The numbers behind the industry.
huge success of yet another Star Wars re-tread
shows that George Lucas has not lost his touch. Aside from
his six Star Wars episodes, Lucas has shaped the
new Hollywood through Industrial Light & Magic, the
state-of-the-art illusion factory that he founded in 1975.
By Lucas' reckoning, eight out of the 10 most profitable
movies in history have been outsourced to ILM. He also created
THX, his own brand of digital surround sound for both multiplexes
and home theaters. Along with Steven Spielberg, Lucas deserves
much of the credit for turning the cinematic experience
into a visual and sonic amusement park for youth, but he
did not invent what has now become the big studios' Midas
formula. That innovator was Walt Disney.
Disney put all the elements together back in 1937, when
he made Snow White and the Seven Dwarfs. The picture
was labeled a folly by the moguls who ruled old Hollywood
because it was aimed at only a small part of the American
audience, children. As history shows, Snow White became
the first film in history to gross $100 million, demonstrating,
among other things, the propensity of children to see the
same cartoon over and over again. The movie was also the
first to have an official soundtrack, including such songs
as "Some Day My Prince Will Come," that became
a hit record. More important, Snow White had multiple
licensable characters (the dwarves, the wicked witch) who
took on long lives of their own, first as toys and later
as theme-park exhibits. So, here was Hollywood's future:
Its profits would come not from squeezing down the costs
of producing films but from creating films with licensable
properties that could generate profits in other media over
long periods of time.
advent of computer-based technology has simply provided
new ways of mining this El Dorado. The franchises that have
raked in over a billion dollars from all markets (including
world DVD, television, and toy licensing)—The
Lord of the Rings, Harry Potter, Spider-Man, Finding Nemo,
Star Wars, Shrek, The Lion King, Toy Story, and Pirates
of the Caribbean—share most, if not all, of the
nine common elements of the Midas formula:
1) They are based on children's fare—stories, comic
books, serials, cartoons, or, as in the case of Pirates
of the Caribbean, a theme-park ride.
They feature a child or adolescent protagonist (at least
in the establishing episode of the franchise).
They have a fairy-talelike plot in which a weak or ineffectual
youth is transformed into a powerful and purposeful hero.
They contain only chaste, if not strictly platonic, relationships
between the sexes, with no suggestive nudity, sexual foreplay,
provocative language, or even hints of consummated passion.
(This ensures the movie gets the PG-13 or better rating
necessary for merchandising tie-ins and for placing ads
on children's TV programming.)
They include characters for toy and game licensing.
They depict only stylized conflict—though it may be
dazzling, large-scale, and noisy in ways that are sufficiently
nonrealistic and bloodless (again allowing for a rating
no more restrictive than PG-13).
They end happily, with the hero prevailing over powerful
villains and supernatural forces (and thus lend themselves
They use conventional or digital animation to artificially
create action sequences, supernatural forces, and elaborate
They cast actors who are not ranking stars—at least
in the sense that they do not command gross-revenue shares.
(For his role in Spider-Man, Tobey Maguire received
only $4 million and a share of "net profits,"
which do not divert from the revenues flowing into the studios'
success of the DVD has propelled the Midas-formula sequels
to dazzlingly high earnings. A studio with a successful
franchise now assumes it will sell over 30 million units
per sequel, harvesting for itself between $450 million and
$600 million dollars. (When Shrek 2 sold a mere
30 million copies this year—and had 7 million in returns—it
wiped out a good portion of DreamWorks Animation's quarterly
earnings.) The studios, looking at a half-billion dollars
or so in the DVD take alone, often decide to produce multiple
sequels at the same time, as New Line did with The Lord
of the Rings and Disney is currently doing with Pirates
of the Caribbean.
While this is an enormously high-stakes game—Disney's
double helping of Pirates of the Caribbean is budgeted
at over a quarter of a billion dollars—even a single
successful licensing franchise can put a studio in the black.
A top Paramount executive pointed out to me, after Paramount
gambled on the Lara Croft: Tomb Raider series and
lost, that if Paramount had made Spider-Man instead
of Sony Pictures, Paramount would be leading the studio
pack instead of dwelling in last place. So, the studios,
no matter how steep the losses when these movies bomb, must
gamble to stay in the game.
consolation prize with Lara Croft was that it reduced
most of the cost through German tax shelters and other gimmicks.)
doesn't every studio have a Midas-formula franchise? Much
of the territory is already staked out. Disney controls
the sequel rights to six animated Pixar films (even if Pixar
decides to partner with another studio) and Pirates
of Caribbean; Time Warner has both Harry Potter
and Lord of the Rings; Sony owns Spider-Man;
DreamWorks has Shrek; and, finally, there's the
indefatigable George Lucas and his Star Wars. The
space at the playground is limited by available slots at
the multiplexes on holiday weekends, by established long-term
merchandising tie-ins, and by scarce shelf space at Wal-Mart
and other stores. Succeeding at this game is anything but
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