Ask The Experts: The Economics of Oscar Season
Movie-goers are usually in for a treat when winter rolls around. It’s Oscar Season, after all, and big studios are busy lobbying for the inclusion of their films in the discussion for an Academy Award. Prestige obviously is a driving factor in all of the Oscar hoopla, but it’s dollar signs that studio execs, agents, actors, writers, producers, and directors see when they look at that iconic gold statuette (officially known as the Academy Award of Merit).
Winning an Academy Award – or even being nominated – can greatly help a studio's bottom line and make the careers of industry professionals. But you’ve got to spend money to make money, and millions of dollars are invested in the Oscar selection process each year.
Lobbying For Oscar Love & Profit Potential
This goes well beyond ‘For Your Consideration’ ads in trade publications, promotional billboards, and the dissemination of screening copies to critics and voters, according to Gabriel Rossman, associate professor of sociology at UCLA.
“Oscar marketing budgets run from a few hundred thousand to a few million,” he says. “The really big costs are in tailoring the film towards the Oscars in terms of its genre conventions, release date, etc.”
In other words, studios and producers have the Academy in mind from the earliest stages of strategic planning and development, producing scripts and scheduling release dates that will resonate with Oscar voters. History has shown that they prefer dramas, especially those that touch on compelling social issues, to comedies and are the personification of the recency effect.
Studios also understand that some films need Oscar buzz more than others. Big-budget tentpole films – think summer blockbusters like “Independence Day,” “Armageddon,” or pretty much any superhero movie – wouldn’t gain much from the Academy’s recognition and free marketing, but projects with less financial backing and limited mainstream appeal need the shine because quality, not subject matter, has to be their main draw.
“For a film like ‘The Avengers,’ it wouldn’t have been a big deal if it was nominated because it’s already made so much darn money and it would just be a drop in the bucket. But, particularly for mid-level films, Oscars can be the difference between profit and loss,” says film historian Jonathan Kuntz, a visiting professor with UCLA’s School of Theater, Film and Television. “We’ve seen, particularly in the 1990s when Harvey Weinstein was so effective back with Miramax at working the Oscars and getting nominations for films like ‘American Beauty’ and ‘Shakespeare in Love,’ that the Oscar can be huge for a mid-level or small film. It can really magnify the box office magnitude of those films.”
But it’s not just at the box office that Oscar nominees and winners benefit. Studios can also feature a film’s accolades on DVD packaging and on-demand descriptions, thereby maximizing both its longevity within consumer consciousness and back-end revenue potential.
You’ll Always be an Oscar Winner (or Nominee)
An Academy Award may have a much bigger impact on the fortunes of a director, actor or actress. No longer under contract to a studio, as they were in the “golden age of Hollywood,” they're free agents. Tom Hanks, who began his movie career starring in light comedies like “Splash,” became a Hollywood mega-star after collecting back-to-back Best Actor Oscars for ‘Philadelphia’ in 1993 and “Forrest Gump” in 1994.
“The stars that get nominated, or get the Oscar, benefit most when they're someone like Jennifer Lawrence, an unknown quantity who is suddenly A-list by virtue of Oscar's imprimatur,” Menne said. “Their salaries will double. That's why, in fact, these stars often spend out of pocket for an Oscar. Their publicist's salary will double during Oscar season.”
The Oscar Brand
Dominique Hanssens, a management professor at UCLA, says an Oscar nod is important to a studio and film because it has become its own “brand” over the years.
“What you have here from a consumer choice perspective is risk reduction,” Hanssens said. “If a film receives an Oscar, it is almost a guarantee of a good experience. So, for people who really don’t want to investigate themselves whether or not the film will be to their liking, the Oscar is a signal of quality. And signals of quality, given that the price is the same because the movie ticket doesn’t change, are usually a strong motive to attend a movie that they otherwise wouldn’t attend.”
The Age of Netflix
A bigger shaper of the motion picture industry, our experts agree, is the emergence of Netflix, providing instant access to films online that might not rate a DVD rental, much less a movie theater ticket.
“It makes small documentaries and low budget movies, like Andrew Bujalski's movies, somewhat more viable,” Memme said.
Hanssens believes Netflix actually has the power to influence what consumers will see on the screen in the future. While Netflix is acknowledged to have a massive amount of video content, Hanssens says that it also possesses something even more valuable – data. Netflix knows what people are watching and how much they like it.
“You can then use that data, combined with the demographics of these people, to actually go figure out for any new projects, what is the likelihood that a lot of people in a certain demographic will watch it and that they’ll actually like it. So that turns the whole process of green-lighting around a bit, in the sense that your predictions of what people will like are much better because of the quality of the data.”
That's important for Netflix, Hanssens says, since that company has now moved into producing content. For the industry, access to this kind of data may, in the long run, be much more important for the economics of the industry than winning an Academy Award. Armed with this data, Hanssens says Netflix products could be one home run after another.
“And by products I mean movies or television series that they actually pretty much know ahead of time are going to work,” he said. “Which is of course, the mantra for the movie industry: Will it sell, will it sell?”
Fighting the At-Home Viewing Experience
While “social” has become a point of emphasis for pretty much every industry in the age of Twitter, Instagram and Facebook, technological advances have also left the film industry at a crossroads. On the one hand, filmmakers are doing innovative things with effects, sound, and picture quality. However, the call of the couch is beckoning stronger than ever, given the relative affordability of huge flat-screen TVs and powerful at-home sound systems as well as the trend of replacing actual human interaction with online communication.
More and more consumers are therefore faced with making the tough choice between watching movies, sporting events, and even concerts at home or in public. And given the economic turmoil of the past few years as well as our societal laziness, a sizeable contingent is choosing to access programming on their own schedule and with all of their creature comforts readily at hand.
As a result, movie studios, theater chains, professional sports leagues, and various other live entertainment organizations must figure out a way to add value to the in-person viewing experience as well as unearth new revenue streams. Sports franchises – both on the collegiate and professional levels – are doing this by building bigger video boards, adding new luxury suites, improving stadium Wi-Fi, providing alternate forms of game-day entertainment, and licensing just about everything. Movie theaters are making bigger, more comfortable seats as well as adding alcohol to the menu, emphasizing 3-D, and promoting visually-stunning films like “Gravity” that just don’t look as good at home.
But is the film industry doing enough? The National Football League, in particular, has been masterful at capturing viewer attention throughout the calendar year, turning visually-dull events like the Scouting Combine and Draft into appointment viewing for many people. The so-called No Fun League has also fully embraced fantasy sports and is beginning to incorporate dynamic pricing into ticket sales. Such strategies together promote engagement among a broader spectrum of fans and speak well to the league’s continued success.
While Oscar pools have become popular in certain offices and households, the film industry has not fully embraced the “fantasy” trend, which could be easily applied to the entirety of the Awards Season by establishing “leagues” where fans draft a roster of actors, films, and directors and earn points for every trophy they haul in. Dynamic pricing – where ticket costs fluctuate based on a particular film’s appeal or the weather, for instance – is not much in evidence either. Sure, you have to pay more to see a movie right when it comes out, versus waiting for it to be released On Demand, at Redbox, on Netflix, or on premium cable, but there is clear opportunity to take things a step or two further.
Ultimately, there is one thing that we know for sure: The film industry will be a far different place 5-10 years from now, much like the current landscape makes movies from the early 2000s look like they’re from the Stone Age. So grab your popcorn and stay tuned for a wild ride!
Oh, and if you’ve fully embraced binge viewing and cannot wait to see what’s in store, you can get a sneak peak by checking out more of what our film industry experts have to say below.
Meet Our Experts
- How Crucial is Oscar Season to the Big Movie Studios?
- To What Extent Does Winning an Oscar Impact Earning Potential?
- How has the business of making movies changed in recent years?
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