Hollywood blockbusters and the message for Big Pharma

AvatarThe business model for blockbusting films is coming under increasing scrutiny. There may be a message for the major drug companies

Last year, [2013] 26 films costing more than $100m each were released by the major Hollywood studios – more than ever before. They are likely to have raked in tens of billions of dollars in worldwide box office revenues as a result. But despite the runaway successes, there are concerns that blockbuster budgets are getting dangerously high.

The business model

The business model works because the large blockbuster is more the visible part of a process than a stand-alone product. The basic plan is to develop a series of movies after an initial demonstrated [financial] success. Each successor is part of marketing campaign now well-routinized of spin-off products and deals.

Only a fraction of revenues come from ticket sales with the bulk coming from television licensing, DVD sales, and assorted merchandising deals. Arguably it is the model for sporting franchises as well.

“There’s eventually going to be an implosion, or a big meltdown,” said Hollywood elder statesman Steven Spielberg in a speech earlier this year. “Three or four or maybe even a half dozen mega-budget movies are going to go crashing into the ground, and that’s going to change the paradigm.”

Spielberg had warned of an “implosion” in Hollywood as In 1980, Heaven’s Gate effectively bankrupted United Artists.

Half full or half empty?

British film academics John Sedgwick and Mike Pokorny have found that blockbuster films become have become more reliably profitable: in the late 80s just 50% of major studio films turned a profit. In 2009 it was 90%. Flops have become rare. Spielberg worries with others who note the changes in the market place. DVD sales are threatened by online streaming services such as Netflix. Studios are seeing profits growing more from their TV interests.

Aesthetic bankruptcy

Others refer to dumbing-down and “aesthetic bankruptcy”. Screenwriting talent is increasingly moving over to television.

Entertainment has flourished on change since silent moves found its voice, and later its glorious in sound and visual transformations. The blockbuster model may well be bust. The challenge to Hollywood is one that also applies to the giants in Big Pharma

A message for Big Pharma?

It is the challenge facing other industries where the early winners face being overtaken by outsiders as the name of the business game changes. Maybe Big Pharma will learn from Hollywood that the days of searching for big blockbusting drugs are over.

What else?

The question may be addressed by the stirrings of interest in new leadership approaches in recent years. The last movement to claim New Leadership was in the 1980s. That involving visions and transformations. Newer ideas are trying to recentre business leadership as utterly concerned with ethics and also with distribution of power and authority. [see here for a more critical view of distributed leadership]. It calls for further rethinking of the ultimate rationale for organizational structures and patterns of behaviour.

We not be able to wait another forty years for such ideas to be applied effectively and globally.

One Response to Hollywood blockbusters and the message for Big Pharma

  1. Edward Spalton says:

    Funnily enough your article coincided with a letter of mine to the local paper concerning an earlier era of Big Pharma. A left wing correspondent, who thinks that Marshal Stalin was a great guy (although she has grudgingly admitted that he did some “unacceptable” things!), wrote to say that penicillin was only developed because it was taken up by the NHS.

    This was so contrary to the facts, that I had quite a bit of fun with it – pointing out how the British research work was developed and scaled up to mass production precisely by “Big Pharma” in the United States. Florey took his research work there from Oxford in 1940 because the British chemical industry was fully committed. At that time British production of pencillin was on what it is not unkind to call a cottage industry basis. Bed pans were being used as fermenting vessels!

    The Americans overcame many problems and scaled this up to 10,000 gallon tanks from which they were able to extract 80-90% of the active substance as against about 1% in the British experiments. They reduced the cost of the material from priceless to 20 dollars per 100,000 units by 1943 to less than 10 cents by 1949.

    Florey had taken a principled line that he would not patent the process. I can’t help reflecting that, whilst this was a generous–spirited attitude, it would have helped Britain greatly if he had done so. The country was desperate for dollars at the time.

    I ended by hoping that the left wing lady was suitably grateful to the effects of mass production and capitalist enterprise by the American companies concerned – which I named.

    Great fun!

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