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Doing Business in Hollywood

The Hollywood Trek provided participants with an insider’s view of Hollywood, a place that offers challenges and barriers to MBAs.

Hollywood has always been an enigmatic world for businesspeople. Bored with the utilitarian halls of investment banks, they aspire to conquer the exciting and mythical entertainment capital of the world. Hollywood is a place of mythology, filled with the lore of creativity. Unfortunately, most businesspeople only know Hollywood superficially, which is why 50 HBS students ventured to Hollywood in order to learn the nuts and bolts of the entertainment industry. Students were introduced to major studios such as Paramount, Disney, Warner Brothers, and Fox Entertainment; powerful Hollywood agencies such as Creative Artists Agencies; start-up production companies such as Generate; gaming companies such as Buena Vista Games; and media moguls such as Mark Gill, whose credits include “Am‚lie,” “March of the Penguins,” and “Life is Beautiful.”

The 2007 HBS Hollywood Trek was successful as the 50 participants left with an increased awareness of the cultural and business environment of the industry. Trek participant Mikael Pelet (NJ) noted, “The Hollywood Trek was especially remarkable on two dimensions: breadth of companies and profiles met, and impeccable organization…the Trek provided a great opportunity for students interested in pursuing a career in the entertainment industry to network and to understand what an HBS graduate could realistically do.”

Peter Stone (ND) was equally enthused. “Having lived in LA before business school, I especially enjoyed the Hollywood Trek because it gave us access to key individuals at the companies I had been curious about for a long time. It was a classic Southern California experience-from private screening rooms to the House of Blues Foundation Room, from gridlocked traffic to star sightings. It provided an up-to-the-minute update on current industry dynamics, opportunities and anxieties.”

Power in Hollywood is divided between two symbiotic communities-the creative side and the business side. The two camps are in constant conflict with each other. The creative community includes the directors, writers and actors. The business community includes studio executives, producers and agents. The business community is often attacked by the creative side for making Hollywood a money-making machine and for not upholding artistic sensitivity. On the other hand, the creative community is often attacked by the business side for being emotionally unstable and not having shrewd business skills. These, of course, are only stereotypes.

The HBS graduate who wishes to pursue a career in Hollywood must choose between working in one of the two core groups that dominate the Hollywood feature film system: major studios (e.g., Paramount Pictures) or independents (e.g., Hal Lieberman Company). Exactly how do the functions of the major studios differ from that of the independent production companies? The primary function of an independent film studio is to acquire, produce, distribute and market motion pictures. The focus of the major studios is on distribution. In essence, studios are big banks or lending institutions that finance individual film projects and then release the finished product worldwide through their sophisticated distribution systems. In contrast, the independent film production and distribution companies are more streamlined and compact than the large studios. They essentially operate like mini-studios. The amount of autonomy one wishes to have determines career direction. Although the major studios might be more glamorous, independent film producers have more latitude.

Doing business in Hollywood is distinctly unique from any other city in the world. The following are 13 lessons on understanding the cultural business environment in Hollywood. These will hopefully allow the aspiring HBS student to maximize his potential for doing business in the entertainment industry:

1. Understand that business in Hollywood constantly changes.
Everything about Hollywood-its starts, its market trends, its CEOs, its use of technology, its products-change on a daily basis. According to Michael Converse, director of development at the Hal Lieberman Company, “All jobs at studios are meant to be revolving-door jobs with a five-year policy.” Entertainment jobs are not meant to last. It is imperative to keep up with the trades: the Hollywood Reporter and Variety. These two news sources are what the Wall Street Journal and the Economist are to the investment banker. They inform you about the entertainment business.

2. Business relationships are paramount. Accept the fact that Hollywood is notorious for nepotism.
In Hollywood, “who you know” is more important than “what you know”. Hollywood is one of the few places in the world that denounces pedigree. This is one of the greatest challenges a student with an MBA degree must face. Often, jobs are given to family and friends regardless of experience.

3. Strive to become a global citizen.
Although Hollywood is the entertainment capital of the universe, the entertainment industry is a global business. It is important to experience different worlds and different cultures. Visit the Czech Republic and ask, “Did you know that much of the last James Bond movie was filled in the Czech Republic?” The best movie producers are global citizens. Keith Feldman is the International CVP and General Manager of 20th Century Fox Films Home Entertainment. He sells, markets, and distributes DVDs to fifteen countries-nine in Europe, four in Asia, and two in Asia. Recently, the Russian market was opened. According to Feldman, in order to be a leader in the entertainment industry, it is important to strive to become a global citizen. It is very easy to become lost in the ethereal and non-tangible world of Hollywood. All successful entertainment companies are global companies.

4. Become well versed in new technology and emerging media.
Technology continues to shape the entertainment business. At the 2007 Consumers Electronics Show in Las Vegas-a show that was attended by the top Hollywood executives-the focus of the conference was on high-definition televisions. Today, people are more open to home theatres, and are less willing to watch a movie straight through. According to Feldman, digital media will grow extremely important in the entertainment industry in the immediate future. A great issue today involves the shift from packaged media to digital media. Understand that new technology and emerging media will reshape Hollywood in the near future. Recommended reading: Wired magazine.

5. Do not take everything at face-value.
Remember, Hollywood is a make-believe world-including the people that rule it. Scoundrels abound, and lying is a common business practice. For example, directors and agents expect actors to lie about their credits, their experience, and their age. Don’t forget that plastic surgeons thrive in Hollywood. Yes, this is the harsh reality. Doing business is Hollywood is not for the weak. Even A-list actresses such as Nicole Kidman share this sentiment: “I am pretty careful with whom I share my life. I surround myself with truthful, kind people, most of whom are not in the business.” According to veteran entertainment lawyer, Richard Schulenberg, “If you cannot weather the downside of this business, you should get out as quickly as possible because it will kill you one way or another-spiritually, emotionally, physically.”

6. In order to survive, have an alternate source of stable income.
According to Michael Lynton, CEO and Chairman of Sony Pictures Entertainment, there is no safety-net in the industry. Therefore, it is important to have an alternate source of stable income, like real estate.

7. Be generous. Help others.
Be generous with your connections. Once you become a Hollywood media mogul, give someone their first
break. It is easy to grow selfish in this industry.

8. Look at driving in Los Angeles traffic as a wonderful opportunity to meditate.
Hollywood is an automobile museum. Due to the immense Hollywood landscape, one must own a car in order to survive.and learn to love or at least enjoy driving in LA traffic. I personally see driving in LA traffic as a wonderful opportunity to learn a new language on CD. If you love New York, then you probably will abhor Hollywood. The geography of Hollywood is an immense physical sprawl of over four-thousand square miles.

9. Understand that Hollywood agencies are the central nervous system of the entertainment industry.
The agencies represent Hollywood royalty-the A-list actors, the Academy-Award winning directors and writers. Many CEOs with prestigious degrees from the Harvard Law School, etc., started their entertainment career in the agency mail-room making minimum-wage.

10. The Hollywood club is still dominated by males.
However, as noted in lesson #1, Hollywood is in constant flux. The Hollywood Reporter publishes an annual issue highlighting the 100 most powerful women in the industry. Nancy Josephson is one great example of a strong female figure in Hollywood. Look her up. Her accomplishments require an entirely separate article.

11. Have a sense of humor and a positive attitude.
Try to avoid the “sour grapes” attitude. Be persistent and have faith. Is Hollywood unfair? Yes. In the end, “what goes around comes around”. Look at the positive. Hollywood is filled with the most creative and innovative and fascinating people in the world. Appreciate the good people you meet.

12. The entertainment industry is one of the few industries in the world that does not value pedigree!
In Hollywood, everyone is self-made, and no cares that you went to Harvard. Understand that pursuing graduate studies at Harvard is for one’s pleasure if you wish to work in Hollywood. The Chairman of Sony Pictures Entertainment, Michael Lynton (HBS ’87), is a Harvard Business School graduate and learned this fact quickly. However, according to David Stainton (HBS ’89), ex-president of Disney Animation, resumes are always questioned in the entertainment industry. Although people in Hollywood do not care about pedigree and a Hollywood career is somewhat instable, your Harvard credential is a something concrete and stable that you will hold for life.

13. Do not pursue the entertainment industry for the money!
Your first summer internship in the entertainment industry will be either unpaid or barely paid. If you want to make money, then put your Harvard MBA into use and work for Goldman Sachs in investment banking. Waiving your Harvard diploma will not help; be ready to start off with a 20K salary. Pedigree is completely disregarded in Hollywood, and lateral career shifts from finance to the creative side are rare. There are only a few exceptions of lateral career shifts, such Dan Lin (HBS ’99), who currently works as a creative executive at Warner Brothers.

How do you know whether or not you have what it takes to make it in entertainment industry? The answer is simple: PASSION. According to Michael Lynton, “The most successful people in the industry are those who cannot imagine doing anything else in the world.” Do not go into the entertainment industry thinking that it will be easier than working in investment banking. Like a career in investment banking, a career in the entertainment industry is a 24/7 job. Sleep is considered a luxury. Hollywood values hard work. Go into the entertainment business not for the money, but because you have the opportunity to influence lives creatively.

Many thanks to the entire 2007 Hollywood Trek organizing committee: Philippe Alessandrini (ND), Ryan Barlow (NA), Paul Davis (NB), Constance Jones (NA), Jules Juliana (NC), and Megha Trivedi (NJ). Without a doubt, the 2007 HBS Hollywood Trek was a success and ran smoothly.with the exception of someone trying to hit on Jennifer Aniston at one of the agencies!

January 29, 2007
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