The dysfunctional economics of filmmaking
...nal economics” of filmmaking, but through various articles, case studies, and videos such as De Vany &Walls, Arundel Partners, and The Trillion Dollar Bet, it’s easy to see how and why people continue to wrestle with the economics behind this industry. As De Vany & Walls discussed, “Nobody knows what makes a hit or when it will happen.” This means that the only time you’ll know whether or not a movie is going to be a success is after it has been released! As De Vany & Walls also point out, “Film audiences make hits or flops and they do it, not by revealing preferences they already have, but by discovering what they like.” This is when an information cascade begins to form—which will either boost a film or sink it. So the question remains, how can you attempt to economically quantify, measure, or model a film in such an unpredictable industry? One of the best analogies for the economics of filmmaking comes from the documentary, The Trillion Dollar Bet in which three brilliant economists, Fisher Black, Myron Scholes, and Robert Merton discover a mathematical breakthrough that revolutionized modern finance. Their model worked in theory as well as in the real world. But ...