PRAISE FOR THE HOLLYWOOD ECONOMIST “[A] terri c job.… There’s fun to be had in knowing speci cs, and Epstein o ers plenty.” —ENTERTAINMENT WEEKLY “The mysteries of modern-day lm spreadsheets.” —THE WALL STREET JOURNAL nancing … the seamy underbelly of Hollywood PRAISE FOR EDWARD JAY EPSTEIN’S THE BIG PICTURE “A rich adventure that will change the way you look at movies.” —BUSINESSWEEK “Edward Jay Epstein is here to tell us that when it comes to Hollywood these days, we’ve got it all wrong.” —THE WASHINGTON POST BOOK WORLD “One of the virtues of The Big Picture is Mr Epstein’s astonishing access to numbers that movie studios go to great lengths to keep secret … A groundbreaking work that explains the inner workings of the game.” —THE WALL STREET JOURNAL “Hollywood has needed one of these for a long time—a user’s manual This one could not be more complete.… [Grade] A.” —ENTERTAINMENT WEEKLY “In his adroit charting of the dence ow between the various entities and eras Mr Epstein kicks up a lot of little surprises … Edward Jay Epstein is quite good.” —LARRY McMURTRY, THE NEW YORK REVIEW OF BOOKS “… [A] valuable education for those seeking to enter and understand the entertainment industry.… Factually impressive.” —JOEL HIRSCHHORN, VARIETY “Epstein peels away the Hollywood facade and gives a nuts-and-bolts view of how the six entertainment empires—Viacom, Fox, NBC/Universal, Time Warner, Sony, and Disney—create and distribute intellectual property today.… [He] presents a fascinating look at the unbelievable efforts that must be coordinated to produce a film.” —BOOKLIST “In vivid detail, he describes the current process of how a lm is made, from the initial pitch to last-minute digital editing There’s a refreshing absence of moral grandstanding in Epstein’s work With no apparent ax to grind, he simply and comprehensively presents the industry as it is: the nuts and bolts, the perks and pitfalls and the staggering fortunes that some in the business walk away with This is the new indispensable text for anyone interested in how Hollywood works.” —PUBLISHERS WEEKLY “[A] meticulously reported new book.” —THE BALTIMORE SUN “What one learns from these investigations is that the deepest, darkest secrets in Tinseltown have nothing to with sex, drugs, blasphemy, or politics, and everything to with money.” —THE WEEKLY STANDARD “Edward Jay Epstein blew the lid off Hollywood’s dirty little open secret.” —THE WASHINGTON TIMES “Compelling.… [Epstein] demysti es the contemporary process of digital age.” —THE PITTSBURGH POST-GAZETTE lm-making in the ALSO BY EDWARD JAY EPSTEIN Inquest: The Warren Commission and the Establishment of Truth Counterplot: Garrison vs the United States News from Nowhere: Television and the News Between Fact and Fiction: The Problem of Journalism Agency of Fear: Opiates and Political Power in America Cartel: A Novel Legend: The Secret World of Lee Harvey Oswald The Rise and Fall of Diamonds: The Shattering of a Brilliant Illusion Who Owns the Corporation?: Management vs Shareholders Deception: The Invisible War Between the KGB and the CIA The Assassination Chronicles: Inquest, Counterplot, and Legend Dossier: The Secret History of Armand Hammer The Big Picture: Money and Power in Hollywood THE HOLLYWOOD ECONOMIST RELEASE 2.0 © 2010, 2012 E.J.E Publications, Ltd., Inc All rights reserved First Melville House printing: January 2012 Melville House Publishing 145 Plymouth Street Brooklyn, NY 11201 www.mhpbooks.com eISBN: 978-1-61219-051-8 Parts of this book appeared in earlier form in The New Yorker, Slate, The Wall Street Journal, the Financial Times, Gawker, and The Wrap A catalog record for this book is available from the Library of Congress v3.1 For Susana Duncan CONTENTS Cover Other Books by This Author Title Page Copyright Dedication INTRODUCTION Why We Don’t Understand Hollywood PART The Popcorn Economy Ten Years Ago, I Learned the Real Secret Is the Salt Why Do Most New Movie Theaters Have Fewer than 300 Seats? Sex in the Cinema: Asset or Liability? The Vanishing Box Office The Reel Silver Lining PART II Star Culture The Contract’s the Thing—If Not for Hamlet, for Arnold Schwarzenegger Movie Stars Come in Two Flavors: $20 Million and Free The Angst Question in Hollywood: What Is Your Cash Breakeven? The Sad Lesson of Nicole Kidman’s Knee—Or What a Star Needs to Get a Part The Starlet’s Dilemma There Is No Net The Video Windfall Nobody Gets Gross “I Do My Own Stunts” PART III Hollywood’s Invisible Money Machine Why Lara Croft: Tomb Raider Is Considered a Masterpiece of Studio Financing Money-For-Nothing from Germany How Does a Studio Make a Windfall out of Being on the Losing Side of a Japanese Format War? Romancing the Hedge Funds Ending Up on the Wrong End of the Deal Ever Wonder Why New York Looks Like Toronto in the Movies? The Foreign Mirage Pushing the Pseudo Reality Envelope The New Civil War among the States The Rise and Fall of Pay Television For Whom Does the Movie Business Toll? PART IV Hollywood Politics In the Picture Paranoia for Fun and Profit: The Saga of Fahrenheit 9/11 The Saga Continues Plus Ça Change: Paramount’s Regime Change Tom Cruise, Inc The Studios—Required Reading An Expert Witness in Wonderland PART V Unoriginal Sin Audience Creation Teens and Car Crashes Go Together The Midas Formula Market Testing Villains Why Serious Fare Went Small Screen PART VI Indie Film The Oscar Deception Can Indie Movies Survive? How to Finance an Indie Film PART VII The Politics of Streaming The Quest for the Digitalized Couch Potato The Samurai Embrace The Rise of the Tube Moguls The Last Days of the Video Store And the End of Theatres? Downloading for Dollars EPILOGUE Hollywood: The Movie APPENDIX I Warner Bros Distribution Report #6 Midnight in the Garden of Good and Evil APPENDIX II Warner Bros Distribution Report #4 Harry Potter and the Order of the Phoenix ... Counterplot, and Legend Dossier: The Secret History of Armand Hammer The Big Picture: Money and Power in Hollywood THE HOLLYWOOD ECONOMIST RELEASE 2. 0 © 20 10, 20 12 E.J.E Publications, Ltd., Inc... comes to the movies After audiences are mesmerized by Al Jolson in The Jazz Singer, Hollywood, in one of the great technological feats of modern history, converts most of the 21 ,00 0 movie theaters... craze, they build distribution networks to service other exhibitors, and then studios to assure that they have enough movies Along the way, they battle part of the establishment in the form of the