Thursday, 15 March 2012

Hollywood Babble On & On #866: A Swift Kick In The Goldman Sachs.

Yesterday a now former employee at Goldman Sachs named Greg Smith posted a letter citing a toxic culture at the venerable financial giant as the reason he was leaving after 12 years.

Now you're probably wondering why I'm talking about a guy leaving his Wall Street career behind when this blog is supposed to be about the business behind popular culture, like movies, TV and books.

Well, I could claim that since Goldman Sachs does have media interests it matters, but that's not really why I'm writing about this.

I'm writing about this because of attitude, and forgetting your purpose.

You see, the toxic Goldman Sachs culture that G. Smith wrote about is prevalent in Hollywood, and has been prevalent for decades.

This is because the people who run Hollywood have forgotten their purpose.  Now there is a fundamental purpose behind every business, that is TO MAKE MONEY, but each business has what I call a PRIMARY PURPOSE that unique to that business.  When you forget the primary purpose, you run the risk of completely poisoning your business model and ultimately destroying your business.

Let's take what Mr. Smith says about Goldman Sachs. As a brokerage and investment business the primary purpose of Goldman Sachs is to make money by making money for their investor clients.

Simple, right?

It should be, however, according to Greg Smith, and just about everything else you read about Goldman Sachs, they seem to believe that their real purpose is to sell questionable "investments" like derivatives and mortgage backed securities to their clients, while they themselves lobby for more protection in the form of market manipulation and bailouts from the politicians and bureaucrats in Washington.

Now let's go to how this relates to Hollywood.

The primary purpose of a movie studio is to make movies and TV shows that make money for their shareholders and investment partners.

That's a pretty simple and straightforward business model. There is risk inherent in it, but if you do things right, you can create a consistently profitable model.

Well, not really.

The usual business model followed by Hollywood studios is essentially to screw pennies out of everyone they do business with for the profit of a select few in positions of power. Everyone, including shareholders, financiers, creators and performers get screwed over on a regular basis.  Those who can try to grab whatever they can when they can, which is the key reason that film-making has an inflation rate not seen since Weimar Germany.

They are literally making it impossible for a movie to make a profit at the box office.  Now yes, the odds of profitability improve when you include international television/home video, and merchandising, but the way things are going soon even that won't be enough.

I call it a self fulfilling idiocy.

Need another example?

Let's look at the comic book industry.

At one time it's primary purpose was to sell stories of adventure, excitement and humor to kids and adults alike.  Then it was a mass medium where individual titles sold in the millions every month.

The business started to slump in the 1970s and 1980s as the mainstream retailers dropped them, and specialty retailers took them up.  Now instead of trying to reclaim their status as a mass medium, the comic book industry, by then the majors were subsidiaries of bigger corporations, changed their business model to avoid that sort of work.

The new business model shifted from selling stories to kids and adults, was now all about keeping them in print in order to hold onto characters and franchises that could be made into profitable movies, TV shows, and related merchandise, and keeping them out of the hands of their creators (or their heirs).

Despite some recent bumps sales are down overall, the audience is aging, and shrinking, and there are no new readers getting into the medium. In another 20 years, it'll probably be dead in the water as a vital and creative medium.

But dammit, they're doing a bang-up job making sure Jack Kirby's estate doesn't get any residuals from the characters he created.

That's not a healthy way to run a business, any business.

1 comment:

  1. Same thing can be said for the sports card industry. They became more about catering to the aging collector market that treated rookie cards like a sound investment plan. That caused inflated manufactured rarity and value that caused a bubble to burst and the higher prices of packs priced them out of the hand of kids, who abandoned them for the CCG's. Expect to see Topps, Fleer and Upper Deck falling apart and going Ch11 in another generation or less.