The Never-Ending Story – The Concept and Issue of Franchising

Star_Wars_1977_A_New_Hope_Han_Luke_Chewie.jpg.CROP.promovar-mediumlarge       Fig. 1: Star Wars (1977) – a hugely popular franchise and transmedia storyworld.

“As a result of [the] absorption of studios into much bigger companies, a greater emphasis on the buttom line [has become] central. Indeed, with the accelerating costs – star salaries and digital special effects being primary among them – Hollywood [has come] to a point where most big-budget movies [are] not really making money in theatrical release. Profits [come mostly] when ancillaries like home video, television screenings, and licensed products [are] reckoned in.” (Thompson 2007)

“Like any business, the purpose of a film company is to … attract and retain customers at a profit.” (Drucker 2007)

1. Introduction

In the 1920s the American president Calvin Coolidge famously said that “The business of America is business.” Similarly, one could plausibly say that ‘the business of American films is business.’ Indeed, concepts like blockbusters and franchises are naturally, if not exclusively, linked to American films, and the majority of the world’s most profitable movies are Hollywood productions.

Being closely and naturally intertwined, one would think that many studies exist on the economy or “business” of movies, but, in fact, the study of franchising is still a relatively de-prioritized area in the many studies of films and television. While studies abound on the internal qualities of American films and the technological and aesthetic history of Hollywood, only a few studies have thoroughly tried to unlock the interconnections of Hollywood films and economy, and the cultural history of franchising is still an area of film studies which needs to be addressed.

In the US studies of this nature do exist (e.g. King 2002, Shone 2004, Sladdin 2005, Thompson 2007, Tryon 2009, Russell 2012), and the cultural history of blockbusters and franchising has not been entirely overlooked in Europe. Still, the notion that art and industry are opposites – perhaps even mutually exclusive – seems to have resulted in something of a collective repression (cf. Sladdin 2005: 7-9).

2. The aims of my paper

Accordingly, this paper aims at unlocking and understanding the interconnections between franchising and American cultural history and, more closely, the interrelations between franchises and the Hollywood economy. Investigating American films and film history in the light of franchising and economy, this paper, thus, addresses and attempts to answer the following questions:

  • Why and how are concepts of blockbusters and franchising inextricably linked to American films, in particular modern American movies?
  • Is franchising central to the American film industry? If so, how is this discernible?
  • How has the concept and idea of franchising changed throughout the history of American films?
  • Do “high concept” movies and blockbusters constitute an “era” in American film history, or are the ideas behind such concepts (however new the terms may be) in fact a natural part of the American film industry?
  • Is Thompson right in assuming that profits of most big budget movies no longer come from theatrical releases, and how, if so, does this affect the production and distribution of films?

According to Kristin Thompson, “the franchise” today “is often the star” (Thompson 2007: 6). If this assumption is correct, an in-depth understanding of American films and film history would naturally presuppose an understanding of franchising as a concept and cultural phenomenon. As both Thompson (2007: 4) and Sladdin (2004: 1) argue, we tend to misunderstand or misrepresent the concept of “franchising” which is often sloppily reduced to “sequelization.” While sequels or “sequel-itis” (to use Thompson’s word) are, indeed, connected to franchising, the concept of franchising is broader, including the selling of tie-in products, tied promotion deals, cross media distribution and cross-promotion (cf. Halskov 2010).

The notion of a “blockbuster” covers a wide range of films, but essentially defines a huge box office hit that attracts a horde of movie goers (as if busting an entire apartment block). Is this still the case for modern-day blockbusters, or do modern big budget movies, in fact, generate profits by thinking outside the box (office), by thinking beyond ticket sales and by producing a block of different sources of entertainment and income?If this is the case, a study into the concept of franchising is central to understanding modern films like The Lord of the Rings (2001) and The Dark Knight Rises (2012), and, if so, it is interesting to see whether this is an exclusively modern and inherently American phenomenon.

3. Gross misunderstandings

Primarily, this paper tries to illuminate a number of common misunderstandings and misconceptions – misconceptions regarding the economy of Hollywood films, the importance of box-office revenue and the actual shape of the American film industry. The first of these (potential) misunderstandings has to do with the way that we – the general audience, the journalists and even parts of the academia – understand and describe the Hollywood economy.

It is widely known that the crisis of the studio system in Hollywood, as an effect of the Paramount Case from 1948, changed the industry in different ways, giving way to a number of independent directors who made small-scale films, outside of the major studios, under the banner of New Hollywood. Afterwards, directors like Steven Spielberg and George Lucas, often known as “movie brats,” essentially rejuvenated the studio system, thus kickstarting an era in American films which has often (rather derogatively) been known as “The Age of the Blockbuster,” “The Age of Sequels” or (more neutrally) New New Hollywood (cf. Schatz 2003: 15f). The term blockbuster, however, is rather vague (indeed, Julian Stringer [2003: 2] defines it as a genre with “no essential characteristics”), and the extreme focus upon large-scale films “which top the box-office charts” (ibid.) supposedly represents a general misconception regarding the economy of modern American films.

Indeed, the interest in box-office charts is problematic and potentially misleading for many different reasons. First of all, the revenue of a film, in reality, has only little to do with the box office (according to Denby [2007] and Ravid [2004: 34] only 20% of a film’s total revenue comes from ticket sales), and most films today are more dependent, in terms of gross, on licensing fees, tied promotion deals and ancillary products (so-called ancillary revenue). Second of all, the focus on box office – in particular the opening weekend box office – has a tendency to divert our attention from the complexity of the matter. A film such as Sahara (2005; fig. 2), an adventure film produced by Paramount, was no.1 at the opening weekend box office, but cost $160 million to produces and another $78,3 million to distribute, and is today remembered as one of the biggest money-losers in history (cf. Epstein 2012).

SaharaFig.2: Sahara (2005) – one of the biggest money-losers in the history of Hollywood.

On the other hand, an indie-production such as Moonrise Kingdom, released in May 2012 in only four theaters in two cities, had a relatively weak opening weekend, but gradually, due to “word of mouth,” moved to 924 theaters in the US in late September (ibid.). In the case of Moonrise Kingdom it is essential for us to distinguish between playable films (i.e. films that grow gradually through “word of mouth”) and marketable films (i.e. films that need to be “well positioned and platformed” in order to succeed) (cf. Lewis 2003: 65).

Moonrise Kingdom and MIB3 (2012) are interesting examples, inasmuch as MIB3 had a strong opening weekend on 4248 screens (and a placement as no. 1 at the opening weekend box office), but a shorter staying power than the aforementioned indie-film by Wes Anderson. While Anderson’s film gained gradually due to word of mouth, MIB3 slowly faded. Still, there is no doubt that MIB3, all elements taken into consideration, has grossed more money than Moonrise Kingdom – even if the numbers themselves are not easily measurable – which, once again, reminds us that modern American films rely on ancillary revenue more so than box-office revenue. In fact, as Edward Jay Epstein (2012) posits, “even the numbers themselves are misleading.” The reported “grosses” are, in other words, not the grosses of the studios but the projected sales of tickets at the movie houses in the USA and Canada, and as Epstein says,

Whatever the amount actually is, movie houses remit about 50 percent to the movie distributor, which then deducts, off the top, its out-of-pocket costs, which includes advertising, prints, insurance, local taxes, and other logistical expenses. For an average big-studio movie, these costs now amount to about $40 million—so, just to stay in the black, a movie needs $74 million in ticket sales. (Epstein 2012).

An interesting example here is the Disney film Gone in 60 Seconds (2000; fig. 3), a film which cost $103,3 million to produce and which got a mere $11,6 million from ticked sales (counting all necessary deductions). This situation, however – where a film has red box-office numbers, but is still considered a financial success – is not uncommon. Indeed, according to Epstein, “[m]ost Hollywood movies nowadays actually lose money at the American box office and make it from ancillary markets.” (ibid.).

Fig 2_Gone in 60 SecondsFig. 3: Today, many films, like Gone in 60 Seconds (2000), lose money at the box office and make it from ancillary markets. This film, starring Nicolas Cage, is a remake of a 1975-action film, using a readily recognizable and popular genre formula.

Thus, as we have seen, the focus on blockbusters and the box office is potentially misleading because most Hollywood films today rely on ancillary revenue more so than box-office revenue, and because the numbers themselves are potentially misleading.

Not only are the numbers difficult to tally. They are often, in fact, intentionally vague or manipulative. As Jon Lewis (2003: 64) says, the Hollywood business – as most other businesses – is “driven by guesswork, bravado, and deliberate told falsehoods,” and the studios and producers are not required to reveal the total profit of a given production (cf. Wümpelmann 2008: 41). Furthermore, the ancillary revenue of a film is almost impossible to measure, inasmuch as a film may set in motion a veritable commercial cycle which may or may not be pointed back to the given film. The total box-office revenue of the Lord of the Rings-trilogy is $2,92 billion, but Kristin Thompson argues that this trilogy is the greatest franchise of all time, a franchise whose total gross, including ancillary revenue, is estimated to at least $10 billion (cf. Thompson 2007: 1-13). Thompson’s estimate is rough and imprecise precisely because we cannot, in definite numbers, define the total gross of the trilogy (the same goes for the Star Wars saga which is equally expansive and omnipresent). After the distribution of Jackson’s trilogy, the original books by J.R.R. Tolkien were re-distributed in both paperback and hardback versions. We cannot say with any degree of certainty, however, that there is a simple and direct causal link between the films and each of the sold books. Hence, when it comes to the economy of Hollywood movies, there are many questions to ponder and address, questions regarding misconceptions, measurability and transparency.

4. The History of the Franchise

If the first question of this paper was, why has so much focus been put on the box office, when the gross of a movie is more complex and reliant on ancillary revenue?, then the second question is, when and why did franchises and ancillary markets become so important to American films? Like the first one, the second question is not easily answerable, and, in fact, the history of franchising is lengthier and more complex than one might naturally think.

A key term in Hollywood is that of systematized synergies. A synergy, according to Jane Wasko (2003: 170), “can be defined as the cooperative action of different parts for a greater effect,” and this notion is at the very heart of the Hollywood system. Systematized genre formulas, a standardized system of movie stars (who are used in the promotion of movies, which simultaneously function as vehicles for the aforementioned stars), a system of adaptations and recycling (where novels and plays are adapted and re-distributed at the premiere of a film), the use of sequels, spin-offs, remakes and merchandising are only a few of the main strategies which are historically and intrinsically linked to Hollywood.

The use of sequels is often linked to The New New Hollywood of the late 1970s and early 1980s, and particularly to the films of Steven Spielberg and George Lucas (cf. Kapell & Lawrence 2006). As Kristin Thompson says, however, this is not a new trend in Hollywood, let alone in films and Western culture. In films, serialized villains go back, at least, to the 1910s and 1920s. In Germany, they had Dr. Mabuse (1922, 1933, 1960), in Denmark we had Gar el Hama (who was the central character of two movies: Dr. Gar el Hama and Dr. Gar el Hamas flugt), and in France they had Fantômas (who was the main character in a number of French and even American films) (Thompson 2007: 2-3).

In the 1920s, Disney, a company whose importance can hardly be overstated, produced a number of serialized cartoons which featured well-known characters. One such character, Felix the Cat, became the basis of many films (though not produced by Disney) and even ancillary products in the form of stuffed toys. During the 1970s and 1980s, however, the use of sequels became an increasingly visible and significant part of the film industry, and in 1997 the film Batman and Robin became the first film to “crash” at the box office without killing off the franchise. As Thompson says,

Sequels and series often were continued so long that they overstayed their welcome. The Batman films began in 1989 with Tim Burton’s popular Batman, but eventually audiences watched Batman and Robin (1997) crash and burn, apparently killing the franchise – until another entry, Batman Begins (2005), revived it to the sort of acclaim that had greeted Burton’s original. […] Successful series based on original ideas, such as the Halloween and Freddy films, became increasingly clichéd in their premises as the producers attempted to exploit them beyond what their underlying ideas would sustain. […] All these factors indicate that the studio decision makers are looking for something beyond the individual film, however successful. They want franchises. (Thompson 2007: 3; my emphasis).

A franchise like Felix the Cat (fig. 4) or Batman could exploit a typical branding strategy of automatic name recognition (ANR), and the use of recurring characters and formulas could assure a certain degree of predictability.

maxresdefault (1)Fig. 4: Felix the Cat was a popular cartoon, which would be the site of heavy serialization and merchandising during the 1920s.

Hollywood companies, starting in 1962, have entered a process of conglomeration. In the words of Jon Lewis,

[a]ny attempt to evaluate or otherwise intellectually account for these films seems to begin and end with a larger Hollywood story regarding recovery, conglomeration, multinationalization, and vertical and horizontal integration (a.k.a. synergy). (Lewis 2003: 61).

In 1962, MCA (Music Corporation of America) bought Universal, and this is often seen as turning-point in American film history (cf. Thompson 2007: 4). As MCA would control both music labels and film companies, the strategic use of soundtracks became ever more ubiquitous (cf. Smith 1998, Reay 2004). Today, most American film companies are part of such media conglomerates, and, more interestingly, many of these conglomerates have diversified into “various intersecting popular information and entertainment media” (Lewis 2003: 64). AOL/Time Warner, to give an example, owns Warner Bros. (and its various satellite companies such as New Line and Fine Line), television networks as TNT, CNN and HBO and popular magazines such as Entertainment Weekly. In Entertainment Weekly, the box-office numbers of major theatrical releases are often announced, and this points to an interesting “conflict” of interest that would further emphasize the non-transparency of film grosses.

Given that film companies today are often owned by major conglomerates, it is no surprise that films are seen as consumables – as products which could and should be seen as parts of a bigger chain of products. Films being particularly expensive, then, executives are often disinclined to take risks, and, according to John Cassidy, they are , thus, attracted to “simple rules” and industry formulas that enhance “predictability” and “stability” (Cassidy 1997: 36). These rules and formulas include,

  • Casting (a film starring an Academy Award winner is given a higher numerical value than, say, a film which stars an Academy Award nominee)
  • Genres (some genres are more popular at a given time, and are thus given a higher numerical value than other genres)
  • Sequelization (films that naturally lend themselves to serials or sequelization are considered more marketable than other films) (Lewis 2003: 66-67).

5. Questions for Further Study

“In the past few decades,” claims Wasko, “the Hollywood industry has become more explicitly commercialized through the practice of featuring products in films.” In addition, she adds, “more commodities are being produced in conjunction with feature films in the form of merchandise, as well as the production of media products that flow out of the primary film commodity.” (Wasko 2003: 154).

The conglomeration of the American film industry is central to the sequelization and franchisation of American films (cf. fig. 5), and in that sense it is arguably fair to see this as a primarily, if not uniquely, American phenomenon.

Fig 4_Sequelization Fig. 5: The sequelization of American films

Some questions, however, still need to be investigated and addressed and are, thus, subject to further study. First of all, it would be interesting, if rather difficult, to investigate the hypothesis which is put forth by Edward Jay Epstein in his article “The Hollywood Deception” (2013), saying that Hollywood – through industry events such as The Academy Awards – sells a deceptive image of itself as a producer of “serious”, “original” films. Using Epstein’s crude assumptions as a general hypothesis, one might ask: Is there a discrepancy between Hollywood’s ‘story’ of itself, the audience’s understanding of the industry, and the actual Hollywood economy? And, if so, how is this seen, and how can it be explained?

Finally, it would be interesting to investigate the Danish film industry to see, whether concepts such as blockbusters and franchising are relevant, too, in terms of Danish films. Why, one might wonder, are concepts of blockbusters and franchising never used when describing and analyzing the Danish film industry, and does this reflect an industry which is not driven by high-concept movies, or does it reflect a different cultural framing and understanding of the film industry?

In recent years, some of the most successful Danish films, indeed, include franchises such as Min søters børn and Far til Fire and something akin (in a Danish context) to the concept of “megamoneymakers” – films such as Klovn – The Movie (2010), Alle for én (2011) and Alle for to (2013) (cf Lewis 2003: 61). Klovn – The Movie, then, is particularly interesting as a low-budget production (with a budget of 14 million kr.), co-produced by Zentropa (which is commonly seen as an artistic film company) and TV2 Zulu, and spun-off from a hugely popular television show.

Understanding this phenomenon of franchising (films that are not necessarily huge in and of themselves, but part of a larger franchise) is central to understanding modern American films. Indeed, it may even be applicable to the Danish film industry.


6. Sources

Cassidy, John (1997): “Chaos in Hollywood: Can Science Explain Why a Movie is a Hit or a Flop?,” New Yorker, March 31: 36.

Denby, David (2007): “Hollywood looks for the future”, The New Yorker, August 1, 2007. Online:

Drucker, Peter (2007 [1955]): The Practice of Management. Oxford: Butterworth Heinemann.

Epstein, Edward Jay (2012): ”Gross Misunderstanding: What journalists miss about the movie business”, Columbia Journalism Review, November 1, 2012. Online:

Epstein, Edward Jay (2013): ”The Oscar Deception”, in 16:9, #49, February 2013.

Halskov, Andreas (2010): “Quid pro quo – om tværmedialitet og krydspromovering”, in 16:9, Sept. 2010.

King, Geoff (2002): New Hollywood Cinema: An Introduction. London: I.B. Tauris.

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Ravid, S. Abraham (2004): “Film Production in the Digital Age – What Do We Know About the Past and the Future?”, in Moul, Charles C. (ed.): A Concise Handbook of Movie Industry Economics. Cambridge: Cambridge University Press, 32-58.

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Sladdin, Jeremy (2005): Never Ending Stories: Hollywood and the Franchise Phenomenon. Leeds: Sladdinc Books.

Smith, Jeff (1998): The Sounds of Commerce: Marketing Popular Film Music. New York: Columbia University Press.

Stringer, Julian (2003): “Introduction”, in Stringer, Julian (ed.): Movie Blockusters. London: Routlegde, 1-13.

Thompson, Kristin (2007): The Frodo Franchise: The Lord of the Rings and Modern Hollywood. Berkeley, Los Angeles: The University of California Press.

Tryon, Chuck (2009): Reiventing Cinema: Movies in the Age of Media Convergence. New Brunswick, New Jersey: Rutgers University Press.

Wümpelmann, Rikke (2008): Film i den danske oplevelsesøkonomi – filmproduktion,  filmstøtte og biografmarkedet i Danmark. København: Samfundslitteratur.