Hollywood’s current game plan: it’s the IP and not the actor

ABSTRACT

Ever since the success of Star Wars in the 1970s, Hollywood’s obsession with blockbusters and their sequels (prequels) has been evident. The exploitations of successful intellectual properties (IP) have, in many instances, served the studios well, with many going on to reap hundreds of millions at the box-office. However, in recent times, such strategies have gone to new levels, to the extent that studios’ annual portfolio of movies is now virtually dominated by IP-related projects hence the endless list of sequels, prequels and so on. The implication of such phenomenon is that the key resource to success in the industry no longer resides with human capital (i.e. movie stars) but instead the IPs. One should expect fewer standout original standalone movies should this practice continue.

KEYWORDS:

• Motion picture industry
• intellectual property
• movie stars
• business strategy

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. At the time of this paper is written, i.e. as of June 2023.

2. A good example (among quite a few) was Top Gun: Maverick which was scheduled to go into theatres in June 2020 before being moved to December that year due to the COVID-19 pandemic which saw theatres being shut down (Rubin, 2020b). It was eventually released only in May 2022.

3. Many of the cast of the Avengers and Justice League movies are household names but their movies outside the franchise are not impressive. For example, Robert Downey Jr, as Ironman, was the key mainstay of the Avengers franchise but his 2014 release, The Judge was poorly received at the box-office despite good reviews and even boast of an Academy Award nomination. Similarly, Chris Hemsworth, another popular actor in the series, also saw failure in 2019’s Men in Black: International – this despite it being also a franchise itself! (although a dormant one at the time). In fact, there so few real “movie stars” left – Tom Cruise and Leonardo DiCaprio are the probably the very few that would stand up to the current wave of IP-driven strategies of studios.

4. Big productions like 2012 (2012), Jack the Giant Slayer (2013), John Carter (2012), to name a few, had budgets of near or in excess of US$200 million and yet did not boast of any major A-list movie stars.

5. Assuming that big stars have the luxury of selecting more promising movies (these likely to be bigger budget ones), then the “star” variable is likely to be (highly) correlated to the “production budget” variable, i.e. a multicollinearity problem. Such problem can potentially cause larger standard errors hence leading to insignificant coefficient estimates – this may explain the non-significance of “stars” in driving a movie’s box-office revenue. In any event, studios themselves would prefer to put stars in movies which they expect to be successful (usually bigger budget tentpole movies), a sentiment that is echoed by Professor Arthur De Vany, who has researched extensively on the movie industry, who argued that it is in fact a movie that makes a star! (Porter & Fabrikant, 2006).

6. See Barney (1991) for a comprehensive discussion on the resource-based theory of the firm.

7. https://www.reuters.com/article/film-alist/hollywood-rethinks-use-of-a-list-actors-idINN125223620091113; https://fortune.com/2016/09/29/hollywood-salaries-2016/

8. Block (2012).

9. The production budget for the Avengers series are as follows: (a) The Avengers (2012): US$225 million, (b) The Avengers: Age of Ultron (2015): US$365 million, (c) Avengers: Infinity War (2018): US$300 million, and (d) Avengers: End Game (2019): US$400 million (Figures from https://www.the-numbers.com/)

10. Figures taken from https://www.the-numbers.com/

11. To provide some context, the average production budget for a movie in North America in 2008 was US$22.96 million (Crane, 2014). Meanwhile, the average production budget for the 30 biggest movies for that year was US$105,600,000. In the following year, the average (for the 30 biggest movies) was US$113,233,333 (figures tabulated from data from https://www.the-numbers.com/).

12. They define the ROI as total revenue minus production budget divided by the former. Meanwhile, they categorised their sample movies according to 4 different groups – low budget (US$1,000 – US$19 million), moderate budget (US$20 million – US$49 million), big budget (US$50 million – US$ 99 million) and mega budget (in excess of US$100 million).

13. Figures taken from The Economist (2011).

14. In fact, according to Young et al. (2010), up to 80% of a movie’s revenue are non-theatrical revenues. Given the prominence of content streaming today, this figure is more likely than not, greater.

15. Traditionally, the summer and Christmas holiday spells are the usual period in the calendar in which big releases are earmarked to open annually, this to ensure huge openings – i.e. receipts are crucial in the initial run at the box-office especially the opening weekend and the following week or two. In any case, releasing the movie during these periods would also mean possible longer legs in the box-office run as well. However, such strategy is less obvious nowadays as studios have since gone on to release major movies throughout the year. Schuker (2009)reported studios moving their major releases beyond the usual period (the holiday seasons like Christmas or summer) on the basis that the timing of release had become insignificant in that, studios, believe sufficient audiences could still be guaranteed at any time of the year given the right marketing strategy and of course, the right movie. Further, Lee (2014), using 2009 US box-office data, found the timing of release variable (for both the summer and Christmas periods) to be insignificant in a movie’s box-office receipts.

16. It is easier to introduce a new character based on past serialised works than through a new standalone offering, a practice that has seen great success in the case of comic book adaptation movies. Further, these movies are usually easier to market to international markets as well.

17. While a common measurement of volatility (representing the riskiness of returns) is the standard deviation, the use of the coefficient of variation (CV) measures the risk per unit of return (see Brigham & Houston, 2004). Given that the formula for it is the division of standard deviation over the mean, an inverse value of it would entail the measurement of returns per unit of risk borne an investor, i.e. the compensation for taking on more risks (Holgersson et al., 2012).

18. Its market share of the premium video-on-demand went from just 1% in the third quarter of 2019 to 18% in the fourth quarter 2020 (Carson, 2021).

19. Barnes and Sperling (2020).

20. For example, Scarlett Johansson, the star of Disney’s Black Window movie took the company to court – citing the studio’s move to release the movie on streaming (via the Disney streaming platform, Disney+) as well as cinemas simultaneously as a breach of contract (Lee, 2021).

21. Lucasfilm, owned by Disney, announced plans for at least 16 film and TV titles linked to the Star Wars universe for 2021 and beyond (Ferme, 2021).

22. Via Disney and Marvel Studios’ collaboration.

23. BBC News (2020).

24. Some of the notable Marvel characters that are owned by Fox include the Fantastic Four, Deadpool and X-Men.

25. Whelan (2023).

26. https://editorial.rottentomatoes.com/article/your-full-list-of-all-upcoming-sony-spider-man-universe-movies-with-key-details/

27. Rubin (2020a).

28. Kevin Feige, president of Marvel Studios, argues that the move as “probably one of the greatest decisions in the history of Hollywood” (O’Connor, 2023).

29. Its production budget is listed as US$90 million in www.boxofficemojo.com. However, according to Donnelly (2019), the actual production cost for “Once Upon a Time” is still debatable, with some close to the project insisting that the movie cost $110 million, although the figure was subsequently reduced to $90 million after Sony was awarded a tax rebate from the State of California.

30. Mr. Sumner Redstone, the late media mogul who owned Paramount Pictures, referred this as “fantasy gratification” (Hirschhorn, 2005).

Additional information

Notes on contributors

Lee Yoong Hon

Lee Yoong Hon is an Associate Professor of Business Economics at the University of Nottingham Malaysia. He teaches Economics courses for both the post-graduate and undergraduate students in the business school. His research interests are in the areas of media economics, sports economics, and efficiency and productivity analysis.