Edward Jay Epstein - The Hollywood Economist 2.0: The Hidden Financial Reality Behind the Movies

PRAISE FORTHE HOLLYWOOD ECONOMIST

[A] terrific job. Theres fun to be had in knowing specifics, and Epstein offers plenty.

ENTERTAINMENT WEEKLY

The mysteries of modern-day film financing the seamy underbelly of Hollywood spreadsheets.

THE WALL STREET JOURNAL

PRAISE FOR EDWARD JAY EPSTEINSTHE BIG PICTURE

A rich adventure that will change the way you look at movies.

BUSINESSWEEK

Edward Jay Epstein is here to tell us that when it comes to Hollywood these days, weve got it all wrong.

THE WASHINGTON POST BOOK WORLD

One of the virtues of The Big Picture is Mr. Epsteins astonishing access to numbers that movie studios go to great lengths to keep secret A groundbreaking work that explains the inner workings of the game.

THE WALL STREET JOURNAL

Hollywood has needed one of these for a long timea users manual. This one could not be more complete. [Grade] A.

ENTERTAINMENT WEEKLY

In his adroit charting of the confidence flow between the various entities and eras Mr. Epstein kicks up a lot of little surprises Edward Jay Epstein is quite good.

LARRY McMURTRY, THE NEW YORK REVIEW OF BOOKS

[A] valuable education for those seeking to enter and understand the entertainment industry. Factually impressive.

JOEL HIRSCHHORN, VARIETY

Epstein peels away the Hollywood facade and gives a nuts-and-bolts view of how the six entertainment empiresViacom, Fox, NBC/Universal, Time Warner, Sony, and Disneycreate and distribute intellectual property today. [He] presents a fascinating look at the unbelievable efforts that must be coordinated to produce a film.

BOOKLIST

In vivid detail, he describes the current process of how a film is made, from the initial pitch to last-minute digital editing. Theres a refreshing absence of moral grandstanding in Epsteins work. With no apparent ax to grind, he simply and comprehensively presents the industry as it is: the nuts and bolts, the perks and pitfalls and the staggering fortunes that some in the business walk away with. This is the new indispensable text for anyone interested in how Hollywood works.

PUBLISHERS WEEKLY

[A] meticulously reported new book.

THE BALTIMORE SUN

What one learns from these investigations is that the deepest, darkest secrets in Tinseltown have nothing to do with sex, drugs, blasphemy, or politics, and everything to do with money.

THE WEEKLY STANDARD

Edward Jay Epstein blew the lid off Hollywoods dirty little open secret.

THE WASHINGTON TIMES

Compelling. [Epstein] demystifies the contemporary process of film-making in the digital age.

THE PITTSBURGH POST-GAZETTE

ALSO BY EDWARD JAY EPSTEIN

Inquest: The Warren Commission and the Establishment of Truth

Counterplot: Garrison vs. the United States

News from Nowhere: Television and the News

Between Fact and Fiction: The Problem of Journalism

Agency of Fear: Opiates and Political Power in America

Cartel: A Novel

Legend: The Secret World of Lee Harvey Oswald

The Rise and Fall of Diamonds: The Shattering of a Brilliant Illusion

Who Owns the Corporation?: Management vs. Shareholders

Deception: The Invisible War Between the KGB and the CIA

The Assassination Chronicles: Inquest, Counterplot, and Legend

Dossier: The Secret History of Armand Hammer

The Big Picture: Money and Power in Hollywood

THE HOLLYWOOD ECONOMIST RELEASE 2.0

2010, 2012 E.J.E. Publications, Ltd., Inc.

All rights reserved

First Melville House printing: January 2012

Melville House Publishing
145 Plymouth Street
Brooklyn, NY 11201

www.mhpbooks.com

eISBN: 978-1-61219-051-8

Parts of this book appeared in earlier form in The New Yorker, Slate, The Wall Street Journal, the Financial Times, Gawker, and The Wrap.

A catalog record for this book is available from the Library of Congress

v3.1

For Susana Duncan

INTRODUCTION
Why We Dont Understand Hollywood

There was a time, around the middle of the twentieth century, when the box office numbers that were reported in newspapers were relevant to the fortunes of Hollywood: studios owned the major theater chains and made virtually all their profits from their theater ticket sales. This was a time before television sets became ubiquitous in American homes, and before movies could be made digital for DVDs and downloads.

Today, Hollywood studios are in a very different business: creating rights that can be licensed, sold, and leveraged over different platforms, including television, DVD, and video games. Box office sales no longer play nearly as important a role. And yet newspapers, as if unable to comprehend the change, continue to breathlessly report these numbers every week, often on their front pages. With few exceptions, this anachronistic ritual is what passes for reporting on the business of Hollywood.

To begin with, these numbers are misleading when used to describe what a film or studio earns. At best, they represent gross income from theater chains ticket sales. These chains eventually rebate about 50 percent of the sales to a distributor, which also deducts its outlay for prints and advertising (P&A). In 2007, the most recent year for which the studios have released their budget figures, P&A averaged about $40 million per titlemore than was typically received from American theaters for a film in that year. The distributor also deducts a distribution fee, usually between 15 and 33 percent of the total theater receipts. Therefore, no matter how well a movie appears to fare in the box office race reported by the media, it is usually in the red at that point.