De Vany - Hollywood Economics: How Extreme Uncertainty Shapes the Film Industry

Just how risky is the movie industry? Is screenwriter William Goldmans claim that nobody knows anything really true? Can a star and a big opening change a movies risks and return? Do studio executives really earn their huge paychecks?

These and many other questions are answered in Hollywood Economics. The book uses powerful analytical models to uncover the wild uncertainty that shapes the industry. The centerpiece of the analysis is the unpredictable and often chaotic dynamic behavior of motion picture audiences.

This unique and important book will be of interest to students and researchers involved in the economics of movies, industrial economics and business studies. The book will also be a real eye-opener for film writers, movie executives, finance and risk management professionals as well as more general movie fans.

Arthur De Vany is Professor Emeritus of Economics at the University of California, Irvine and President of Ars Analytica, a consulting company specializing in energy, motion pictures and risk-return analysis.

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Hollywood Economics

How extreme uncertainty shapes the film industry

Arthur De Vany

A heretical and wise perspective on the economics and consumer patterns of Hollywood. Provocative and eye opening for its depth and intelligent analysis.

Thom Mount, Producer and former Universal Studios President

This book provides dramatic evidence that, in comparison with the film industry, normally uncertain markets are virtually sure things. Not even popular stars or large first-week audiences are valid predictors of a films future success. The volume demonstrates what sophisticated analysis can and cannot reveal about an industry in which no one knows anything. It will be extremely valuable to anyone with an intellectual, financial or other interest in the market for popular films and for anyone concerned with analysis of subjects characterized by extreme uncertainty. Nonspecialists should not be daunted by the demanding technical analysis for there is plenty that will readily be understandable and fascinating to any intelligent reader.

William J. Baumol, Professor of Economics, New York University and Senior Research Economist at Princeton University, USA

If you want an applied exposition of the wild type of uncertainty, this is the book. I know of no better text to understand kurtosis, the contribution of the very small to the very large, and the dynamics of rare events. The value of this book lies way beyond the film industry. In addition it is written with great clarity and does not use anything beyond intuitive mathematics.

Nassim Nicholas Taleb, PhD, Empirica LLC, Bestselling author of Fooled by Randomness (Texere, 2001)

Professor De Vany has written a seminal work on the risks of film investment, a topic with which Hollywood may be painfully familiar, but which has rarely, if ever, been the subject of such thorough analysis. Through his statistical studies and analyses, Professor De Vany questions many of the assumptions made by Hollywood dealmakers, investors and studio executives.

Sam Pryor, Partner, Alschuler Grossman Stein & Kahan Adjunct Professor, Entertainment Law, USC Law School

The breakthrough work of De Vany that is represented in this book is both thoughtful and thorough, providing a theoretical foundation for understanding the statistical dynamics and economic structure of the movie business in a way that has never been done before. Hollywoods business practices and contractual relationships, often characterized as being bizarre and chaotic, are placed in a theoretical framework that makes them all appear quite rational and workable in the context of an economically-driven system. Even if readers do not fully grasp all of the mathematical details, industry executives, analysts, and students are likely to benefit greatly from this book and cannot claim to know the business of Hollywood and its economics until theyve been exposed to this material.

Harold L. Vogel, author of Entertainment Industry Economics (CUP, 2001)

With this book, the agnostic mantra of the motion picture industry nobody knows anything finally loses its legs. Somebody does know something, and its Art De Vany. When the history of motion picture industry thought is written, this author and this book will have its unique place and special recognition in that story.

Bruce Mallen, PhD, Director, The DeSantis Center, Dean, College of Business, Florida Atlantic University

Arthur De Vany has revolutionized the way in which Hollywood can be thought about. He has brought a rigour to the study of film that simply cannot be ignored, even where the reader does not always agree with his conclusions. These articles are essential reading for anyone wanting to understand the manner in which Hollywood works.

John Sedgwick, Principal Research Fellow in Economics, London Metropolitan University, UK

Screenwriter William Goldman is famous for having said that nobody knows anything about the economics of the entertainment industries. His claim is now proved wrong for the movie industry. Arthur De Vanys book makes it transparent. Even those who are not very familiar with the sophisticated statistical and econometric tools that he uses will understand the arguments, which are explained with great clarity and lucidity. De Vanys book will soon be among the very few classics on the entertainment industries.

Victor Ginsburgh, Professor of Economics at Universit libre de Bruxelles, Belgium