A Bondian Guide to the Economics of Movies

I came across this table from Wikipedia, and it got me thinking about how the Bond franchise provides an excellent case study of the economics of Hollywood over the past sixty years.

[Note: budgets and box office are corrected to 2005 dollars despite the films going to 2021.]

Both movie budgets and box office are deeply flawed metrics even before you factor in Hollywood accounting, but they they are often pretty much the best we have. Any discussion of motion pictures as a business has to start here and any discussion of cultural impact has to at least take these things into consideration.

One useful way of framing the discussion is to ask, for every dollar put into this film, how many dollars in box office would it bring in? (not the formal accounting definition of ROI, but close enough for our purposes here).

Return on investment is a very poor metric for individual low budget films. When your denominator is that low, it's not that difficult to get a really big number now and then. For that reason we should probably ignore Dr No and possibly From Russia with Love and even Goldfinger. From Thunderball on, however, the Bond films became a big budget franchise given the standards of the time. We can definitely learn something looking at ROI from that point on. (One of the remarkable things about the series is how expensive those first three films look, particularly given the special effects of the day and the fact that even big budget movies still used embarrassing rear screen projection.)

With the exception of Bond which came about a decade earlier, franchises before the blockbuster era (which started in the 1970s) tended to follow patterns of slowly diminishing returns. You would possibly start out with one or two big budget films but sequels as a rule would become more modest. Those that did not simply fade away settled into a low-to-medium budget equilibrium. Of the many reasons you could argue the Bond films invented the modern blockbuster franchise, one is how it introduced the practice of ramping up budgets following successful installments.

On the whole, the budgets for the franchise provide a pretty good example of how Hollywood has approached  major releases with  sharp growth kicking in over the past twenty or so years. In retrospect, the industry looks remarkably well disciplined before 1990. Even the notorious Heaven's Gate which went almost four times over budget only clocks in at slightly under $160 million in 2022 dollars, which would put it squarely in the middle of the pack for a big budget film these days. 

While it would take a serious analysis to actually nail this down, it certainly appears that while box office numbers have been spectacular, return on investment for big pictures has been in steady decline for a few decades. That is certainly the case with Bond.

Misalignment of policy

This is Joseph.

As a follow-up to my prior discussion on housing supply due to this article, I want to discuss a more delicate topic. Canada has an aggressive immigration target at the federal level. Immigration is good. You always want to the country that ambitious people move to and create new wealth in. It creates economic growth, supports old age pension plans, and helps bring in an important diversity of perspectives to allow for fast and effective growth. It is good.

But it needs to be properly supported. The conservative idea that the people who live in a neighborhood should have the ability to shape how it changes in character is a serious problem. It is not that any one place resisting change is a problem or that any specific rule is bad, it is a slow and cumulative effect. Mark has this example of a rule that will not great, really isn't making a big impact in this instance and the net effect of this specific tax policy is a good approximation of zero. 

Let me give an example. When I first visited Winnipeg I was shocked by the traffic. Everything was slow and congested -- key arteries were simply on the verge of being nonfunctional in the winter (adding ice to construction and congestion). Then the pandemic hit and driving, in the very same places, was just fine. Almost pleasant. The drop in traffic volume made for massively faster commutes and far better user experiences when doing basic tasks like parking. Then the traffic came back and the problems returned.

Which car was it that tips the system over? Which short sighted infrastructure decision was it? None of them.

Instead it was a collection of small decision, all justifiable, and all made with an intent to be sensitive to communities.

But there is a housing shortage and a large planned immigration coming. All of a sudden, you have the problem that 500,000 new Canadians (per year) need a place to live. That's a 1.3% annual population growth from immigration alone. Greater efficiency of existing housing could clearly absorb this for a year, or two years . . . But eventually, realistic plans for new housing have to exist. 

Unless the laws of geometry change, that involves more density in existing settlements, expanding the borders of settlements (sprawl), or creating new settlements. The first involves changing the character of at least some neighborhoods. The second involves accepting traffic jams. The third involves finding new sources of employment for these new places. All of them require an alignment of goals between the different levels of government.

Again, no single rule is bad and many are good. But there does need to be a plan that avoids increasing Canadian homelessness and that, to be blunt, requires homes. 

Merry Christmas from Little Nemo

And make sure to drive safely.

Christmas Eve

 From XKCD

The most famous reindeer of all...

 

If you've gone through the holidays without hearing Sugar Rum Cherry...

 

  ... you have not had a cool Christmas.

Actually, the kids' atomic energy lab wasn't as horrifying as you'd think, but the cabbage patch doll with a taste for human flesh...

Though it takes away a bit of the romance, the Gilbert U-238 Atomic Energy Laboratory wasn't as dangerous as it sounds.

The professional journal IEEE Spectrum published a more-detailed review in 2020, discussing the kit in the context of the history of science education kits and safety concerns. It described the likely radiation exposure as "minimal, about the equivalent to a day’s UV exposure from the sun", provided that the radioactive samples were not removed from their containers, in compliance with the warnings in the kit instructions.

The Bulletin of the Atomic Scientists published a brief article on the web, which featured Voula Saridakis, a curator at the Museum of Science and Industry (Chicago) hosting a detailed video tour of the Atomic Energy Lab components. She concluded by saying that the kit failed to sell because of its high price, and not due to any safety concerns at the time.

Christmas with CollegeHumor

We'll get back to the serious stuff Monday, I promise.


My favorite Katie Marovitch sketch.

Housing supply

This is Joseph.

Twitter has been discussing homelessness after the recent Jerusalem Demsas article which really places the blame for homelessness on housing costs and supply. I am not completely convinced that asset inflation and the rise of the REIT has not accelerated an underlying problem, but it is becoming beyond doubt that this is an important part of the picture and one that imposes enormous social costs. 

Homelessness and rent affordability. 

The inflection point in this graph is alarming. It is clear that zoning in Canadian cities, for example, favors detached housing (60% of the area of Toronto) which limits the ability of the market to build enough housing. 

That said, I am not sure that this criticism is really well aimed:

The small-c conservative belief that people who already live in a community should have veto power over changes to it has wormed its way into liberal ideology. This pervasive localism is the key to understanding why officials who seem genuinely shaken by the homelessness crisis too rarely take serious action to address it.

I would instead tend to say that it is the elites in these locations that are important; few people in poverty are going to be upset that house prices are not going up. Instead it is the need to appeal to middle class homeowners that is the issue. And, honestly, this suggests that a lot of the solution is to push the decisions about zoning much further up the political ladder. We see some early signs of this in California. 

The truth is that we need to stop worrying about preserving neighborhood character and accept that things change. Here is Ken White talking about losing an online space he had once valued. It is the same for cities. All of places I loved when I first lived in Seattle are gone (university village Barnes and Noble, Half price books, Bauhaus cafe, Wayward Coffeehouse, Northgate mall, The Dreaming comics) and that is with the keeping of single family zoning. Living places need to grow, evolve, and change. 

I just hope we can allow the growth before the homelessness crisis gets any worse.