hoc opus

By way of Dave Poland over at The Hot Blog (see post), there's a new expert in film performance and profit: Entertainment Business Group. Established as a "a California business services, production funding and global sales company" aimed at assisting producers, EBG has landed itself in The Hollywood Reporter and was picked up by Reuters. Unfortunately for EBG, while the article applauds the company for focusing on an attempted measure of profitability, it points out that creating an index with opening weekend box office doesn't really provide any valuable information whatsoever.

The tricky thing about Hollywood is that unlike most other industries, especially those comprised of public information, there is not much in the way of market data, outside of box office grosses and dvd sales ranks. Common wisdom that most films are still in the whole after theatrical release is accurate given average film production costs and P&A costs reported by the MPAA. So, the windows that provide profit for a film are not reported per film.

Analyzed on average performance, this is both a strength and weakness of the film industry. A strength because measuring performance across a portfolio of investment is the best way of achieving returns from these risky assets. While a single home run can push venture capital funds to three digit returns, any wise investors looks to the returns from the entire investment base.

A weakness because there is very little post mortem learning on a per film basis towards understanding the effectiveness of cost structures and spending relative to return. Marketing and distribution departments love to say that the success or failure of any film is impossible to predict and based on an innumberable amount of factors.

So, any effort to focus on the profit is welcomed here. Of course Kagan has been at it for a while.

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