Hollywood’s Hit-Driven Business Model: Why It Disappeared and Why That’s Important

Welcome back to One Moore Hollywood Podcast, where movie fans learn more about what makes Hollywood tick from three industry insiders: Chris Moore, Katie Marpe, and Dennis De Nobile. 

In this episode, the discussion centers on an article Moore and Marpe wrote for the industry blog Dear Producer, titled The Disappearance of the Hit-Driven Business Model. 

The Hit-Driven Business Model: What Is It?

Let’s start with precisely what Moore means by the hit-driven business model. As the creative producer of films like Good Will Hunting, American Pie, and most recently, Manchester by the Sea, Moore has been in the movie business for a long time. Hits ran the industry from the moment he stepped onto the scene in 1997 until the mid-2000s, meaning box office numbers, DVD sales, and movie rentals were paramount.

For someone like Moore, these numbers backed his future projects, proving his ability to suss out talent and stories that people would want to watch. They also made up the majority of the compensation for creatives on the film–the bigger the hit, the better the pay. 

At least, that’s how it used to work. Things are a little different now. 

How the Subscription Model Has Hurt the Movie Business

In this day and age, streamers often premiere films on their subscription-based sites instead of theaters, making it much more difficult to measure how many people have watched an individual project.

When the only transaction is the monthly subscription fee, identifying what movie or show may have prompted someone to subscribe to Netflix, HBO, Hulu, or any other streaming platform is next to impossible. Without exact numbers to reference, it’s tricky to understand the relative popularity of your film versus someone else’s, meaning creators can’t be paid based on their projects’ popularity anymore. Instead, people get paid less, budgets for projects decrease, and the only ones who benefit are the streaming services.

“In the subscription economy, we have lost the ability to place value on each individual film.”

–Chris Moore

Consequently, the economic system running the film industry since the 80s has changed.  Instead of paying for individual content, people now pay monthly subscription fees to access many pieces of content. Since these streaming services are making content to satisfy everyone rather than niche groups, the goal is quantity rather than quality. 

Can You Trust the Algorithm? 

You might be thinking, what about the curated Top 10 list I see on my Netflix when I turn on the TV? 

According to our podcast hosts, no one really knows how trustworthy those lists are. Only Netflix is privy to how many people watch each piece of content, and it's the same for other streaming services. Without access to Netflix's inner circle, it’s impossible to say whether their algorithms sort by demographics, location, or general viewing numbers. If we have no idea how streaming platforms designate content as trending, how realistic can those lists be? 

“I think the menus on all the streaming services are marketing machines.” 

–Chris Moore

Similar to how physical stores have limited ‘shelf space,’ so do streaming platforms regarding how much they can advertise on their homepage. While Moore, Marpe, and De Nobile can’t say exactly how their lists are curated, you’ll notice Netflix originals are given primary placement as a way for the platform to push their own content.

“Part of why this podcast matters to me is to say don’t accept everything the media business tells you–learn how to figure it out…or maybe they’ll start being more honest.”

–Chris Moore

There are, of course, a few exceptions. Times when, as Marpe states, “...the cultural event overrides the algorithm,” and word of mouth wins, pushing the streaming services to list obviously trending content, lest they look out of touch. Recent examples discussed on this episode of the podcast include Squid Game, Succession, and the third episode of The Last Of Us.

Why Do Hits Matter?

Our hosts' biggest issue with this new economic system is that none of us know how it works. Hits, as they stand today, are almost entirely in the hands of the streaming companies.

Many people are guided to content because others like it, so inaccurate data leads to a stilted setup. Moore argues for a three-week premiere window to gauge popularity in which people must pay to stream new films before they’re available to stream for free. All creative entities would split proceeds accumulated throughout the premiere window, evening the playing field for the creators and the audience.

“That dialogue with filmmakers and with the audience is what One Moore Hollywood podcast is about.”

–Chris Moore

It takes a lot to stop publicly traded companies from running their businesses exactly how they want to. With the conversations evoked on this podcast, Moore hopes to spark cohesive discussions about the industry’s current workings among movie lovers by helping them understand how things have changed and how they could be better. 

Listen to the entire episode here: Apple Podcasts, Spotify, Amazon Music, or iHeartRadio.