Hollywood

As William Goldman said, nobody knows anything. And people are hard-wired to see and act on patterns that may well not be there:

Meet Hollywood's Latest Genius - Los Angeles Times: Then again, in 6 months he could be a loser. Box-office success is more random than you may think. By Leonard Mlodinow: [A]re the rewards (and punishments) of the Hollywood game deserved, or does luck play a far more important role in box-office success (and failure) than people imagine? We all understand that genius doesn't guarantee success, but it's seductive to assume that success must come from genius. As a former Hollywood scriptwriter, I understand the comfort in hiring by track record. Yet as a scientist who has taught the mathematics of randomness at Caltech, I also am aware that track records can deceive.

That no one can know whether a film will hit or miss has been an uncomfortable suspicion in Hollywood at least since novelist and screenwriter William Goldman enunciated it in his classic 1983 book "Adventures in the Screen Trade."... With each passing year the unpredictability of film revenue is supported by more and more academic research. That's not to say that a jittery homemade horror video could just as easily become a hit as, say, "Exorcist: The Beginning," which cost an estimated $80 million, according to Box Office Mojo, the source for all estimated budget and revenue figures in this story. Well, actually, that is what happened with "The Blair Witch Project" (1999), which cost the filmmakers a mere $60,000 but brought in $140 million—-more than three times the business of "Exorcist." (Revenue numbers reflect only domestic receipts.)...

Last year was a big year for Brad Grey... of Paramount.... Viacom [had] applied the usual strategy: ax the studio head and bring in a new guy.... Grey's next moves were described in the trades as a "sweeping revamp" and "massive makeover."... Grey rebuilt the studio... presented it to the press as a hipper, edgier film company cleansed of the outmoded thinking that had weighed down Paramount's bottom line. And now, under Grey and his wise helmsmen, Paramount's ship is making its way. At least that's what they like to believe... [but] look at the events that led to the situation Grey was hired to fix.

When Viacom Chairman Sumner Redstone bought Paramount Pictures in 1993, he inherited Sherry Lansing as studio chief.... [U]nder Lansing, Paramount won best picture awards for "Forrest Gump," "Braveheart" and "Titanic" and posted its two highest-grossing years ever. So successful was Lansing that she became, simply, "Sherry"—-as if she were the only Sherry in town. But Lansing's reputation soon plunged.... [Why? T]he short answer... 11.4%, 10.6%, 11.3%, 7.4%, 7.1%, 6.7%.... [T]hose six numbers represent the market share of Paramount's Motion Picture Group for the final six years of Lansing's tenure between 1999 and 2004.... How could a sure-fire genius lead a company to seven great years, then fail practically overnight?...

Lansing had been praised for making Paramount one of Hollywood's best-run studios, with an ability to turn out $100 million hits from conventional stories. But when her fortune changed, the revisionists took over. Her penchant for making successful remakes and sequels became a drawback. She was now blamed for green-lighting box-office dogs such as "Timeline" and "Lara Croft Tomb Raider: The Cradle of Life."... But can she really be blamed for thinking that a Michael Crichton bestseller would be promising movie fodder? And where were all the "Lara Croft" critics when the first "Tomb Raider" film took in $131 million in box-office revenue? Even if the theories of Lansing's shortcomings were plausible, consider how abruptly her demise occurred. Did she become risk-averse and out-of-touch overnight?... Postdiction is less impressive than prediction. But as the final chapter of Lansing's career shows, postdiction is how Hollywood does business.

Academic research provides an alternate theory of Lansing's rise and fall: It was just plain luck.... [I]n Lansing's case there's already evidence that she was fired because of the industry's flawed reasoning rather than her own flawed decision-making.... Paramount's 2005 films (and even half of 2006's) already were in the pipeline when Lansing left the company.... With films such as "War of the Worlds" and "The Longest Yard," Paramount had its best summer since 1994 and saw its market share rebound to nearly 10%.... [H]ad Viacom had more patience, the headline might have read, "Banner year puts Paramount and Lansing's career back on track."...

Arthur De Vany, recently retired professor of economics.... De Vany likes to illustrate the oddities of the film business by comparing films to breakfast cereal. If breakfast cereals were like films... our typical cereal breakfast would consist of a product we had never before tried, and very well might not like, but bought because we heard about it from friends or read of it in the newspaper cereal section. That's precisely how films behave in the marketplace. If we hear good things, we go and perhaps tell others; if we hear bad things, we stay away. It's that process—-the way consumers learn from others about the expected quality of the product—-that De Vany found is the key to the odd behavior of the film business today. Economists call it an "information cascade." "People's behavior is simple," De Vany says, "but in the aggregate it leads to a complex system, a system bordering on chaos."...

If hits are so hard to predict, why does it often appear that certain people, at certain times, have a hot hand? The work of former UC Berkeley professor Daniel Kahneman helps explain this.... Not only are people bad at recognizing random processes, they also are easily fooled into thinking they are controlling them....

Although economists and psychologists have no problem understanding Hollywood's randomness, Hollywood executives, not surprisingly, are generally less convinced.... One Hollywood executive who spoke up against De Vany's work in the late 1990s was Frank Biondi, who ran Universal. Biondi thought he had it figured out. After running the numbers, he concluded that the industry was not as chaotic as it appeared. Films that cost more than $40 million had the highest return on capital, he said... "impact movies."... Two years of impact movies later, with depressed film earnings and no relief in sight, Biondi was fired....

Old style seat-of-the-pants executives also object to the randomness theory. White-haired seventysomething Richard Zanuck... ran production at Fox and then briefly ran the studio until some major dogs... crippled the studio financially and led his dad to fire him.... In Zanuck's case, as in Lansing's, his bad streak ended.... The films he developed before he got canned... won best-picture Academy Awards—-1970's "Patton" and 1971's "The French Connection."... A few years later, Zanuck became the man responsible for Steven Spielberg's 1974 feature debut, "The Sugarland Express," as well as Spielberg's 1975 follow-up, "Jaws" (which took in $260 million on a budget of about $7 million). Did he feel "Jaws" would be a hit of historic proportions? "We didn't have any idea," he says. "We bought it from a manuscript, and the book became a bestseller while we were still doing the film"...