Hollywood: Too many artists and not enough Wall Street hustlers

Until now:

... Hollywood has long bought much more than it sells. Every year, the six major studios shell out for hundreds, if not thousands, of pitches, scripts, and books, sometimes for millions of dollars a throw; on average, each studio will turn only eleven of those ideas into movies. The rest of all that hope and capital ends up lining shelves and clogging hard drives. "There's no other industry where that kind of waste would be acceptable," [Ryan] Kavanaugh says. "I'm not in this for the art, you know? I don't care about awards. I want to make money. I want to own a business."
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You can't think of it as money," Kavanaugh says, kicking those blue Converse All-Stars up onto the table in front of him. "You have to think of it as math.
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Before Relativity commits to financing a particular movie — either through its slate deals with Sony and Universal or on its own — it's fed into an elaborate Monte Carlo simulation, a risk-assessment algorithm normally used to evaluate financial instruments based on the past performance of similar products. Enough variables are included in the Monte Carlo for Wilson and his team to have reached the limits of their Excel's sixty-five thousand rows of data: principal actor, director, genre, budget, release date, rating, and so on. After running the movie through ten thousand combinations of variables (in marathon overnight sessions), the computers will churn out a few hundred pages that culminate in two critical numbers: the percentage of time the movie will be profitable, and the average profit for each profitable run. The computers will also calculate the best weekend for the movie to be released, whether Russell Crowe will earn his salary or Sam Worthington will be good enough, and the box-office effect of an R rating versus PG-13. But for Kavanaugh, those are secondary considerations: Unless the movie shows the distinct probability of a return — no one at Relativity will reveal the precise green-light figure, but it's something like 70 percent — the script gets shredded. "Everything has to run on the principle of profit," Kavanaugh says. "We'll never let creative decisions rule our business decisions. If it doesn't fit the model, it doesn't get done."
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"Giving actors $20 million for a movie that loses money is like giving bonuses to the CEOs of bankrupt companies," Kavanaugh says.
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Some in Hollywood — even more than some — see Kavanaugh as this town's latest false prophet and his talk of regression analysis as so much mathematical flimflam. ("All he's built is a house of cards," says one rival producer.) They read through his catalog of misses and mostly modest hits — in the normal studio equation, a multitude of sin is covered up by a single gigantic success — and wonder how he keeps the money flowing. Kavanaugh says his critics are missing the point. His system is designed to eliminate the dice rolls that made legends and goats of the old moguls — it's designed especially to eliminate the calamitous, crippling flop. "Volatility is a bad thing in any business," he says. "We're just not going to take big risks. That means we'll probably never hit a home run, because the model makes it hard for us to swing for the fences. We wouldn't have made The Matrix. But we wouldn't have made Waterworld, either."
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The computers have told him again and again that love is an outlier. This time, Kavanaugh has chosen not to believe them.