The Big Picture: Money and Power in Hollywood

This book is an astute analysis of the film business by someone outside the motion picture business. Many books are written about the movie business by insiders or entertainment reporters but often these writers are too close to the subject or in awe of the subject and as a result miss the mark. Mr. Epstien gives an astute analysis of the current state of the business using sources that normally are not available to the public. An example is the confidential disclosures by the six major studios to the Motion Picture Association Of America (MPAA), which are then compiled into an industry compendium disclosing studios sources of revenue. Mr. Epstein confines his analysis to the six major studios, Disney, Sony, Universal, Warners, Paramount and Fox, which dominate the motion picture and ancillary entertainment businesses world wide. Once a movie's theatrical release was the primary source of a studios income and indeed in the beginning the only income. Now however the theatrical release is just the beginning of income to the studios that now earn more income from video/DVD sales and rentals than the initial theatrical release. Also particular types of movies that lend themselves to action figures, promotional tie-ins, theme park rides and sequels are the major earners for the studios. Examples of these are Star Wars, Jurassic Park and Batman. These movies are easy to understand, involve multiple spectacular action scenes and cater to a young demographic who go to movies, buy the action figures and memorabilia associated with a movie and after seeing it more than once in the theatres may buy the DVD or video of the movie. While the cost of making and advertising the theatrical release may exceed box office receipts the picture will make money for the studio over the years in rentals, sales of the movie, leasing to television, pay per view, income from licensing toys and other products associated with the movie. Mr. Epstein has described the historical development of the studios from creators of films shown in wholly owned theatrical chains to vast clearing houses greenlighting and financing producers to distributing, selling, licensing movies and related products world wide. This book was a profound look at the business side of the entertainment business and the people who control and profit from it. Ever wonder why there is such a paucity of quality entertainment for persons older than twenty-five? Because in order to have a mega blockbuster that generates billions of dollars in income over the years it must be geared toward the 12 to 24 year old audience, with a story line that can be easily understood even it all the audience doesn't speak the language of the movie well. This means action movies with a simplistic story line of good triumphing over evil. This was an excellent book and after reading it you will understand why the major studios no longer care about making quality-sophisticated entertainment. Edsopinion.com

This is a very detailed and insightful book on the movie entertainment business. Epstein researched an enormous amount of proprietary financial information from the Motion Picture Association All Media Revenue Report (MPA). This is a report disclosed only to the studios that details movie earnings. It is unclear how Epstein obtained access to this proprietary data. Epstein leveraged this proprietary data into an incredibly insightful analysis of the movie-entertainment industry. Thanks to Epstein lively writing style the book is a quick read despite the volume of information provided. The movie business is not an economically viable stand-alone business. Indeed, over 95% of the movies loose a ton of money at the Box Office even if they often generate hundreds of millions in such Box Office revenues. Movies have become extremely expensive advertising for a very risky long-term investment in an "intellectual property" right. The pioneer of such a business model was Walt Disney who fully grasped the possibilities of the ancillary businesses more than half a century ago. Related ancillary revenues generated by videos, Pay TV, and Networks dwarf the revenues at the Box Office. While the major studios derived 100% of their revenues from Box Office in 1948, this percentage has continuously dropped to only 18% in 2003. Additionally, these ancillary businesses are almost all profits. The vast majority of the production costs have already been absorbed within the Box Office business. However, a majority of movies still loose money when you figure the full life cycle of its "intellectual property." Epstein details throughout the book such a cycle for "Gone In 60 Seconds" with Nicolas Cage. At first, the movie seems a roaring success as it grossed $242 million in worldwide Box Office. But, when you figure the whole cycle, as of 2003 the movie including the ancillary businesses was still $150 million in the tank. The reason movies still get made is because there are so many willing equity partners absorbing the brunt of the losses in financing movies. The studios survive because they are supported by their strong parent holding companies whose businesses are diversified in technology, news, media, and consumer products. The directors and stars make a fortune. And, the equity partners are the ones loosing their shirts. After reading this book, one assesses that movie stars are the most overpaid human beings on the planet. In one single movie, they often make more money than sports stars make over their entire career (tennis or golf comes to mind). Even though some stars do attract the public, the underlying economics of their movies over the full cycle is not attractive. If it were not for equity partners making irrational investment decisions, the castle of cards would crumble. The book also breaks or confirms many interesting myths. For one, Tom Cruise does not do his own stunts despite what you see in DVD bonus features. Th

Epstein's book strips the Hollywood movie industry down to its underwear. Hollywood tries hard - and often succeeds - to portray itself in certain ways that we usually accept just because Hollywood is in the business of creating fantasy. But Epstein disrobes the pretense that Hollywood dresses itself in and shows that even Hollywood is just a business, albeit one that operates with accounting rules heavily stacked in favor of the studios. Take, for example, Epstein's oft-cited example of the movie "Gone in 60 Seconds". The movie cost $103 million to make in 2000. Disney spent $103 million more on various residual fees, printing costs, insurance, taxes, and so on, for a total cost of $206 million. The film grossed $242 million worldwide, $139.8 million was paid to movie theaters leaving only $102 million for Disney, out of which it had to pay employees and overhead, leaving it with a net loss of $160 million. So, the movie was a bomb right? Wrong. The movie earned $198 million from sales and rentals of DVDs and videos and $18 million from HBO for the television rights. No doubt there are other revenue streams that Epstein doesn't mention. But, due to some nifty accounting tricks, most of this revenue is pure profit. So Disney's $160 million loss is more like a $30 million profit once DVD and video product expenses are accounted for. Not bad for a movie that was a complete flop at the box office. Epstein delves into the history of Hollywood and really does a great job of telling you why it is like it is nowadays. You'll learn how big stars like Schwarzenegger get preferential treatment by the studios while lesser actors receive what the studios think they're worth. You'll learn the difference between " & " and "and" in movie credits and how studios came to love DVD despite their initial grievances. And you'll learn why G-rated movies hit the financial bullseye so much more often than R-rated ones. All told, this book will appeal to those of you who are intrigued by the mysterious nature of Hollywood and how it manages to turn sows' ears into silk purses. Read it and see the wizard behind his curtain.

I like books on business in general and also read many books on the movie business. This is an exceptional book to understand the current-day economics of the movie business which has changed drastically. Much in this book has already been covered of the original movie business starting from an Eastern Jewish influence to the West Coast. Fortunate to have a business with complete control of the talent through the studio system it was a "win-win" controlling the talent as well as what movies were shown in the theaters they owned. But laws soon outlawed owning the theaters and by the 60s the studio system completely crumbled allowing directors and stars to now bid their pay to incredible wealth. Where this book really excels is not in the history of the business, where a fine job was done, but in the current discussion of the economics of the business. There are specific examples but probably the most telling is concerning the film, "Gone in Sixty Seconds", a typical car crash film starring Nicolas Cage. Most would probably assume this was not a profitable movie but he explains how movies are generally not profitable from ticket sales but through licensed video games, DVD sales and other promotions. This movie was hugely profitable but only when considering this ancillary income. The example is carried further in explaining the mystic behind "net" and "gross" points. The known fact in Hollywood is always to get your points in "gross", prior to expense allocation. That's easier said than done. He goes through the whole math of the clearing house. As a former CPA it's an excellent explanation on what is "behind the curtain" in Hollywood accounting that leads to so many lawsuits. Overall, I consider this on of the best books ever written about Hollywood. But this reads somewhat like a college textbook full of thought provoking information. This is not a light, fun read but a business book which should be required reading for anyone considering entering the business side of Hollywood. I strongly recommend this book if you want to "study" the finance/accounting side of the business.

How can one book (in only 352 pages, at that) possibly explain the simultaneously anarchic and minutely orchestrated film industry? I didn't think it could be done until I read Edward Epstein's The Big Picture. Prior to this book, the best descriptions of Hollywood also have been the briefest, like William Goldman's famous dig "Nobody knows anything." But Epstein's exhaustively researched book captures how Hollywood has gone from one sure-fire profit machine relying on the vertical integration of studios (or "film factories", as Epstein puts it), distribution networks, and theaters, into another, similarly profitable oligopoly obsessed with the leveraging of intellectual property. In a work that would do both an investigative reporter and a strategy consultant proud, Epstein masterfully pieces together the interlocking stories of how movies get made and how movies get profitable. Though this may sound dry, The Big Picture never bogs down. Instead it masterfully weaves together discussions of Hollywood's personalities, fateful business decisions, the obvious and not-so-obvious impacts of changes in law and technology, and the mechanics of how movies get made and marketed. One of the best books of the year.