Why are Hollywood movies bad?

Here’s a conundrum for you – why aren’t Hollywood movies better?

Today, I’m going to go through the market forces which have led to the current state of mainstream cinema and show you the data behind it.

Let’s start with the seemingly incongruous situation.

Hollywood as an industry has been honing its craft for well over a century. Given the power, prestige, and money on offer, it attracts some of the brightest minds of each generation. It’s also an extremely visible sector, where both hits and misses are clear to everyone, meaning there is no shortage of discussion and analysis.

Cinemas around the world have taken in close to $0.9 trillion over the past two decades, in today’s money, and that is theatrical tickets alone, before a penny from streaming, discs, or television. So there are both the resources and the motivation to make better products.

Finally, good movies do exist. Humans have figured out how to make feature films which make us laugh, cry, fear, feel and get excited. Making a good movie is not easy, but it’s far from an unknowable mysterious process like dark matter.

So you would have thought the most motivated, smartest, and best-resourced folks in the business (i.e., Hollywood Execs) would have all they need to make pretty much every movie they make extremely good.

And yet a frequent refrain from audiences is that many modern movies are bad.

What gives?

The first thing to note is that Hollywood is not trying to make good movies. The execs are selected, trained and rewarded to act more like corporate CEOs than artists or filmmakers.

As a result, they are trying to make money, not art.

Furthermore, they don’t even want to make movies. The way to sustainably make money in an art-based business is not in creating the works but in selling them.

• Making movies is expensive, risky, and you have to deal with unpredictable creatives. Every successful film is a new prototype that is hard to replicate and scale.

• Selling movies is scalable, repeatable, and you’re dealing with business-y folk. After all, cinemas and streamers are not in the art business either. The former rents seats and sells sugar, whereas the latter sells subscription-based access to bottomless content buckets.

At its core, Hollywood is a logistics and marketing business. The only reasons the studios make movies are because:

1. Supply. No one else can create the type of movie they want to sell.

2. Ancillary income. They want to be able to make money from the other rights (t-shirts, theme park rides, etc)

3. Power. They want control over what the product is and what they can do with it.

The most reliable income a studio receives from its involvement in a movie will come from charging distribution fees and exploiting the IP elsewhere, rather than taking a share of any profits.

So, if reliable income comes from selling a stream of movies, then the incentives shift from ‘Try to make a profitable movie’ to ‘Try not to lose money with any one movie’.

This creates a risk mitigation mindset. It doesn’t make sense to swing for the fences and try to make brilliant, original movies. Instead, all the incentives align to encourage executives to pursue risk reduction.

This has created a spiral. The “safest” films are the biggest ones (movies over $200 million, flop the least often, only 31% of the time), because that budget is only approved for something with a guaranteed audience.

But when one does go down, the loss can be huge (median loss is $183 million). This makes the failures more dramatic and painful, thereby fueling further fear and risk-mitigation efforts.

As movies have got bigger and bigger, so too has the pressure on Hollywood execs to have an ‘anti-flop mindset’.

A steady stream of mediocre films is good business. A series of ambitious attempts at great art will inevitably lead to some very damaging losses, which hurt pride and wallets.

So let’s look at the data in order to build a simple ‘Anti-Flop Manifesto’.

I crunched the data on 2,271 feature films, released since 1980, each with a budget over $50 million in today’s money. I’m going to refer to anything that didn’t recoup twice its budget at the box office as a ‘flop’. The reality is more complicated than that (see Notes at the end of the article), but for now, just know that these are the underperforming titles most likely to result in a net loss for the studio.

Here are the five things the evidence says you should do if you want to have the lowest chance of losing money on a movie.

The surest way to lower your risk is to sell people something they have already agreed to like.

This is the single biggest point in the Anti-Flop Manifesto. The general public will often ascribe this approach to laziness, and while there are many things you can accuse Hollywood execs of being, lazy is not really one of them.

An original is more than twice as likely to lose money – 23% of big-budget sequels flop, against 57% for an original screenplay.

Every original screenplay you green-light instead of a sequel roughly doubles your chance of a loss. So while it’s true that more flops in recent years have been sequels of one form or another, that’s not because they are riskier, but because Hollywood is making way more sequels.

By the way, this isn’t a technical point about lineage. It’s about how it feels to the audience. The recent flop Supergirl, for all its comic-book heritage, was closer to a standalone bet than a true sequel. A fresh lead, a character most people could not place, and no run of hit films behind her all make for a riskier bet.

But I can see why Supergirl felt like a relatively safe movie to greenlight. In the past few decades, superhero films, the genre journalists keep pronouncing dead, are the safest kind of big film to make, with only 28% of them flopping.