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April 1, 2004

The Marketplace QED

I wasn't sure how to react when I first came across Tyler Cowen's post saying, essentially, that Hollywood makes about as many "wholesome" movies as the market will bear, ipso facto:

While some bias may be present, enough moviemakers are simply greedy. The study shows that many wholesome movies are in fact made and succeed financially. So if more wholesome movies would make more money, we would get them. They are not shut out of the market. So in financial terms I doubt if the bias can be a large one.

Part of the problem is that the organization that put out the report hasn't made it available online. Some of the summary data can be found on WorldNetDaily, and some actual numbers can be found here, but it's difficult to form a complete picture from what's offered. Still, Cowen's conclusion that there "is only room for so many wholesome pictures in the market," beyond which "consumers demand sex and violence in their movies," overlooks some of the factors that affect relative data.

For one thing, nothing in the information that we have — or probably even in the full report — gives direct basis for guesses about "what if" questions. Cowen seems to rely on the assumption that "enough moviemakers are simply greedy" that they would make a larger number of moral films, even if it went against their own immoral principles to do so. Far from being self evident, that assumption would seem to require additional substantiation to refute the argument that even the greed motivation isn't being heeded. Moreover, a predisposition to naked greed would exacerbate a problem that Craig Henry notes:

Markets are efficient information processors, but they are not omniscient. Buyers can only purchase what is presented to them by producers. Since producers are not gifted with perfect foresight, they often miss opportunities. That is why innovators and new entrants can reap high returns. As Clayton M. Christensen shows in The Innovator's Dilemma, established firms usually are locked into existing customers and are blind to the profits to be found in new or underserved segments.

More problematic to Cowen's hypothesis is that moviemakers have tended to flood the market with working formulas. At the very least, one would expect the industry to make more of the types of movies that sell most. Were that the case, the average earnings would seem likely to even out, as more "moral" movies were made, with the bulk making less money, thus bringing down the average. (This also may suggest that moviemakers will only make "wholesome" movies that are sure to succeed, while they're willing to take financial risks with "unwholesome" movies.) Consider this chart of data drawn from the actual numbers link above:

The solid lines are the actual numbers (left axis), while the dashed lines are earnings (right axis). Without knowing the distribution of the films being averaged, one can only speak generally. However, all things being equal, according to Cowen's explanation, the lines of the same color should be relatively parallel and less steep. The former because the industry would make more movies of the type that made the most money; the latter because making more movies means more movies that can flop and more that share the same niche.

The dashed green line represents the average earnings of "movies with very strong moral content." Unfortunately, I don't know how many movies this includes, but drawing on the inverse proportions between "no sex" and "no nudity" movies, whereby the 15% fewer "no sex" movies earned 15% more, my best guess is that 62 or 63 strongly moral movies were made.

The bottom line is that, whatever the reason, Hollywood would do well to make more moral movies. (That will surely require some new hires of higher-ups who can create such movies without seeming insincere.) And as for Cowen's bottom line that people "demand sex" after a certain number of wholesome movies, I'd suggest that the slight uptick of revenue for movies with "excessive" sex and the coalescing trends between revenue and number for excessive nudity give a pretty good indication that this is the only market that is adequately covered... well, not adequately covered, but you know what I mean.

Posted by Justin Katz at April 1, 2004 11:09 PM
Culture
Comments

I'm reminded of something I read many years ago. Dick Cavett was being interviewed, and he was asked about the quality of most television programming. He said something like this: "It's often said the public gets what it wants. The truth is the public gets what it gets."

Posted by: ELC at April 2, 2004 9:23 AM

Your analysis is meaningless. The meaningful number for the financial success of a movie is not its box office gross but its profit. Obviously, a high-budget movie must earn much more than a low-budget one to be profitable. High-budget movies also typically have much higher advertising and distribution costs than low-budget ones, and those costs also affect profit. So box office receipts alone, which are the only numbers provided in your link, tell us nothing meaningful about profitability, and thus nothing meaningful about the relative economic success of the different categories of movie you describe.

Furthermore, even ignoring the issue of profit, the use of average box office gross by category is a very poor measure of the economic performance of that category, both because some categories tend to have much higher budgets than others, and because the economics of the movie industry tends to be dominated by a relatively small number of high-grossing pictures that may massively skew the average for the category they represent. Movies with very strong sexual content are almost always low-budget art films whose audience is limited not only by their content but also by the imposition of an R or NC-17 rating. Because of their low budgets, such movies may be highly profitable despite modest box office returns. In contrast, the category that you refer to as “movies with very strong moral content,” meaning movies with little or no sexual or violent content, tends to be dominated each year by a handful of expensive, special-effects-laden family or children’s pictures like Finding Nemo or Harry Potter. That small number of very successful PG-type movies will cover a multitude of failures in the same category.

Here are the top 10 grossing movies for 2001, the year covered in the Christian Film & Television Commission’s laughable “study.” In descending order of box office receipts, they are: Harry Potter and the Sorcerer’s Stone, The Lord of the Rings: Fellowship of the Ring, Shrek, Monsters Inc., Rush Hour 2, The Mummy Returns, Pearl Harbor, Ocean’s Eleven, Jurassic Park III and Planet of the Apes. Of that 10, only 3 could reasonably be described as having little or no sexual or violent content (Harry Potter, Monsters Inc. and Shrek), and they are all aimed primarily at children. All the others contain significant amounts of violence and/or sex. And just outside the top 10 were the ultra-violent Hannibal and the ultra-sexual American Pie. Tyler Cowen is also correct that the movie industry is especially sensitive to the sensibilities of its audience and to formulas and styles that work. It’s always looking for a hit, and an unexpectedly successful picture will usually spawn a throng of copycat films the following year. If there were significant additional potential in the market for “wholesome, family films,” Hollywood would already be exploiting it.

In short, the Christian Film & Television Commission’s report is a crock. There is no credible basis for thinking that Hollywood would be better off making more movies that the CFTC or you would consider to have “very strong moral content.”

Posted by: Dan at April 2, 2004 10:24 PM

Well, gee, Dan, I have to admit that your opening sentence put me in a less than amenable frame of mind for your long comment. Pretty bold, too, considering that I don't see a single thing therein that decisively undermines my basic argument.

First of all, for the record, I stated pretty clearly in my post that the information given leaves us only able to speculate about specifics. The major complication is that we don't know, really, what makes a movie "moral," in this study, nor do we know what movies qualified. Essentially, I was reacting to the conclusion that Cowen drew from the same limited information. But to your comment:

The meaningful number for the financial success of a movie is not its box office gross but its profit.
— Are you suggesting that moral films are necessarily high budget productions? If not, then I must insist that box-office receipts are the relevant measure, because they bear on the potential market. The ticket costs the same whether the movie was high budget or low.

Movies with very strong sexual content are almost always low-budget art films whose audience is limited not only by their content but also by the imposition of an R or NC-17 rating. Because of their low budgets, such movies may be highly profitable despite modest box office returns.
— Two points (assuming that this is true). First, I suggested that the number of movies with "very strong sexual content" seems to be pretty well matched with the audience. Second, that low-budget art films tend to be sexually explicit constitutes no proof, of itself, that "wholesome" low-budget art films couldn't do better, if produced with the same sincerity and quality. (Ask Mel.) In fact, I spoke to this point when I suggested parenthetically that the industry might only make wholesome movies that it is confident will succeed, which would match up closely with movies that the studios are willing to spend big bucks on.

I'm also not sure why you think it counts as evidence against me that the three non-sexual movies in the top 10 (plus) are in the top 4. Moreover, the violence measure is your addition; The Passion of the Christ wouldn't fit your definition, but I'd wager that it would fit the Christian group's. (Again, though, not knowing the basis for "moral" is a large gap in the available data.)

Tyler Cowen is also correct that the movie industry is especially sensitive to the sensibilities of its audience and to formulas and styles that work. It's always looking for a hit, and an unexpectedly successful picture will usually spawn a throng of copycat films the following year.
— I'm the one who mentioned formula production. I did so to suggest — based purely on the numbers being discussed — that one would expect the most number of films to fall in the category with the highest receipts (again, assuming morality doesn't, of itself, come with a higher price tag). That's not the case, and among the limited information that we have in this discussion is that this trend isn't a one-year fluke.

If there were significant additional potential in the market for “wholesome, family films,” Hollywood would already be exploiting it.
— Ipso facto. Q.E.D. This is the statement being challenged. Restatement isn't fortification.

Posted by: Justin Katz at April 2, 2004 11:22 PM

I've always been baffled by the juxtaposition of "wholesome" with "sex and violence" in discussions of entertainment. It seems a very value-laden choice of words, and largely divorced from reality. The Passion is one of the most violent movies ever, and arguably one of the most moralistic and wholesome. Violence and sex are not inherently evil. Evil is evil.

Posted by: Ben Bateman at April 5, 2004 4:28 PM

I'm delighted to read conversation on this topic. I hope we can all agree that the role modeling of actors in the shows we watch will tend to have an effect on us. A very sound study by a group of psychologists showed that teens watching movies laden with cigarette smoking scenes were five times more likely to begin smoking than those who saw very little (and three times as likely when adjusting for other influential factors). The details of the study are excellent.
I mention this to emphasize the importance of the content of films for not only children and youth, but adults as well. What is the film industry encouraging people to do? Certainly both good and bad, right and wrong. But shouldn't we do all that we can do encourage the industry to promote moral values that make a society strong: honesty, responsibility, diligence, etc. I think there are many movies that do so. I'm glad. But I deplore the movies who teach the opposite.
As far as the studies goes, I must admit that it would be nice to know the operational definitions of some words.

Posted by: Jeremy T. Johnson at July 24, 2004 10:03 PM