If Put In Other Industries, Many Hollywood Executives Would Be Fired

11/11/2014 01:34 pm ET Updated Jan 11, 2015

This summer's box office performance declined about 15 percent when compared to last summer. While some industry Pollyannas might claim that better days are ahead, long-term trends do not support the sunny disposition. Higher ticket prices, leading to sustained revenue, have glossed over the fact that attendance has been declining for years. Per capita movie attendance has dropped a whopping 21 percent from 2002 to 2013. Though studio executives can cite various reasons for the attendance decline such as a growing list of entertainment options/streams that consumers enjoy and the shortening of the release window from theater to other outlets, another reason for the decline is harder to swallow; too many films suck!

One analysis revealed that roughly five percent of films account for nearly all industry profits, reflecting a dismal hit rate of 1 in 20. Most executives in other industries would be fired for such a record. But not in Hollywood. Why?

In Hollywood, the art of the deal takes precedence over audience appeal. Ideas and screenplays are bought and produced with millions of dollars before any consumer is allowed to take a peek at the results. There's little or no early research to understand if audiences have any interest in the story idea itself, and little or no audience input as the idea progresses through various stages of the development process. Only after films are nearly fully produced do they benefit from audience screenings. By then massive dollars have been sunk and it's often too late to make truly significant changes. Minor films don't even get test screenings. One studio executive confided that most of the audience research money is not spent on development research, but on advertising research in an attempt to find commercials and trailers that can sell a crappy film. In one case, dozens of trailers were tested to find the one that could sell a dog. Why? Because the studio head had to justify a project he greenlighted years before.

Instead of using audience appeal to select projects, decisions are often swayed by the power and track record of the executive selling the idea. Want to keep a powerful actor, producer or director happy? Then sign on to do his or her pet project even though you have serious reservations. Are you anxious to lose the bid for an independent film that is getting buzz among insiders at a recent film festival? Then bid high and snatch it up before your rival does. Don't bother asking mainstream audiences what they think. Instead, have a Hollywood power lunch. Package the elements. Make the deal. Sign the contract. Then rush it through the development and marketing process and spend millions. Then pray.

That's the norm in Hollywood. It makes you wonder if the old studio system, in which studios held more power than the talent, was a better model in some respects.

In other industries, concepts are first tested to ascertain which of many potential ideas generates the greatest audience interest. Those that demonstrate the highest interest are then sent into development and are tested again about halfway through the development process to ascertain if they remain on the right track.

Hollywood executives will argue that testing early story ideas is dangerous because the concepts are too rough and audiences are not sophisticated enough to comprehend the director's vision without the production values. Though there's some truth to that, the more significant reason is related to fear and ego. Creators don't like anyone messing with their vision. Yet I have tested story ideas in rough form and the results were well worth the cost. The story idea simply has to be conveyed in a form that fits the medium. In one case, I motivated the studio to create storyboard videos of two films under consideration. Each video ran 10 minutes and had a narrator who took the audiences through the beginning, middle, and end of each narrative. The research accurately predicted which idea would do best and the strengths and weaknesses of each. But the studio, to my knowledge, never conducted that type of research again. It was not in its nature. No one running a studio today wants to tell a powerful director or producer, "While we like your idea, we want to see what consumers think of it before we write you a check for $100 million." And so audience opinions are shunned until the idea is produced, and then studio executives wait anxiously to discover what the audience thinks of their $100 million product.

Is audience research always right? Nope. Sometimes audiences can't see the vision. In addition, the researcher must be skilled enough in storytelling to know when audience input would hurt the narrative. I'm sure that if Shakespeare tested Romeo and Juliet, audiences would have preferred that the lovers lived. Yet good storytelling demanded that they die. When placed in good hands, audience research, combined with experienced judgment, is better than having no audience input at all. It's much better than waiting until the audience speaks loudly at the box office.

The studios that fair best are those with franchises that have already demonstrated consumer appeal and those that do not depend only on box office results but on an array of entertainment businesses. The Walt Disney Company is a premier example. Not coincidentally, many of these other lines of business often use consumer research early in the development process.

I believe that there are only a handful of executives who have proven that they do not need consumer research. I'd put the likes of Spielberg, Lasseter, Cameron, and Bruckheimer in that category. They each have a formidable success record. I believe this is because their personal sensibilities are in line with mass audience desires. They feel as we feel. The other 99.9 percent of filmmakers desperately need audience reactions early in the development process but they do not seek it.

In any other industry, the executives that put the art of the deal before consumer appeal would be fired. But not in Hollywood.