Will Big Data Eat Hollywood’s Lunch?

Yves here. The introductory fine arts course at college (widely called “Darkness at Noon”) presented a technology-driven form of crapification, which the instructors called “devolution”. In the later Roman Empire, drills had displaced chisels for producing sculpture. It was easy to identify the statues produced with this labor-sasving device: key details, above all hair and beards, were much more crudely rendered than before.

The movies business has been going in a bad direction that resembles that of the book business. Before, publishers did fine churning out so-called “mid list” books that got moderate advances and were expected to produce reasonable but not huge sales. Some of them would be duds, and some would break out and become bestsellers. Publishers would also pursue potential blockbusters and pay very large advances on them. While these books were also important to their profits, they didn’t make them the foundation of their business, as they do now.

The algoification of movies strikes me as even more threatening to the health of movies long-term, as it looks likely to produce the bad sort of herding that is already losing audiences: too many big action pictures, where there are only so many ways to kill baddies and wreck scenery; too many rom coms and gross-out teen comedies.

I doubt an algo would green light some of my favorite movies, like The Lives of Others, Michael Clayton, Bandits, Patton, or Dr. Strangelove. Nor do I suspect would it be keen about such classics as Citizen Kane, Casablanca, On the Waterfront, Psycho, or The Third Man.

By Enrico Verga, a writer, consultant, and entrepreneur based in Milan. As a consultant, he concentrates on firms interested in opportunities in international and digital markets. His articles have appeared in Il Sole 24 Ore, Capo Horn, Longitude, Il Fatto Quotidiano, and many other publications. You can follow him on Twitter @enricoverga.

From the legendary days of Thor to the modern era of Captain America, humanity has called upon heroes to hold civilization together.

More recently, superheroes have been defending another universe: Hollywood.

At first glance, they’re doing a great job. The DC Universe has produced $2.3 billion, Superman $2.4 billion, Ironman $2.4 billion, the Dark Knight $2.4 billion, the Hobbit $3 billion, XMen $4.4 billion, not to mention epics of more recent vintage like Hunger Games (almost $3 billion), Twilight ($3.3 billion), Pirates of the Caribbean ($3.7 billion), and Jurassic Park ($3.5 billion) – all data from Gamesradar (as of February 2017).

But now a fresh and threatening enemy has appeared on the scene: Big Data. From the timid but dangerous Netflix to its big brothers, Amazon and Facebook, the new players are preparing to swallow Hollywood whole.

Superheroes will not save Hollywood from this new menace. Let’s take a closer look.

How Hollywood Came to Rely On Epics

From the 30s to the 50s, there were a few large studios and a great number of smaller outfits. This last group churned out thousands of “B-movie” films – many of them the very popular Westerns, where all you needed was some bleak terrain, a stretch of desert, four horses, two cowboy hats, and a sheriff.

Since then, there has been massive consolidation, and now we have just six major studios.

Meanwhile, from the 70s to the 90s, and still more with the turbocapitalism of the dot com era and the years leading up to the GFC, every sector with speculative opportunities was squeezed for increased return on investment. Hollywood has become an industry that grinds and spits out content that can be used to pay its financiers on Wall Street, and more recently, in China. As it tries to do this, it faces unprecedent challenges:

A Decrepit US Market: Generation X is short on money and not interested in paying $10 or more for a movie. Box office receipts have collapsed and with the advent of the Internet, who’s going to pay for a DVD?

Millennials: As far as marketers are concerned, they are the most disloyal generation ever. It’s difficult to figure out what they want, and especially what they’re willing to spend money on, given that they’re also less well-off than their predecessors. They are fractured like the shards of a broken mirror – trying to pinpoint a few categories to which specific movies can be “anchored” is challenging and requires a great deal of consumer understanding and data, understanding which Hollywood lacks.

Foreign markets: To make up for domestic losses, Hollywood needs to seek markets elsewhere. But will When Harry Met Sally resonate in China? In India? In Africa? In each geographic area there are different social and economic conventions, different ideas about relationships. Will the American approach work? Hard to say. Once again, the necessary information is not readily available.

For further analysis in the form of a first-person account, see also Lynda Obst’s Sleepless in Hollywood.

If you’re working with one of the major studios, how do you resolve these problems? Simple. Drop the barriers to entry and to cultural diffusion. Simplify content to more or less infantile levels, aiming for a classic mix: male hero / female heroine, good guys and bad guys (more or less credible/cruel), destruction of (almost always American) cities, explosions and other expensive special effects. Throw in mountains of franchising, with toys, cheap clothing made in Asian sweatshops, maybe even razors and skin care products. If the first in the series is a winner, then assuming a halfway decent producer and director, the result is a goose laying golden eggs – a perpetual money-making machine.

Trouble Ahead

Over time, though, this model is turning into a trap.

The budgets are enormous, and each new installment typically has to cost a little extra in order to maintain the hype. Lack of knowledge about audiences means unwillingness to change a formula that seems to work, and so each sequel becomes practically a clone of its predecessors. Over time, it starts to become tiresome.

Take Valerian and the City of a Thousand Planets – an SF film with a good director (Besson), but it bombed. Why? The movie was based on a comic strip popular in France, but more or less unknown elsewhere. This, together with a confused marketing strategy, has led in practice to the demise of what Besson had hoped would be a new epic series. The difficulties seen here in trying to sell even an SF series swimming in lasers and sexy heroines to an American audience should underline the seriousness of the problems facing Hollywood.

Can Hollywood reproduce the environment that existed earlier, arranging for a large number of low-budget films to be produced in hopes of picking out a pearl that will become a blockbuster? In theory yes, but in practice there is enough financial pressure on each venture that this approach is unlikely. Hollywood could try to cherry pick from indie films – but once again, without a clear picture of what its audiences want, that would still involve taking leaps in the dark.

Enter Big Data

On the other hand, “knowing one’s target” is the model of the Big Data players. The beginnings of their entry into cinema can be dated around 2012, according to GigaOm. If Netflix and Amazon frighten Hollywood, then Facebook, which just a few days ago announced that it would launch a video platform, is a nightmare.

In 2013, Netflix launched House of Cards. According to Netflix itself, the show’s success was due to the service’s extensive knowledge of how and what its viewers watch. It could draw on extensive and intimate information about its users, including their ratings of shows, what times of day they are entertaining themselves, and even where they rewind and fast forward.

More recently, the Netflix show Stranger Things was a big success, partly due to its use of extensive data analysis to target Gen X nostalgia (artful nods toward Goonies and ET).

An Uncomfortable Parallel

With the advent of Big Data, distribution has become a strategic asset, as other sectors have painfully learned. Take, for example, ordinary hotels (chain and family-owned).

Until a few years ago, the sales reps of (e.g.) Booking.com would go to the various tourism trade fairs pleading with marketing managers or sales directors of hotel groups to let them be in charge of a few rooms to rent. Often online travel agents (OTAs) were considered by sales directors to be rather unserious, but they reasoned, “If they can fill me an extra room or two via Internet, why not?”

Now if a single hotel or even a hotel chain gets unplugged from online travel networks, it is de facto dead – see, for example, an analysis here. The OTA, which now knows everything about the customer’s interests, will be only too happy to propose an alternative to the “no longer available” hotel.

Could the same thing happen to Hollywood? Will it be reduced to a junior partner of the Big Data firms, which meanwhile pillage its resources (actors, directors, producers)? How many directors will balk at working in a setup where they can work on somewhat original plots, backed by a modicum of confidence that an audience will exist?

A Way Out?

Does Hollywood have the data capacities to compete on its own? No. And the Big Data firms are extremely tight-fisted with their data.

A few days ago, it was reported that Disney, beginning in 2019, will stop distributing content via Netflix, switching instead to its own platform. The news has led to tremors in the stock prices of the two companies.

Disney’s intent is clearly to process its own data, so that it can better plan marketing strategies both in the content world and in its entertainment ventures. It remains to be seen whether time is on its side – the Big Data firms enter this struggle with a big lead.

Can other major studios create their own in-house data options? Perhaps they could instead delegate the role to others. There are two “old school” firms that could provide solutions: IBM and Microsoft, both of which have started edging into the Big Data world. They are notoriously slow movers relative to Facebook et al. – Microsoft has only recently started to focus on its Azure Cloud services, while IBM is trying to rebuild its brand with Watson. Nevertheless, these two institutions could perhaps fit well with Hollywood – they are established, credible, American, and would like to present themselves as being in step with the times.

Meanwhile, the only response that Hollywood has tried is to enroll still more superheroes. It won’t work forever. As Superman has recently illustrated, even superheroes can die.

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