A while back I watched the movie Kong: Skull Island on the Kodi. It was one of those impulse things. I felt like watching a movie and this one just happened to be easily accessible. Samuel L. Jackson’s angry black guy routine stopped being fun a long time ago, but I figured the movie was going to be mostly about the giant gorilla. As far as modern movies go, it was not too bad. I suspect it was better in a theater with high end sound and the giant screen to make the monsters look more monstrous.
For some reason, I got to wondering what it cost to make, so I looked it up. (I know, I know. I should not be using Wiki, but the Infogalactic page is out of date.) According to the published data, the film cost $185 million to make and generated $586 million in ticket sales. That looks like an amazing success, but movie accounting is a bit weird. The theater gets half the gross, so the distributor got about $285 million. That’s a gross simplification, but a useful one for looking at the mathematics of movie making.
Movies don’t always do so well. King Arthur was a giant flop this summer. It cost $175 million to make and grossed just $140 million. According to people who know these things, the studio lost $150 million on this one film. There were other massive flops this summer like the Aliens movie and the Amy Schumer comedy. The opacity of Hollywood accounting makes it impossible to know the final tally, but people who claim to know suggest that the big studios are posting losses this year as a result of the bombs.
Hollywood can withstand a bad year because of the high cost of making and distributing movies. Getting together $185 million to make a giant gorilla movie is not something you do on Kickstarter. It’s why Hollywood seems to be hooked on films with massive special effects budgets. It’s a niche only they can serve so they are trying to squeeze every penny from it. Dramas and documentaries, in contrast, have small budgets and small margins, so lots of small players can fight for those customers.
A common complaint about Hollywood is that they are not investing in new ideas and original scripts. Instead it is comic book movies, remakes of old films and sequels. The people in the business will counter with the fact that the losses are almost always accounting losses. The actors and directors are all getting paid. Once the accountants do their magic, often taking advantage of tax laws and special deals made with governments to shoot their films on location, the studios are in the black or close to it.
They are probably right in the short term. Hollywood is surely aware of what happened to the pornography business and what is now happening to the news business. Porn used to have a high barrier to entry. If you wanted to sell sex to the public, you had high costs due to a complex thicket of state and local laws to navigate. The Internet obliterated the barriers to entry. First came a wave of video makers who wiped out the skin mag operations. Then a wave of amateurs came through to wipe out the movie industry.
A similar thing is happening with the news and commentary business. First the internet undercut the ad business of newspapers. Why sell your car in the classifieds when you can sell it on eBay? Why advertise your job in the Boston Globe when you can use Monster? The only logical response has been for the newspapers to slowly move from their old distribution model to the internet. But, the cost of putting up a website is near zero now so anyone wishing to compete with the NYTimes can give it a go.
It’s not just the legacy media. Take a look at on-line audio and video. Joe Rogan does a one hour interview show that will get a few million viewers. His production costs are a fraction of what it cost to make the Charlie Rose program. Yet, Rogan reaches ten times the audience. The YouTube comic PewDiePie reaches 55 million people and he is essentially producing his show from his basement. Anthony Cumia was making his show from his basement until his success allowed him to rent a studio in Manhattan.
A similar thing is happening to radio. Podcasts are becoming a popular way to listen to news and commentary, that used to be the domain of radio. Buy a new car and you can sync your phone to the audio system, so you can tote around your own music and podcasts to play on the road. It will not be long before your car radio will let you listen to this stuff off the internet. Again, the low barrier to entry means a wider range of shows so the public can narrow cast to their taste. Old fashioned radio, as a result, is dying.
If you are in the media business, your number one task right now is figuring out how to keep the barrier to entry to high for that army of internet content makers. That’s why Hollywood is fixated on massively expensive super hero movies and film series based on comic books. They spend $100 million building out the infrastructure and then make five versions of Pirates of the Caribbean for $200 million a copy. Mike Cernovich is not competing with that, no matter how many Kickstarter campaigns he starts.
The beauty of this approach is that these sorts of films can easily be sold into foreign markets. The Chinese dudes watching Fast & Furious 19 don’t care about the dialogue or story. They want to see buff white dudes driving cars while shooting at bad guys. Given the level of writing for some of these movies, they may not even have to provide subtitles as no one really cares what’s being said. Hollywood is now in the business of creating giant special effects demonstrations that are viewed in movie theaters.
Whether this is sustainable in the long run is hard to know. Kong: Skull Island made a lot of money so a lot of people must have enjoyed it. I thought it was mostly stupid, but I watched it free at home, so I got my money’s worth. As long as these things keep making money, there’s no reason to think this model will break. It also means that Hollywood will be looking for ways to make these films even dumber. If they can get global audiences habituated to enjoying two hours of explosions, it simplifies their business even further.
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