The Economics of Hollywood

The name Edward Jay Epstein might ring a bell as the author of Inquest, a 1966 tracing of Oswald’s footprints prior to the JFK assassination. After reading his The Hollywood Economist 2.0: The Hidden Financial Reality Behind the Movies published 49 years later, I am left with the feeling that he has uncovered a more serious if less violent crime: the degradation of American film by an industry much more committed to the bottom line than culture.

While I have written over the years about how commerce trumps art, including for CounterPunch and Class, Race and Corporate Power , I now understand the nuts and bolts behind commerce’s triumph. Epstein describes in meticulous detail that would make a CPA envious exactly how we have descended from “Citizen Kane” to films such as “Transformers” shown at multiplexes. Ironically, it was the latter day versions of William Randolph Hearst—the inspiration for Charles Foster Kane—who transformed the film industry into what it is today, a globalized behemoth that not only churns out films geared to children and teens but one that appeals to their basest instincts, the equivalent in some ways of selling crack cocaine to high schoolers.

Epstein, who is ten years my senior, probably mourns the loss of great filmmaking as much as me or anybody who was blessed with the opportunity to live through the Golden Age of Hollywood. It was not just that it was it home to Orson Welles, Alfred Hitchcock, John Ford, Preston Sturges and Stanley Kubrick. It was linked to palatial movie theaters that evoked cathedrals, including the six thousand seat (!) Roxy Theater in New York that Epstein alludes to on page one. I remember traveling to New York to see a movie at the Roxy in 1955 with my mother who promised that it would be the experience of a lifetime. It was like a Catholic family visiting a shrine for a miracle that some saint had performed.

Epstein reports that in 1929 an average of 95 million people went to a movie once a week, about four-fifths of the ambulatory population. Today weekly attendance is 10 percent and dwindling. Obviously the main explanation is television but beyond that it is market forces that dictate what gets shown to those who still go out to see a movie and wonder afterwards why they wasted twelve dollars and two hours of their precious leisure time. This is not limited to literate adults. Even the target demographic—the 10 to 17 year old—is finding entertainment elsewhere, including the hollywoodeconInternet. With ticket sales in 2014 the lowest in twenty years, Hollywood shows no interest in retreating from its reliance on sequels to establish brands like “Transformers”. As with Detroit’s love affair with gas-guzzlers, the road to ruin is irreversible. There’s little to dissuade the key players in Hollywood, especially someone like Rupert Murdoch whose Fox studios before his takeover was capable of producing a film like “Roots of Heaven”, the memorable 1958 Errol Flynn vehicle based on a Romaine Gary novel that celebrated guerrilla warfare to protect African elephants from big game hunters.

Perhaps the biggest revelation in The Hollywood Economist is how the multiplex was born, a horror in some ways more unspeakable than the killer robots found on the screens within their bowels.

With the advent of television and declining audiences, the theater owners converted larger theaters into multiplexes in order to take advantage of economies of scale. If a film like “Roots of Heaven” would be boring to the average 13 year old (although it wasn’t to me at the time), a multiplex could show it while some idiotic comedy starring a SNL alumnus played next door. Of course, as it turned out the multiplex became wall-to-wall idiocy.

For the multiplex, the summer blockbuster is essential. Typically, nearly half of all tickets are sold during the summer when as one Fox executive told Epstein “Every day is a school holiday”. Another good chunk of tickets are sold between Thanksgiving and New Year’s as well. For the peak seasons, catastrophe movies like “Godzilla” or “Battleship” or bromance comedies are featured to the accompaniment of expensive publicity campaigns on television both in commercials and the crappy “entertainment” shows whose influence seeped into late night television talk shows. For Hollywood executives shaping the publicity campaigns, they fall into various categories such as “Clearasil” (coming-of-age), “genre” (teen-age horror), “romantic comedy” (love story), “ethnic” (Black characters), “franchise” (a sequel to some sorry film), and “catastrophe” (volcanoes, comet/asteroid/monster, loud sound track, CGI). The best of all possibilities is a film like “Titanic” that covered all these bases.

In a section provocatively subtitled “Why do most new movie theaters have fewer than 300 seats”, Epstein provides a mind-boggling but not entirely unexpected answer. It seems that it was done to thwart the Americans with Disability Act of 1990 that required theaters with 300 seats and more to provide ramps for wheelchairs, something that would compete with revenue generating seats. This led to a proliferation of screens in the multiplex world. Between 1990 and 2005 the total number of screens in the USA increased from 23,000 to 38,000 as theaters subdivided even further.

After the success of “Avatar”, Hollywood decided that the answer to lagging ticket sales was technical fixes like 3D or CGI, all on display in the abysmal “Jurassic World” that is generating huge box office numbers, news that is more depressing than anything coming out of the Middle East.

In a celebrity-driven society, it is not surprising that the star has more clout than ever. If a film’s success is based on the name recognition of a star, you can expect huge amounts of money to be spent on someone like Arnold Schwarzenegger who made record sums off of the Terminator series. Even now at the age of 67, he is expected to rake in millions for the upcoming “Terminator Genisys”, which might be more accurately titled “Terminator Geezer”.

My favorite chapter in Epstein’s book is titled “Unoriginal Sin” that begins “In Hollywood originality is anything but a virtue”. Honing in on his target like a heavyweight boxer, he explains exactly why we end up with a catastrophe movie like “San Andreas” whose main virtue would be the representation of an earthquake swallowing up Warner Brothers studios, where it was made.

In a section deliciously titled “Teens and Car Crashes Go Together”, Epstein lays it all out. After television took over, Hollywood had to reinvent itself. This meant zeroing in on key demographic sectors that could be induced to leave their home and see a movie. This was the American teenager that tended to watch the same shows on television, where a carefully crafted advertising campaign could seduce them into a trip to the local multiplex. Since teens are prodigious consumers of popcorn and soda, the chief profit-makers in movie theaters rather than ticket sales, and tend to buy follow-up items like electronic games connected to a film, this was an audience worth cultivating even if it meant writing off anybody who enjoyed Proust or Charles Bukowski for that matter.

By 2009 Hollywood had fine-tuned its demographics-driven strategy to such a great extent that over 70 percent of the audience at multiplex type theaters were under 21. To quote Epstein, “The movies that filled that bill were action films laden with special effects, explosions, crashes and mayhem.”

And now to quote Eleanor Roosevelt, “It is better to light a candle than curse the darkness”. Unlike my colleagues in New York Film Critics Online who are forced to review something like “San Andreas” or “Terminator Genysis”, I have the luxury of seeing what I want rather than what a 17-year-old wants to see. As an avocation, film reviewing can’t be topped. As a vocation, it is not what I wanted to do after retirement even if friends advised me that I could supplement my income that way. My interest will continue to be in those films that get neglected by the mainstream press and whose leading characters will never get invited to appear on the Jimmy Fallon show.

In 1938 Christopher Caudwell wrote “Studies in a Dying Culture” that fortunately can be read in its entirety on the Marxist Internet Archives. Towards the end of this indispensible book, the author who died fighting in the Spanish Civil War, made this astute observation:

Why does not bourgeois society fulfil the wants of its members? Because it does not understand the laws of economic production – it is unorganised and unplanned. It is unconscious of the necessities of economic production, and, because of that, cannot make economic production fulfil its desires. Why is it unconscious of the necessities of economic production? Because, for historical reasons, it believes that economic production is best when each man is left free to produce for himself what seems to him most profitable to produce.

Thanks to Edward Jay Epstein’s brilliant Hollywood Economist 2.0: The Hidden Financial Reality Behind the Movies, we are now in a much better position to understand why—to paraphrase the first sentence above—Hollywood does not fulfill the wants of its audience.

Louis Proyect blogged at and was the moderator of the Marxism mailing list. In his spare time, he reviewed films for CounterPunch.