Slate's Hollywood Economist: 'Midas Formula' Franchises

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Alex Chadwick talks with Slate contributor Edward Jay Epstein about how movie studios build franchises. Epstein says that studios sometimes take enormous risks to build a successful movie franchises, like the Spider-Man and The Lord of the Rings, but the rewards for success can be enormous. He also details the "Midas formula" for reaping huge profits through licensing and merchandising.

ALEX CHADWICK, host:

This is DAY TO DAY. I'm Alex Chadwick.

People often complain that hit movies are formulaic. Writing for our partners at the online magazine Slate, Edward Jay Epstein is the author of the Hollywood Economist column, which looks at Hollywood and business. He's back with us now.

Edward, you say there actually is a formula. You call it the Midas formula. Is this something you have derived, and what is it?

EDWARD JAY EPSTEIN reporting:

Well, I've derived it in the interviews I've done for my book with the executives at the studios, and what the Hollywood Midas formula is, it's proof that fairy tales can come true in Hollywood. They start with a fairy tale. They take out all the elements that might be unpleasant. They add a prince, and basically they turn it into a franchise that can be worth a billion dollars.

CHADWICK: And these things are worth a billion dollars because they create, as you say, characters and elements which can be sold and resold. The originator of all this, you say, was "Snow White and the Seven Dwarfs" back in 1937 from Walt Disney.

EPSTEIN: Right. Basically what he did is he added seven little dwarfs and a witch and a prince to an old tale, and then he had a licensing platform, and for Disney, the licensing produced much more money than the movie itself. That was 1937. It took Hollywood up to "Star Wars" in 1978 to catch on to the formula--the other studios in Hollywood, I should say. And now all the studios do it. Basically, they create platforms to sell the licensing rights to the characters in their movies and the licensing rights to the off-spin from their movies, including sequels, DVDs, foreign sales, whatever.

CHADWICK: And you look at this and you say you can draw certain rules about these platforms that they build. They always begin with a youthful, very often child protagonist. This person sets off on some sort of journey or quest, is challenged by really evil villains and, in the end, triumphs. That's very simplistic, isn't it?

EPSTEIN: Well, it's what fairy tales are; except, as I say, some fairy tales get a little nasty, so they clean them up. But, you know, the real point is they need certain things. They need merchandising tie-ins with people like McDonald's, which Disney has a contract with. To do that, they have to have either PG-13 or better ratings, so they know they need a rating. They also need a child actor because they have to identify with the child audience or a youth actor to identify with a teen-age audience. So many of these things just come from their requisites and other things are added on. The action is stylized and ritualized. The endings are happy. The characters can be related to by either boys or girls.

CHADWICK: I was surprised to read in your piece that back in 1937, people sneered at Disney when he was releasing "Snow White." Everyone thought it was going to be a dud, precisely because it appealed to, or seemed to appeal to, a very small slice of the audience, just children.

EPSTEIN: Exactly right, Alex. They called it Disney's folly, because in those days, when the entire population went to the movies every week, they didn't believe that you could segment the audience, break it into little parts, and still make money. And what Disney showed is, yes, with children, you can make money, 'cause they buy toys, and they see movies over and over and over again.

CHADWICK: And they drag Mom and Dad along and, what the heck, "Snow White's" a pretty good film.

EPSTEIN: And a credit card--they take the credit card with them.

CHADWICK: Opinion and analysis from Edward Jay Epstein. He's the author of "The Big Picture: The New Logic of Money and Power in Hollywood." You'll find his piece on the Midas formula at slate.com.

Edward, thanks again.

EPSTEIN: Thank you, Alex.

CHADWICK: DAY TO DAY returns in just a moment. I'm Alex Chadwick.

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