Blockbusters: Hit-making, Risk-taking, and the Big Business of Entertainment Read online

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  His charming, unassuming personality easily made up for it, but Dewey Readmore Books, the star of Vicki Myron’s Dewey: The Small-Town Library Cat Who Touched the World, was one fat cat. A million-dollar cat, in fact. In 2007, the Manhattan-based publishing house Grand Central Publishing shelled out $1.25 million for the rights to the book about the fluffy orange creature, found abandoned as a kitten in the returned-book slot of the Iowa public library in which Myron worked.

  Five days before the publisher made the winning bid, Karen Kosztolnyik, then a senior editor at Grand Central Publishing, received a forty-five-page book proposal from Myron’s literary agent, Peter McGuigan. Impressed by what she read, Kosztolnyik quickly passed the document on to her boss, Jamie Raab, then senior vice president and publisher of Grand Central, who was hooked on Dewey just two pages into the proposal. The following day, they started the bidding process by offering an advance of $300,000, already a significant amount for a book by a first-time author. Author advances in the tens of thousands of dollars were much more common. (Such advances are payments made against an author’s royalty, which usually run between 10 percent and 15 percent of the retail price of a hardcover book.) A frantic bidding war ensued, during which McGuigan told Kosztolnyik that a second publisher was shadowing Grand Central’s every move. But Raab urged Kosztolnyik to “do everything humanly possible to buy this book,” and Grand Central eventually acquired the book in a preemptive strike, a day ahead of a scheduled auction that would have involved other publishers.

  Raab and Kosztolnyik had high hopes for Dewey, billed as the feline answer to the best-selling Marley & Me: Life and Love with the World’s Worst Dog, John Grogan’s 2005 memoir of his misbehaving Labrador retriever. Marley & Me had garnered critical and commercial success, selling over three million copies to date. Dewey was no stranger to the spotlight. Over the course of his nineteen-year life, this unusually resilient cat—named in a contest after the Dewey Decimal System used in most libraries to catalog books—became a mascot for the library and the town of Spencer, Iowa. As his popularity grew, he even started to attract the attention of tourists and filmmakers, appearing in two documentary films. Shortly after he died in November 2006—in Vicki Myron’s arms—his obituary ran in more than 250 publications, including USA Today and the Washington Post.

  However, this was an unprecedented level of pressure even for Dewey. When that exceedingly high bid was tendered, the reaction in many quarters was disbelief. William Morrow, a HarperCollins imprint, had paid a mere $200,000 for the rights to Marley & Me back in 2004. Grand Central’s gamble on Dewey immediately turned the book into one of the publisher’s biggest bets for the year among its annual output of 275 to 300 books. “It’s stunning, the advances being paid. If it might be the next Da Vinci Code or the next Marley & Me, the ante just increases,” Robert Miller, the president of rival publisher Hyperion, said. The proposal did not scream instant success: typically, cat books are not big sellers. According to Kosztolnyik’s records, Peter Gethers’s The Cat Who Went to Paris and Stephen Baker’s How to Live with a Neurotic Cat—next to Marley & Me the two most comparable titles—had sold only around 30,000 and 120,000 paperback units, respectively. And the book’s main character had died—making him unavailable for, say, a publicity-grabbing appearance on Oprah Winfrey’s couch.

  “Magical things always happen around Dewey,” Myron said about her furry friend after the bidding. But with more than a year until the book was published, it would be a while before Grand Central learned whether its seemingly outrageous bid for the manuscript had been the right move.

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  The double-or-nothing daring move to acquire Dewey was only one in a string of big bets made by Grand Central and a host of other leading publishing houses. Like major Hollywood studios, book publishers, too, have largely adopted a blockbuster strategy. In the year before the Dewey gamble, for instance, Grand Central spent close to 20 percent of its total adult hardcover acquisition budget of $40 million on its biggest title alone, and over half of this budget on the five most expensive titles on its list of roughly sixty adult hardcover front-list titles. (A publisher’s front list is its catalog of new books; its back list contains books that have already appeared in an initial edition. On average, about 70 percent to 75 percent of a major publisher’s sales comes from front-list titles.) Grand Central chose to compete this way in a sector where, like the film industry, the failure rate is high: only about one of every five new books recovers its costs in the marketplace, and retailers reportedly return roughly 30 percent of all publishers’ physical book shipments. While exact rates differ across the various sectors and genres, it generally is the case that, for any given title, the most probable outcome is a financial loss.

  Grand Central’s aggressive pursuit of Dewey may prompt a prudent manager in any other industry to wonder what on earth the company was thinking. Faced with such low odds of success, why would Grand Central put itself in the position of having to outsell all cat books released in recent memory to earn back its seven-figure advance and make a decent profit? Rather than putting all their eggs in one basket, wouldn’t the executives at Grand Central be smarter to place a larger number of smaller bets on a range of topics or, if the belief in pet books is so strong, commission a number of books on feline or other creatures? Publishers, like movie studios and other entertainment companies, sometimes seem like riverboat gamblers. What explains the prevalence of audacious bets such as the one Grand Central placed on Dewey?

  The first thing to understand is that, given the variability in execution of books, movies, and television series, and given the constantly shifting tastes of consumers, it is extremely difficult to forecast demand for any individual new title. Speaking about the movie business, screenwriter William Goldman once said, “Nobody knows anything.” Executives in the film industry often quote that famous line, and although it may be too strong a statement, Goldman’s words accurately reflect the frustration of having to make a prediction based on just a proposal, a script, or even a pilot.

  “It is guesswork,” Jamie Raab told me. “To some extent, we are all just winging it. I have a good track record of picking winners, but it is far from perfect. No one in this industry has a perfect score. It really is a crapshoot, albeit an ‘informed’ crapshoot.” The one useful indicator of potential—and this is a critical notion that drives much of how entertainment industries operate—is a new idea’s resemblance along some dimension to an existing hit. But that is an indicator that, by its nature, is evident to any industry player, so there is heavy convergence of interest on certain properties. This, in turn, triggers competitive bidding situations for proposals and soaring fees for the creative people who can bring these properties to the page, the big or small screen, or indeed to any mass entertainment medium.

  This was the kind of luck that Dewey, in characteristic fashion, stepped into. Soon after the book proposal started to make the rounds, many industry insiders compared Dewey to the runaway hit Marley & Me. The sixth-highest-selling book (fiction or nonfiction) of 2006, it spawned two related children’s titles also written by Grogan about his rambunctious canine (an adaptation for ages eight to twelve, Marley: A Dog Like No Other, and the new adventure Bad Dog, Marley!), a number of other dog books, and even a Hollywood movie starring Jennifer Aniston and Owen Wilson. Publishers saw essential similarities in Dewey’s story: it was a touching story about how an animal could bring out the humanity in people it encountered, featuring an animal that was much more than just an average pet. It would surely appeal to pet lovers, many felt.

  While executives at Grand Central were careful about making comparisons between Dewey and Marley—the world is divided into cat and dog lovers, after all, and every title needs to be judged on its own merits—the similarities undeniably spurred publishers’ enthusiasm for the Dewey rights. Fearful that the price would reach astronomical heights at auction, Grand Central snapped up the book a day before several other publish
ers would have had their shot at it. “You can’t underestimate the market out there for people who love animals,” remarked Kosztolnyik, who would oversee the editorial process. “Marley & Me has been a publishing phenomenon. I think there are equally as many cat lovers as there are dog lovers.”

  These same dynamics also explain why, when the popular television series Sex and the City ended in 2004, not one but two shows—Lipstick Jungle and Cashmere Mafia—sought to fill the gap by building a show around three successful professional women living in New York City. Likewise, the best-selling Twilight series sparked a renewed interest in vampires, and we have the smash hit American Idol to thank for the onslaught of talent shows—including NBC’s The Voice—that fill our television screens.

  During Alan Horn’s tenure at Warner, many of the studio’s event films were based on properties that had established their value in other domains. Harry Potter, for instance, was a megahit in book form, and The Dark Knight was based on the Batman comic-book series. Other event films leaned on formats that had worked in the past, be they sequels to original films that were a resounding success, such as The Hangover and Sex and the City, or ideas that featured stars, directors, or writers that have previously scored a hit. Even Speed Racer fit this pattern, remarked Horn: “The Wachowski siblings had done three Matrix movies which were phenomenally successful, and their next film, V for Vendetta, also made a fair amount of money. When they, with their track record, said they wanted to do Speed Racer, it was hard to say no.”

  When planning sequels to movie franchises or additional seasons of successful television series, studio executives will strive to leave a “winning formula” unchanged and thus avoid uncertainty about how, say, a switch of a lead actor or talent show judge will pay off. As a result, the costs of production often dramatically increase over time. American Idol is an example: in 2009 Simon Cowell was rumored to have pocketed well over $100 million to extend his run as a judge on the show for one more year. (He later launched X Factor, a rival talent show, in the United States.)

  With so much money invested in their most promising projects, entertainment executives will understandably do everything in their power to make these products a success in the marketplace. For both its fall/winter and spring/summer lists, Grand Central turns a handful of its biggest bets into what Raab calls “focus books,” which receive a disproportionately high level of attention and promotional dollars. Of those, a small handful of titles per season are the all-important “make” books. “We pull out all the stops to make those books happen,” explained Raab. Focus books will get more attention from the marketing and sales team, more time during meetings (such as those with sales representatives), and a more prominent placement in the publisher’s catalog for retailers. At Warner Bros., event films not only receive a higher production and marketing budget; they are also often slotted into the most favorable opening weekends (such as around Memorial Day in the United States), and more efforts are dedicated to these films in dealings with exhibitors, retailers, and other partners. Similarly, television networks’ biggest bets are given the most valuable times in the television schedule and more airtime for promotions. The holy grail here is a spot during the Super Bowl, watched in recent years by a hundred million viewers—or, even better, airing an episode immediately after the game, as NBC chose to do in 2012 with a special episode of The Voice.

  To pursue a more cautious strategy seems foolish. After all, if a product like Dewey, The Dark Knight, or The Voice fails to draw audiences, an entertainment company knows its profitability will be severely hurt. At the same time, the effect is to escalate the company’s commitment and increase the size of its bet. With such high stakes and money tied up in a few big projects in the pipeline, the need to score big with a next project becomes more pressing, and the process repeats itself. The result is what I call a “blockbuster trap”: a spiral of ever-increasing bets on the most promising concepts.

  And so it happens that the expenditures required to procure winning properties can reach bet-the-farm proportions—this explains why NBC and Paramount were inclined to switch away from a blockbuster strategy for a time. When a first-time author can produce a bestseller like The Art of Fielding (a much-praised novel by Chad Harbach), when a show like American Idol can draw a huge audience after getting its start in an unfavorable summer slot amid decidedly modest expectations, and when a no-name filmmaker with a minuscule budget can produce a major hit like The Blair Witch Project or Paranormal Activity, it might seem inadvisable to pay so much for material. The race for the next blockbuster can even stifle innovation: the same tendencies that lead to bidding wars for projects that resemble past winners work against other projects that look nothing like them but may have strong merits of their own. Many movie lovers lament the offerings available to them in theaters and speak disapprovingly of a market in which nine of the top ten selling movies in 2011 were sequels of major franchises, and the tenth, Thor, was based on a comic-book character.

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  Yet, as much as managers may crave to reduce the risks that go hand in hand with big bets, and as much as we might want to criticize entertainment executives for single-mindedly chasing after winning formulas, forgoing blockbuster bets altogether likely creates even more problems. What happens if a publisher like Grand Central decides to stop making large bids like the one it tendered for Dewey, or when a studio like Warner Bros. forgoes the kinds of investments associated with its event films? And what happens if a content producer of any kind walks away from the most sought-after, and therefore expensive, new properties?

  First, when businesses opt out of the blockbuster race, they take themselves out of the market for the most promising new projects. Literary agents will stop sending their most sought-after book proposals and movie scripts to such a producer. “If you are constantly backing out of big-ticket auctions your list is going to hurt,” one publishing executive told me. “You are going to get a stigma that you don’t play for the big ones, and you are going to get shunned. Say historically you won’t bid more than $2 million on a book, but an agent thinks they can get $10 million on a project. Why would they bother letting you into the loop? They will no longer consider you for what they feel are their best projects.”

  Editors at publishing houses work hard to cultivate working relationships with agents because they tend to be the sources for the lion’s share of proposals that eventually are turned into books. Even if a publisher could develop extraordinary competence in finding gold in the “slush pile” of thousands of pieces of unsolicited material received each year from aspiring authors, the dividends would be limited. After one success, the talent the publisher has nurtured would discover the value of an agent, driving up the advance needed to sign the writer’s subsequent books. The same need to build relationships and be “in the market” for the best projects exists in the film business. “Sometimes this industry is like the mafia—it’s about showing respect,” said one Warner Bros. executive. Similarly, if a television network starts “managing for margins” rather than aiming for the widest possible audience, then agents, producers, and writers may quickly stop considering that network a good destination for their best projects.

  In every entertainment business, a strong lineup of projects is often key to cultivating the next hit. Consider the world of television. Viewership is “sticky”: many viewers will not immediately switch channels after seeing their favorite program, meaning they may also end up watching the program in the next slot. In addition, networks primarily advertise new shows using promotions they run on their own channels, so that much of a new program’s viewership is a direct result of the popularity of the other programs on its channel. Even a casual examination of television schedules over the years reveals strong success-breeds-success trends. It is no coincidence that ABC launched Grey’s Anatomy and a number of other successes on a Sunday evening anchored by its breakout hit Desperate Housewives. Likewise, FOX used American Idol to boost House, Lie to Me, and most
recently Glee. As a result, any smart producer sitting on what he or she believes is the next big idea in television will prefer to do business with the most popular network, as that increases the chances of market success. So the more content producers focus on saving costs rather than driving sales, the more they lose their bid to contend for the most promising new projects.

  Second, if a publisher or studio would constantly shy away from blockbuster bets, the most talented editors, filmmakers, television producers, and other creative talent would leave to work for a company that would let them pursue the projects they thought had the highest chances of success. This is not because of the much-discussed “big egos” of creative workers—a factor often named in the aftermath of bidding wars. It’s a simple result of the passion that many media and entertainment professionals bring to their work—and the fact that careers are built on blockbusters. Grand Central’s publisher and now president Jamie Raab, for example, is known for discovering the best-selling romance novelist Nicholas Sparks. As a result, Raab receives a steady stream of the best new love stories from literary agents.

  When you work on a project-by-project basis, as most creative workers do, every project could be your last. Hits buy you extra time and new opportunities in your career. A few misses here and there can be overcome: A-list talent is rarely evaluated on a “hit rate” or “batting average”—the total number of hits, or just the most recent hit, generally matters more. George Clooney, for instance, became a leading man in the 1990s after his star turn on NBC’s popular series ER—at the time, everyone seemed to have forgotten that he had previously played parts in more than a dozen television shows that never went anywhere. But people and projects that have “failure” written all over them often receive the cold shoulder.