Reel Returns - Why Hollywood execs (and investors) ought to reconsider the status quo
Did you know John Ratzenberger – who played bar-stool fixture ‘Cliff Clavin’ in 271 episodes of Cheers – technically stands fifth among the highest-grossing movie stars of all time? Supporting vocal roles in the likes of Inside Out and the Toy Story franchise mean he has been involved in 42 movies that have taken a combined total of $5.13bn (£3.6bn) – and yet he is still one place behind Bob Bergen.
Yup, the Bob Bergen. Predominantly credited throughout his career as ‘Additional voice’, he has been involved in 54 movies that have grossed $5.24bn in all, with his biggest single coup being Minions, which is 11th in the list of highest grossing films of all time. Indeed, one of the oddest things about that list is how few of the leaders are fronted by what one might traditionally think of as ‘box-office stars’.
Take Frozen in ninth place (worldwide gross: $1.29bn) or Jurassic World in fourth place ($1.67bn) or The Force Awakens ($2.06bn), the latest Star Wars instalment, where a trio of unknowns took the lead roles. Sigourney Weaver aside, you could say something similar about Avatar, whose $2.79bn of takings make it the highest-grossing film of all time.
That film studios can no longer bank on the pulling power of Hollywood A-listers was the thrust of a recent piece in The Economist, Fading stars. This focuses on the recently-released film Deadpool, which breaks some traditional ‘golden’ rules on constructing a box-office smash – aside, of course, from the guarantee of success that seems to come with any movie about a Marvel Comics character.
Thus, despite being based on a comic, the film is ‘18’ or R-rated, thereby supposedly ruling out a large proportion of its obvious fan-base. It also sees the star talking directly to camera, which audiences are supposed to hate – even if Lovejoy did do it for a decade. Plus, adds The Economist, it is does not rely on a world-class movie name – although that is arguably a little harsh on its star, Ryan Reynolds.
Despite all this, Deadpool has set a number of box-office records – including becoming the highest-grossing R-rated film ever – and, with more than $750m in ticket sales, is closing in on the all-time top 50. Or should we say ‘because of all this’? Certainly The Economist points to a significant correlation between movies that do not necessarily boast the biggest stars and those that make a lot of money.
Nevertheless, Hollywood executives are finding their belief in the pulling power of movie stars a hard habit to break, with even a string of flops seemingly not enough to prevent them betting on a very big name just one more time. According to the article, though, all the academic studies carried out in recent decades have failed to find conclusive evidence to justify such faith.
Quite the opposite, in fact, with some real evidence suggesting box-office success these days has very little to do with whether a very big name has a starring role. Indeed, if anything, the presence of that very big name at the top of the credits may well put a film at a disadvantage because it is likely to have involved the writing of a very big cheque.
Studio bosses could, in other words, benefit from unlearning some of those traditional ‘golden’ rules – just as, we would suggest with the predictability of the final reel of a summer blockbuster, could many investors. For in investment, as in Hollywood, there are a lot of preconceived ideas about how everything works and what does and does not lead to success.
Sometimes, however, what is required is a fundamental reappraisal of a situation. Look at things with no preconceived ideas of how they should be. And if it turns out your own conclusions fly in the face of conventional wisdom, it does not necessarily mean you are wrong – indeed it could mean you have spotted something of real worth, which is the entire raison d’être of value investing.
None of which is to suggest a leading character in the ninth highest-grossing film of all time is a follower of value – only that investors and Hollywood bosses alike might want to revisit their current thinking and then take her advice to, all together now: “Let it go, let it go …”
Fund Manager, Equity Value
I joined Schroders in 2001, initially working as part of the Pan European research team providing insight and analysis on a broad range of sectors from Transport and Aerospace to Mining and Chemicals. In 2006, Kevin Murphy and I took over management of a fund that seeks to identify and exploit deeply out of favour investment opportunities. In 2010, Kevin and I also took over management of the team's flagship UK value fund seeking to offer income and capital growth.
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