For Hollywood’s Big Studios, the Picture Is Looking Bleak

Try to think of a major movie not based on a best-selling novel, comic book or disco-era franchise.



Rod Pennington

Feb. 26, 2017

Wall Street Journal

Sunday’s Oscars ceremony takes place during one of the gloomiest times for the film industry in recent memory. The news Wednesday was that Brad Grey would step down as CEO of Paramount Pictures, which lost nearly $500 million in fiscal 2016. That follows the January shocker that Sony Corp. would take a write-down of nearly $1 billion on its film unit. When the Best Picture slate was announced, none of this year’s contenders had crossed the average break-even point of $100 million for a major motion picture. Worse, according to a Hollywood Reporter survey, 60% of Americans could not name a single Best Picture nominee.

The modern film studio is big and bloated. Movies frequently take years to produce after the initial pitch. In the age of instant information, this means story lines are often outdated before release. Yet the pressure to reach a wide audience is enormous. Exciting moviegoers enough to make them reach for their wallets and car keys isn’t as easy as it sounds.

Try to think of a recent movie from a major studio that you simply had to see in the theater. Now dig deep and try to pick one that wasn’t based on a best-selling novel, a comic book or a rehash of a disco-era franchise. Not easy, right? That eliminates “Harry Potter,” “The Hunger Games,” “Star Wars,” all the yoga-pants Marvel hero films, and anything with Chris Pine doing a spot-on William Shatner impersonation. The rest is slim pickings.

It’s hard to justify driving across town when a movie ticket costs more than a monthly Netflix subscription. Plus, you always run the risk of sitting in the dark for two hours in front of a sketchy guy mumbling into his cellphone. If the “theater experience” has lost its charm, you can rest easy knowing that new releases soon will be in Redbox or available for streaming. In a few weeks, and for less money, you can watch the same movie at home with the luxury of a pause button for bathroom breaks.

The rating system is another headwind. Since anything more restrictive than PG-13 is the kiss of death for the core teenage and foreign audiences, studios can’t rely on the grittier material that dominates so much of cable TV. The co-creator of HBO’s “Game of Thrones” said the fantasy franchise wound up on cable simply because it would have been impossible to hit a PG-13 rating: “That means no sex, no blood, no profanity.”

That leaves the movie studios paying copious sums for “bankable” stars and expensive special effects. But those advantages are fleeting. A big name is no longer a guarantee at the box office, and ever-improving technology allows even small competitors to produce dazzling visuals.

The big movie studios aren’t going to die tomorrow. Huge amounts of their revenue, often more than half, now comes from foreign markets. If the studios were relying only on domestic sales they would be in deep trouble. But a recognizable face and simple narrative can still be a hit with audiences abroad that haven’t lost their appetite for American culture.

Studios continue to do a marvelous job of adapting other people’s intellectual property to the silver screen. Unfortunately, they’ve already done all of the good comics people remember from their youth, and sequels don’t have the same drawing power.

The solution to today’s film malaise is simple: better storytelling. Studio executives seem to have forgotten the basic rules preached by the late mythology scholar Joseph Campbell, and his model of the “Reluctant Hero.” Over four decades this formula has dominated the blockbusters: Luke Skywalker, Harry Potter and Katniss Everdeen, among many others, are ordinary people reluctantly thrust into extraordinary situations. Elaborate car chases and stunning special effects are fine, but audiences still want someone they can root for. Want people to come out? Tell fresh, original stories.

For the moment, the major studios are roughly in the same space occupied by the dinosaurs when the first snowflakes started falling from the dusty sky. Amazon and Netflix have incredible advantages: fewer restrictions on language and nudity, built-in revenue from armies of monthly subscribers. Throw in HBO and Showtime, and it’s even tougher to compete. But if these difficulties inspire the studios to rediscover their roots as great storytellers, it’ll be a happy ending after all.



1.What would a five forces analysis more likely identify as the main causes of lagging industry profitability? In other words, how would the structural features identified by Porter’s five forces contrast with the type of analysis offered by the author of the article?

According to the five forces analysis, there are multiple reasons for why the movie industry is failing other than poor story lines. One of the reasons is that buyers have bargaining power by being able to choose other entertainment sources. This leads to the fact that there are substitute sources of entertainment that may be more of a bang-for-your-buck such as theatre plays, sports games, or going to the bar with friends. A way that the movie industry can keep up with their competitors is by offering a streaming option for newly released Hollywood films. In the article it talks about how people aren’t fond of the movie theatre experience any more. A way for this problem to be resolved is by offering a Pay-Per View service where you would pay a $35-$50 fee to watch it in the comfort of your own home with your family and friends. This could compete with the intense rivalry tactics of Netflix and Amazon.

  1. What does the author consider to be the remedy for Hollywood’s ills? Is this consistent with the type of solution that a five forces analysis would suggest? Why or why not?

The remedy that Pennington suggests, which is to create better story lines is not consistent with the solutions that a five forces analysis would suggest. Pennington said that most of the great story lines stemmed from books and comics, which leaves the movie industry at a halt. The five forces analysis would suggest to improve other external aspects rather than the quality of what they produce, which Pennington said the movie industry is unable to do anymore since all of the good book and comic ideas have already been used.