Early this summer at the University of Southern California, Steven Spielberg sat before an audience and worried aloud that Hollywood had become too dependent on blockbuster movies. The director, hardly a stranger to big summer hits, was concerned that studios were fixating on franchises and sequels to the point that they no longer wanted anything else. “There’s going to be an implosion,” Spielberg warned, “where three or four or maybe even a half-dozen megabudget movies are going to go crashing into the ground.”
The next few weeks seemed to bear out his prediction, as “The Lone Ranger” (reported cost: $215 million), “R.I.P.D.” ($130 million), and other big titles flopped. But then a funny thing happened. When summer came to an end, Hollywood had brought in more money than ever: a
domestic box office of $4.76 billion. For every “Lone Ranger” there had been an “Iron Man 3” and a “Fast & Furious 6.” Hollywood wasn’t collapsing under the weight of its blockbusters. It was enjoying its best summer ever.
That might have surprised Spielberg, but it’s exactly what Anita Elberse expected. Elberse, a professor at Harvard Business School, has spent a decade studying the entertainment industry and how it’s changing in the online economy. Many observers had predicted the Web would revolutionize our culture and wildly expand our choices—and in some ways, it has. But in her new book “Blockbusters,” Elberse argues that for entertainment companies at least, the digital shift has only amplified the star system already in place. Movie studios now succeed by sinking extra resources into a handful of super-hits, and the public responds by flocking to them. “Blockbusters” shows that this strategy has also worked for book publishers, music labels, TV networks, and video game companies.
Elberse analyzes the realm of culture with a rigorous, numbers-driven approach. One of her central findings has been that Chris Anderson’s influential “long tail” theory, which imagined a digital future in which we would happily browse a niche-filled utopia, hasn’t quite worked out as promised. In the pages of the Harvard Business Review, and now in her new book, Elberse has mounted a forceful argument against it, showing that instead of producing a “long tail” of modest successes, consumers respond to an overwhelming mass of products by drifting back to the biggest brands. “Blockbusters,” she writes, “will become more—not less—relevant in the future.”
The notion that blockbusters are doing better than ever has been a big relief for entertainment companies worried that digital content would gut their business. For the wider culture, however, it might not sound so encouraging. Who wants to live in a world where there’s “Fast & Furious 12” and little else?
It’s easy to blame movie studios and publishers for crassly chasing the easy money. But Elberse’s book shows the reasons lie with us, as well. We may think we’ll use the Internet as a gateway to marvelous and obscure new music, books, movies, and so on—but to a significant extent, we’re really using it for a mass discussion of Miley Cyrus’s new number one hit. A blockbuster economy, it seems, is what happens when people get what they really want.
Elberse’s office on the Harvard campus isn’t that of a typical business professor. “Most of my colleagues have research awards on the shelf,” she jokes. “I have party invites.” In one corner sits a guitar autographed by the guys in Maroon 5; on the wall hangs an invitation to LeBron James and Jay-Z’s Two Kings’ Dinner.
Before she was an expert on the entertainment industry, the Dutch-born Elberse was a fan. “I spend way too much time watching television, going to sports games, going to movies,” she says. But for all the cultural chatter about those events, Elberse noticed that very few scholars were studying them empirically. “It struck me that there’s an awful lot of data in the public domain for these sectors,” she says. “The movie industry publishes weekly sales numbers—not many industries do.”
While a graduate student at the London Business School, Elberse decided to quantify the best entertainment business strategies, building complex models that controlled for all kinds of factors. Subrata Sen, a professor in Yale’s School of Management, still remembers the novelty of Elberse’s 2002 dissertation on the film industry. “She doesn’t just wave her hands and make some general statement,” Sen says. “She actually works with the numbers. She does the math.” Once she got to Harvard in 2003, Elberse began mixing in more qualitative research as well, including interviews with book publishers, music executives, and movie producers.
While doing this work, Elberse kept bumping up against a popular new idea: the long tail. According to Chris Anderson, who developed the theory in a 2004 Wired article, then in a 2006 book, the Internet makes it easier than ever to produce, distribute, and buy products—and this freedom would transform customer behavior. With evangelical fervor, he wrote of an end to the era of bland, one-size-entertains-all popular culture. A typical mass-market “demand curve” slopes from left to right, graphing the fall-off in popularity from the megahits in the “head” to the less trendy “tail,” which represents the many products with a relatively small audience. The Web, Anderson predicted,would empower us to reach beyond the high-volume head of the curve to the long and ever-expanding tail, where people would increasingly create and consume products better suited to their personal tastes.
Anderson’s book itself became a blockbuster, and his theory became a key framework for understanding the cultural marketplace. But Elberse was skeptical from the start. “I remember thinking, this just does not jibe with the underlying data I’ve seen for the industry,” she says.
No one disputes that the Internet gives consumers many more choices—just compare your local bookstore’s selection to Amazon’s. But when it comes to what most of us actually buy and read, Elberse argues, there’s little evidence that we’re taking advantage of the immense variety out in that tail. Perhaps the best example comes from digital music. From 2007 to 2011, the number of unique songs that sold at least one copy, largely through iTunes, exploded from 3.9 million to 8 million. But in 2011 nearly a third of those songs sold only one copy—a percentage that keeps increasing every year. And 94 percent of the songs sold fewer than 100 copies.
The long tail, it turns out, is a pretty lonely place. Instead, more and more fans are moving to the head, where the blockbusters reside. In 2007, 36 songs sold at least a million copies. But by 2011, more than a hundred songs sold that many. Put another way, a mere 0.001 percent of the available songs was responsible for 15 percent of all sales. “Every time new data come out,” Elberse says, “we see more demand shifting to the head.”
In “Blockbusters,” Elberse shows how Warner Bros. has capitalized on this trend. After a strategy shift in 1999, the studio began committing an unprecedented chunk of resources to a mere handful of movies. In 2010, for example, Warner Bros. put a third of its production budget and nearly a quarter of its marketing budget into just three of its 22 movies: “Harry Potter and the Deathly Hallows, Part 1”; “Inception”; and “Clash of the Titans.” It worked: Those three generated more than 50 percent of the studio’s worldwide box-office.The blockbuster strategy doesn’t always work—for Warner Bros., it’s led to disasters like “The Green Lantern” and “Speed Racer”—but over time, Elberse demonstrates, the approach consistently produces the highest returns. Last year, Warner Bros. became the first studio in history to earn $1 billion or more for 12 straight years, and Elberse has uncovered the same pattern in other fields. When a music executive described one of Lady Gaga’s albums, he invoked the Hollywood model. The release, he said, had been orchestrated like “a movie blockbuster in the summer months, like ‘Avatar.’”
For entertainment executives, the blockbuster strategy makes a lot of sense. But what about for the rest of us? Do big movies succeed because they’re what we want, or because the studios invest lots of money in pushing them on us? Elberse wrote her dissertation on that question, creating models that accounted for a movie’s budget, its stars, the number of theaters, the quality of the reviews, and more. She found that both factors were at work. “Success is a combination of supply and demand forces,” she says.
In other words, a big part of any blockbuster’s appeal is that we simply like blockbusters. And here we’ve changed less than you might think. In fact, Elberse says, the work that best explains today’s consumers isn’t Anderson’s “Long Tail” but the far less seductively titled “Formal Theories of Mass Behavior,” a 1963 book by sociologist William McPhee.
Elberse first learned about McPhee’s book when an emeritus professor at Harvard mentioned it during one of her presentations. When she checked the title out at the campus library, she saw it hadn’t been borrowed since 1973. McPhee constructed a series of experiments where people evaluated 12 different entertainment options. What he found was that most fans of pop culture were fairly light consumers—they didn’t consume many products, but when they did they preferred the biggest hits. The heavier consumers (the film buffs, the music junkies) were more likely to dip into what we now call the long tail. But McPhee also found that they were less likely to enjoy those obscure items. Even movie buffs liked blockbusters, he observed—and most of the long tail just wasn’t that good.
When Elberse read McPhee’s findings, she recognized them instantly. “I still remember the feeling of, ‘Oh my God, he described it back then,’” she says. She’s replicated his model in all sorts of modern settings—for example, in the user queues of Quickflix, an Australian version of Netflix. But Elberse also believes it makes intuitive sense. “It’s really not fun to have seen a movie that you want to talk about and you can’t find anyone else who’s seen it,” she points out. “It’s much better to say, ‘Did you watch yesterday’s “Scandal” episode? Oh my God, can you believe...’”
Elberse’s findings about the profitability of big hits has reassured those inside the industry who had feared the long tail would end their businesses. “Throughout the 2000s, there was a lot of questioning and concern,” says James Diener, the president of Maroon 5’s record label (and a subject for one of Elberse’s early case studies). Elberse’s models “demystified, even within the music industry, what was often mysterious to us,” Diener says.
Elberse expects the strategy to keep working: “I don’t really see a saturation point anytime soon,” she says. But to some that sounds worrisome. At USC Spielberg didn’t just question the durability of blockbuster strategy—he questioned its impact on quality, too. “You’re at the point right now,” the director said, “where a studio would rather invest $250 million in one film for a real shot at the brass ring than make a whole bunch of really interesting [projects].”
One hears echoes of Spielberg’s concern across the entertainment industry. Sub-blockbuster commercial products—what book publishers call the “midlist”—are where a lot of the best popular art has traditionally emerged. That space has also nurtured and supported artists before they started producing hits. Jonathan Franzen, to take only one example, wrote two slow-selling novels before his breakthrough “The Corrections.” Yet with bigger profits coming from blockbusters, today’s companies now have less incentive to invest in music that’s not obviously Top 40, or in TV shows that try something new. As a Warner Bros. executive told Elberse, “because technology is shrinking the pie, at least in the foreseeable future, we’ll have to make fewer smaller movies.”
Elberse can point to a few sound business reasons for making smaller movies, even in a blockbuster age. Smaller movies help movie studios preserve their relationships with movie theaters and maintain a flexible schedule. They’re the best place to try out new concepts or actors. “You don’t want to do your R&D in a blockbuster,” Elberse says.
But she also notes that, in the end, the cultural products that thrive are up to us. “In a way it’s our fault for not going to the movies more often,” she says. “Would I prefer to see ‘Lincoln’ over ‘Iron Man 5’? Yes. But is that representative of the general population? No. There’s clearly an enormous group of people out there who find tremendous value in these blockbuster movies.”