How come so many movies are sequels, adaptations and reboots? Why do music studios spend so much on just a handful of superstar artists? And since when did TV shows become so lush and sophisticated?
These sound like scattered questions for an entertainment guru, not an economist, but Anita Elberse, a professor at Harvard Business School, is both. And her great new book, Blockbusters, explains that the four questions share one answer. The blockbuster strategy—betting more and more money on fewer and fewer titles—has taken over the entertainment world.
The book comes out in an interesting time for Hollywood, which suffered a row of famous big-name flops this summer. Has the last year proved that the blockbuster approach is dead—or stronger than ever? That was just one question I asked Elberse in a wide-ranging interview. This conversation been edited for length and clarity.
THOMPSON: Would I be oversimplifying your thesis if I said: "In movies, music, TV, and books, people have learned that $1 spent on a blockbuster is better than $1 spent on a not-blockbuster"?
Elberse: I think that's a good way to summarize the book. Another way is to say that, although there is no way to play it safe in the entertainment industry, a blockbuster strategy is the safest way to play. In investing, we intuitively think we should make a number of small bets. A blockbuster strategy is the opposite. It means making fewer huge investments. But it turns out to be safer.
The obvious reason that you're right is that people keep showing up to big, loud sequels in movie theaters, so studios keep making big, loud sequels. But the most interesting part of your book is the not-so-obvious ways that spending more money on fewer projects is smart. For example, if you're known for making big popular movies, then you attract artists and creatives who think they're sitting on a big popular idea.
Yes. And you can price yourself out of the market for great entertainment by not spending big on high production value. This is true in film. It's true in television, where NBC tried to manage costs for a few years, saw margins decline, and lost out on some major new projects. If you're a book publisher, and you don't compete for the biggest and most promising books, you'll lose shelf space at Barnes & Noble, and leverage with Amazon, making it harder to get and promote future books.
So what you see is that efforts to save on cost might improve profitability in the short run. But in the long run, you're undermining the very essence of what builds blockbusters. Studios and publishers need help from talent and from retailers to make these big hits.
And there is a trickle-down effect. The companies that made the last successful blockbuster, whether it's a book or a TV show, tend to be well-positioned to produce the next successful blockbuster. How do blockbusters beget blockbusters?
If you haven't had a hit in a long time, it's harder to build the next one. One hit has a halo effect. [The opposite effect] is what NBC is experiencing. They haven't recovered from the period when they managed for margins.
You see the same dynamics in movies, too. Think about trailers you see in theaters. If you're seeing a Warner Bros film, the studio might have three of the five trailers. So having a hit helps you create the next hit. If Macmillan publishes Bill O'Reilly's book "Killing Jesus," and it sells well, Macmillan can urge him to interview me about my new book [also published with Henry Holt - Macmillan] driving up sales for my book. Hits create hits.
And in music?
It's very much the same. One way you see the trickle-down is in concerts. If you are the record label who owns Lady Gaga, and you have a new artist coming up, you can say, "Let's have the artist play just before Gaga." Now you've exposed the huge Gaga audience to the new artist. It's similar to showing a trailer before a movie. The hit creates a hit.