Hollywood’s Next Great Studio Head Will Be a Computer
Film companies are following Netflix by using big data to make big decisions — yet it could cut down on the risk-taking that makes classics
“Nobody knows anything,” wrote legendary Hollywood screenwriter William Goldman in 1983. “Not one person in the entire motion picture field knows for a certainty what’s going to work. Every time out it’s a guess and, if you’re lucky, an educated one.”
Nearly 40 years later, Hollywood studios are still making wild guesses about which movies might break even or make a profit. Films are what economists refer to as experience goods, so viewers don’t know whether they’ve made a good decision until they’ve watched the film. Movie marketing, too, is still costly and inaccurate, averaging $30 million per film but rising to as much as $200 million for major blockbusters. For Hollywood, this informational asymmetry has always been a problem, and in an industry in which every product represents an extremely costly investment, nothing is worse than unpredictability.
The internet, however, is a rich resource of behavioral consumer data that holds many of the answers Hollywood needs — provided it will look for them. Even as Silicon Valley built multibillion-dollar empires off the back of consumer data, the movie industry remained cautious and conservative, continuing to rely on a combination of traditional market research, experience, and gut feeling. Yet Hollywood is finally recognizing that data analysis can help it make more informed decisions about projects, and the industry is developing internal data analysis teams and working with external specialists.
Both audience research and test screenings are imprecise and time-consuming.
In the past, Hollywood relied on surveys and test screenings to assess which viewers were interested in what. Both have a long history in the film industry, as Vinzenz Hediger, professor of cinema studies at Goethe University in Frankfurt explains:
Testing movies was, like a lot of things, probably an idea of the director D.W. Griffith. Audience research, on the other hand, began in the 1930s in reaction to two…