males) seems less and less interested in buying tickets, while DVD sales decline, I doubt this will stay a commercially tenable approach for long. Given that Hollywood seems unlikely to successfully revert to a more diverse output, I wonder if Hollywood won't soon come to appear a stumbling dinosaur - the way publishing has been for as long as I can remember.