Death of the Movie Star: It's the Money, Stupid

Why is Hollywood moving away from the star-driven vehicle, and more towards the gimmicks of 3-D, IMAX, and animation? The answer is, of course, economic.

Since Star Wars appeared in 1977, Hollywood has been primarily driven by two factors: the blockbuster film and the star-driven vehicle. The studio’s portfolio theory economic model requires the blockbuster. It is these massive revenue generators that push a studio into profitability, to counteract the revenue drag created by other films, which lose money.

The star-driven film has been around since Hollywood’s golden age. There is an implicit assumption that audiences will go to a movie with their favorite star. The reason things got out of whack was because, in the 1990’s, agencies wisely began pushing the asking price of their clients up – way up. Stallone, Schwarzenegger, Carrey, Cruise – they all became $20 million men. This was a brilliant strategic maneuver. Knowing that the industry was driven by fear, the agents knew that the first time a studio caved to an outrageous salary demand, all the other studios would do the same. No studio wanted to be left out in the cold without a star to drive its latest blockbuster. So they caved.

The asking prices continued to escalate, with some stars getting a piece of gross revenue.

Now the market is correcting. The reason, as I’ve stated before, is that audiences grew tired of the decreasing quality of Hollywood product. Total movie admissions throughout the past decade have been flat to down year-over-year, with the exception of 2009, when people chose to go to the (comparatively cheaper) movies over other entertainment events. This trend, combined with the decline of the DVD market (and syndication in television), began to restrict Hollywood revenues. Meanwhile, production expenses continued to rise, as did advertising expense. The internet’s fragmenting of consumer attention exacerbated the problem.

The industry has responded in several ways. They have drastically shifted their blockbuster model away from original films to branded entertainment. Consumer brands have equal, if not more, consumer awareness than some stars. The brand becomes the star. How else to explain Transformers, which starred the mega-action hero…Shia LeBouf? The two films have generated $1.55 billion in box-office revenue alone, and far more in ancillary markets. Why add $15 million or more to the $150-$200 million production budget with a star when you just don’t need one to open the movie?

A more interesting piece bit of evidence pops up in Arthur deVany’s book Hollywood Economics. In his survey of dozens of films over a 20-year period, Mr. deVany determined that a star had negligible effect on the total box-office gross, in the aggregate. Rather, he discovered that a star provided a box-office floor for a movie. So while a supremely talented actor like Mr. Cruise might assure a certain attendance for a film, he was not the ultimate determining factor in how much revenue the film generated.

As for gimmicks like 3-D and Imax, that’s what they are. We’ve seen this before. 3-D was big in the 1950’s. Oviously, technology has improved the experience since then, but with few exceptions has it been used with particular effectiveness (Robert Zemeckis’ Beowulf comes to mind). Otherwise… anybody recall Sensurround? Percepto? Smell-O-Vision? Frankly, unless you’ve actually shot a film in IMAX, it’s just a really big screen. These gimmicks are just an excuse for studios and exhibitors to raise admission prices, to offset the stagnant admissions they’ve been experiencing.

All of these things – branded entertainment, viewing gimmicks – are simply band-aids. They are an attempt to mask an underlying problem: Hollywood content has been in decline for some time. There is a solution, of course, and perhaps someone will see the light. One hopes that, should Lionsgate take over MGM, that they will institute a new method of creating content and managing talent.

Meanwhile, Hollywood just continues its unnecessarily expensive ways. Do you or your kids really care if a star provides the voice of a Kung Fu Panda? I know a few voice-over actors who would do the job just as well, and for a lot less money.