For the past couple weeks, one of my favorite blog-reads has been Jonathan Taplin’s blog. I got to know Jon when I lived in LA last year when he was co-faculty with me at the USC Annenberg Centre: he’s a smart polymath with a background as a music and film producer (Bob Dylan, Mean Streets, others), Democratic party shaker, financier, high-tech startup entrepreneur, and good thinker on diverse issues related to media, politics and technology.
Taplin’s blog is as eclectic as he is, a straight-up analysis blog that rips into the headlines, illuminating everything from economic news to the writers’ strike to heavy weather to democratic politics. I keep finding myself returning to Taplin’s posts as I read the news and talk with friends.
Hollywood is caught in “The Prisoner’s Dilemma”, a classic bit of game theory that is behind such notions as a nuclear arms race. It would be in the financial and security self interest of both India and Pakistan to not spend billions on nuclear weapons, but because they don’t trust each-other, they continue to do so, instead of feeding their poor. Hollywood moguls, caught up in the useless notion of “Market share”, don’t trust each-other to not make more movies to grab greater share. The notion of market share of the box office never entered Hollywood’s lexicon until the Coca Cola company bought Columbia Pictures in 1982, bringing their supermarket shelf space POV to the movie business. Market share with a commodity product like sugar water is a fine notion. Market share with a one-off variable cost product like a movie is financial suicide. Coke quickly figured this out and in 1987 unloaded Columbia to Sony, desperate to own content so it didn’t get screwed in the DVD wars to come as it had in the Betamax disaster. Of course Sony’s guess turned out to be wrong as well, as their ownership of content has not helped BluRay’s High Definition player succeed in a similar Prisoner’s Dilemma stand off with Toshiba’s HD DVD. The excess movie output problem is further complicated by the role of A list talent, who’s only objective is to secure as many multi-million dollar fees per year as possible. They always believe their film will rise above the crowd, and when this does not happen, they have no penalty for the failure. No one ever asks Tom Cruise or Joel Silver to give back their fees on a bomb.
With the hedge funds that fueled much of this madness now licking their wounds from the sub prime meltdown, perhaps some sanity may return to the business. Without crossing the anti-trust fine line, perhaps the majors and their equally guilty specialty divisions might make a New Year’s resolution to cut back production. After all, the mark of a good business is not market share but Return on Investment.