Hollywood Doesn’t Change Its Course Well in Digital Atmosphere

This is the moment on the calendar when dire year-end analyses start appearing in the media — data-driven reports that are both portentous and ominous. The message is usually the same: The ground is shifting and Hollywood had better adapt or shrivel.

I’m persuaded that few in the industry ever read these reports, because Hollywood has never displayed a talent for accommodating change, and there is no sign of mutability in this behavior. Other industries seem able to assimilate new business models and shifting technologies, but Hollywood is traumatized by them, replaying its crises over and over again. It makes for messy economics but good showbiz.

The present cycle of change is more angst-producing because, as the Economist declares in its year-end report, “the era of easy money in Hollywood has toppled over, like a precariously stacked pile of DVDs.”

The DVD reference is apt, because the decline of the mighty disc was accelerated by Hollywood’s inattentiveness and lack of adaptability. “When the DVD was at its peak, the studios failed to reinforce its growth through broader distribution and price elasticity,” argues Warren Lieberfarb, who was the longtime head of Warner Home Video. “While electronic delivery is clearly the best hope to get revenue back on a growth track, the industry should have fortified the DVD as a way station in the ongoing evolution of entertainment delivery.”

Hollywood also displayed this kind of rigidity in the 1950s when the rise of television devoured 65% of the movie industry’s “habit audience,” the frequent filmgoers of their time. Instead of adapting its product to a new and younger crowd, the studios kept grinding out tired “program pictures” — genre movies made to fill out the schedule of studio-owned theaters — until they ran out of money. Richard Zanuck, then chief at Fox, looked on in disbelief as his stodgy late-’60s musicals like “Star!” and “Doctor Dolittle” opened to empty theaters.

Ironically, a generation earlier, it was Zanuck’s ferocious father, Darryl, then production chief at Warner Bros., who seemed frozen by the Great Depression, incapable of meaningful response. With the nation’s economy in paralysis in 1933, other studio chiefs advocated a 50% cut in salaries across the board, from grips to actors to executives. Zanuck stubbornly refused to accept a cut, proposing that Hollywood should simply wait out the Depression. The cuts came anyway, and Zanuck left Warners that year.

In its relationship with its stars, Hollywood also has displayed a neurotic intransigence. At the zenith of the studio system, top stars were put under rigidly exclusive contracts that dictated the course of their careers. When grosses started slipping, the studios revoked these deals as extravagant and irresponsible; stars, who were used to being coddled, found themselves out in the cold. The next iteration didn’t feature studio contracts. Instead, top stars were granted gross-participation deals — agreements in which they realized big bucks from a movie before it reached profitability. Under new studio models, such pacts, which were accepted then, are now deemed profligate irrelevancies.

Likewise, these days, just about every network chief will tell you pilot season is an anachronism, but no one thinks it will go away. As for movies, distributors generally agree that the amount of money spent on marketing is out of control, especially during awards season. And, of course, spending on awards supposedly is also out of control, yet this year in particular, the dollars keep rolling in.

For Hollywood watchers, these neurotic phenomena are entertaining to watch; for the number-crunchers, they pose an exasperating reminder that it is very difficult to manage either entertainment or the people who create it.

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