Lessons from Hollywood

For such a juicy situation, the online debate about Infinity Ward has been pretty dull. A summary, for those who haven’t been following along: 99.99% of people believe that Activision committed a grievous error and is clueless about the value of talent — the other 0.01% of people work for Activision. Either the wisdom of the crowds has revealed itself, or anyone who sympathizes with Activision has been unwilling to speak up for fear of being mocked.

It won’t surprise regular readers of this blog that I’m on the “pro talent” side of the debate. Making great games on a strict schedule is exceedingly hard, and anyone who can reliably manage a team to that end is probably worth their weight in gold. That said, there’s an interesting question to be asked here: if we take for granted that Jason & Vince were worth their weight in gold, is it possible that they were simply demanding “too much” compensation in their ongoing negotiations with Activision (i.e. all the gold, and more on top — leaving too little for Activision’s shareholders?) Or was Activision simply greedy and unappreciative?

I doubt that we’ll ever know the definitive answer to that question; the relevant facts seem unlikely to become public knowledge. And since Activision has bungled the removal of Jason and Vince so badly that most of Infinity Ward’s senior leadership has already decided to jump ship, this situation will almost certainly end poorly for the company. Activision’s shareholders can’t possibly be well-served by the crippling of the company’s marquee studio. But hypothetically speaking, if Activision had managed to retain most of IW’s lieutenants and other employees, would it still have been a terrible mistake to drive away Jason and Vince?

I’m inclined to believe that, yes, it was a terrible mistake. That said, research on this topic is all over the map. On one hand, there’s plenty of data to support the value of star performers like Jason and Vince. Some very famous companies, like Pixar, have very publicly attributed their great performance to the leadership of one or two key stars at the helm of each production. And Pixar has obviously served its shareholders very well.

On the other hand, multiple academic studies have indicated that in Hollywood, top-tier stars tend to consume all of the value they generate (in economic lingo, “stars capture their economic rent.”) A recent study by Anita Elberse of Harvard Business School went further, claiming that when film studios employ top-tier stars, their financial valuation does not significantly increase (financial valuation being the only metric that shareholders ultimately care about.)

Film production and game development are obviously very different beasts, so it’s unclear to what extent the experiences of Pixar or other film studios are relevant to the game industry. It’s also unclear that we can compare “stars” like Jason and Vince to “stars” like Tom Hanks, as they play very different roles (if you’ll pardon the pun.) Nevertheless, it’s unquestionably true that game development, like film production, is a complex team effort – Tom Hanks couldn’t make Castaway by himself or with a weak supporting team.

So, to rephrase my earlier question: as more individual game developers become celebrities (which seems to be the direction in which our industry is slowly tracking), will video game publishers begin to look like Hollywood studios and find themselves at the financial mercy of their stars? Or will video game publishers find a way to become like Pixar and thrive hand-in-hand with their star creative talent?

Time will tell. But I’ll say this: I’m glad that I don’t work for the average game publisher. ;-)

10 Responses to Lessons from Hollywood

  1. Maybe Activisions senior executives are short the stock via some offshore proxy:

    http://www.dailyfinance.com/company/activision-blizzard-inc/atvi/nas/short-interest

    Wouldn’t that be funny?

    Here’s a really simple idea: talent should be compensated with portfolio income (shares, options or % of the net on a per-project basis) instead of just salary income. It’s called multiplication, it did a lot for mathematics when it came out and it might just do something good for the game industry.

  2. > Maybe Activisions senior executives are short the stock via some offshore proxy

    Ouch. ;-)

    > talent should be compensated with portfolio income (shares, options or %
    > of the net on a per-project basis) instead of just salary income.

    Jason and Vince *were* entitled to a multi-million dollar royalty, or so it seems from reports.

  3. I think the most important compensation is independence. The question of whether Activision was going to force Jason and Vince to build a particular game against their will, or prevented them from building the one they wanted, seems like the central conflict in this story.

    “Financial mercy” is kind of a loaded term, and I’m surprised you used it because it seems to be counter to your main argument. It implies that it’s somehow improper for the financial success of a business to depend on the talent of its employees. Of course your finances are going to be largely controlled by the creative output of a few individuals in a non-commodified industry, it seems silly to imply that it might be otherwise.

    With that said, I think that celebrity of game developers increases the financial predictability of games, not decreases it. To return to the movie analogy, you know what you’re getting into when you sign up Tarantino to direct a film, because of the additional information that his celebrity provides. Now let’s say you’re hiring a game developer and it seems like he’s worked on some real hits in the past. But what if he wasn’t the key ingredient for those games? Maybe he was just a minor factor in their success, or they succeeded in spite of his failures. You don’t know, because there’s less of a culture of attribution in the gaming world so far.

  4. > It implies that it’s somehow improper for the financial success
    > of a business to depend on the talent of its employees.

    No, you’ve missed my point. Recall the research on Hollywood celebrities that I referenced. That research indicated that stars consume *all* the value they create. That’s the context for “financial mercy” here. But at the same time, companies like Pixar have demonstrated that it’s possible to embrace “stars” (albeit a different sort) and thrive. So there’s two models here, but apparently only one of them works for shareholders. (If the research is to be believed, anyway.)

  5. Thanks for clarifying what you meant by “financial mercy”, but I’m afraid that I still think it’s a bit loaded even given the rent-capture of star actors. You give Tom Cruise $92 million to star in your movie, and you get roughly $92 million more in revenue than you otherwise would have (ignoring effects from his interaction with other cast members). That doesn’t seem like a great deal, but it also doesn’t seem like anyone’s at Cruise’s mercy, either. It just seems neutral to me. Is there some special meaning of the phrase that I’m missing?

    Back to the point about celebrity: The papers you cite are about *actors* only, not celebrities in general. It seems quite likely to me that data about movie actors has no applicability to any other group of people. I can think of a few reasons why comparing actors to game developers specifically is inapt; a major one is that actors generally don’t have much influence over the end product (many don’t even see the films in which they star), whereas a game developer is entirely responsible for every aspect of the developed product. Another is that actors are generally paid upfront, whereas game developers typically get a mix of upfront payments and royalties. In short, actors are treated as resources and developers are treated as creators.

    I think it’d be much more reasonable to compare movie directors and game developers; there are a lot more reasonable parallels there (though one should never start from the presumption that two different things are comparable). I think you kind of head in this direction when you talk about Pixar-style stars, because they’re all directors! Is there any research out there on this group of people? Maybe we could talk about that, because the inaptness of the actor-developer comparison is a little too great for me to engage with.

    Next thought: One sentence from the second paper caught my eye: “this study suggests that the expected contribution of a newly recruited star also positively depends on the number and, particularly, the strength of the other star cast members attached to the project”. Recognition that the whole team’s composition is an important factor in producing high quality results is, correctly, quite widespread throughout the game industry already. I think there’s an interesting avenue to be explored in understanding team dynamics like that. Take a look at sabermetrics for baseball, which have produced some interesting metrics that show how much a player contributes to his whole team’s effectiveness. Baseball is kind of uniquely suited to this sort of analysis because it’s so statistic-laden and players have such formalized interactions with each other that treating them as interchangeable is actually a reasonable model, but there’s some notion that someone could build similar statistical metrics for the various components of a game development team (not that I’d want to be subjected to the sort of data collection that would be required).

  6. > but it also doesn’t seem like anyone’s at Cruise’s mercy

    I don’t believe that Tom Cruise generally ends up owning the film’s IP or having control of future versions of the film (unless he’s asked to be in them, of course.) The same does not appear to be true of Jason & Vince when they were with Activision (they claim to have legal control of Modern Warfare) or now with EA.

    > The papers you cite are about *actors* only, not celebrities in general.

    Correct. I said as much. (RE: “It’s also unclear that we can compare stars like Jason and Vince to “stars” like Tom Hanks”). But the research still seemed interesting to me because stars like Jason & Vince are, in some ways, treated similarly to actors. They walk the red carpet at DICE. They’re lavished with consumer press attention. Kids want to be them. Etc. They aren’t actors — this is undeniably true. But they are in the entertainment business, and they are celebrities.

    > someone could build similar statistical metrics for the various
    > components of a game development team

    Seems somewhat harder than for baseball (for example, a pitcher is always a pitcher, but a producer in one development studio can be very different from a producer in another studio — i.e. she could have a much more or less creative role, depending on the studio.)

  7. > Correct. I said as much. (RE: “It’s also unclear that we can compare stars like Jason
    > and Vince to “stars” like Tom Hanks”). But the research still seemed interesting to
    > me because stars like Jason & Vince are, in some ways, treated similarly to actors.

    I saw that, but I didn’t feel it did enough to distance the conclusions of the actor study from the questions you raise for the game industry. It seemed more of an aside and I feel that the incomparability is the crux of the issue. But perhaps that’s more of a minor discussion about wording.

    > They walk the red carpet at DICE. They’re lavished with consumer press attention.
    > Kids want to be them. Etc.

    The same is true of J.K. Rowling, though. And Barack Obama. Hell, you could even say the same things about Kobe Bryant. All I’m saying is that I’d prefer if you’d show how the inferences you’re drawing are based on meaningful parallels; I feel that the actor-developer comparison is not substantial enough. Your point about IP ownership (which is a good one that I hadn’t thought of) makes it even more clear how deeply different these two roles are.

    Definitely agreed that this is interesting stuff! I’m glad you posted this research. If the intent of your phrasing was to provoke discussion, it worked! :)

  8. > I feel that the actor-developer comparison is not substantial enough.

    Yup, it’s not a perfect comparison by any means. Just food for thought.

    > If the intent of your phrasing was to provoke discussion, it worked!

    That is generally my intent, yes. :-) But it rarely works so well as it did with you, here. Maybe I need to start writing more provocative stuff? *grin*

  9. It’s a hundred years later in internet time, and Tom Jubert has some thoughts on this very same topic. (the last part of the sentence is a link, which I have to point out because links in these comments look exactly the same as text -_-)

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