Movies, generally speaking, find themselves at the crossroads of fiction and reality, representing an artifice that, while occasionally fanciful or escapist, grounds itself in universal truths. Even documentaries, which may record life as accurately as possible, engage in time displacement, making the transpired events seem somewhat otherworldly. Like many other forms of entertainment media, films struggle to balance their dual nature, occasionally pitting artistic freedom against economic constraints. With few exceptions, one might see an expectation for movies to achieve success on both counts: the creative forces (e.g., director, writer, and stars) would appear to have a stake in the imaginative aspects of filmmaking whereas businesses (e.g., studios, producers, and theater owners) focus on the economic components. Truthfully, however, the interests of the involved parties do not always fall along clear-cut lines: as we shall see, entities can fluidly switch positions and allegiances based on immediate and long-term goals.
The director/studio/producer relationship almost defines the classic battle between creative and economic forces in the film industry. Without much effort, ordinary people can likely picture the tension that exists on a set as both the director and the studio/producer fight to protect their interests in an enterprise that puts millions of dollars at stake. Despite speaking the same language, these two entities might experience difficulty communicating their notes to one another in a productive manner. In order to maintain artistic integrity, a director might demand reshoots while a line producer could simultaneously express concern regarding overages—given their individual perspectives, both people have a valid point and compromises must be reached in order for the project to continue. Perhaps, in exchange for a particular shot or sequence, a director will have to excise an entire scene down the road.
On one level, the aforementioned skirmish represents a conflict over income: the line producer, beholden to a studio whose profits suffer as overages increase, places increased importance on the bottom line, whereas the director sees an endeavor that might be larger in scope. The director might recommend changes in order to increase character development, add clarification, or to add visual appeal in an attempt to make a better product. However, in the eyes of the producer, the changes proposed by the director might seem unnecessary as they do not necessarily increase the revenue (i.e., gross income) potential or profitability (i.e., ability to generate net income) of the movie. The producer might feel a strong sense of loyalty to a studio as the studio might pay for a portion of the producer’s expenses; studios, in turn, view this lost money as an investment in scripts/projects, possibly gaining the right of first refusal in return (Epstein, The Big Picture: Money and Power in Hollywood, 2006). Thus, in accordance with their interests, the producer/studio might feel that the suggested alterations represent an indulgence. This relatively simple scenario presents a rather clear conflict for some of the various parties involved in films, but the clash between creative and economic forces can become increasingly complicated when examining an issue such as the Motion Picture Association of America (MPAA) ratings.
Originally established as a trade organization, and thus exempt from anti-trust laws, the MPAA represented (and continues to represent) the interests of the major studios in various political arenas, including content regulation and copyright infringement. In its early years the MPAA, then called the Motion Picture Producers and Distributors of America, instituted and enforced the Hays code as a form of self-regulation in order to protect the industry from censorship by the government. Over time, these decency guidelines evolved into the now familiar ratings (e.g., G, PG, PG-13, R, etc.) used by virtually all mainstream domestic productions.
Ostensibly, the ratings provided by the MPAA function to notify individuals of a movie’s content, thereby aiding adults in deciding which films are appropriate for their children (or themselves) to view. In and of itself, there seems to be nothing wrong with this model—allowing parents to make informed choices regarding their children’s consumption habits appears perfectly legitimate. Were this purely a matter of content, a relatively minor conflict might arise between directors/stars (who might argue the social or cultural importance of the film) and the public. However, economic ramifications cloud the issue a bit as ratings can determine a myriad of things including marketing strategy, ticket sales, and distribution. Suddenly a host of entities—ranging from studios to distributors, retailers, and theater owners—has an interest in a film’s rating.
Participants whose existence depends on the commercial success of movies (distributors, studios, and theaters) tend to shy away from films rated NC-17 as these projects present some significant additional challenges. On top of a restricted audience base and extra staffing needs (to prevent theater jumpers), NC-17 (formerly X) movies suffer a lingering stigma of licentiousness that arose in the 1970s. Originally, a rating of “X” merely denoted material not appropriate for children (as NC-17 does today) but the rating did not have the same connotation that it currently does, with critically acclaimed hits Midnight Cowboy and A Clockwork Orange receiving the designation. However, the failure of the MPAA to copyright the label led to mislabeling of movies in order to capitalize on a sense of titillation or intrigue (Sandler, 2001). Significantly, pornographic films began to employ the rating, which caused the public to form a rather negative association with the term; the rating has since been unable to shake the stigma, causing current films to suffer from misperception.
This changing attitude toward X-rated movies had disastrous consequences. Richard Maltby argues that the move from the Production Code Administration to the Code and Rating Administration in 1968 (and resulting classification of movies) represented a shift in profit making for studios: under the old system, movies appealed to the broadest audience possible in order to reap maximum profit whereas the new ratings system created increasingly smaller customer bases (1995). Studio executives and theater owners began to notice the economic downturn soon after the institution of the X rating (Aubrey, 1971; Arkoff, 1972; Rugoff, 1971), branding the classification as trouble.
Additionally, distributors’ current dependence on major retail and rental outlets only serves to compound the problem. With a large portion of their revenue coming from stores such as Wal-Mart and Blockbuster—who do not sell/rent NC-17 content—studios and distributors must focus on productions that retailers deem acceptable (Epstein, The Big Picture: Money and Power in Hollywood, 2006). In short, modern investors have come to learn that NC-17-rated movies are generally not profitable or revenue streams.
Initially, directors, writers and celebrity stars might not overly concern themselves with a film’s rating—they are, after all, engaging in a process whose purpose is to occasionally push the public’s boundaries and force us to confront hidden parts of ourselves. Creative entities in cinema can view film as a medium of expression, or a language, that helps them to communicate their point of view to an audience; powerful movies have the ability to make us feel long-forgotten emotions or to change the way that we see the world. However, in a trickle-down effect, an X rating typically causes the creative forces of a movie to suffer pressure from studios or producers. To avoid this sort of confrontation, production companies might contract their directors to deliver a movie with a particular rating (Finn, 2008; Weinberg, 2005), which might mean that a director must restructure a movie if the film receives an initial rating of NC-17. However, even if a director is not legally bound, the director might participate in a form of self-censorship might in order to prevent an unfavorable rating. Stars might also refrain from fully exploring their characters in an effort to make them more palatable to mass audiences. This sort of pressure suggests a stifling of artistic license and expression but also reflects the idea that movies represent commodities that exist in a context—material deemed (or merely perceived to be!) “offensive” or “inappropriate” is generally not economically viable. Directors and stars must often make compromises to their visions in order to get their movie produced, or risk the project stalling out and fail completely.
Further examination of the issue reveals that conflict might arise as a result of involved parties’ differing measures of a film’s success. Entities like studios, theaters, and distribution companies derive their income (and, therefore, their existence) from sales of tickets, merchandise, licenses, or concessions—all of which depend, to a greater or lesser extent, on the volume of people who pay to see the movie in question. Movies like Transformers, for example, represent the ideal movie for these groups in a number of ways: targeting teenage males, the PG-13 picture contains explosions, (relatively bloodless) violence, and brief sexual situations tied in with action sequences involving flashy cars. Movie studios and distribution companies rely on ticket sales as they derive their income as percentages of box office receipts while the theater also benefits from young people spending their discretionary income at the concession stands. Indeed, the only thing that might make the film more financially successful might be cutting down the run time from 144 to 128 minutes. Accordingly, it makes sense in this context that these particular entities find themselves obsessed with the raw economic ramifications of films; maximizing both revenue and profitability are important to these corporations as evidenced by Epstein’s thoughts regarding “marketability” and “playability” (The Big Picture: Money and Power in Hollywood, 2006). While the public might think of revenue as the more important factor (e.g., regular reporting of box office receipts from opening weekends), studio executives also find themselves concerned with the notion of profitability; business people want to develop a brand that they can reliably provide a stream of income off into the future (Hade, 2001). Like most business, revenue does not necessarily provide the information a company needs to judge its financial health—a better measure might be, for example, return on investment or profitability (Ravid, 1999). Sherry Lansing, former CEO of Paramount explicitly stated this idea in 2002 by saying “I’m not interested in box office and I never have been, I’m interested in profitability” (Epstein, The Big Picture: Money and Power in Hollywood, 2006). This attitude reflects how individuals, as opposed to corporations, might be more concerned with issues of profitability; moreover, these notions of profitability might not limit themselves to a single film but instead reach across the lifespan of a company or career.
A movie’s value, then, might be evaluated in a wider variety of ways: a film could establish well-defined franchise characters for a studio (creating or developing intellectual property rights), or raise awareness of a star’s talent. Although studios, stars, and directors cannot entirely divorce themselves from the day-to-day financial success of their movies, they may find that a project might pay dividends that are not immediately apparent. The 2008 movie, Frozen River, illustrates this concept beautifully with Melissa Leo receiving an Oscar nomination for Best Actress despite the film’s relatively limited revenue capture (Box Office Mojo, 2009). Although somewhat of an anomaly, this picture undoubtedly raised the profile of its director and lead actress (even if only temporarily)—something that could be even more valuable to these individuals than the immediate promise of money. Taking this vantage point into account, one can see why a director or actor might consider performance or artistic integrity more important than a movie’s financial numbers.
Studios might also choose to place value on a film’s non-economic components in order to build relationships with particular stars or directors or to increase the eventual home distribution profitability of movies by producing “Oscar-bait.” Typically geared toward adult audiences (e.g., the voters in the Academy of Motion Picture Arts and Sciences) and rated R, films that debut around the holiday season may contain heightened expressions of story, drama, or emotion. Although many might consider these movies as high points in the year’s achievements, studios may, in fact, be overproducing R-rated movies from an economic standpoint. A study conducted by de Vany and Walls in 2002 suggested that movies with an R rating brought in the lowest profits (as compared to movies with less restrictive ratings) and common sense would imply that studios must be making a choice not to maximize their profits in dollars (de Vany & Walls, 2002). In some cases, for these participants, increased prestige is a form of profitability.
It should be noted that stars and directors are not unaware of the salient economic forces at play, however, as a large part of contract negations can revolve around fees and perks (Epstein, Hollywood’s Morality Play, 2006; Epstein, The Big Picture: Money and Power in Hollywood, 2006). Stars or directors with celebrity status have the negotiating power to demand significant compensation for their efforts, often resulting in smaller gains for other participants—such as producers—in the process. Victor Goldberg, for example, argues that an otherwise successful movie may fail to yield a net profit if an individual benefits from the gross profits (1997). Although major stars or directors will occasionally make monetary concessions in order to proceed with a project (e.g., Ocean’s Eleven) or to participate in a amusing endeavor (e.g., cameo appearance), contracts generally signify instances where these individuals are more concerned with revenue than profitability.
The previous scenarios suggest that, in order to get a movie made, participants must make some sort of concession in order to pacify the opposition. Intuitively, this business model makes sense to most people; compromise is an essential part of functional working relationships. However, although the relationship between stakeholders in films might occasionally be antagonistic in nature, participants can also work together symbiotically to afford mutual benefits.
In recent years, new socially-responsible companies have sprung up embracing a different strategy; to be sure, these institutions are still interested in profits, but also incorporate other goals into their mission statements. This new paradigm allows creative forces to express their voices, and actors to challenge themselves in meaningful roles, while the production company raises relatively significant income for involved parties.
Participant Media (formerly Participant Productions) aims to develop films that are not only commercially viable, but also contain a social message (Pinsker, 2004). Although the name of the company might sound unfamiliar to many, Participant Media has been involved in a wide variety of well-known projects over the past five years, including films such as: Fast Food Nation; Good Night, and Good Luck; An Inconvenient Truth; Charlie Wilson’s War; The Kite Runner; Murderball; The Soloist; North Country; and Syriana. Even people not familiar with the inner workings of Hollywood should be able to recognize a few projects on the aforementioned list; clearly this company has established a presence in the industry. Interestingly, many of the movies also take a step further, attempting to capture the spirit of activism generated by the projects themselves. For example, audience members or interested parties can visit a specialized webpage on the company’s website (http://www.participantmedia.com/social_action.php) in order to help causes directly related to the content of the production company’s films. The website allows individuals to connect to the issues at hand and provides them with simple actions (i.e., “next steps”) to take in order to remain involved. In addition to performing social good, this new format of interactive media also more saliently recognizes that movies exist as part of a community—and the films of Participant Media are tapping into the power inherent in that population.
Participant Media has also attracted major stars (e.g., Charlize Theron, Tom Hanks, and George Clooney) to its projects, lending the production company’s philosophy some influence. Star power also allows actors and directors to engage in projects or forward causes that are important to them, making the arrangement mutually beneficial. Additionally, all involved parties might benefit from the goodwill associated with the project, making it lucrative for theaters and distribution companies to connect with these productions. In this case, the goals of many participants coincide with one another with success or profitability being measured in dollars donated or amount of awareness raised. Revenue is certainly a factor, as it would be with any business, but income might be treated with slightly less importance.
Films may also contain less obvious political messages, as in the case of Batman, which subtlety connected Time magazine with damsel-in-distress Vicki Vale in order to promote the brand’s virtue. At the time, the studio responsible for the movie, Warner Bros., was in the process of merging with Time (to form Time Warner), and the positive portrayal of the publication would help to increase Warner Bros.’ eventual profitability. Examples such as these highlight another way that movies can possess value for their stakeholders; this time, it is the studio that benefits from movies as a form of expression (Christensen, 2002).
Further examination of the issues of revenue and profitability has shown that these two interrelated forces resemble quantitative and qualitative (respectively) aspects of a success or achievement in the film industry. For movies that exist within a system or business model—thus excluding independent art films or experimental media—revenue always resonates as a consideration but does not necessarily tell the whole story. The various permutations of a movie’s profitability (e.g., critical acclaim, establishment of brands, development of bridging ties to other key members within the Hollywood community) continue to affect participants long after an individual film’s accounts have settled. Although these two forces may occasionally conflict, stakeholders ultimately attempt to maximize both in a manner consistent with their priorities.