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26. INTERVALS OF HORROR

Here is a wrong statement: “If there weren’t any horror movies released recently, your horror flick will do better”. In the past few months we have witnessed so many horror movies doing very well: Mama, Evil Dead (remake), Texas Chainsaw 3D, Paranormal Activity 4, Sinister and others. This genre was never intended to make hundreds of millions, but since it is by far the cheapest to produce – it has become a gold mine for anyone who gets it right.

The opening statement here is wrong, even though it feels very intuitive: if I got my dose of nightmares to last me a couple of months, why would I need to see another horror movie any sooner than that? Well, it turns out that while this logic may seem reasonable to a scaredy-pants such as myself, it does not hold for horror lovers.

Here is a plot of all the movies released between 1997 and July 2013 that were categorized by boxofficemojo.com as “horror” of different kinds. I narrowed it down to those that had a wide release (>2000 screens):

Lifetime Domestic Grosses vs. Interval from Previous Horror Release

R-squared = 0.02. That’s a pretty much non-existent correlation. A similar picture can be seen for opening weekend grosses:

Opening Weekend Domestic Grosses vs. Interval from Previous Horror Release

What does this mean?

It means one of two things, or both: 1. Horror film audiences don’t need a hibernation period to digest the harsh scenes from one movie before they are ready for the next; 2. Marketing, as usual, is the determining factor of a horror movie’s success, regardless of the genre-similarity of competing brands (a conclusion I keep reaching on this blog).

I’ve heard someone say that there is a theory running around Hollywood, according to which a horror movie will make more money if it is released more than 8 weeks after the previous horror release. On average – that may be true ($67M vs. $61M for all movies, which is a roughly 10% gain), but the variance is so big that it makes the whole statement non significant.

In a future post, I will take a look at other genres, but horror is such a well-defined one, that I had to go for the low hanging fruit first. So if you are an exec, sweating over a release schedule decision for your horror flick – take it easy. I would pay more attention to what other genres are doing on your potential opening week (see the previous post on that surprising matter) than what your fellow horrorists have been up to recently. It just doesn’t matter. Oh – and don’t forget to market the living daylights out of it, of course.

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** All raw nominal grosses, release dates, theater counts and genre classifications are from boxofficemojo.com

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25. WAIT FOR IT… ANTICIPATION CAMPAIGNS!

Here’s what Google can teach us about one of the past decade’s most significant changes in film marketing and promotion: Anticipation campaigns.

Google Search Volumes for Domestic Film Sales Related Keywords

The relative search volume (in the United States) of the search term MOVIE RELEASE DATE has shot up by about 3x since 2009 (the blue line), whereas the relative search volume of BUY MOVIE TICKETS has remained fairly steady (the red line). (Note: Google normalizes the numbers so that they represent a specific term’s search volume relative to total Google search volume, so this accounts for Google’s own growth).

Now, of course, the red line might be affected by the growth of websites like Fandango that might have “stolen” traffic from Google, but the important graph here is the blue one: people are becoming significantly more intrigued by promotion campaigns for movies that are still far from release. Just like in the movie “Inception”, the idea is planted in their minds and marinates there for a few months.

But why did this happen?

The first reason is that the industry’s marketing teams took their time but finally, somewhere in 2009, they realized the potential of social networks and their ability to exponentially grow buzz over time.

But I believe another reason is that moviegoers are overwhelmed by the growing number of weekly releases competing for their attention – more specifically, blockbusters.

Ten years ago, it was enough to throw $150M at a production to make it a “must see”. But once all the studios learned that trick, we started being bombarded with too many of those mega movies, “The Lone Ranger” being the most recent victim of this inflation.

The result is that the concept of spontaneous ticket buying has taken a hit. I know from my own experience that I rarely just go to the cinema to see whatever is playing. I now have a checklist of movies I want to see ever since their first trailer was released over six months ago. And the longer a movie is on that queue, the higher it climbs up the list, making the chances of it actually being watched and paid for at the box office, higher.

I didn’t have such a checklist in 2005. Did you?

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24. TWIN MOVIES

Have you noticed that “Olympus Has Fallen” and “White House Down” are basically the same movie? Yeah, you probably have. And do you remember having that feeling in the past, with “Oblivion” and “After Earth”? And what about “Mirror Mirror” and “Snow White and the Huntsman”; “Friends with Benefits” and “No Strings Attached”; “The Truman Show” and “EdTV”; “Dante’s Peak” and “Volcano”; “Armageddon” and “Deep Impact”? The list goes on and on.

Here is a look at a bunch of such twin movies – all of them are clearly descendants of a common ancestor-script and were released within a few months of each other. They are arranged chronologically (from bottom to top) into pairs and then compared according to their production budget, worldwide grosses and ROPB, which is a term I invented for Return On Production Budget (kind of like ROI):

Twin movies - budget, grosses and ROI

So, before I plotted this thing, I thought I’d get a clear pattern showing that the first movie of each twin-pair to be released will be the winner, as in the case of Olympus vs. White House, but that didn’t happen. Then I thought perhaps grosses depend on budget, but that too was not the case and the ROPB doesn’t show any clear patterns either.

I slowly reached the sad conclusion that these are most likely case-by-case scenarios, in which marketing is probably the biggest X factor: in some cases, the general buzz is shared by both twin-movies, especially when they are well differentiated – like in the case of “Armageddon” and “Deep Impact”, or “Dante’s Peak” and “Volcano” – which nourished each other by making it clear that while they are similar in concept, they are different in the experiences they offer.

The first mover advantage comes into play when the two movie-brands are mixed up and tangled into each other – like in the case of “Olympus” vs. “White House Down”: they were both perceived as “that White House destruction movie” – if I saw the first one, why should I see it again?

A good marketing campaign is one that not only creates anticipation for a concept, but also creates awareness to a specific and unique production version of that concept. In my experience, a good example is “The Truman Show” vs. “EdTV” – Truman came out first, but that’s not why I saw it rather than EdTV at the time. I remember very clearly waiting for the specific “Jim Carrey borderline-artsy movie”.

The same applies for “A Bug’s Life” that was beaten to the release-line by “Antz” but ended up doing much better – because viewers knew it wasn’t just “another cartoon about bugs”. The same applies to “Snow White and The Huntsman” that was well differentiated from “Mirror Mirror” – by emphasizing its darkness, style, unique special effects and star power.

The bottom line:

If you are a studio exec and you know your competitors are working off a similar (if not identical) primary script darft – don’t focus on being the first to the finish line. Rather, focus on making your presentation of that concept unique and easily differentiated, via creative production value (harder) or original marketing efforts (a bit easier).

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** All grosses figures and most budget figures for this post are from boxofficemojo.com. Some production budget figures are from The-Numbers.com

23. DANGLING OFF THE SHOULDERS OF GIANTS

A couple of weeks ago, “This is the End” opened against “Man of Steel”, in what seemed to be a kamikaze mission. In the right corner – a square-jawed giant with a $225M budget. In the left corner – a bunch of stoners with a skinny $32M budget, a lot of heart and admirable determination.

And then a great thing happened. No – “End” didn’t beat Superman, but it did pretty well, grossing $32.4M. And so did Superman, with $156.7M. Everyone wins.

Wait, what do you mean everyone wins? How can everyone win?

Well, if you truly embrace who you are on the spectrum of film sizes and correctly position your expectations according to the three tiers of movie budgets (over $70M, $20M-$70M and under $20M) – you quickly realize that films in other tiers aren’t your enemy.

Let’s take a look at the relationship between the weekly grosses of the movie in 1st place vs. the weekly grosses of the movies in 2nd place, for movies that had a weekly gross of up to $200M (which excludes The Dark Knight Rises and Iron Man 3, because they are both in a world of their own), during the last year (=50 weeks) (all data from boxofficemojo.com):

Weekly 1st Place vs 2nd Place Grosses

Another way to look at it is through average per-theater weekly grosses of 1st vs. 2nd places (all numbers are from boxofficemojo.com):

Weekly 1st Place vs Second Place Per Theater Grosses

In both charts there is a positive relationship. It’s not incredibly strong (r-squared = 0.3-0.4), but it’s definitely not negative: the big guys aren’t gobbling up the little guys. When the big guys do better, so do the little guys. They exist in a different, parallel, box office universe, but there is a connection between the two universes – a connection of positive support – not cannibalism.

Now, we all know that correlation is not causation. This relationship might not be a direct one: perhaps holiday weekends mean a bigger pie for everyone, or perhaps there is a “leakage” effect – where the lines for a blockbuster are so long that some people just end up going to a different movie. Or maybe some people go to see the non-blockbuster so that they can say they’re special. I don’t know.

The exact reason should be further investigated, but my point is that I’m not saying  you should necessarily take on Jerry Bruckheimer. Rather, I’m telling you not to write off that idea as quickly as intuitively recommended. He doesn’t want to take your toys – he doesn’t care about them. In fact, it is likely that the more toys he has, the more you will get to keep for yourself.

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22. SHOW ME THE STARTUPS!

Startups are good. Startups mean innovation. Startups are the reason high-tech and biotech are the future. Startups are the core of the American competitive advantage. An abundance of startups is a sign of a healthy, evolving, competitive industry. A lack of startups is a sign of conceptual inbreeding of the same ideas over and over and over by a few reigning giants.

So where are the startups of Hollywood? Show me the Startups!

One answer would be – here they are:

Number of Releases - by Distributor

The above chart shows the number of feature releases by distributor. At first, it looks amazing – look at all those movies distributed by companies that are not the big guys!

But wait. Quantity is never a good measure on its own. Lets look at real grosses by distributor:

Real Grosses - by Distributor

Oh snap. That doesn’t look as good. In fact, it seems that while everyone is weeping about overall box-office stagnation, the big guys are actually growing. It’s the little guys that are having their share of the pie significantly eroded.

Another way to look at this is through ticket sales:

Number of Tickets Sold - by Distributor

Same picture. The leakage in total ticket sales is coming only from the “others” compartment – not from the big players.

And finally, let’s look at market shares – the ultimate battle score:

Market Shares - by Distributor

Again, we see that since 2004 the little guys’ market share had evaporated from 29.7% to 12.2%. The big distributors are eating into their share.

What does this mean?

It means that we are seeing more and more movies being released by new players that are not part of the “Big-7” (I include Lionsgate in that group – see why here), but these players are fighting among themselves for a shrinking piece of the pie. It means that indies are hurting. It means that this industry needs shock treatment or it will consolidate into a predictable formulaic machine.

Dear studios, Indies were once your dogs – the ones who ran ahead and brought you innovation in their jaws. But now during this winter, you feast on their own flesh, feeling good about your own growth – but what will you do after you’ve eaten up all your dogs?

I realize that big studios own the big distributors and that even bigger conglomerates own the big studios. I realize that cinema is evolving into nothing more than a promotion tool for home entertainment, merchandize, and amusement parks. I realize there is a bigger picture. But the even bigger picture is that at the core of all this is creativity and innovation – new heroes, new genres, new formats.

It’s great that over 650 movies were released last year, but if the vast majority of them were screened in a couple of hidden locations in Tribeca, what’s the point? Innovation rarely comes from fat and happy incumbents, which is what we have here.

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** Raw nominal data source is from The-Numbers.com. The data there is very similar to the data on boxofficemojo.com, but runs further back to 1995.

21. THE DECADE OF THE SUPERHERO

Superheroes have everything that (corporate) Hollywood loves – for better and for worse: a pre-existing and loyal fan base, franchise potential, visual 3D extravaganza potential, merchandise and amusement park revenue streams, undemanding plot logic requirements, easy formulaic scripts, predictable humor and much more. On the other hand, the cost of differentiating them is increasing beyond the ability of small players, which are gradually disappearing in this consolidating landscape.

This has been the decade of the superhero, and more specifically – the decade of Marvel’s superheroes. DC Comics, which is owned by Warner Bros., is still hanging in there, but they have only managed to capitalize on two key franchises – Batman and Superman. The first had a very good run with Christopher Nolan, but that’s over now and the latter is being rebooted these days – and doesn’t seem to be of the same scale.

Let’s take a look at the huge growth in this domain and at the changing relative market shares – by comics’ publisher (who own the rights to the characters) and by distributor:

Worldwide Box Office Grosses of Superhero Films - by Comics' Publisher [Real 2013$]

Worldwide Box Office Grosses of Superhero Films - by Distributor [Real 2013$]

You would think that since the Disney-Marvel merger of 2009, Disney would shoot forward as the leading distributor in this domain, but apparently (according to this article) – so many of the Marvel characters are tangled up in very complex licensing deals with all the other studios, so it will be years before Disney will be able to fully capitalize on its Marvel assets in the way WB is doing with DC Comics. But once the lawyers get paid, or once the current licensing agreements expire – we will probably see Disney emerge as the dominant Superhero player. WB & DC will always be relevant, but it looks like Marvel is doing a much better job at leveraging its arsenal of characters.

In any case, the domain of superheroes is consolidating. On the publishers’ front – the past decade and the decade to come will be dominated by Marvel. Most of the leftovers will go to DC Comics, but all the smaller players will have a much harder time, as these productions become more and more extravagant and expensive to produce and market.

On the distributor front – the upcoming decade will show a gradual shift in Disney’s favor, at the expense of Paramount and other studios that had licensing agreements with Marvel. Warner will have to up its game if it wants to rise to the level of Disney-Marvel. The others will have to figure out what to do, as there’s not much left for them in this domain. Perhaps coming up with original superheroes? Yeah, right…

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20. DOES WORD OF MOUTH REALLY AFFECT BOX OFFICE PERFORMANCE?

Word-of-mouth is a nice buzz expression. But you should be careful when and how you use it. Companies like Cinemascore have spent the last couple of decades gauging viewers’ responsiveness to movies as they leave the theater. It is common perception that if a movie gets an A+ score is likely to have a good run due to positive word-of-mouth. If it gets an F (like Brad Pitt’s recent “Killing Them Softly”) – they are expected to crash and burn very quickly after the first week.

BUT that’s not always true.

Rotten Tomatoes’ thousands of users’ scores (which are different from their critics’ scores) can be used as a gauge of word-of-mouth: if I gave a movie a bad score, I will probably tell all my friends that I didn’t like it. So let’s compare that to box office performance after the first week in theaters – aka “box office decay over time”.

If we look at the top 90 box office films of 2012, we see somewhat of a correlation between Rotten Tomatoes users’ scores (not critics) and box office decay over time: R-squared = 0.25 – fairly weak, but still there (wait for it…)

Word of Mouth vs. Box Office Decay Over Time - for Films Ranked 1-90 at the Box Office in 2012

But here’s the punch:

When you look only at the top 30 performers at the box-office in 2012, that correlation drops to almost zero:

Word of Mouth vs. Box Office Decay Over Time - for Films Ranked 1-30 at the Box Office in 2012

The situation is similar for the next 30 films:

Word of Mouth vs. Box Office Decay Over Time - for Films Ranked 30-60 at the Box Office in 2012

But then, when you look at the films ranked 60-90 at the box office in 2012, that correlation shoots up – R-squared = 0.5 ! A higher score correlates to more money made after the first week (=smaller decay over time):

Word of Mouth vs. Box Office Decay Over Time - for Films Ranked 60-90 at the Box Office in 2012

What this means:

This means that the mega blockbusters are controlled by their marketing, or by the power of the franchise or by whatever – but not by what your friends tell you about the movie. Think about it – how many people told you not to watch “Ice Age: Continental Drift” and yet – you watched it anyway? That movie got a user score of 63, implying people are not saying good things about this movie, and yet – it made 81% of its total grosses after the first weekend – a very low box office decay over time.

On the other side are the more modest movies – those that bring in $30M-$50M. Those movies’ performance after the first week is much more sensitive to word-of-mouth. And that makes sense: when you don’t have a gigantic brain-washing budget, you have to actually make good products.

The bottom line: We watch mega blockbuster “event” films because we have to – it’s primarily a social obligation and only then an emotional entertainment experience. And then we watch smaller films in order to satisfy our personal need for quality entertainment. In other words: we watch Spider-Man because we have to, and the fact that it is good or not will not change our actions. But we watch Lawless primarily because someone we trust told us it is good.

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