“These aren’t engineers you can just replace”

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It hurts. But then, putting it in context, the person was comparing engineers to Hollywood stars.

What am I talking about? Just the biggest news in the movie business:

Last week, when Jason Kilar, WarnerMedia’s chief executive, announced that 17 more Warner Bros. movies would each roll out on HBO Max and in theaters à la “Wonder Woman 1984,” talent was handled in a very different manner. To prevent the news of the 17-movie shift from leaking (and to make the move speedily rather than get mired in the expected blowback), WarnerMedia kept the major agencies and talent management companies in the dark until roughly 90 minutes before issuing a news release. Even some Warner Bros. executives had little warning.

The surprise move left agencies on a war footing. Representatives for major Warner Bros. stars like Denzel Washington, Margot Robbie, Will Smith, Keanu Reeves, Hugh Jackman and Angelina Jolie wanted to know why their clients had been treated in a lesser manner than Ms. Gadot. 

“For the longest time, Warner Bros. has been known as the best home for talent, and that has been a significant competitive advantage,” Michael Nathanson, a founder of the MoffettNathanson media research firm, said in a phone interview. “With this move, they alienated the very talent they have worked so hard to attract. These aren’t engineers you can just replace.”

So, fellow engineers, it is not just us, but also Denzel, Keanu, Will, and to my surprise, Angelina, who are a notch (or more) lower than Gal Gadot!

But I understand. Angelina Jolie has been upgraded to Gad Gadot, not withstanding:

Salt, Mr. & Mrs. Smith, Wanted, Lara Craft.

Of course, there are others who are great: Charlize Theron (Mad Max: Fury Road, Atomic Blonde), Jennifer Lawrence (Red Sparrow, X-Men, Hunger Games), Scarlett Johansson (Iron Man, Lucy), Halle Berry (X-Men, John Wick) and many others.

Now to something that might be a bit unexpected.

About 3 months ago, one of our Operations Management (OM) PhD students at Tepper, Franco B., doing his thesis in the interface of OM and Marketing, with Tim D. as his advisor, gave a presentation to executives at Warner Bros.

On what?

On the optimal time between releasing a movie in theaters and for home viewing.

Yup.

Using hundreds of movies, and lots and lots of data, he built a structural model and estimated this optimal time, using an equilibrium (game-theoretic) model, where the studio is maximizing its profits accounting for advertising budget, movie performance in theaters, the lag effects on home-video release, and so on. It is a cool paper. (Disclosure: I am a co-author. Thanks also to Mike S.)

The executives asked lots of questions.

One of the strengths of structural estimation models is the ability to do counterfactuals. What would happen if the theater demand dropped 90%, and home-watching demand increased to make up for 50%, 60%…90% of lost demand?

The executives asked for his slides and permission to circulate them within their organization.

Guess what the optimal solution is in this current pandemic situation?

What am we going to do as a family? Watch it in a movie Theater (in XD), or at home (on HBO Max) on our 108 inch (DLP projector) with surround sound?

We have reserved the entire movie theater (“Private Showing”) for December 26th

Yup, it is Gal Gadot.

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