Blockbusters: Hit-making, Risk-taking, and the Big Business of Entertainment

by Anita Elberse

  Two characteristics of the talent life cycle readily come to mind: first, the odds of success—any success—are low and, second, careers in entertainment tend to be relatively short. Most people who hope for a career as a professional tennis player, actor, musician, or other type of entertainer don’t even come close to achieving that goal. Those who do succeed tend to remain at or near the top of their field for a limited amount of time, especially when compared to professionals in many other domains, such as doctors, lawyers, accountants, or consultants. When we think of careers in entertainment, we tend to think of the big successes—of the few stars with staying power, such as Sharapova, Cruise, or Lady Gaga—but the truth is that most performers come and go, and only a tiny minority manage to remain on top for an extended period. This fact creates significant challenges for creative talent—and for entertainment executives betting on that talent.

  When we look more closely at how the value of talent in different sectors varies over time, we find that the result resembles a bell curve. That is, the contribution that creative talent makes to the creative economy generally rises and then falls over time—regardless of whether one defines “value” as the sales generated by a musician’s recordings, the size of the audiences willing to pay to see a movie star’s performances, or the money generated by a model’s photo shoots. As the following charts illustrate, such bell curves are everywhere in the world of entertainment. We find them when we look at the ages of players starting in English Premier League games, for instance, or at the ages of the players behind every goal scored. Or when we consider the ages of tennis players in Grand Slam finals or at the top of the international rankings. Or when we examine the ages of actors and actresses when the Hollywood movies they star in are released and measure how much money those movies generate at the worldwide box office.

  Life Cycles of English Premier League Soccer Players

  The chart on the left shows the ages of all players starting in the English Premier League games played in the ten seasons from 2001–2002 through 2010–2011; the chart on the right shows the ages of the players who scored goals in those games.

  Life Cycles of Professional Tennis Players

  The chart on the left shows the ages of all finalists in the four men’s and women’s Grand Slams (the Australian Open, the French Open, the US Open, and Wimbledon) from 1980 through 2012. The chart on the right shows the ages of all players in the top 200 on the ATP (men) and the WTA (women) rankings, as of September 2012.

  Life Cycles of Hollywood Movie Stars

  Based on a sample of the 675 movie actors and actresses listed on boxofficemojo.com, a site tracking Hollywood data, the chart on the left shows what age those actors and actresses were when the over thirteen hundred movies they played in were released. The chart on the right shows the total worldwide box-office revenues of the movies they starred in, again by actor age. The data were collected in June 2012.

  But if the broad trends in a given field are predictable, individual careers come in all shapes and sizes. It is far from easy to quantify an athlete or entertainer’s current value, let alone predict his or her trajectory over a long period. That’s partly because a few individual performers always seem to flaunt the rules of the universe, whether it is Manchester United’s Ryan Giggs (who is still going strong even though he is two decades older than some of his teammates), Maria Sharapova (who was so young when she won her first Grand Slam), or Meryl Streep and George Clooney (who both demonstrate enduring star power even as they age). But even aside from those few performers who defy the odds, there are more fundamental reasons why assessing an entertainer’s value is so difficult.

  One such factor is that early winners often have an inside track on further successes, thus demonstrating what economists call “path dependencies” or “positive feedback effects.” Imagine a casting director selecting film actors. She probably has little to go on when trying to distinguish among hundreds of unknown actors auditioning for a small role. But after a particular actor has been chosen once or twice and has met expectations, there is a good reason to favor that actor in the future. As a result, a decision that may have been based on a subtle advantage compared to other actors—if a difference existed at all—could translate into a lucrative career for the lucky winner and a dearth of opportunities for the hundreds of other hopefuls.

  Even in sports, seemingly minor initial events sometimes cast a wide shadow on a later career. Sharapova, born in an industrial town in West Siberia, might never have had a chance to reach the top had not the 1986 Chernobyl nuclear disaster forced her parents to move to the Black Sea resort town of Sochi, where the young player found more opportunities to play tennis. And had not she and her father had the good fortune to attend tennis clinics in Moscow just when tennis legend Martina Navratilova was paying a visit, Navratilova, who spotted the then six-year-old hitting balls on the court, would not have been able to encourage Sharapova’s father, Yuri Sharapov, to develop her talent further. Sharapov, in turn, would have been much less inclined to seek world-class coaching for his daughter at the famous IMG Bollettieri Academy in Florida.

  The same holds true for those who work behind the scenes. When Eisenbud joined IMG in 1999, he was sent to the Bollettieri Academy as part of his training. Had he not encountered a young Maria Sharapova there—“I knew right away that she was special,” he said about his first meeting—he might not have developed into the top agent he has become. If he had instead joined IMG a little while later, another agent might have already forged a bond with the girl who would go on to win Wimbledon. Similarly, Tom Cruise was one of Paula Wagner’s first clients as an agent, and Wagner would eventually come to advise the careers of actors Demi Moore, Val Kilmer, and Kevin Bacon, as well as filmmaker Oliver Stone. It’s impossible to say even now whether either Cruise or Wagner would have had the same stellar career had they never met.

  This is not to say that superstars and their agents and managers do not earn their success, or that it is always smooth sailing for them after some initial lucky breaks. Eisenbud and Wagner are highly competent agents, and Sharapova and Cruise are both known for their commitment, determination, and remarkably consistent performances. Sharapova has gone on to win a third and fourth Grand Slam—becoming only the tenth woman ever to complete a Career Grand Slam—and is among the top career prize-money earners in women’s tennis. And Cruise has starred in more movies that collected at least $100 million at the box office than all of his peers. Rather, the point is that even the biggest superstars need things to fall their way sometimes, especially early in their career. And the point is that an artist or athlete’s objective quality—however that quality is assessed—is often not a good predictor of success.

  Genuine talent is unquestionably a valuable asset, but for any creative worker there is a very thin line between achieving superstar success and remaining a complete unknown. In soccer, just making the cut for Boca Juniors’ youth academy can make a tremendous difference to a player’s overall career. The music business is full of stories of stars being dropped by their label or coming very close to it—Alicia Keys, 50 Cent, and Katy Perry are just a few of the many musicians who have gone through that experience. Despite her raw talent, Lady Gaga is another example: she was dropped a mere three months after signing a record deal with top producer L. A. Reid at Def Jam Records, before eventually finding a home with Vincent Herbert’s Streamline Records. We can only wonder about the countless potential superstars we have never heard of because they were simply less fortunate and were not given a second chance.

  Another complicating factor in assessing an entertainer’s value is that when products are made by teams, it is often difficult to isolate a single individual’s contribution. This is due to the so-called O-rings principle, named after a key component on the space shuttle Challenger whose failure contributed to the shuttle’s explosion. This theory, first described in the context of the creative industries by the economist Richard Caves, dictates that an enterta
inment good’s quality depends on all inputs—all workers—performing up to a particular standard. Think of an orchestra: one out-of-tune musician can ruin the ensemble’s entire performance. Or think of a movie: as many industry insiders can attest, two actors may be perfectly fine performers by themselves, but when they are put together in one movie sparks sometimes fail to fly. The implication is that one team member’s contribution to a product, be it a piece of music or a movie or a soccer game, depends on the strength of the other people involved in producing it.

  Establishing the cause of an entertainment product’s success or failure is often virtually impossible. A popular actor may star in a movie that sets records at the box office, but that does not mean the actor caused the high ticket sales. (It is admittedly tempting to come to just this conclusion, however, when noting that, say, worldwide box-office revenues for The Bourne Legacy, the first Bourne movie starring Jeremy Renner, were more than $150 million below the revenues for The Bourne Ultimatum, the last Bourne movie featuring the franchise’s original star, Matt Damon.) Similarly, the fact that the addition of a certain soccer player to a team’s roster happens to coincide with a sudden turnaround of a club’s fortunes does not mean that the new player caused it. Because entertainment goods such as films and soccer matches are one-off goods that cannot be assembled and reassembled, it is hard to rule out alternative explanations.

  A final complicating factor is that entertainers can be superstars for a number of different reasons. Stardom, as Maria Sharapova’s career suggests, is not a one-dimensional concept. At the time Sharapova climbed to the top of the “highest-paid” list, several other female tennis players had a better on-court record, so other factors must have played a role in her ascent. Her looks, her determination to win, the careful management of her brand by Eisenbud—all of those played a role, too. Tom Cruise’s career illustrates this point in a different way. He has never won an Oscar, and critics may argue he was never among the finest actors in the movie business. And yet for more than two decades he was one of the industry’s biggest audience draws. More recently, Jennifer Lawrence garnered acclaim for her acting skills (winning a host of awards, including an Academy Award, for Silver Linings Playbook), but she was also widely praised for her endearing acceptance speech at the Oscars (preceded by a spectacular fall on her way to the podium) and her appealing behind-the-scenes interviews, both of which further enhanced her star status.

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  Despite the difficulty of assessing and predicting a performer’s value, most stars do their best to measure how they stack up against their peers so they can better manage their careers. The more accurate their yardstick, the better stars can deal with a recurring trade-off they face—they need to decide, to put it in business school jargon, when to “create value” and when to “capture value.” A star’s choices with respect to sponsorships illustrate this dilemma: endorsements can build a performer’s brand (“create value”), capitalize on that brand (“capture value”), or do a mix of both. Because stars can dedicate only a limited amount of time to sponsorship commitments, choosing between the types of endorsements can be very difficult.

  Consider the perspective of a successful movie actor who is trying to choose among a number of movie roles. Some roles may help that actor further develop his craft, establish his brand as a serious actor, or avoid being typecast in one genre (“create value”). Other roles may be less challenging but offer the opportunity to star in mainstream films and so provide a higher income and help position an actor as a bankable star (“capture value”). How this actor approaches this trade-off likely depends on his talent–life cycle stage. If he is at an early stage of his career, he may choose to star in movies that build his brand. If he is at a later, more mature stage in his career, he may want to accept the roles that allow him to capitalize on the brand he has already established. That, at least, corresponds with how a product manager would approach decisions throughout a product’s life cycle.

  There is a lot to learn from how team Sharapova managed the tennis player’s talent life cycle. Early on, Sharapova and her advisers primarily chose endorsements that helped build her brand. Eisenbud was well aware that Sharapova’s first commitments after her Wimbledon victory would have a considerable impact on perceptions of her brand and her future opportunities. “I felt it was important to come out with a big global deal with a blue-chip company right out of the gate,” he explained to me. So shortly after Wimbledon, Eisenbud and his team made a deal with Motorola. “That set the tone,” Eisenbud recalled. “Then Canon and Tag Heuer followed—everything started falling into place.”

  The Motorola opportunity—which led to a multiyear global deal—seemed like a gift from the gods. Immediately after winning the trophy, watched by millions of television viewers around the world, Sharapova had tried in vain to call her mother on an unbranded cell phone. As it happened, Motorola was just preparing to launch a new phone, the Razr, for which its head of marketing sought an endorser. But if that endorsement deal was irresistible, Eisenbud turned down dozens of other, even more lucrative opportunities. He preferred to associate his player with companies that stood for the same qualities that team Sharapova wanted to highlight—as Eisenbud put it, that she was “cool, hip, and a champion.”

  When weighing offers, Eisenbud also considered each deal’s timing. In particular, he pursued endorsements that would end at opportune moments during Sharapova’s career. “The most important part of these deals is not how much the guarantee is, but when they expire,” Eisenbud said. In the months after his star’s Wimbledon victory, he sought deals with early expiration dates, because he was already preparing for a time when Sharapova would be in an even better position to command top fees. She ultimately signed lucrative one-year, Japan-only agreements with Pepsi and (remarkably, before she even had her driver’s license) Honda. Later, team Sharapova’s focus shifted to opportunities that predominantly allowed her to capture value from her carefully crafted brand. Her deals with Colgate-Palmolive, Samantha Thavasa, Land Rover, and other brands positively shaped Sharapova’s own brand, but mostly allowed her to cash in on her success.

  Creative workers across the spectrum of entertainment businesses need to be thoughtful about which projects are suited to their short- and long-term objectives. The actor Will Smith, for one, is known to be especially shrewd about his choice of movie roles. After making the transition from his television series The Fresh Prince of Bel-Air to movies in the mid-1990s (when such transitions were less common than they are today), Smith and his agent carefully analyzed past film performances and chose to be involved in those movies that, they believed, had the characteristics—such as special effects, a love story, and alien creatures—that gave him the highest odds of success in the marketplace. And he surrounded himself with respectable, established movie actors as co-leads, such as Bill Pullman and Jeff Goldblum in Independence Day, Tommy Lee Jones in Men In Black, and Gene Hackman in Enemy of the State, each of whom helped him build his brand as a serious actor while putting together a string of hits.

  Of course, managing people as brands can be distinctly different from managing “regular” products. Performers may resist a brand-capitalization opportunity at any stage of their career because they want to “sell” but not “sell out.” After all, they will have to live with the personal brand that is created by their choices. Sharapova, for example, has always resisted endorsing a skin cleanser associated with battling acne, even though by doing so she could make millions of dollars for only a couple of days’ work.

  Agents (and, in sectors such as the music industry, managers) often play a critical role in this process. If performers are “products” or “brands,” then agents are “product managers” or “brand custodians.” Most superstars enlist the help of agents or other intermediaries to broker deals with the firms that seek their services, and to manage a variety of other business-related matters for them.

  IMG, Sharapova’s agency, is a major force in the
world of entertainment. The firm represents hundreds of athletes, performing artists, writers, and fashion models, as well as television properties, events, and cultural institutions. IMG’s agents, in turn, are supported by a global sales team made up of dozens of executives who represent IMG in its contacts with corporate clients. “Our salespeople assist our agents in driving revenue and building their clients’ brands through affiliations with multinational companies,” one IMG sales executive told me. “We know the decision makers—the CMO, or the head of sponsorship, or the person responsible for buying endorsements—and constantly strive to build better relationships with them. Being a good agency is about who you know … and knowing what their ‘hot buttons’ are.” Although compensation plans for agents and salespeople are a closely guarded secret throughout the entertainment industry, agencies like IMG are thought to receive an average of 10 percent of an athlete’s prize money and 20 percent of his or her endorsement earnings. Agents, like the stars they represent, will thus want to find the right balance between creating and capturing value from endorsements.

  A wealth of evidence suggests that just as movie stars can help studios attract audiences and thus drive higher box-office revenues, celebrity endorsements can boost the financial performance of corporations. My own study of hundreds of endorsements by athletes shows that sales for brands in a variety of consumer-product categories jumped an average of 4 percent in the six months following the start of an endorsement deal, even after controlling for advertising expenditures and other factors that could be expected to drive up sales. (Four percent may not sound like much, but that increase can add up to tens of millions of dollars for even a reasonably successful consumer brand.) Several brands I studied saw sales rise more than 20 percent after teaming up with an endorser. And because spillover effects on other brands in the category were limited, it seems the endorsements helped brands to gain an edge over their competitors. Athlete endorsements, my study shows, can even improve a brand’s stock market valuation: on the day an endorsement deal was announced, the endorsed company’s stock typically increased nearly a quarter percent. And illustrating the payoff of betting on superstars, athletes with winning records are particularly effective endorsers. In fact, my study showed that each major victory by an athlete could boost both the sales and stock price of a firm he or she has endorsed.