Working Paper: DRAFT – DO NOT CITE

Race, Markets, and Hollywood's Perpetual Antitrust Dilemma

Hosea H. Harvey*

This Article focuses on the oft-neglected intersection of racial bias and anti-competitive markets. Applying theory to practice through historical, contextual, and empirical analysis, the Article describes the state of Hollywood motion-picture distribution from its anti-competitive beginnings through the industry’s role in creating an anti-competitive, racial impasse at the end of the last century. The Article demonstrates through empirical analysis that race-based inefficiencies have plagued the film distribution process and that such inefficiencies were caused primarily by the anti-competitive structure of the market itself, and not merely by overt or intentional racial-discrimination. After explaining why traditional anti-discrimination laws would be ineffective remedies for such inefficiencies, solutions are framed through antitrust remedies and market mechanisms.

*Assistant Professor of Law and Political Science, Temple University, Beasley School of Law. J.D. (2000), Stanford Law School; Ph.D. (Political Science) (2005), Stanford University.

INTRODUCTION

Some years ago, despite a strong script and a leading black entertainer behind the project, every major Hollywood studio rebuffed production of the feature-film

Amistad-- leaving Steven Spielberg’s DreamWorks SKG studio as the only viable option.1 It seemed that Amistad was somehow coded for “blacks only” as if its commercial fate rested solely in the hands of African-Americans while being automatically and uniformly rejected by the rest of the U.S. population, white

Americans in particular.

1 The executives who refused had comments ranging from “No one is interested in this” to the more succinct “Slaves on a ship. How revolting!” See, e.g., Donna Bailey Nurse, A Tale of Two Ships Launched in Hollywood, THE GLOBE AND MAIL (Toronto), March 27, 1998. 2 Amistad’s release was eventually widened to more than 500 theaters, but barely so. 3 Studying the real-life consequences of racial bias in these markets is not an entirely new phenomenon, 1 Working Paper: DRAFT – DO NOT CITE

Dogged persistence and an army of A-list industry leaders eventually found a production home for Amistad. But once a film is produced, control over its box-office potential and market success shift to Hollywood’s highly consolidated marketing and distribution regimes. So what might we expect from a lavishly filmed Spielberg release attached to well-recognized actors? If you were to imagine a marketing blitz followed by a massive, nationwide release, you would be very wrong. Instead, Amistad was shuttled to as few theaters as humanly possible, all things considered. The theory, as set out above, was that consumer demand for the product was nil. Yet Amistad grossed

$14,192 per screen at 322 theaters during its first week of release in the post-

Thanksgiving season.2 By comparison, in their first weeks of release, The Truman Show grossed $13,606, Air Force One grossed $12,709 and Armageddon generated $11,544 per screen. Yet, because a movie like Armageddon was initially distributed to nine times as many theaters as Amistad, its opening weekend box office grosses were significantly higher. What might explain this seemingly inefficient result? In this Article, I argue that racially biased market outcomes are long-standing consequences and characteristics of industries that lack competition. So to solve these biases, competition, market forces, and antitrust law – not traditional anti-discrimination regimes – will provide the best remedies.

This Article examines race bias in an unfamiliar context – outside of the familiar rubric of traditional anti-discrimination regimes. In doing so, it treads on relatively unfamiliar ground. Law scholars have not given adequate attention to a fairly significant problem – the fact that non-competitive markets fuel inefficient and racially biased outcomes – not just in the labor market, but also especially in economic

2 Amistad’s release was eventually widened to more than 500 theaters, but barely so. 2 Working Paper: DRAFT – DO NOT CITE outcomes relating to production, creation, and distribution of goods and services.3

When we move beyond racial-disparities in the traditional employer/employee relationship, what becomes of racial bias in the transactional marketplace? In these markets where we see a sort of anti-competitive racial impasse, how can we more easily determine whether racial inequities remain, what causes them, and how the law can eliminate them?

This Article proceeds as follows. First, I examine the broad contours of existing race-bias scholarship. Next, I trace the development of the Hollywood production and distribution system, with an eye toward the role that a lack of competition might play in structuring racially stratified outcomes. Then, I turn toward the modern pre-video-on- demand (pre-VOD) era, specifically the contextual role that race (and to a lesser extent, gender) played in feature film distribution between the years 1991 and 2000. Through econometric modeling of race, distribution, and outcomes data, I attempt to determine the extent of a race-based injury being caused by non-competitive distribution market forces.4 The data shows that race-bias is indeed a driving force of distribution decisions, and likely rooted primarily in a lack of competition, although such decisions must also be contextualized within a prior history of explicit racial preferences and/or racial animus. Therefore, a review of anti-discrimination remedies shows why antitrust law

3 Studying the real-life consequences of racial bias in these markets is not an entirely new phenomenon, but is still a largely undeveloped field. Ian Ayres is among leaders in the field and has made many important contributions. Prior to his widely cited car audit experiment, few legal scholars had broached the subject. See, e.g., Ian Ayres & Peter Siegelman, Race and Gender Discrimination in Bargaining for a New Car, 85 AM. ECON. REV. 304 (1995). See also IAN AYRES, PERVASIVE PREJUDICE? UNCONVENTIONAL EVIDENCE OF RACE AND GENDER DISCRIMINATION (2001). 4 As the Article explains later, the data gathered herein includes a series of gender-related variables. Although gender (standing alone) is not fully discussed here, except in contrast to race, the discussion of how gender differs from race in this framework will be the subject of a subsequent article. 3 Working Paper: DRAFT – DO NOT CITE and market-forces provide a more robust analytical framework for the problem.5

Finally, I offer tentative conclusions, next steps, and discuss areas of uncertainty.

The difficulty in connecting antitrust injury and racial outcomes in this Article is underscored by a frank scholarly admission: “there seems to be a widespread, implicit belief (at least among white males) that race and gender discrimination is not a serious problem” in markets defined by products, not workers.6 Accordingly, legal scholars have engaged in few studies of the role that race plays in structuring modern marketplace interactions between seller and buyer and the overall racially polarized structure of market movements within industries.7 This lack of credible information, particularly regarding the role of race in structuring decisions about what to sell, and to whom, is troubling if one cares about remedying modern commercial racial bias.

Therefore, the goals of this Article are twofold – (1) to move further toward engaging market-wide and antitrust scholarship with the empirical analysis of discrimination and

(2) to highlight an underdeveloped area of legal study – solving the harms resulting from markets where race plays an important, but difficult to identify role in shaping market outcomes.

5 My concerns in this Article focus on identifying harms in a market that is not operating at maximum efficiency. In a different article, one might solve for problems of bias in markets where such bias is indeed efficient – at least with respect to profit maximization. 6 AYRES, supra note ** at 3. 7 See, e.g., Ian Ayres et. al., supra note ** (noting “almost no one has tested whether consumers’ taste for discrimination might be directed at a seller’s race itself (or the race of a seller’s employees). This failure to test is unjustified.”) 4 Working Paper: DRAFT – DO NOT CITE

I. BIAS AND THE SCHOLARLY PATH NOT TAKEN

More than forty-five years after President Johnson signed the Civil Rights Act of

19648 in an effort to forthrightly reduce bias in the United States, the commercial marketplace and large organizations have improved with respect to overall levels of racial bias. But marketplace dealings with respect to race are still far from perfect.

Certainly the Civil Rights Act of 1964, its progeny, and sisters at the state and local level were necessary to combat a legacy of de jure and de facto inequality.9 These anti- discrimination remedies substantially eroded discrimination in public and private life – by penalizing employers, governments, and individuals who discriminated. Although much work remains to be done, overt manifestations of racial prejudice have declined to the point where old-fashioned intentional discrimination is harder to find, despite our awareness that racial inequalities remain.10 In place of the old prejudice, new and more difficult to reach racial problems are challenging our assumptions about how law can fully eradicate bias in the United States – particularly in commerce. In more recent times, questions of how racial bias should be mitigated have moved beyond political and formal integration to more intractable questions about how racial minorities are incorporated into the cultural and economic fabric of American life. These more intractable questions are difficult to answer because research pointing in the direction of answers is scarce. Further, well-intentioned actors who are unintentionally biased or

8 Pub. L. No. 88-352, 78 Stat. 241; 42 U.S.C. Sec. 2000a to 2000h-6. 9 See, e.g., JOHN HOPE FRANKLIN AND A. A. MOSS, FROM SLAVERY TO FREEDOM: A HISTORY OF NEGRO AMERICANS (New York: A.A. Knopf, 1988). 10 Among many examples, African-Americans and Latinos, on average, spend at least $3,000 more than white citizens on locating and buying a house. See JOHN YINGER, CLOSED DOORS, OPPORTUNITIES LOST: THE CONTINUING COSTS OF HOUSING DISCRIMINATION (New York: Russell Sage Foundation, 1995). 5 Working Paper: DRAFT – DO NOT CITE even unaware that the bias occurs oftentimes cause many racially-biased outcomes in a variety of industries. 11

The contemporary study of discrimination and racial bias has most frequently been tied to two basic explanations for the existence of discrimination in the United

States – tensions between groups based on fears of resource constraints and aversions to members of groups based upon one’s views of the group’s overall characteristics. Legal scholars have also engaged discrimination at the macro-level, but viewed the role of race as primarily filtered through the context of various legal regimes and structures.12

These well-developed research programs have proven that facially neutral formal decision rules or organizational structures still often yield a racially biased impact in various institutional settings. This is especially true in the criminal justice system, where racial discrimination has been more than widely scrutinized.13 The deleterious impact of ignoring racially impacting schemes has also been demonstrated in other areas such as voting rights.14

The general trend – no matter the theoretical framework – is that law and social science at least still can agree that racial bias has not been eliminated completely. Racial bias now takes more complicated and nuanced forms, despite the effective formal

11 John Dovidio and Samuel Gaertner, Aversive Racism, in 36 ADVANCES IN EXPERIMENTAL SOCIAL PSYCHOLOGY 1 (Mark P. Zanna ed.) (San Diego, CA: Academic Press, 2004). 12 See, e.g., Dorothy Roberts, KILLING THE BLACK BODY: RACE, REPRODUCTION, AND THE MEANING OF LIBERTY (New York: Pantheon Books, 1997) (describing the link between prejudice against African- American women and the role of race in setting social welfare policies that affect African-Americans). 13 See Michelle Alexander, THE NEW JIM CROW: MASS INCARCERATION IN THE AGE OF COLORBLINDNESS (New York: New Press, 2010). See also Randall Kennedy, RACE, CRIME AND THE LAW (New York: Pantheon Books, 1997). 14 See Lani Guinier, THE TYRANNY OF THE MAJORITY (New York: Free Press, 1994) (arguing that traditional winner-take-all voting systems disadvantage both minority citizens as well as progressives who support diverse policy choices and candidates). 6 Working Paper: DRAFT – DO NOT CITE power of the law’s prohibitions against discrimination.15 Legal scholars are now further integrating insights from social psychology into the study of anti-discrimination law and the research programs resulting from this inquiry are clearly promising.16 Scholars from other fields have joined the debate and are questioning the appropriate social science form of inquiry.17 Yet though cross-disciplinary scholarship has provided useful insights, theories of discrimination in transactional markets still focus on a familiar debate. This debate, between animus and cognitive theories of market behavior, almost exclusively focuses on legal regimes governing the traditional employer/employee relationship. Therefore, in this Article, I focus instead on the ways that an anti- competitive market can create and maintain racially biased commercial outcomes.

Given the impressive array of existing work, in any attempt to frame problems involving racial bias within the constraints of existing legal regimes, one might normally wrestle with some core questions, such as the role that constitutional law or

Title VII might play in providing a “solution”, whether discrimination is “animus” or

“statistically” based, and so-on. Then, one might walk through the Title VII burden- shifting framework and map such framework onto the problem.

This Article does not attempt this for a number of reasons detailed later in

Section IV, but which bear mention here. First, as the racial bias studied here is related to a product, not a person, the Title VII regime is simply not a useful framework with which to frame the problem. Second, as the article is not (directly) concerned with

15 See David B. Oppenheimer, Negligent Discrimination, 141 U. PA. L. REV. 899, 902-15 (1993) (reviewing studies showing that overt acts of discrimination have declined amidst social opprobrium, but that covert levels of racial bias remain high). 16 Vol. 94 CAL L. REV. (2006) was devoted to exploring this issue. See, e.g., Anthony G. Greenwald & Linda Hamilton Krieger, Implicit Bias: Scientific Foundations, 94 CAL. L. REV. 945 (2006) as an example of such work. 17 See Gregory Mitchell & Philip E. Tetlock, Antidiscrimination Law and the Perils of Mindreading, 67 OHIO ST. L.J. 1023 (2006). 7 Working Paper: DRAFT – DO NOT CITE employment/labor practices, it makes little sense to retread familiar ground. Finally, with respect to issues of casting and hiring and remedies that might result from racial discrimination, definitive and innovative solutions have been framed and the question much more thoroughly explored than is appropriate for the top-down analysis presented here.18

When studying racial bias at the market level, divorced from the framework of employment discrimination and related laws, the legal harm is a vexing question that must be addressed. In a traditional employer/employee dispute, a racially biased outcome might occur when an individual suffers some sort of adverse job/labor action connected to his or her race. That action is a race-based harm that can be easily identified, but perhaps less easily proven. But, when studying racially-biased markets and industries, how might one assess who is harmed by racially biased or stratified outcomes? For this Article’s purposes, if we imagine a ‘film’ as a product, the ‘owners’ of that product are primarily financiers, producers, and (often) production houses and studios. Thus, when that product suffers from some sort of racial bias in the marketplace, those owners suffer from a legal harm that antitrust law can remedy.19 To fully understand the scope of the market-bias and its impact, we now turn to contextual analysis of the industry’s competitive failure over the last century.

18 See, e.g., Russell Robinson, Casting and Caste-ing: Reconciling Artistic Freedom and Antidiscrimination Norms, 95 CAL. L. REV 1. (2007). Robinson focuses on race-bias in the casting process, whereas this Article’s focus is on the market as a whole. Consequently, though I do not dispute that such bias exists, it shall not be discussed at length here. 19 Though it is true, secondarily, that actors and others who helped to create the product also suffer a harm, this Article focuses on the direct harm to those who own the product. 8 Working Paper: DRAFT – DO NOT CITE

II. THERE IS NO COMPETITION: HOLLYWOOD, RACE, PRODUCTION, AND DISTRIBUTION

Movie studios and their distribution arms are ideal candidates for an empirical analysis of market-wide racial bias. In addition to their freedom from most race and gender discrimination regulations20, there is no federal or state agency with regulatory oversight over movie studios – separating and distinguishing them from the more highly regulated television and radio firms.21 The only “regulator” that governs film production and distribution is a voluntary and private industry-created group, the

Motion Picture Association of America (MPAA), which, among other things, provides the ratings structure for virtually all major studio films released in the United States.22

Further, because of the relatively open reporting of film box-office results, one can test theoretical and observational findings with a quantitative analysis of measurable economic output. When market outputs are tested in this fashion, one can determine the extent to which they are tainted by racial bias.23

20 But see, e.g., Robinson, supra note ** at 29, describing how traditional race-related claims might be viable in certain contexts. 21 For an efficient discussion of the Federal Communications Commission’s (FCC) oversight of the radio and television industries, see Monroe E. Price, The Market for Loyalties in the Electronic Media in A COMMUNICATIONS CORNUCOPIA 148-49 (Roger G. Noll and Monroe E. Price eds.) (Washington, DC: Brookings Institution Press, 1998). 22 Major studio films are defined here as films produced or distributed by Hollywood based major studios that were released to a minimum of 500 theater screens. This 500 theater minimum accounts for the large majority of studio-produced films in a given year. Major studios during the time period studied here, for distribution purposes, are defined as: Disney/Miramax, MGM/Universal, 20th Century Fox, Warner Brothers/ New Line, Paramount, and Sony/Columbia. 23 This approach is an underutilized, but highly effective method of examining discrimination. See AYRES, supra note *** at 404-5 (“outcome tests can provide powerful evidence of when a particular kind of decision-making bias has an unjustified disparate impact.”) 9 Working Paper: DRAFT – DO NOT CITE

A. Anti-Competitive Beginnings

In contrast to recent times, the motion picture industry originally developed and thrived amidst immense government regulation.24 Thomas Edison developed the first motion picture camera and player, and others followed in pursuit. After a significant period of development, he and his competitors agreed to pool their patents for cameras and projectors, creating the Motion Picture Patents Company (the MPPC). In 1910, the

MPPC created the General Film Company (GFC), in order to control the distribution pipeline of films and to ensure that exhibitors who sought popular films also used

MPPC products. Fearing the growing dominance of the MPPC and the GFC, the lone remaining independent distributor sued the MPPC and GFC, arguing that their growing dominance violated federal antitrust law. The courts agreed, and ruled that the MPPC had to dissolve.25 See Chart 2.1.

24 See James Sweet, EARLY ANTI-TRUST REGIMES AND THE RISE OF HOLLYWOOD STUDIOS, unpublished manuscript on file with author. 25 See United States v. Motion Picture Patents Company, 225 F. 800 (E.D. Pa 1915). 10 Working Paper: DRAFT – DO NOT CITE

Chart 2.1

The chart shows 1912 market share between the major (General Film Company) and the independents as a function of exhibitor control - the main revenue stream at the time.

11 Working Paper: DRAFT – DO NOT CITE

After dissolution of the MPPC, studios that produced movies sought to create another system of monopolistic control. When audience demand for films stabilized, a three-branch industry developed to supply the demand. First, film producers, primarily studios, supplied and manufactured films. Second, wholesale distributors brought those films to theaters around the country. Finally, exhibitors served as the retail outlet for those films. Rather than focus on controlling the movie making equipment, studios vertically integrated production, distribution, and exhibition of films. Studios developed films with well-recognized stars. Then, they developed distribution chains to help distribute their stars’ films. Finally, by merging with existing regional theater chains, they then bought out the retail space where those films were exhibited. By forming these vertically integrated corporations, studios could easily exercise market dominance and prevent outside producers from successfully entering the marketplace. By the end of the silent movie era in the late 1920’s, five studios had control over each branch of the movie making industry. Paramount, 20th Century Fox,

Loew’s-MGM, Warner Brothers, and RKO dominated production, distribution, and exhibition.26

Government intervention again proved critical to breaking up this oligopolistic regime. For much of the pre-war period, government regulators turned a deaf ear to the tight coupling of production, distribution, and exhibition. As one account of the period reminds us, “when MGM released Gone with the Wind in 1939, it was shown in

MGM’s theaters, staffed by MGM employees showing the public to their MGM-owned

26 Three minor studios were also market players: Columbia, Universal, and United Artists. Columbia and Universal produced and distributed films. United Artists distributed and exhibited films. See MICHAEL CONANT, ANTITRUST IN THE MOTION PICTURE INDUSTRY (Berkeley, CA: Univ. of California Press, 1960). 12 Working Paper: DRAFT – DO NOT CITE seats.”27 Finally, after growing public resentment of the studios’ monopolization of content, distribution, and exhibition, the United States Department of Justice (“DOJ”) filed a complaint against the eight studio/producer distributors, alleging that their practices unreasonably restrained trade in violation of the Sherman Antitrust Act.

However, after heavy lobbying, the studios negotiated a settlement in 1940 that effectively maintained their status quo. After a number of years, government antitrust regulators found that the settlement terms were not effective. In response, the federal government again sought aggressive remedies.

In the mid 1940’s, a protracted court battle pitting the DOJ against the major

Hollywood studios ended the standoff with an aggressive plan of studio dis-integration

– forcing the production, distribution, and exhibition arms of each studio to actually compete with one another.28 The settlements and subsequent court orders became popularly known as the “Paramount Decrees.” Less than ten years later, each studio had separate production, exhibition, and distribution channels – ostensibly opening the market and providing for vigorous free-enterprise without the concomitant concerns about excess corporate consolidation and power. Therefore, by the late 1950’s, government intervention, regulation, and antitrust pressures had already completely transformed the entire motion picture industry – twice. But, during this time, race was not center stage in the film industry. There were simply no major movies with minority themes and very few speaking roles for ethnic minorities.

The gradual re-consolidation of the motion picture industry is beyond the scope of this Article. In short, as the marketplace shifted in the period between the late 1950’s and late 1980’s, studios slowly re-integrated distribution of their products, while

27 TOM SHONE, BLOCKBUSTER: HOW HOLLYWOOD LEARNED TO STOP WORRYING AND LOVE THE SUMMER 105 (New York: Free Press, 2004). 28 See United States v. Paramount Pictures, 85 F.Supp. 881 (S.D.N.Y. 1949). 13 Working Paper: DRAFT – DO NOT CITE encouraging the development of large chains of independent exhibitors. As these competing exhibitors continually developed more theaters and screens, studios and their distribution divisions maximized profits amidst a period of large scale growth within the film industry. However, this growth was not without its costs. Despite the expansion of studios and their distribution networks, movies featuring women, minorities, and minority-themes simply were not frequently made or distributed widely.

B. Present Day Distribution and Production

This Article’s focus thus begins with the fully consolidated, modern version of the industry, specifically the period between 1991 and 2000 (“the Decade”). The average movie during the Decade was financed with roughly $53.4 million dollars, and films with big-name stars easily required $100 million with an additional $40 million in marketing expenses.29 Veterans in the film industry estimated that major studio movies only earned a profit of 5% after expenses, even including profits derived from home video, international, and other markets.30 As the costs of developing, promoting, and distributing films grew during the Decade, studio executives sought to maximize profits and minimize costs – the prototypical, neoclassic model of the firm. As major studios adopted free-market models of behavior, they learned to speak the language of

Anthony Downs, as they sought to adapt “to fast-changing events and see[k] the ‘one- time vote’, the ticket bought by the moviegoer.”31 Yet, studios failed to take advantage

29 Josh Chetwynd, Lights, Camera, Money?, USA TODAY, March 8, 1999. 30 Veteran film producer Tom Pollock, as quoted in Paul Farhi, Taming Movies’ Titanic Costs, THE WASHINGTON POST, March 13, 1999. 31 Randall Rothenberg, Advertising: Movie Promoters Adopting Modern Marketing Skills, NEW YORK TIMES, February 23, 1990. See also ANTHONY DOWNS, AN ECONOMIC THEORY OF DEMOCRACY (New York: Harper and Brothers, 1957). 14 Working Paper: DRAFT – DO NOT CITE of economically efficient opportunities to serve eager audiences. The inefficiencies were most notable in production and distribution of movies starring ethnic minorities.32

C. Modern Economics of Film Distribution

The initial distribution of a film is uniquely tied to studio profit. In most studio- exhibitor contracts, ninety percent of first-week box office revenue reverts to the studio.

As one analyst demonstrates, “under that arrangement, it is clearly in the studios’ interest to earn as much of the gross in the opening weekend as possible.”33 If films are distributed in an economically inefficient manner by race, the unique effect of first-week consumer demand further artificially depresses a film’s actual earning potential. As it stands, distributors and studios solicit individual theaters and chains with target proposals for exhibition contracts for all movies. These proposals emphasize the studios’ insider knowledge about a film’s potential success in each theater’s market.

Then, within a highly constrained choice set, distributors arrange exhibition contracts to maximize their expected maximum return on their products. Despite this rational calculus and consistently throughout the Decade, studios failed to take advantage of economically efficient opportunities to serve hungry audiences. The inefficiencies were most notable in distribution of movies starring women and minorities.34 In the early

1970’s, when screens and new movies were rarer, a typical movie with solid box-office

32 Hereinafter, I use the phrase “majority-minority” to indicate only those movies that had a majority of the speaking cast as members of ethnic minority groups. Therefore, the all-minority mainstream comedy Boomerang is majority-minority, but the Denzel Washington thriller Pelican Brief is not. When I say woman-led, I mean that the movie stars a woman in a leading role. The comedy There’s Something About Mary is woman-led, but the action-filled Armageddon is not. 33 Rick Lyman, In Multiplex Age, Even Blockbusters Find Fame Fleeting, NEW YORK TIMES, Aug. 13, 2001. 34 As shall be explained, the distribution of films is characterized by an irrational racial bias based upon whether the movie partially or predominantly features minority actors. In a fully competitive market, racial bias would have no logical effect on market strategy of Hollywood studios, despite their freedom from most antidiscrimination regimes. After all, according to free market theorists, if the studios were indeed discriminating in film distribution practices, they would be punished by the market – and then perish. 15 Working Paper: DRAFT – DO NOT CITE potential might open in 300 to 400 theaters. By the Decade’s end, the major Hollywood studios were releasing record numbers of films while distributing them to the widest number of theaters possible. This shift in distribution and marketing strategies led the

2,000 - 3,000 theater opening to “become commonplace.”35

Lack of healthy competition and a one-size-fits-all model led to a racial impasse, as distribution calculations focused exclusively on non-minority films. For films to produce the most profit, “the economics of marketing powerfully favor nationwide openings in thousands of theaters over the traditional ‘platforming’ approach.”36

Having a film open on the widest number of screens is critical for a film’s long-term revenues because the opening weekend box-office figures have become “the fulcrum for selling everything from videos to foreign distribution to toys and popcorn.”37 Even large theater chains recognize that when a movie secures a first place finish during its opening weekend it “pays dividends long after the movie leaves the theaters.”38 This formula appears to be true for all films, regardless of the race and gender of the cast.39

And, if it is true that screen space is too limited to put minority or women led movies in wider distribution, it is contradicted by leading industry analysts’ suggestions that the rapid increase in building of screens during the Decade created a “glut in theater

35 Peter Passell, As Cost of Movie-Making Rises, Hollywood Bets it All on Openings, STAR-TRIBUNE (Minneapolis-St.Paul), December 29, 1997. 36 Id. 37 Id. 38 Howard Lichtman, executive vice president for marketing for the Cineplex-Odeon theater chain, quoted in Id. 39 A prominent article on the box-office outcomes for majority-minority movies encouraged movie audiences to buy tickets, but “especially on their opening weekend.” Dwight Brown, Hollywood Sees Green in the Mosaic of Black Life, EMERGE, November 30, 1998. 16 Working Paper: DRAFT – DO NOT CITE capacity.”40 This glut led some theaters to “strain to fill auditoriums” with many

Hollywood releases.41

Yet theaters showing movies with predominantly minority actors were much more likely to be filled to capacity.42 Given that theater owners recover most of their profits through selling candy to “young, junk-food craving consumers”, it is surprising that both theaters and studios failed to exploit this winning market scenario -- at least for movies that would draw young audiences.43 Part of this inefficiency may have resulted from the relatively stable oligopoly of studios that supplied roughly 98% of all film content to the nation’s theater screens and the studios’ failure to recognize their race-based decision-making calculus. See Chart 2.2.

40 Passell, supra note ***. 41 Id. 42 See, e.g., James Surowiecki, If it’s Wednesday, A Black Film Must Be Opening, SLATE.COM (August 13, 1997) (discussing the trend of opening “black” movies on Wednesdays to relieve overcrowding at the limited number of theaters). . (Last visited January 2011). 43 Tom Sherak, then Vice President for Marketing at 20th Century Fox, arguing that theaters recognize the profit potential in luring teenagers into theaters early during a movie’s run. As quoted in Passell, supra note ***. 17 Working Paper: DRAFT – DO NOT CITE

Chart 2.2

The chart above shows market share by percentage share of box office receipts at

Decade’s end. Compare it with the chart below that shows market share in terms of number of films released at Decade’s end. Even though the independents made more films overall, the distribution networks of the majors may have helped them to completely dominate revenue performance. Competition during the decade increased in the production and exhibition segments, but not in distribution.

18 Working Paper: DRAFT – DO NOT CITE

D. The “Science” of Distribution

Although it is reasonable to expect that distribution is initially linked to audience demand, industry norms prove otherwise. The lack of demand measurements has long hampered forecasting and pre-release models of major studios, academics, and industry analysts. The Economist, when surveying the history of studio efforts to predict box- office hits, concluded that despite decades of tinkering with models and measurements,

“none has worked well.”44 A few companies attempt to fill this void, but with mixed results.

First, during the period discussed in this Article, the National Research Group

(NRG), a division of A.C. Nielsen, conducted small-scale consumer surveys to create a

“tracking score”.45 The score is essentially a percentage of survey respondents who indicate that a particular movie identified by the survey taker is the one they most want to see. Given this relatively simple measurement, it is not surprising that virtually all

44 The Economist, Terminator 9: You’ll Love It (Forecasting the Success of Films), THE ECONOMIST 75 (1992). 45 See Terry Lawson, ‘Lost World’ Opening: Not a Question of Big, but how Big, KNIGHT-RIDDER NEWSPAPER SYNDICATION, May 23, 1997. 19 Working Paper: DRAFT – DO NOT CITE pre-release movies scored within the same 15-point band on the NRG’s scale. And, even movies with the highest consumer recognition registered with less than 25% of the sampled public. For these reasons, the NRG survey was typically used to gauge the hypothetical performance of a small group of blockbuster releases that received copious amounts of advance release exposure. During the Decade, the weakness of this model even extended to the blockbuster films. For example, NRG predicted an opening of $28

- $31 million for X-Men, quite different from its $54.5 million opening weekend.

Whether for lofty or awkward reasons, NRG does not release or discuss its models, surveys, or methodologies, preventing both industry and academic scrutiny of particular results.46

Alternative methods of tracking viewer interest are typically derived from week- of-release sources. In other words, studios gauge demand from post-distribution sales or search data. For example, during the Decade, Moviefone, the telephone/internet service that enables consumers to find where movies are playing in their neighborhood, had an extensive database that tracked each consumer-initiated search. By mining the data during the first week of a film’s release, Moviefone’s corporate subscribers

(primarily industry analysts) could fairly accurately gauge consumer interest and demand – often organized in relatively discrete community-level data.47 Similarly,

Cinemascore conducts exit polling during a movie’s first week of release.48 In short,

Cinemascore asks audiences to rate movies on a familiar letter grade scale, which is popularly distributed to industry insiders and publications. Cinemascore also collects key demographic information that is used to further analyze individual level responses.

46 Sreenath Sreenivasan, What is a Hit Film? Moviefone May Know, THE NEW YORK TIMES, June 2, 1997. 47 Id. 48 Fred Zufryden, New Film Website Promotion and Box-Office Performance, 40 JOURNAL OF ADVERTISING RESEARCH 1 (2000). 20 Working Paper: DRAFT – DO NOT CITE

Nonetheless, it is widely known that despite the use of occasional test screenings and polls, movie studios have never used anything “as intense or precisely calibrated as the sampling devices some toothpaste and cereal companies employ.”49

Given the absence of pre-release demand information, the importance of this analysis is clear. There is no industry standard to determine the scope of a film’s distribution, and there is no standard for predicting a movie’s profitability.

Consequently, this lack of standard leads to race-based harm. Academics and economists have aggressively pursued a standard, but have found that “attempts to predict revenue patterns without any sales data meet with limited success.”50 In other words, prior to the release of most films, the film industry and its distributors often do not know just how well a film will do at the box-office or what its optimal level of distribution is. However, in the weeks preceding a general release, studios use marketing research from limited test screenings to develop awareness of the public’s response to “advertising themes, trailers, posters, and other promotional materials,

[which] helps devise effective campaigns geared toward a film’s potential audience.”51

But without clear standards or objective data-driven models until this late in the production/distribution equation, studios can be more vulnerable to unreliable information – particularly in film projects that are tied to race or minority actors.

Seizing on the absence of real data and the temptation to fill the void with racial conjecture, critics of the studios’ demand arguments point out that distributors and studios themselves are substituting their own theories of demand and telling

49 Jay Mathews, The Foolproof Film Forecast Formula, THE WASHINGTON POST, June 12, 1994. 50 Jehoshua Eliashbert and Mohanbir S. Sawhey, A Parsimonious Model for Forecasting Gross Box- Office Revenues of Motion Pictures, 12:2 MARKETING SCIENCE 113 (1996). 51 Martine Danan, Marketing the Hollywood Blockbuster in France, 23:3 JOURNAL OF POPULAR FILM AND TELEVISION, September 22, 1995. 21 Working Paper: DRAFT – DO NOT CITE filmmakers “to make hood movies or nothing.”52 For much of the 1990’s African-

American actors and filmmakers thus found themselves “frustrated by studio executives who seem reluctant to embrace films that explore other facets of the black experience outside of life on the streets.”53 These failures to achieve sustained growth of the market for diverse films led by African-American actors prompted one well-known magazine to charge that “when African-Americans [actors and actresses] come knocking on Hollywood’s door, the response is still ‘Whites only.”54 Most importantly, there is no published data to back up the quiet idea that whites simply avoid certain movies because the actors are predominantly racial minorities.55 Market research indicates that African-Americans are 12% of the population but 25% of the market for commercial films.56 Yet, throughout the Decade, films that feature African-American actors seemed to be under-distributed to all audiences, regardless of the audience’s color or the movie’s topic. This history of excluding or limiting African-American opportunity in the industry also stems from its lack of competition.

E. Majority-Minority Films – A Brief History

From its early beginnings as a tightly controlled oligopoly, the Hollywood studio system did not produce enough material to satisfy diverse tastes.57 Indeed, these historically market-inefficient, production-side inequalities may be a significant

52 Esther Iverem, Black But Not Beautiful, NEWSDAY, October 24, 1993. 53 Thomas R. King, Black Entrepreneurship: Cash Crunch, THE WALL STREET JOURNAL, February 19, 1993. 54 Pam Lambert et. al., What’s Wrong With This Picture? Exclusion of Minorities Has Become a Way of Life In Hollywood, PEOPLE MAGAZINE, March 18, 1996 (discussing the exclusion of minorities from all but one category of the 1996 Academy awards). 55 It is frequently true that when I refer to majority-minority movies or minority actors, they are African- American. Regretfully, studio films led by Latino or Asian-American actors are so rare that they cannot be analyzed as separate subgroups within the dataset developed for this Article. 56 The figure is often attributed to BLACK ENTERPRISE, as in Nurse, supra note ***. 57 An early influential analysis of this type of marketplace discrimination can be found in Peter O. Steiner, Program Patterns and Preferences, and the Workability of Competition in Radio Broadcasting, 66:2 QUARTERLY JOURNAL OF ECONOMICS 194 (1952). 22 Working Paper: DRAFT – DO NOT CITE contributor to the level of disparate participation by women and ethnic minorities in the filmmaking process.58 This was, in some part, to be expected. By their very structure, oligopolistic industries are, to some degree, inefficient. In the still unregulated

Hollywood marketplace, that inefficiency is particularly intransigent.

But this failure of production also involved an abundance of old-fashioned racism typified by Jack Warner who once said, “I don’t want no niggers on this lot.”59

Although Hollywood studios have long lacked market ingenuity in areas of diversity, the distribution problem for African-American dominated films did not play nearly as large a negative net-economic role in previous generations. Throughout much of the

20th century, Hollywood studios failed to produce one general release film featuring a majority of minorities in starring roles. Through formal segregation and with some creative ingenuity, black filmmakers such as Spencer Williams and Oscar Michaux independently developed and distributed all-black movies to receptive audiences in all- black theaters.60 After the break-through of Sidney Portier and the “blaxploitation” fad that swept through American theaters in the 1970’s, blacks in Hollywood had little hope that filmmaking opportunities would advance beyond roles for black performers in stories filled with hyperbolic sex and violence, and usually directed by whites.61

Although a well-developed film like Superfly actually led the box office rankings and grossed $11 million in 1972 dollars at $3 a ticket, studios found that consumers would

58 Although his work focuses more generally on a comprehensive historical approach to participation and inclusion in all aspects of Hollywood filmmaking, Jesse A. Rhines offers an interesting critique of the discriminatory effects of flawed distribution practices. See JESSE ALGERNON RHINES, BLACK FILM/WHITE MONEY 7-13 (Rutgers, NJ: Rutgers University Press, 1996). 59 As quoted in JAMES SALLIS, CHESTER HIMES: A LIFE (New York: Walker & Co., 2001). Himes was an African-American writer (of crime, primarily) whose attempts to break into Hollywood were resoundingly unsuccessful. 60 David Sterritt, Blacks in the Mainstream, CHRISTIAN SCIENCE MONITOR, July 2, 1990. 61 Further, although black filmmakers such as Michael Schultz and Gordon Parks Sr. and Jr. did reach wider audiences in mainstream films, but they were “eventually squeezed out of major status by white- dominated market and studio forces.” Id. 23 Working Paper: DRAFT – DO NOT CITE not be fooled by a deluge of carbon copies. Further, while the 1970’s and 1980’s led to an opening of opportunities for African-Americans in political and corporate sectors, industry insiders seemed to agree that the movement for inclusion failed to reach

Hollywood until the middle of the 1990’s.62 Thus, during the period of study in this

Article (1990 – 2000), it was not initially clear that any forces – external or internal – would cause both the production and distribution channel inefficiencies to change.

Despite such pessimism, an assessment of opportunities for African-Americans in Hollywood early in the Decade argued in favor of the rational firm approach, noting that most industry insiders agreed that “the problem is more a question of money than racism. In other words, as long as films made by and for blacks earn money,

Hollywood will continue to finance them.”63 Moreover, the optimism fueled by the

1980’s success of Eddie Murphy, and successful yet budget-conscious releases by Spike

Lee, Robert Townsend, and Keenan Ivory Wayans, suggested that, as one 1990 article noted, “a new wave of films may at last win wider acceptance for minority themes.”64

The promised opportunities and developments did not exactly come to pass as the

Decade unfolded.

Developments throughout the Decade are far too numerous – and predictable – to be discussed at length here. Simply put, as individual movies with majority-minority casts (New Jack City, Boyz N the Hood, Menace II Society, Malcolm X, Poetic Justice, Waiting

62 V. Dion Haynes, Call To Empowerment: Many Think It’s Time to Get Serious About a Black Film Industry, CHICAGO TRIBUNE, October 20, 1996. 63 Likewise, Morgan Freeman echoed this assessment by noting that Hollywood was not “locked anymore on color . . . they’re looking for the bucks.” See Joe Dechick, Blacks Face Hollywood Roadblock, GANNETT NEWS SERVICE, February 21, 1990. 64 1989 saw the successful low-budget Hollywood Shuffle (by Townsend) and I’m Gonna Get You Sucka! (by Wayans) perform profitably on a small scale. The summer of 1989 brought Lee’s memorable Do the Right Thing. And, though not dealing with a predominantly minority cast or theme, Denzel Washington’s turn in Glory (1989) and Morgan Freeman’s role in Driving Miss Daisy (1989) suggested that Hollywood studios were warming to the idea of rethinking their traditional reticence to think creatively with regard to African -American actors and directors. See, e.g., Sterritt, supra note ***. 24 Working Paper: DRAFT – DO NOT CITE to Exhale, and countless others) entered the distribution channel, they did so at rates that were seemingly uncorrelated with their respective supply and demand. When New Jack

City opened, its gross trailed only box-office leader Silence of the Lambs despite having only one-third of the theaters.65 A few months later, Boyz N the Hood debuted with a box-office average per-theater higher than Terminator 2.66 Ironically, studio failure to adequately predict demand and a strong miscalculation in distribution led to violence at a Los Angeles venue where the over-capacity theater was forced to turn away opening-night ticket holders, along with those who sought to buy tickets to the sold out showings of New Jack City.67 The melee occurred only after the theater sold out for the evening, but failed to tell the patrons who were still waiting in line for several hours.68

Years after its release, the director of New Jack City argued that the violence “was caused by people standing outside with tickets trying to get into the movie . . . The obvious move would be to make enough theaters available.”69 This would have been particularly hard to do during the period studied in this Article given the narrow number of distributors and their reliance on the same faulty distribution models. See

Chart 2.3.

65 Dave McNary, Studio Defends New Jack City, UNITED PRESS INTERNATIONAL, March 11, 1991. 66 John Leland with Donna Foote, A Bad Omen for Black Movies, NEWSWEEK, July 29, 1991, p. 48. 67 Roger D. Scott, Looting: A Proposal to Enhance the Sanction For Aggravated Property Crime, 11 J. L. AND POL. 129 (1995) at fn. 6. 68 Fox, supra note ***. 69 Richard Peterson, Why ‘Friday’ Opened on Wednesday, THE DALLAS MORNING NEWS, June 2, 1995. 25 Working Paper: DRAFT – DO NOT CITE

Chart 2.3

26 Working Paper: DRAFT – DO NOT CITE

F. Money Talks

Despite the rational calculations identified earlier, the suspect performances of many non-minority, big-ticket movies, coupled with the strong showing of under- appreciated smaller productions, demonstrates that “performance is too often measured by the crudest of metrics: box-office gross. Profitability is an afterthought.”70 This major studio logjam for smaller and minority-led productions led some prominent filmmakers to charge that studio executives who failed to green-light moderately budgeted minority led films were “violating their fiduciary duty to generate profits for their shareholders.”71 As an example, critics point to New Line Cinemas’ taking three long years to option a sequel to the majority-minority Friday, which grossed $27 million in box office revenues with a $3.5 million dollar budget.72 But, those who argue that bias, not economics, drives studio decision-making must contend with a variety of non- racial arguments that studios proffer to actually explain their behavior.73 In classic free- market analysis, these responses are described as a legitimate use of statistical discrimination – a form of legitimized racial discrimination based upon objective criteria driven by race-neutral performance data.74 As was true throughout the Decade, studio insiders were relatively slow to understand the problem without the threat of

70 James Surowiecki, Hollywood’s Star System, THE NEW YORKER, May 28, 2001 (arguing that “from an economic point of view, Hollywood should be making more small films and fewer expensive ones- especially those featuring famous, expensive actors.”). 71 Filmmaker Warrington Hudlin writing in Warrington Hudlin, Black Film Blossoms Without Hollywood, NEWSDAY, April 14, 1996. 72 See Patrick Goldstein, Video Hit Spawns an Unlikely Sequel, BUFFALO NEWS, November 21, 1998, p. C10. The original movie’s profit potential extended into the video realm. It was on the best-seller lists for 98 straight weeks, outlasting all other commercial films released to video except the Oscar winning Braveheart. 73 See, e.g., the rich insights regarding movie studio and distributor risk-hedging during and after the Decade in TIM WU, THE MASTER SWITCH 217-37 (2011). 74 See Posner, infra note *** for a detailed discussion of the theory. 27 Working Paper: DRAFT – DO NOT CITE legal action. Moral force wasn’t going to work either. As a senior Miramax executive argues, “this is a business, this isn’t the civil rights movement.”75

The distribution problem is unique in part, because a wide distribution of films is dependent upon perceived market demand. Yet studios create market demand through marketing efforts that often bungle movies with predominantly minority actors. 76

Therefore, for these “minority” films, marketing and public perception matter a great deal. Analysts have also suggested that while mainstream films with popular stars can survive negative reviews, films by and about African-Americans are said to be

“especially sensitive to negative reviews.”77 In part, however, this might be attributed to a number of factors. First, some critics cite the low marketing budgets of minority- led films.78 Others target the non-minority executives who decide how to market or distribute films.79 Indeed, the filmmakers who created the 1993 hit Menace II Society strongly objected to the distributor’s active efforts to change marketing materials during the film’s release. The distributor’s response was that it wanted to “broaden the film’s appeal. . . and attract crossover business.”80 But New Line Cinemas’ first audience study of Menace II Society suggested that the movie’s opening audience was a highly

75 Miramax Senior Vice President Helena Echogoyen, quoted in Jacqueline Trescott, For Blacks, 50 Years on the TV Fringes, THE WASHINGTON POST, p. g4. 76 One such executive survey indicated that Disney, Universal, Fox, MGM, Paramount, and Warner Brothers had no African-Americans in Vice-President or higher positions. MGM, Paramount, Universal, and Warner Brothers had no minority Vice-Presidents at all. At the time, only Sony Pictures (through Columbia) had African-American leadership. Perhaps not coincidentally, the Columbia V.P. helped to develop the commercially successful Boyz N the Hood, as discussed in Robert W. Welkos, Against the Odds, LOS ANGELES TIMES, September 6, 1992. 77 Steve Nicolaides, co-producer of Boyz N the Hood and Poetic Justice, as quoted in Terry Pristin, Why Audiences Failed to Do “Justice”, LOS ANGELES TIMES, August 16, 1993. In a well-cited incident, Los Angeles Times movie critic Kenneth Turan gave Eddie Murphy’s largely minority comedy Boomerang a negative review, citing its majority casting of blacks as professionals “silly and arbitrary”, discussed in Esther Iverem, supra note ***. 78 Pristin, supra note ***. 79 Id. 80 Claudia Eller, Taking the “Menace” Out of Ad, Poster, LOS ANGELES TIMES, July 22, 1993. 28 Working Paper: DRAFT – DO NOT CITE skewed demographic -- 98% African-American teenagers. Studio executives promoting the admittedly gritty movie struggled to broaden the movie’s audience until finally generating an audience that was 25% white.81

The experiences of 20th Century Fox may also be illustrative of the larger marketing/distribution conundrum. As the senior vice president of 20th Century Fox noted, “in reality, the white audience looks at [majority minority] films and says, ‘It’s not for me.’”82 Confusingly, the same studio’s President soon advocated that studios pursue more movies that target selected market groups. In a 1999 address, 20th Century

Fox President Bill Mechanic told the annual theater owner’s convention that by not aiming movies at the widest audience, “you also have a chance to reduce your costs and make movies, hopefully, that aren’t as safe and aren’t as boring.”83 During the Decade,

20th Century Fox not only admittedly bungled Waiting to Exhale, Bulworth, and How

Stella Got Her Groove Back, but also underestimated and thus under-distributed the

“surprise” summer 1998 blockbusters There’s Something About Mary and Doctor Dolittle.84

Oddly enough, as studios continue to both undermarket and under-distribute majority- minority films, evidence from the extensive marketing efforts of moderately budgeted majority-minority movies suggests that increased marketing for minority films leads to these films being considered “events” and generating larger box-office revenues.85

81 Id. 82 Tom Sherak, senior vice president of 20th Century Fox, as quoted in Kim Masters and Jacqueline Trescott, Why Hollywood Keeps Blacks Waiting, THE WASHINGTON POST, March 24, 1996. 83 Recall that the other Fox executive lamented the ‘failure’ of the movie Waiting to Exhale, which cost $14 million and grossed $70 million just in theaters. How these comments could be compatible with Mr. Mechanic’s statements is beyond comprehension if bias or market ignorance is not at work. Mechanic is quoted in Welkos, supra note ***. 84 If Dolittle and Mary had been properly pre-screened and marketed and not under-distributed, the studio wouldn’t have been caught off-guard by what an analyst called Hollywood’s “big surprises”. See Confusing Season Leaves Moviemakers in the Dark, NEW YORK TIMES, October 1, 1998. 85 Malcolm X’s extensive marketing, some argue, is what led to its box-office success both here and abroad. See Christopher Vaughn, Can “X” Open Hollywood?, BLACK ENTERPRISE, February 1993. 29 Working Paper: DRAFT – DO NOT CITE

Marketing and distribution problems can also partially be explained if one believes that movie audiences have very little overlap in their preference for movies and that such preferences are highly tied to race – specifically the race of characters in a movie. In other words, if African-Americans and whites have no movie preferences in common, these “preference externalities” might make some of the decisions discussed in this Article seem more efficient.86 There is little solid data that this is the case.

Further, marketing the same film to multiple target audiences in this era wasn’t terribly difficult, with the Decade’s expansion of cable and television network television shows.

Yet, it was apparently no secret that Hollywood studios would “frequently hamstring

[majority-minority] projects by failing to allot them the funds necessary to reach beyond traditional African-American markets.”87 When they did make such an effort, often the biggest problem for studios was making the lead actors appear less violent.88

Hollywood studios also apparently ignored Nielsen ratings data that indicated strong, similar tastes for both blacks and whites in the highly coveted young adult audience.

Indeed, of their Top-20 favorite television shows during the middle of the Decade, black and white Americans aged 12 to 17 had 11 identical picks.89 Despite these commonalties, New Line Cinemas, Disney, and MGM relied on a consulting agency

86 See, e.g., Joel Waldfogel and Peter Siegelman, Race and Radio: Preference Externalities, Minority Ownership, and the Provision of Programming to Minorities, 10 ADVANCES IN APPLIED MICROECONOMICS (2001) who argue that in the market for radio, the different programming preferences of audiences can be differentiated by race. As such, these “preference externalities” tend to make race- free decision making difficult. This approach might succeed in radio, which relies on advertiser differences for its revenues. Advertisers can pay less for minority listeners, because these listeners listen more and tend to buy less. However, these preference externalities should not be expected in film, where studio revenues are not derived from an audience intermediary that values audience dollars differently. 87 Nurse, supra note ***. 88 There were a number of fascinating incidents during 1991 and 1992, where studios removed firearms from the movie posters for the majority-minority Juice, while leaving them prominently featured in ads for the Christian Slater vehicle, Kuffs. See, e.g., Jim Emerson, Black Films Get Violent Scrutiny, THE SAN DIEGO UNION-TRIBUNE, February 3, 1992, p. C7. 89 The data were analyzed by BBDO New York and reported in Christy Fisher, Black, Hip, and Primed (to Shop), AMERICAN DEMOGRAPHICS, September 1, 1996. 30 Working Paper: DRAFT – DO NOT CITE whose president argued that young urban black teens want their humor “raw and R- rated” and will go to see a movie if “they think the soundtrack is good and the beat is there.”90 With marketing experts like these, it’s no wonder that marketing and distribution problems plagued Hollywood studios.

Yet, even with the success of films starring both popular and not-yet-discovered minority actors, the production and distribution of majority-minority films still seemed to under-serve market demands and dampen industry profit potential. The successes of movies like Waiting to Exhale and Soul Food was rebutted by industry comments regarding the barely profitable vehicles The Preacher’s Wife and How Stella Got Her

Groove Back. Even the aforementioned executive at Fox, which distributed the $70 million grossing Waiting to Exhale, argued that they “spent weeks and weeks trying to get middle white America to buy into this film. We never succeeded.”91 Interestingly, this marketing executive was also in charge of the universally panned marketing strategy for the critically praised but box-office under-performing Warren Beatty movie,

Bulworth.92 Yet, even movie experiments like Bulworth do not entail significant financial risks for studios. Bulworth and the barely profitable How Stella Got Her Groove Back were

90 Comments by Ivan Juzang, president of Philadelphia-based Motivational Education Entertainment (MEE) Productions, as quoted in Fred Pampel, et. al., Marketing the Movies, AMERICAN DEMOGRAPHICS, March 1, 1994. I worry about what part of his message is “motivational”. 91 Tom Sherak, 20th Century Fox senior vice president and lead marketer for Waiting to Exhale, quoted in Masters and Trescott, supra note ***. 92 While Bulworth was a sophisticated political satire, it also featured a popular rap music soundtrack and was set in Los Angeles. While one reviewer suggested that the film’s audience would be “young, urban males, specifically the young African-American audience”, the Fox executive who led the Waiting to Exhale campaign also was in charge of Bulworth. He argued that Bulworth would be most successful with “guys” and “older females”. It wasn’t successful, apparently, with either group. The movie received a 1999 Academy Award nomination for Best Original Screenplay, at least suggesting that its content had wide and original appeal. See, e.g., Richard Natale, The Competition Is Only on the Surface, LOS ANGELES TIMES, April 20, 1998, p. F1. 31 Working Paper: DRAFT – DO NOT CITE both produced for “well below the industry average.”93 However, studio big-grossers

Six Days, Seven Nights ($160 million worldwide) and The Horse Whisperer ($180 million worldwide) barely produced profits equal to that of Bulworth and Stella. As one analyst notes, Six Days and Horse Whisperer “didn’t contribute much to the bottom line because they were laden with expensive budgets and hefty profit participation by stars.”94

Based upon these observations, it certainly can appear that no matter what the content of the movie, major Hollywood studio films with predominantly minority themes or with a majority of minority actors were consistently deployed on very few screens nationwide. Likewise, it appears at first glance that no matter what the subject, rating, or critical review, major studio movies not featuring minority themes or a majority of minority actors were consistently distributed to a wider array of theaters.

To more aggressively test these observations, we turn to empirical analysis.

93 Richard Natale, More Losers Than Winners in Box-Office Tally, HOLLYWOOD NEWS ONLINE: LOS ANGELES TIMES, September 8, 1998. 94 Id. 32 Working Paper: DRAFT – DO NOT CITE

III. DATA ANALYSIS – THE LOGIC OF PROFIT AND FILM DISTRIBUTION

The contextual evidence that I have described thus far suggests that race played a strong and independent role in influencing film distributors’ behavior during the

Decade (the ten-year period 1991-2000). In order to determine whether some sort of corporate racial bias (as opposed to profit maximization based on customer preference) is at work, I gathered a dataset of demographic information pertaining to a wide variety of films distributed for general release during the Decade.

A. Previous Studies and Industry Models

Because the models in this Article are influenced by traditional studies of product sales, consumer preferences, and product quality, they have been designed to reflect models of consumer and corporate product sales. Such studies that focus on aggregate consumer marketplace demand “take the form of [OLS] multivariate regression models in which demand for a vector of products is related to marketing variables such as prices, displays, and various forms of advertising.”95 That approach is taken here, though with the uncertainty of demand reflected by the lack of a direct measurement.96 Box-office forecasting models take this basic marketing study approach, but studios and academics adapt that model of choice to reflect the peculiarities of Hollywood filmmaking and distribution. The most notable difference between general consumer product models and those for film is a reliance on product and environmental factors of films to predict sales and profits, as opposed to demand –

95 Peter E. Rossi, Greg M. Allenby, Statistics and Marketing, 95 JOURNAL OF THE AMERICAN STATISTICAL ASSOCIATION 450 (2000). 96 Demand, when needed here as a variable, is measured by using overall box-office performance. This is, of course, a post-hoc gauge of demand, which is precisely what works best to determine whether demand is being accurately predicted at the outset. 33 Working Paper: DRAFT – DO NOT CITE which is widely used in traditional consumer products research. This is so, in part, because the pattern and life-cycle of a film’s release and box-office results is the exact opposite of the typical “bell-shaped life-cycle diffusion curve pattern that has been described for durable products.”97 Further, pricing considerations, a central variable in much consumer research, appear to play no role in movie attendance – since prices at various theaters do not substantially vary within a geographic region.

A variety of econometric models of various aspects of film business outcomes provide a useful starting framework for the models that I create and test here. In

“Predicting Movie Grosses”, Simonoff and Sparrow outline their preferred method for predicting a movie’s net theater gate receipts.98 Simonoff and Sparrow use a database of

300 films from 1999 to calculate potential grosses. Using only ten independent variables, Simonoff and Sparrow employ an OLS model to derive their predictive model of a film’s total gross.99 Similarly, Fred Zufryden’s work connects advertising and the level of a film’s distribution to gauge their impact on a film’s overall box-office performance. Zufryden’s model for total box-office performance for new releases relies on a standard regression analysis as well as log-linear regression techniques.100

Two other representative works use a simplified set of variables to predict box- office performance and/or profitability. Sogit Sochay, using a multivariate OLS regression model, modeled a film’s performance as determined by three broad

97 Fred S. Zufryden, Linking Advertising to Box Office Performance of New Film Releases – A Marketing Planning Model, 36:4 JOURNAL OF ADVERTISING RESEARCH 29 (1996). Zufryden uses OLS for some questions, and a logged dependent variable ridge regression procedure when analyzing a bounded “intent to see” measure. 98 See Jeffrey Siminoff and Ilana Sparrow, Predicting Movie Grosses: Winners and Losers, Blockbusters and Sleepers, 13:3 CHANCE 15 (2000). Our models differ in one small respect -- they use two logged variables to adjust for a skewed variable tail – a problem that my dataset did not have. 99 Their ten independent variables are: genre, rating, country of movie’s origin, two “star power” variables, production budget, sequel, holiday opening weekend, number of screens, critic Roger Ebert’s rating, and Academy Award nominations and wins. 100 Zufryden, supra note ***. 34 Working Paper: DRAFT – DO NOT CITE categories: creativity, scheduling/distribution pattern, and marketing.101 Sochay’s results suggest that the film’s genre, a proven box-office star, the date of the film’s release, and the total screens/theaters allocated to the film drive the film’s overall box- office performance. Likewise, Abraham Ravid, in varied studies, focused on determinants of a film’s profitability by using a series of OLS regressions.102 Ravid’s work expanded the field by factoring in video-revenues and international revenues to gauge overall film profitability. Significant variables in his work include film budgets, reviewer ratings (after the first week of release), film ratings, and sequel status. Notable results include Ravid’s rejection of conventional wisdom that box-office stars matter for a film’s ultimate profitability. Of course, though OLS regression is the most common technique used in industry-analyses of this kind, other approaches have been tested in experimental consumer analysis studies of film-going behavior.103

The set of regression models in this section is designed to test two things: the validity of the profit-maximizing, race-neutral approach to distribution and the likelihood that any inefficiencies can be corrected by market forces. I expect the data will demonstrate that holding independent variables constant, including actual revenue per theater, studios limit distribution of minority actor and majority-minority movies solely on the basis of race. If true, this would bolster the contention of a number of

African-American actors and film-makers that majority-minority or led films are “given stiffer litmus tests” and that decisions are never made “on an equal opportunity

101 Scott Sochay, Predicting the Performance of Motion Pictures, 7:4 THE JOURNAL OF MEDIA ECONOMICS 1 (1994). 102 S. Abraham Ravid, Information, Blockbusters and Stars, JOURNAL OF BUSINESS, Oct. 1999; S. Abraham Ravid and Suman Basuroy, Beyond Morality and Ethics – Executive Objective Function, the R- Rating Puzzle and the Production of Violent Movies, RUTGERS UNIVERSITY WORKING PAPER (2002). 103 For an interesting example of a psychological approach to film-choice, using a probit-based multi- sample model, see Ramya Neelamiegham and Dipak Jain, Consumer Choice Process for Experience Goods: An Econometric Model and Analysis, 36:3 JOURNAL OF MARKETING RESEARCH 373 (1999). 35 Working Paper: DRAFT – DO NOT CITE basis.”104 The null hypothesis of a non-biased market is that the distribution of a movie is primarily influenced by its perceived national popularity, audience appeal, and ability to generate significant amounts of money per theater. To test this hypothesis, three successive sets of models follow.

The source for the statistical analyses in this Article is the Diversity Film Index

(DFI), a large-scale database I created specifically for this Article. The database includes roughly 300 films, with roughly 60 independent variables associated with each film.105

The economic data for each film include (amongst other things): box-office performance, length of release, per-screen average, per-screen totals, week-to-week performance, and overall budget.106 The films’ demographic information includes: each film’s distributor, length, rating, category. The films’ sociological data includes: the race and gender of the featured actors, as well as select actors’ box-office history.

Few studies of the film marketplace focus on the ultimate question at issue here – distribution. Instead, most models of studio and consumer behavior focus on predicting box-office results. Because these questions are somewhat similar, it is useful to consider common sets of independent variables used in the varied models. The previously mentioned studies of the film industry agree on some common predictive elements. For example, Sharda, Amoto, and Meany gathered data for: date of release, rating, intensity of competition, star power, genre, technical effects, sequel, screens at opening, and final gross.107 Rather than just the five to ten variables typically gathered by these and other researchers, I include race-related variables and other first-time-

104 King, supra note ***. 105 The regressions in this Article were run with a finalized set of 274 films primarily from the latter half of the Decade. 106 Detailed descriptions of the variables used in the regressions can be found in the Appendix. 107 Ramesh Sharda, Henry Amato, and Edith Meanty, Forecasting Gate Receipts Using Neural Network and Rough Sets, working paper (1999). 36 Working Paper: DRAFT – DO NOT CITE gathered data in an attempt to shed new light on the distribution question. The database contains more than 100 films featuring minority actors in leading roles.108 To ensure a wide range of distribution in key variables within the database, almost all movies with available demographic information and released on more than 500 screens during one portion of the latter half of this period were included in the database.109

This gathering of race and gender-based data highlights a fact mentioned at the outset of this work: race, though at the core of our political and sociological landscape, has often been given short thrift in legal, political science, economic, and business- school studies of marketplace outcomes in non-competitive markets. Therefore, notwithstanding the above-mentioned studies of film studio profitability, box-office forecasting, and studio distribution efforts, this Article is the first to directly apply race related research and economic data as variables to be considered in discussing industry economic outcomes.

B. Performance and Distribution Related Models

The three models that follow each focus on a different explanation for race-gaps in movie distribution and performance. The first model, examining causal factors influencing per-theater grosses, is designed to test whether a film’s blackness (or gender) depresses moviegoer turnout, causing a lower per-screen average. If this were true, studios could argue that the scope of distribution was restricted due to an average

108 Additional movies from earlier in the period were added to provide for greater inclusion of diverse films and casts. 109 At the outset, I address a few peculiar statistical problems. Some have suggested that showcasing a movie in fewer theaters would actually drive profits per theater up. Given that such a suggestion would undermine some of these models, the theory was tested independently and the relationship actually moves in the opposite direction. As available theaters increase, generally, so do per theater profits. Recent examples of this phenomenon (outside of the period of analysis here) include My Big Fat Greek Wedding, Bowling for Columbine, and March with Penguins. Therefore, here and elsewhere, both variables are not included on the same side of the model. Finally, relevant variables were tested to meet traditional general linear model assumptions. 37 Working Paper: DRAFT – DO NOT CITE level of interest in these types of movies. If the assumption that the film’s blackness or gender depresses turnout turns out to be false, one would expect that distribution of these films would be equal to distribution of other films – holding other factors constant.

The second and third models build from a similar logic. The second, examining factors influencing overall box-office gross, challenges a familiar industry argument – that black/women led movies make less money overall. For example, using a nationwide audience as the standard, if one found that, all things being equal, majority- minority movies or women-led movies did less well (in total box-office revenues) than others, such a result would suggest that studios would be right to distribute these movies less widely and also produce less of them. On the other hand, if the model shows no negative effect for race or gender, then one can conclude that the average moviegoer does not discriminate as much as industry experts predict. Finally, the third model takes insights learned from the results of the first two and applies them directly to the distribution question. Taking into account various factors from the first two models, I test directly whether race and gender suppress a film’s distribution.

C. Model I- Per-Theater Gross

To begin, I examined a number of factors that are expected to influence per- theater film grosses and constructed a model to those specifications. The results demonstrated the expected statistical significance of some box-office star variables, but also the unexpected non-effects for African-American box-office stars and for majority- minority movies. In addition, rating did not appear to be a factor, but running time did.

Based upon the significance demonstrated by these variables, a revised model was generated that incorporated the more likely significant variables. See Chart 3.1.

38 Working Paper: DRAFT – DO NOT CITE

39 Working Paper: DRAFT – DO NOT CITE

Chart 3.1

Final Model: Per-Theater Gross

Variable Coefficient Std. Error T Ratio P Value

Monthly 15** .08582 .05021 1.71 .089

Running time .30289 .05754 5.26 .000**

Comedy 5.721 2.071 2.76 .006**

White Male Star 9.513 2.22 4.29 .000**

Woman Star 6.671 3.066 2.18 .031*

* = significant at .05 N = 250

** = significant at .01 s = 14.24

R-sq = 23.7%

R-sq(adj) = 22.2%

40 Working Paper: DRAFT – DO NOT CITE

The early analysis demonstrated that, contrary to popular wisdom and this

Article’s null hypothesis, there is no significant relationship between the presence of a minority-cast and per-theater revenues for general release movies. Therefore, there would be no statistical reason to expect that of any two random releases, one featuring a majority-minority cast would under-perform compared to another movie without a diverse cast. This has significant implications, both for theaters who under-book majority-minority movies and for distributors who steer these movies to a limited number of theaters. By demonstrating that a majority-minority cast does not predictably drive per-theater gross, this Article’s data suggest that the marketplace for majority-minority movies during the Decade was underserved given the potential for increased revenues. In other words, seats were filled for majority-minority movies at the same rates for movies with non-minority themes – holding other factors constant.

Finally, the early models produced a number of helpful, but unexpected results.

While it has been demonstrated that “R” ratings negatively impact total box office revenues, it appears that an “R” rating does not drive down the per-theater revenues of movies in this study. Further, as movies became longer in running time, there per theater/screen revenue did not decrease as expected. In addition, comedies were positively associated with per screen revenue, but romances did not have a clear effect on box office revenue.

Despite the unexpected results for majority-minority movies, mixed results emerged for other variables’ effect on per-theater gross. For example, casting a proven box office woman or white male star significantly increased the per-theater gross for a movie. In accord with conventional wisdom, however, the per-theater gross in revenue is significantly larger for men than women. However, casting a proven box office 41 Working Paper: DRAFT – DO NOT CITE

African-American star did not have an apparent effect on per-theater success. While the inclusion of data for movies like Independence Day and Men in Black would have changed this result, their outlier status compromised the data as a whole.110 Finally, the data suggest that the inclusion of a minority or woman lead, or a minority supporting character, has no significant effect on the per-theater revenues of movies in general release. In other words, the marketplace demand for casting diversity extends most dramatically to stars of both genders, but does not extend to African-American stars or diverse casts generally speaking.

D. Model II: Total Box Office Revenue (U.S. totals only)

The working hypothesis following the first model was that total box office revenues could be predicted by the same factors that predict per-theater revenues, but with significant exceptions. Because total box office revenues as a variable were moderately correlated with the “Top-15” variable, that variable was excluded from the model.111 Likewise, general observation of the data indicated that blockbuster releases tended to generate large movements in the relationship between box office revenues and maximum theaters. This connection will be explored in a later set of analyses that directly address the distribution question. Based upon initial results, the model was modified to exclude variables that appeared statistically insignificant. Several variables that met .1 significance levels were included to determine whether their borderline significance was due to the masking generated by the additional variables. The revised

110 Because African-American actor Will Smith starred in both movies (and both performed phenomenally at the box-office), the inclusion of them in the analysis dramatically amplified the beta values for several variables and also increased their significance. To ensure that the hypothesis was accurately tested with “normal” African-American films, these films were removed from this analysis. 111 The “Monthly Top 15” variable is a variable designed to control for the popularity of the time period of a film’s release. It is the average gross of the top fifteen movies playing during that film’s release. This variable helps to control for seasonal variations in attendance and overall gross. 42 Working Paper: DRAFT – DO NOT CITE model for the determination of total box office revenue follows in the next chart. See

Chart 3.2.

43 Working Paper: DRAFT – DO NOT CITE

Chart 3.2

Final Model: Total U.S. Box Office Revenue

P Variable (N=250) Coefficient Std. Error T Ratio Value

Running time .5846 .1504 3.89 .000**

R Rating -14.480 5.072 -2.85 .005**

Comedy 7.202 5.525 1.30 .194

White Male Star 37.814 5.682 6.65 .000**

African-American Star 8.915 6.068 1.47 .143

Woman Star 16.518 8.125 2.03 .043*

* = significant at .05 R-sq = 29.3%

** = significant at .01

44 Working Paper: DRAFT – DO NOT CITE

As was true with respect to per-theater revenues, running time, and the inclusion of white male and women box office stars significantly increased a film’s financial bottom line. As was true in the per-theaters analysis, the addition of a white-male star increased the total box-office revenue of a film at a rate almost twice that of women.

The effects of African-American stars washed out in the final analysis, as did the effects of comedy on the box office gross.

There were differences in the per-theater vs. total U.S. gross analyses as to the significant effects of a movie’s rating and whether it was classified as a comedy. The different effects of comedy in this section suggests that comedies fail to achieve either the long-term staying power or the wide-distribution that often helps increase box office performance. The effects of a movie’s “R” rating accord with conventional wisdom that movies with such ratings cannot generate the long-term and repeat audience traffic necessary to achieve a sufficiently high gross.112 The negative impact of the “R” rating can explain, in part, the smaller box-office returns from majority-minority films.

Extrapolating from the data in this Article, while 54% of the movies in this dataset were rated “R”, 74% of majority-minority movies had “R” ratings. Some filmmakers have suggested that the Motion Picture Association of America’s (MPAA’s) ratings system discriminates against African-American films by using heightened standards of language, violence, or sexual decency for films with largely minority casts.113 If this is

112 Study: “G” is for the Greater Box Office, HOLLYWOOD REPORTER, January 28, 1999. Additional data gathered from (last visited January 2011). 113 The commercially successful director of Jason’s Lyric argued that the lengthy MPAA ratings approval process for some sexual scenes in his majority-minority movie demonstrated that “if you have two black people making love, somehow, that’s steamier than other people.” See Bernard Weinraub, Ratings Board Blasted: Critics Say System Discriminatory, THE PLAIN DEALER (CLEV.), October 2, 1994. For a more detailed examination of the Ratings process, see Jacob Septimus, The MPAA Ratings System: A Regime of Private Censorship and Cultural Manipulation, 21 COLUM.-VLA J.L. & ARTS 69 (1996). 45 Working Paper: DRAFT – DO NOT CITE true, it also negatively impacts the box-office draw for majority minority films and actively contributes to further market inefficiencies.

E. Model III - The Racial Impasse – Modeling Film Distribution

Based upon these observations regarding per-theater revenues and box-office revenues, one can predict a number of factors that should determine the scope of a film’s distribution. The null hypothesis of a non-biased market was that the distribution of a movie would be primarily influenced by its perceived national popularity, audience appeal, and ability to generate significant amounts of money per theater. Researchers agree that other factors driving distribution (besides any individual theater booking preferences) include whether the film is rated R, whether it features actors who have recently been in popular films, whether it features a diverse cast, whether it faces strong competition during its time of release, and the movie’s genre. However, unlike this Article’s previous tests, one might expect that if studios are discriminating against movies featuring women and minorities then significant and negative results will be shown for the variables that involve women and minorities. In order to test this marketplace discrimination, it is necessary to use an outcome measure in this model. In this case, final box office gross was used as an independent measure of a movie’s overall pre-release popularity (i.e. pre-release demand). In general, box office grosses for majority-minority movies were also significantly lower than the average.

Therefore, one can expect that absent marketplace discrimination, including this variable would make the independent effect of minority theme (by itself) insignificant without strong market discrimination effects for majority-minority films alone. See

Chart 3.3.

Chart 3.3 46 Working Paper: DRAFT – DO NOT CITE

Preliminary Model: Film Distribution to Theaters (in number of theaters)

Variable (N=250) Coefficient Std. Error T Ratio P Value

Constant 2301.4 241.5 9.53 .000**

Monthly 15** 3.114 1.688 1.84 .066

Running time -5.935 1.845 -3.22 .001**

R Rating -202.06 63.62 -3.18 .002**

Min. Lead -169.76 79.76 -2.13 .034*

Woman Lead 20.03 66.67 .30 .764

Woman Star -8.6 105.4 -.08 .935

Min. Co-star 56.7 148.0 .38 .702

Comedy -138.87 67.84 -2.05 .042*

Majority Minority -486.45 89.93 -5.41 .000**

Romance -139.54 94.16 -1.48 .140

White Male Star 198.35 74.62 2.66 .008**

African-American Star 229.31 83.71 2.74 .007**

African-American co-star -64.8 145.2 -.45 .656

Box-Office Gross (demand) 7.1734 .8071 8.89 .000**

* = significant at .05

** = significant at .01

47 Working Paper: DRAFT – DO NOT CITE

The initial model confirmed and disproved initial hypotheses. First, it achieves a relatively high R-squared of 61%. Also, a number of variables that one might expect to achieve significance (based on earlier models) did so here. However, some variables, such as “womanstr” appeared to have no significance in distribution. In order to generate a more accurate predictive model, the model was redeveloped with significant variables from the first analysis. See Chart 3.4.

48 Working Paper: DRAFT – DO NOT CITE

Chart 3.4

Final Model: Film Distribution to Theaters (in number of theaters)

Variable(N=250) Coefficient Std. Error T Ratio P Value

Constant 2355.0 236.6 9.95 0.00**

Monthly 15 2.887 1.670 1.73 .085

Running time -6.296 1.820 -3.46 .001**

R Rating -202.81 63.08 -3.22 .001**

Min. Lead -158.96 76.82 -2.07 .040*

Woman Star -14.72 96.08 -.15 .878

Comedy -152.23 66.48 -2.29 .023*

Majority Minority -512.93 79.54 -6.45 .000**

White Male Star 189.62 73.23 2.59 .010**

African-American Star 235.52 82.96 2.84 .005**

Box Office Gross (demand) 7.1497 .8032 8.90 .000**

* = significant at .05 s = 423.7

** = significant at .01 R-sq = 60.7%

R-sq(adj) = 59.0%

49 Working Paper: DRAFT – DO NOT CITE

F. Film Distribution: the roles of gender, race, and film attributes

The third model confirmed the non-significance of box-office leading women in distribution decisions for films, as well as the minor significance of the box-office grosses for competing films during the month of release. However, the model also confirmed several relationships that independently drive a film’s distribution and serve as strong indicators of marketplace discrimination and inefficiencies that cannot be explained by neutral economic factors.114 To analyze the significance of these results, each set of explanatory independent variables is explored in turn.

The most notable race-related effects shown by the model suggest that the historical evidence discussed earlier in this Article matches the relationships shown in the data. Not only are there independent effects for the presence of a minority-theme, but there are additional significant effects when a lead actor is also an ethnic minority.

The overwhelming significance and beta value for minority-theme demonstrates that even holding factors such as film popularity (i.e., audience demand) constant, majority- minority movies are substantially under-distributed for reasons that market variables cannot explain.115 This is simply an effect of irrational corporate racial bias and a profound failure of both studio distributors and, to a lesser degree, theaters to exploit a captive and demand-heavy market. Further, the independent significance of the

114 Because this Article is limited to a discussion of race, I shall leave for future work a discussion of the distribution regressions for variables that involve gender considerations. I note that they also present significant marketplace challenges for actors, studios, and distributors who develop films featuring women actors in leading roles or use gendered themes of romance. 115 See Daniel Kahneman, Jack L. Knetsch, and Richard Thaler, Fairness as a Constraint on Profit Seeking: Entitlements in the Market, 76 AM. ECON. REV. 728 (1986), describing the concept of a “reference transaction” – a benchmark that parties without equal information can draw from to form rational expectations about the fairness of a contractual bargain. Here, where reference transactions involving the distribution of movies are themselves false benchmarks, they undermine the bargaining power of racial minorities involved in the production of those movies. 50 Working Paper: DRAFT – DO NOT CITE presence of an ethnic lead character also has irrational market distribution consequences. This demonstrates, in part, that the conventional wisdom of casting a few non-minority actors in majority-minority films might have some bearing on the film’s distribution – even though it does not (as shown earlier) have any bearing on the ultimate per-theater or total grosses. This observation, standing alone, is also evidence of some degree of market irrationality.116

Significantly, film attributes including running time, movie rating, and movie type have significant and independent effects on a movie’s market distribution. Movies that are longer tend to be distributed to fewer theaters. In addition, movies that are rated “R” also tend to be distributed less widely. Finally, comedies tend to be distributed less widely than other types of movies. These factors are particularly significant for their independent effects on movies that feature ethnic minorities and adult themes. As movies become sophisticated in story telling, they become longer. As movies grapple with mature subjects or adult comedy, they are more likely to be rated

“R”. And, movies with less sophisticated themes and less mature subjects can easily lend themselves to comedy. The profound, independent impact that each of these qualities has serves as another independent negative market characteristic that will more heavily impact mature, adult-oriented majority-minority films that may be produced by Hollywood studios. However, because the market for distribution reacts to these film qualities in race-neutral ways, their impact will be felt above and beyond the negative distribution impact for majority-minority films generally. Therefore, as industry executives recognize these limitations, they should also consider producing

116 As other quantitative analyses have demonstrated, this phenomenon also extends, in part, to television network programming. See Robert Schmidt, Airing Race, BRILL’S CONTENT, October 2000. 51 Working Paper: DRAFT – DO NOT CITE majority-minority movies that are not comedies and are not rated “R” in order to limit the already substantial distribution biases against majority-minority films.

G. Distributors’ Defenses: Preference Externalities, Intl.’ Commerce, and Performance

When faced with anecdotal and empirical evidence of the type described above, distributors might offer a number of arguments for why they might distribute films starring racial minorities to fewer theaters than non-minority films. First, distributors contend with a perception by theater chains and movie critics that stories featuring love themes or non-violent plots fail to bring a large and diverse audience to the theater for majority-minority films.117 In short, the studios and distributors are simply creating and providing movies for audiences with distinct tastes and preferences. As such, studio advocates argue that these consumer preference externalities (industry jargon for consumer demand) drive production and distribution decisions, not some vague irrational market prejudice by studios. Because the issue of demand is a compelling justification for industry behavior, one must ask to what extent demand or consumer preferences are relied upon – or are reliable. Studios do not, however, discuss another quiet possibility – that white consumers, for racial reasons, consistently reject movies with minority actors or minority themes. It is also possible that studios aggressively market movies for distribution, but that individual theater owners reject the movies.

The other significant set of distributor arguments actually seem to focus on production, not distribution. Some studios argue that because the international market for films now accounts for roughly 50% of total revenues, movies without international appeal are less likely to be distributed and marketed widely in the United States.

117 While a string of movies in 1991 led many chains to embrace the profit making potential of movies with mostly African-American casts, the under-performance of Director John Singleton’s non-violent 1993 movie Poetic Justice dampened enthusiasm for majority-minority films. See, Pristin, supra note ***. 52 Working Paper: DRAFT – DO NOT CITE

During the period studied here, the United States controlled 85% of the international film market and 90% of the market in Europe.118 As the international market for

Hollywood films expands, some defenders of these racial inequities argue that non- action films just do not fare well in the lucrative overseas market.119 The head of the international theatrical department at Sony, Duncan Clark, once argued, “Black baseball movies, period dramas about football, rap, inner-city films – most countries can’t relate to that.”120 The chairman of Universal Pictures added that “history has said that African

American movies don’t translate” overseas.121 Admittedly, studio executives are still struggling with the overgrowing presence of minority markets around the globe, particularly black audiences. Putting aside efforts to reach the broadest audience possible, just estimating what these global minority film audiences want to see is becoming a problem worldwide, just as black film makers, actors, and minority audiences are generating an expanding influence in countries like England.122

Despite some efforts to address these discrepancies, these “international market” arguments seem disingenuous for many reasons. First, two-thirds of all movies produced during a representative year of this study failed to earn a profit overseas.123

Second, if the distribution and marketing of these films in the U.S. is based upon a faulty race-based logic, it might seem odd that the American distributor “usually

118 One author cites these and numerous related demographics, in Judith Beth Prowda, U.S. Dominance in the “Marketplace of Culture” and the French “Cultural Exception”, 29 N.Y.U.J. INT’L L. & POL. 193, 200 (1997). 119 Masters and Trescott, supra note ***. 120 Quoted in Sharon Waxman, Hollywood Tailors Its Movies to Sell In Foreign Markets, THE WASHINGTON POST, October 26, 1998, p. a1. 121 Id. 122 English Producers Leon Herbert and Treva Etienne, arguing that though distributors have considered the “minority audience as a minuscule market, hardly worth any investment”, that the audience and the professional film community is an untapped, but growing base for increased commerce. See, Leon Herbert and Treva Etienne, Colour Film, THE WEEKLY JOURNAL, April 29, 1997. 123 According to 20th Century Fox studio chief Bill Mechanic, quoted in Welkos, supra note ***. 53 Working Paper: DRAFT – DO NOT CITE provides the worldwide marketing plan and material for a film’s marketing campaign.”124 Third, it will be difficult to establish a strong overseas market for talented women and minorities when distributors for action movies like Drop Zone change the overseas posters to remove the lead black actor’s face and reduce the prominence of his name.125 Fourth, while some majority-minority movies may fare poorly, this logic still fails to address why these movies are underdistributed when playing in the United

States. Fifth, some well-known movies featuring prominent African-Americans have been foreign box office profit leaders.126 Studios that have failed to recognize the value of their minority-led domestic hits have suffered financial peril when others stepped in to take over international distribution efforts.127 Further, majority-minority films made for moderate budgets have consistently turned profits even prior to foreign or video release.128 Finally, films that “go beyond the universal formulas” have out grossed major Hollywood blockbusters for years in the French market.129 Throughout the

Decade, despite some successes and an eight year record in the U.S. alone ranging from

124 Even where foreign market analysts suggest changes, they still must be approved by the U.S. studio parent. See Danan, supra note ***. 125 The U.S. version of Drop Zone featured a large photo of box-office talent Wesley Snipes and Snipes’s name in big letters. The French posters for the movie did not feature a picture of Snipes and reduced the prominence of his name. The change was recommended because Snipes was less well known in France. With actions like that, one wonders how he ever will be. See, e.g., Id. 126 The Martin Lawrence/Will Smith 1995 feature Bad Boys and the 1998 Eddie Murphy vehicle Doctor Dolittle both generated foreign box office results larger than their already impressive U.S. grosses. Significantly, both movies featured only minority characters in the leading roles. While certainly an exception, the virtually all-minority Eddie Murphy movie Coming to America (1988) grossed $350 million on the international market. See, e.g., Lambert, supra note ***. 127 One notable example was the domestic hit Sister Act, featuring Whoppi Goldberg. Warner Brothers decided to sell its foreign rights to Walt Disney Co. because it believed the movie would be too difficult to market abroad. Instead, Disney aggressively promoted it and made $143 million overseas. See Waxman, Hollywood Tailors Its Movies to Sell in Foreign Markets, THE WASHINGTON POST, October 26, 1998. 128 Even lesser known movies like 1994’s Jason’s Lyric produced strong profits – both by its film and soundtrack. Made for under $7 million, the movie grossed $6.3 million in only its first twelve days of release. See Louis B. Parks, ‘Lyric’ Director Takes Different Look at City, HOUSTON CHRONICLE, October 7, 1994. 129 In France, Dances with Wolves and Dead Poets Society outdrew Indiana Jones and the Last Crusade, Terminator II, and Jurassic Park. See Danan, supra note ***. 54 Working Paper: DRAFT – DO NOT CITE

100% returns on investment to a break-even recovery, the studio system continued to under-develop and market films with minority themes.130 Some suggest that the failure to seriously address contentious issues on film results in Hollywood studios’ desires to make their fortunes by “purveying comfortable notions about American culture.”131

This is not to suggest Hollywood studios are alone in this phenomenon of not knowing how to tackle diversity issues. Taking one year of the Decade as an example, television studio writers were well over 90% white and almost 80% male.132

In addition, producers and distributors might argue that since films with no racial diversity sell well, there is no reason to change their behavior. Since films with no diversity can sell, there seems to be no benefit to adding significant numbers of minority actors or themes into the mix of films scheduled for production and no need to think deeply about racial assumptions in the distribution calculus. Indeed, one studio’s vice president of development notes that “there’s no blacks in Saving Private Ryan or

There’s Something About Mary, and they sold at the box office. So there’s not a lot of incentive to make changes. It’s wrong, but that’s the reality.”133 Further, this same-race approach to marketing reinforces the dominant view (which I suggest is the result of lack of competition) that studios do not even consider the possibility of a white audience attending a majority-minority movie. Likewise, in television production, the success of the all-white Seinfeld reinforced the idea that both networks and advertisers

130 No studio that released a majority-minority movie to a minimum of 500 theaters during the Decade reported a negative return in expenditures. 131 Providing a rich contrast of the commercial success of the love story Titanic and the per-theater success, but overall box-office stale performance of Amistad. See Nurse, supra note ***. 132 Susan Estrich makes these points forcefully in Susan Estrich, Hollywood Ignores Diversity, DENVER POST, November 8, 1998. 133 An anonymous studio executive quoted in Allison Samuels and John Leland, They’ve Got Next, NEWSWEEK, April 5, 1999. The executive was also wrong – as There’s Something About Mary featured well-respected African-American actor Keith David in the part of Mary’s stepfather. 55 Working Paper: DRAFT – DO NOT CITE can create hits without regard for the inclusion of racial minorities – even in a diverse city like New York.134

Next, distributors would remind critics that they have already captured the minority-audience – whether for majority-minority films or non-minority wide-release films. In short, studios know the following: market research has long demonstrated that African-Americans consume entertainment at rates exceeding the non-minority population. As described earlier, African-Americans watch 40% more television than non-minorities135 and comprise 12% of the population but 25% of the market for commercial films.136 This has led to an unusual problem of supply and demand. By way of comparison, social science literature indicates that African-Americans accept, desire, and maintain a significantly higher percentage of black-white integration in their social

(and political) lives than the average white American.137 Given that this is so, the average African-American consumer has little difficulty choosing integrated or even predominantly white cultural options for entertainment – the experience of sharing cross-cultural interactions is familiar and does not produce negative reactions.138 Since

African-Americans, therefore, can comfortably embrace existing entertainment options at much higher rates than their white counterparts, the economic incentive to diversify entertainment options to add more African-American or minority characters to “white” films (or television shows), for example, is extremely low.

134 See, e.g., Barry Garron, Press Tour Plays Race Card, HOLLYWOOD REPORTER, July 20, 1999. 135 Trescott, supra note ***. 136 The figure is often attributed to BLACK ENTERPRISE, as in Nurse, supra note ***. 137 Professor Ely argues in the context of political representation that white voters, once blacks reach a certain percentage of the voting population, consider them a threat. Whereas black voters “are probably so accustomed to white people being a majority that experiencing them as even a sizeable majority is likely to seem more relief than threat.” See Ely, supra note *** at 593. 138 Research from psychology suggests that members of “low-status” in-groups manifest in-group bias less than members of “high-status” groups. See, e.g., Marilyn B. Brewer and Rupert J. Brown, Intergroup Relations in HANDBOOK OF SOCIAL PSYCHOLOGY 570, (Daniel T. Gilbert, Susan T. Fiske and Gardner Lindzey eds.) (New York: McGraw-Hill 1998). 56 Working Paper: DRAFT – DO NOT CITE

Finally, Hollywood studios argue that limited distribution of majority-minority films is rational following the moderate performance of many majority-minority films during the Decade.139 Unfortunately for promoters of the expansion of the marketplace for majority-minority films, even the successful producers or directors of earlier works such as New Jack City, Boyz N the Hood, Hollywood Shuffle, and Malcolm X, did not consistently produce box-office revenues equivalent to those movies.140 Despite this, research throughout the Decade did not reveal what types of films the African-

American consumer consistently supported – or what types of minority-driven films would generate sufficient non-minority audiences.141 As a result, even John Singleton, director of the highly profitable Boyz N the Hood, noted that he had to “press” Warner

Brothers for more money to complete his fourth film, which eventually cost $20 million.142

H. Rejecting the Defenses

None of these proffered defenses directly rebuts the empirical results shown in this Article. If one accepts the empirical results, they demonstrate that rational firm behavior deviates significantly from optimality in the real world.143 During the Decade, films featuring minorities and women were not, as was commonly believed, economically inefficient engines of studio and theater profit. The market for these films

139 See Gary S. Becker, A Note on Restaurant Pricing and Other Examples of Social Influences on Price, 99 J. POL. ECON. 1109 (1991) (discussing economics of “quality-certification” process). 140 Mario Van Pebbles followed New Jack City with the low-grossing Posse. John Singleton’s Poetic Justice performed poorly compared to Boyz N the Hood. The studio-backed The Five Heartbeats and Meteor Man underperformed Robert Townsend’s privately funded first movie. And, following Malcolm X, Spike Lee’s movies during the Decade were profitable but on a smaller scale. 141 A production and distribution conundrum highlighted by black filmmaker Warrington Hudlin in Hudlin, supra note ***. 142 Rosewood, SACRAMENTO BEE, February 26, 1997, p. E1. 143 See Daniel Kahneman, New Challenges to the Rationality Assumption, in THE RATIONAL FOUNDATIONS OF ECONOMIC BEHAVIOR 203 (Kenneth J. Arrow, Enrico Colombatto, Mark Perlman, and Christian Schmidt eds.) (New York: MacMillan, 1996). 57 Working Paper: DRAFT – DO NOT CITE was simply underutilized and under-served. As a result, theaters showing these films had higher average revenue than for most other types of motion pictures.144 As a result of the limited screen space, however, these films often did not generate a large overall box office intake. If the films were featured on screens in proportion to their actual demand, they would have generated even more income for studios and for women and minorities in the entertainment marketplace. Something about this market inefficiency during the Decade seems particularly striking, namely that the failure to find the most profitable movies to book also hit theater chains in their pocketbooks. Between 1999 and 2001, America’s four biggest theater chains, Loews, Regal, Carmike and AMC lost more than $340 million. While acknowledging its losses, Carmike blamed the studio’s aggressive financial terms for booking and keeping Hollywood big-budget movies as the reason for theaters’ large financial losses.145

I. No Competition - Why Differences Might Continue to Persist

Ultimately, any explanation of the inefficient behavior of Hollywood studios must begin with its race-bias induced by lack of competition in both production and distribution.146 The scarcity of producers and the concentration of distribution and production amongst roughly a dozen producers, suppliers, and distributors of content makes the race-based input and output problem a fairly entrenched one.147 As one

144 This has been true since at least 1991’s per-theater dominance of New Jack City and Boyz N the Hood. In 1994, the majority-minority Jason’s Lyric was ranked third overall during its first weeks of release, despite playing at only 40% of the total theaters of the #1 box office leader. Similarly, the movie Amistad came close to dominating the weekly charts, despite playing in roughly 25% of the theaters of the box office leader. 145 For a more detailed explanation, see SHONE, supra note *** at 290-291. 146 For a detailed analysis of the effects that the antitrust problem has with respect to the narrower issue of pricing, see Barak Y. Orbach, Antitrust and Pricing in the Motion Picture Industry, 21 YALE J. REG. 317 (2004). 147 The diversity of content providers and distributors, though never wide, has narrowed further over the last five years. For broader perspective on this consolidation, see Stephen R. Barnett, Cable Television 58 Working Paper: DRAFT – DO NOT CITE assessment notes, “Hollywood’s creations are the mirror in which Americans see themselves—and the current racially skewed reflection is dangerously distorted.”148

Evidence of bias is present and apparently not justified by existing revenue streams or customer preferences externalities. As both the historical and data analysis show, studio distributors engaged in gross market inefficiency by irrationally under- distributing movies that featured ethnic minorities. Only some, if any, of this behavior can be explained by supply-side defenses or preference externalities.

How can this be? Professor Ian Ayres offers one solution – “beliefs that are based on erroneous stereotypes may not be tested by the market equilibrium. If market experience does not teach sellers that their preconceptions are false, disparate treatment that is both inequitable and inefficient will persist.”149 Ayres points out that it is possible, either in a growing and profitable market or in a weakly competitive one, for firms to maintain false beliefs that become self-perpetuating because consumers will respond to a stereotypical approach in a predictable way – thus reinforcing the stereotype.150 Put differently by Cooter, increased competition intrinsically allows for

“people with different perspectives [who] tend to notice things that would be missed by people with the same perspective.” Since oligopolies and cartelistic industries tend to implement discriminatory practices, one benefit of increased competition, new actors, and new perspectives should be a reduction in market-wide racial bias.151

In other words, highly consolidated industries can produce racially disparate impacts or remain subtly racially biased because they lack the economic pressure,

and Media Concentration, Part I: Control of Cable Systems by Local Broadcasters, 22 STAN L. REV. 221 (1970). 148 Lambert, supra note ***. 149 See Ayres, supra note *** at 850. 150 Id. 151 See Cooter, supra note *** at 142. 59 Working Paper: DRAFT – DO NOT CITE knowledge, or robust market mechanisms to create pressure to change. These antitrust problems are indeed part of the underlying issue here: since the five major studios and their subsidiaries supplied 90% or more of all film content to the nation’s theater screens during the Decade, it would have been difficult for outside firms to penetrate the market to change this discriminatory calculus.152

During the Decade, the racial impasse in the distribution market was enhanced by yet another powerful reason why market actors did not modify their behavior.

Between 1990 and 2000, total box office grosses increased from $5.0218 billion to $7.661 billion – in most years far outpacing inflation.153 In other words, more than ten years of

(more or less) increasing revenue gave studios and distributors little incentive to dislodge their folk beliefs regarding production and distribution strategies of movies with minority actors and minority themes. Ayres’s reflections are also consistent with the insights of social psychologists. Floyd Allport’s widely discussed analysis of pluralistic ignorance bears some similarity to the inefficiencies of markets discussed here.154 For Allport, pluralistic ignorance exists when, within a group of individuals, each person quietly believes that his or her own perception, behavior, and understanding of the relevant world are different than those of his or her colleagues.

Rather than risking taking an unorthodox position or revealing a departure from expectations, the group member instead chooses to go along with the group’s perceived norm out of a desire to fit into the group and exemplify the group’s philosophy.155

Applying these insights to the results in this Article suggests that it is possible that the

152 See, e.g., the studio market share report at (last visited January 2011). 153 See (last visited January 2011). 154 See Floyd H. Allport, SOCIAL PSYCHOLOGY. Boston: Houghton Mifflin (1924). 155 See Dale T. Miller and Cathy McFarland, Pluralistic ignorance: When similarity is interpreted as dissimilarity, 53 JOURNAL OF PERSONALITY AND SOCIAL PSYCHOLOGY 298 (1987). 60 Working Paper: DRAFT – DO NOT CITE disparities identified here could be apparent to some or many within the system, but without a systemic change in the higher levels of decision making (for example, the studio focus on “blockbusters”), such insights might be more quietly held out of respect for the group’s dominant position.

Toward the end of the Decade, some promising trends emerged. In the summer of 2000, for example, over the course of four successive weekends, four different films with African-American leads opened with significant distribution and with the week’s top grosses.156 This development, coming on the heels of an explosion of teenage interest in hip-hop culture, found one critic applauding the developments and concluding that “black-themed movies [are] no longer just for a niche market.”157 Yet, given the cyclical nature of distribution trends throughout that decade, it would be hasty to suggest that the period between 2000 and 2010 would prove, for that reason, to be substantially different.

Given the overall posture of the industry, coupled with the context and data presented in this Article, the question is not “do the race-based distribution inequities need to be fixed?” but instead “how do we do so?” For a variety of complicated reasons, the solutions to this market-wide failure do not lie in traditional anti- discrimination law, but instead in market-driven initiatives and the potential for antitrust action. To explain why those remedies work best, it is useful to review why the others would (and did) fail.

156 The films were: Martin Lawrence’s Big Momma’s House, Eddie Murphy’s Nutty Professor II, Samuel L. Jackson’s Shaft, and the Wayans Brothers’ Scary Movie. 157 Elvis Mitchell, Snap! Kiss that Niche Market Goodbye, NEW YORK TIMES, August 14, 2000. 61 Working Paper: DRAFT – DO NOT CITE

IV. ANTI ‘ANTI-DISCRIMINATION’ – MARKETS AND COMPETITION AS SOLUTIONS

A. Familiar Paradigms – a Brief Review

When proposing remedies for the type of racial bias described here, one must consider concerns commonly raised when advancing methods designed to eliminate new or subtle forms of bias. As Professor Rhode sets out in her recent work on expanding certain coercive anti-bias regimes, “[i]n considering these questions, it often makes sense to consider both the nature of the characteristic and the context of discrimination.”158 Asking whether inequities in film distribution markets warrant the expansion of existing legal frameworks implicates the broader theoretical question of whether any intervention to eliminate such bias would be warranted in the first place.

Both free-market and anti-discrimination regime perspectives have strong advocates and an internal logic supported by theoretical models.159

The debate about remedying racial-bias begins with those who insist that a government enforcement regime is neither necessary nor appropriate.160 The free marketplace, dependent upon maximizing profits from a diverse array of workers and consumers, will not discriminate by race.161 Government race-based regulations that seek to monitor, control, and specifically outlaw racial discrimination in employment

158 Deborah L. Rhode, The Injustice of Appearance, 61 STAN. L. REV. 1033 (2009) at 1048. 159 The formalities are ably detailed in the provocative exchange between Donohue and Posner in a series of engaging articles. See John Donohue, Is Title VII Efficient?, 134 U. PA. L. REV. 1411 (1986); Richard Posner, The Efficiency and the Efficacy of Title VII, 136 U. PA. L. REV. 513 (1987); and John Donohue, Further Thoughts on Employment Discrimination Legislation: A Reply to Judge Posner, 136 U. PA. L. REV. 523 (1987). 160 th See RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW (5 Ed. 1998). A broad overview of the “law and economics” approach to regulation can be found in A. MITCHELL POLINSKY, AN INTRODUCTION TO d LAW AND ECONOMICS 40-2 (2 ed. 1989). 161 It would work as follows. Corporations who harbor racial biases or false perceptions about individuals will thus falsely judge the marketplace, imposing a cost upon them for their bias. Recognizing this cost will cause the holder of the false beliefs to eliminate them. See, e.g., David A. Strauss, The Law and Economics of Racial Discrimination in Employment: The Case for Numerical Standards, 79 GEO. L. J. 1619, 1640 (1991). 62 Working Paper: DRAFT – DO NOT CITE are inefficient and unnecessary because they interfere with the natural Darwinian consequences of inefficient economic choices, further exacerbating economic inefficiency. In short, firms that continue to discriminate in employment will suffer from the ultimate punishment – they will lose business, lose profit, and perish.162

Therefore, rather than constraining the market, the law should, but does not, let the natural economic order run its course. Based on the status quo of extensive regulations, free market theorists suggest that market bias will never be eliminated.

This is so because the existing government race-based regulations promote market inefficiency as well as exacerbate market bias – by thwarting the market’s natural methods of uprooting irrational race-based behavior. However, few adherents to the free market view within the political system are willing to extend that argument to its logical legislative conclusions.163 Even free-market arguments can allow for some anti- discrimination legal remedies “to the extent that there is monopoly or restricted entry” into various markets.164 How these principles might directly apply to non-competitive markets like those discussed here remains unclear because most scholarship in this tradition focuses on laws affecting labor and employment in the hiring/employment market – not transactional markets for products.165

162 GARY BECKER, THE ECONOMICS OF DISCRIMINATION 14-15, 38, 70-71 (2d ed.) (Chicago: University of Chicago Press, 1971). 163 One reason may be that scholars who advocate the use of markets as the answer to eliminating discrimination acknowledge that even perfect competition will not eliminate the more subtle manifestations of discrimination that exist in today’s complicated marketplace. See, e.g., Richard A. Epstein, Standing Firm, on Forbidden Grounds, 31 SAN DIEGO L. REV. 1, 1 (1994). 164 Richard A. Epstein and Erwin Chemerinsky, Should Title VII of the Civil Rights Act of 1964 Be Repealed?, 2 S. CAL. INTERDISCIPLINARY L.J. 349 (1993). 165 Among the works examining market discrimination from this perspective include the widely read Gary Becker, discussed earlier at supra note ** and thereafter. The earliest modern scholarly approach to this idea can be found in MILTON FRIEDMAN, CAPITALISM AND FREEDOM 109-10 (1962) (arguing that laws against discrimination are inefficient because market forces will eliminate it). Others in this tradition include Ray Marshall, The Economics of Racial Discrimination: A Survey, 12 J. ECON. LITERATURE 849 (1974); EPSTEIN, supra note **; Arrow, supra note ** and Shelly J. Lundberg and Richard Startz, Private 63 Working Paper: DRAFT – DO NOT CITE

Others argue that most or all forms of racial-bias can be eliminated by government intervention. Discrimination and the types of bias identified here, at their core, are not rational. Therefore, individuals and organizations can (and do) discriminate in a variety of ways, despite the fact that such discrimination is profit- limiting, illegal, or both. Advocates for anti-bias laws argue that individual and firm behavior is not nearly as ordered and efficient as the free-market theorists would have us believe.166 Government regulation can serve to change and define the preferences of firms and individual actors.167 As such, government regulation should be used to eliminate market bias through the formal and suggestive power of the law. Based in part on this logic, government proscription of race-based corporate and individual conduct has become the legal norm. However, these thinkers would take this argument further, by including multiple forms of bias, eliminating distinctions between willful and accidental discrimination, expanding definitions of discrimination,168 and considering unique ways of addressing past discrimination -- like reparations.169

Rejecting the claims of the free-marketers, these theorists have also relied on traditional econometrics to bolster their positions.170 But, despite the normative appeal of arguing that federal law should be even further expanded to coerce compliance with anti- discrimination ideals, this Article’s conclusions suggest that, at least with respect to film

Discrimination and Social Intervention in Competitive Labor Markets, 73 AM. ECON. REV. 340, 344 (1983). 166 See Richard H. Thaler, Doing Economics Without Homo Economicus, in FOUNDATIONS OF RESEARCH IN ECONOMICS: HOW DO ECONOMISTS DO ECONOMICS?, (Steven G. Medema and Warren J. Samuels eds.) (Aldershot, UK: Edward Elgar, 1996). 167 See Cass R. Sunstein, Endogenous Preferences, Environmental Law, 22 J. LEGAL STUD. 217 (1993). 168 See Richard Delgado, Words that Wound: A Tort Action for Racial Insults, Epithets, and Name Calling, 17 HARV. C.R.-C.L.L. REV. 133 (1982). 169 See, e.g., Tuneen Chisolm, Comment: Sweep Around Your Own Front Door: Examining the Argument for Legislative African American Reparations, 147 U. PA. L. REV. 677 (1999). 170 See, e.g., Peter Siegelman, Shaky Grounds: The Case Against the Case Against Antidiscrimination Laws, 19 LAW & SOC. INQU. 725, 739 (1994) (skeptically reviewing Professor Epstein’s free-market argument in FORBIDDEN GROUNDS). 64 Working Paper: DRAFT – DO NOT CITE distribution markets, such efforts might be counter-productive.171 Why might such efforts be ineffective or counter-productive? The roots of such answers are in the limitations of traditional civil rights frameworks, which have been construed with a particular emphasis on employer actions in a traditional employer/employee relationship.172

B. Traditional Anti-discrimination Law Does Not Provide a Straightforward Remedy

Title VII has been the cornerstone of anti-discrimination law for almost fifty years, and was the subject of much compromise regarding the scope of its remedies and their implementation in markets. Needless to say, the full history of that Act will not be recounted here.173 The most frequently used provisions of Title VII forbid most employers from intentionally discriminating against an employee because of that employee’s “race, color, religion, sex, or national origin.”174 Most individual cases under Title VII rely on either direct or circumstantial evidence of discrimination.175 The

Supreme Court set out the standard for analyzing these claims in McDonnell Douglas

Corp. v. Green.176 The problem inherent with using subjective, random incidents as

“proof” of discrimination is that these incidents are typically interpreted quite differently from the perspectives of the alleged victim of discrimination to those of his

171 See, e.g., Note, If You Are Attractive And You Know It, Please Apply: Appearance Based Discrimination And Employers’ Discretion, 42 VAL. U.L. REV. 629 (2008) (arguing that employers need less, not more, latitude when using appearance as a hiring criteria). See also Hannah Fleener, Looks Sell, But Are They Worth the Cost?: How Tolerating Looks-Based Discrimination Leads to Intolerable Discrimination, 83 WASH U. L.Q. 1295, 1300-01 (2005) (same). 172 See, e.g., Devon W. Carbado and Mitu Gulati, Working Identity, 85 CORNELL L. REV. 1259 (2000) (in part critiquing such emphasis). 173 For a detailed view of the history surrounding the Act’s enactment, see PHILIP A. KLINKNER & ROGERS SMITH, THE UNSTEADY MARCH: THE RISE AND DECLINE OF RACIAL EQUALITY IN AMERICA (Chicago: University of Chicago Press, 1999). 174 42 U.S.C. Sec. 2000e-2(a). 175 See, e.g., Luciano v. Olsten Corp., 110 F.3d 210, 215-16 (2d Cir. 1997). 176 McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802-3, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973). 65 Working Paper: DRAFT – DO NOT CITE employer.177 But four major barriers particularly prevent Title VII anti-discrimination actions from working in a non-competitive market such as the one discussed in this

Article. 178 This is not to suggest that such barriers are insurmountable, but instead to recognize that in a marketplace like the one described here, such regimes are more difficult to apply.179

The first barrier to applying traditional antidiscrimination regimes is essentially an antitrust dilemma. Many modern industries are highly consolidated, Hollywood film production and distribution being two of many examples. If one produces feature films, few to no business alternatives exist in each geographic region – or even throughout the United States. If a producer or financier were to sue in such a non- competitive environment, a comparable business opportunity in the immediate geographic area or even nationwide would likely not be available.180 As such, the pressure to remain successfully engaged in a professional endeavor within a consolidated or non-competitive industry likely outweighs the value of filing a traditional claim of racial discrimination – even if discrimination occurs.

177 See, e.g., Brummett v. Lee Enterprises, 284 F.3d 742 (7th Cir. 2002). 178 There are many other costs and barriers. See, e.g., John J. Donohue III and Peter Siegelman, Law and Macroeconomics: Employment Discrimination Litigation over the Business Cycle, 66 S. CAL. L. REV. 709 (1993) (demonstrating a connection between the national business cycle and the decisions of individuals to initiate employment discrimination lawsuits). There are other factors not caused by market forces, like an individual’s patience with the lengthy pre-lawsuit process, the psychological difficulties in engaging in a public examination of one’s job performance, the anxiety caused by the high uncertainty of winning, and other non-market factors. See also Karen M. Ruggiero and Donald M. Taylor, Why Minority Group Members Perceive or Do Not Perceive the Discrimination that Confronts Them: The Role of Self-Esteem and Perceived Control, 72:2 JOURNAL OF PERSONALITY AND SOCIAL PSYCHOLOGY 373 (1997). 179 It may very well be that a refinement of anti-discrimination law could reach some of these issues, but such refinement is beyond the scope of this initial inquiry. 180 As Donohue and Siegelman demonstrate, most plaintiffs in employment discrimination cases are not working for the alleged discriminator at the time they file the lawsuit – suggesting a great impediment remains to filing when one intends to continue working for the same employer. See John Donohue and Peter Siegelman, The Changing Nature of Employment Discrimination Litigation, 43 STAN L. REV. 983 (1991) at 1025-27. 66 Working Paper: DRAFT – DO NOT CITE

The second barrier to a successful individual discrimination claim is a network effect. In a public professional network like film production or distribution (along with, say, law professors, doctors, and so-on) accusing one’s business colleagues of biased or racist behavior or market dealings often means that said colleagues will be the subject of a highly publicized dispute within that profession.181 Other firms or individuals in the same professional network likely will hear about the alleged bias and think twice before working with an individual who wages professional war over claims of bias. So, even if other professional avenues are available as options, the dispute may mean that a typical plaintiff would avoid a discrimination lawsuit that would cause other potential business partners to view him or her as tainted goods.182 For example, if Producer

Litigation Larry sued Distributor X and Theater Chain Y, claiming racial bias in distribution patterns and practices, it is highly likely that Distributor Z in the same city and Theater Chain A will learn of this dispute through trade magazines and other networks, and would not be quite as willing to engage in a nationwide distribution plan for Producer Larry’s additional films.

The third major barrier to filing a traditional anti-discrimination claim in cases involving market outcomes in non-competitive markets is the lack of direct proof – such as objective-criteria or a comparable reference group. 183 Large bureaucratic firms,

181 See JOSEPH JETT AND SABRA CHARTRAND, BLACK AND WHITE ON WALL STREET: THE UNTOLD STORY OF THE MAN WRONGLY ACCUSED OF BRINGING DOWN KIDDER PEABODY (New York: William Morrow & Co., 1999); PAUL M. BARRETT, THE GOOD BLACK: A TRUE STORY OF RACE IN AMERICA (New York: Plume Books, 2000). 182 This argument applies not only to racial bias, but also gender bias as well. See, e.g., AAUW EDUC. FOUND. & AAUW LEGAL ADVOCACY FUND, TENURE DENIED: CASES OF SEX DISCRIMINATION IN ACADEMIA 65–68 (2004). 183 Krieger demonstrates that inter-group bias and discrimination often occur when organizations fail to provide a detailed and precise set of performance evaluation guidelines that allow for each individual to be evaluated according to the same criteria. See Linda H. Krieger, The Content of Our Categories: A Cognitive Bias Approach to Discrimination and Equal Employment Opportunity, 47 STAN. L. REV. 1161, 67 Working Paper: DRAFT – DO NOT CITE ranging from the government to large corporations, claim to use evaluation criteria – that naturally “leave less room for subjective and potentially discriminatory judgments.”184 But in markets like film distribution, much of the work product and placement is subjectively evaluated according to taste, skill, results, aesthetic, and other intangible factors – which are quite vulnerable to an infusion of racial bias.185 Against these various subjective categories, an individual challenging distribution practices would somehow have to show that the original distribution plan was objectively wrong

– a difficult task indeed.186 In short, when so much about a service’s or product’s value is subjectively evaluated, applying a modern anti-discrimination regime to analyze a subjective decision or practice is “neither empirically nor economically feasible.”187 In an ideal world, or with a substantive shift in the law, such regimes could provide some form of solution for the problems identified here. At the present time, it may be best to agree that refocusing efforts on producing more systemic solutions through alternative remedies is likely to yield results that might be harmonious with the traditional regimes.

C. Section 1981 – not a solution

1246 (1995). Because these evaluations are subjective, they are difficult to evaluate across different employees in a typical employment discrimination case. 184 Harry J. Holzer, Why Do Small Establishments Hire Fewer Blacks Than Larger Ones? 33 THE JOURNAL OF HUMAN RESOURCES 896, 907 (1988). However, though subjective judgments might be harder, other forms of discrimination (patronage, nepotism, etc.) can remain even more difficult to detect in positions where formal entry-level criteria are low. 185 See Susan T. Fiske, Donald N. Bersoff, Eugene Borgia, Kay Deaux, and Madeline Heilman, Social Science Research on Trial. Use of Sex Stereotyping Research in Price Waterhouse v. Hopkins, 46 AMERICAN PSYCHOLOGIST 1049 (1991). 186 See Watson v. Fort Worth Bank and Trust, 487 U.S. 977 (1988) (holding that subjective employment decision-making criteria can be challenged under a theory of disparate impact). 187 Krieger (1995), supra note ** at 1232. 68 Working Paper: DRAFT – DO NOT CITE

Title VII is the most commonly used method of litigating federal discrimination claims, but it is not the only option.188 Here, focusing on federal law, a few alternatives are left to remedy nuanced cases of racial bias and Section 1981 is chief among them.189

To prove a claim under Section 1981, an individual needs to show that: a) he is a member of a racial minority group, b) an act of discrimination concerning the making or enforcing of a contract, and c) the discriminating person or company intended to discriminate on the basis of race.190 The key difference between enforcement of Title VII and Section 1981 is that claims under Section 1981 must show that the offending party engaged in purposeful discrimination.191 The test for intentional discrimination in

Section 1981 lawsuits is the same as the Title VII test for discriminatory treatment.192

First, the plaintiff must bring forth direct evidence of disparate treatment, thus making a prima facie case of intentional discrimination. Then, the burden of persuasion shifts, and the defendant must rebut the direct evidence of discrimination by proving that it would have made the same choice even if it had not taken race into account.193

Although discrimination must be intentional, it need not be based on racial animus –

188At state and local levels, of course, additional legal remedies exist but will not be discussed extensively here. 189 AYRES, supra note ** at 125-136 (describing use of Sections 1981 and 1982 as remedies in cases of patron discrimination, as in Ayres’ car audit study described earlier). 190 See, e.g., Swint v. Pullman-Standard, Inc., 493 U.S. 929, 110 S.Ct. 316, 107 L.Ed.2d 307 (1989) (a plaintiff proceeding solely on a theory of disparate impact is limited to Title VII and cannot seek Section 1981 remedies). See also Johnson v. Railway Express Agency, 421 U.S. 454, 95 S.Ct. 1716, 44 L.Ed.2d 295 (1975). 191 See General Bldg. Contractors Ass’n v. Pennsylvania, 458 U.S. 375, 389, 102 S.Ct. 3141, 3149, 73 L.Ed.2d 835 (1982). Ayres suggests that amending Section 1981 to allow for disparate impact claims would help to combat much of the racial bias I have discussed here. See, AYRES, supra note ** at 136. While Ayres is correct, the likelihood of amending Section 1981 at this point is too slim to allow for vigorous discussion of its merits as a plausible or immediate remedy. 192 See Patterson v. McLean Credit Union, 491 U.S. 164, 186, 109 S.Ct. 2363, 2377-78, 105 L.Ed.2d 132 (1989). 193 See Price Waterhouse v. Hopkins, 490 U.S. 228, 242, 109 S.Ct. 1775, 1786, 104 L.Ed.2d 268 (1989). 69 Working Paper: DRAFT – DO NOT CITE only racial categorization and discrimination.194 The problem with Section 1981 lawsuits in non-competitive markets like film distribution is essentially the same as with Title VII – individual litigants have both evidentiary barriers and risks to future business prospects in their industry. Further, some suggest that the goal of Section 1981 is to eliminate discrimination in contract with respect to buyers, not sellers.195 In other words, producers and owners wouldn’t even be members of the class the law was designed to protect. Thus, typical anti-discrimination enforcement mechanisms are simply not options for individuals doing business in film distribution markets.196

These laws also are not viable as amended or if judicially reconfigured. As

Professor Rhode also explained when summarizing the prevailing view of those opposed to expanding bias law, there are two primary concerns.197 The first concern, articulated by both progressive and classical theorists, is that the law should not deal with such murky waters because some cultural tastes and styles are simply not mutable or not worth legal attention.198 Others worry that expanding the law to include unfamiliar forms of bias risks trivializing existing bias claims in familiar categories by essentially watering down the overall potency of the total amount of discrimination cases.199 Both of these arguments, when coupled with the analysis presented here, caution against relying on traditional enforcement mechanisms or expanding them to include new and novel theories of discrimination. As a useful alternative, market

194 See, e.g., Goodman v. Lukens Steel Co., 482 U.S. 656, 107 S.Ct. 2617, 96 L.Ed.2d 572 (1987) (finding Section 1981 liability even though “there was no suggestion that the [defendant] held any racial animus”). 195 See, e.g., Ayers et. al., infra note ** at 1656 (arguing that Section 1981 likely does not cover actions by sellers who feel they have been discriminated against by buyers). 196 Consumers in a non-competitive market also cannot easily challenge a race-biased market structure, but that is not my focus here. 197 Rhode at 1067-1069. 198 Rhode at 1067-1069. 199 Rhode at 1067-1069. 70 Working Paper: DRAFT – DO NOT CITE initiatives and anti-trust theories may provide solutions to the problems identified in this Article.

D. Market-Based Solutions

Given that traditional anti-discrimination regimes are difficult to apply here, market-driven solutions and the heavy-hand of antitrust law remain as the most viable law-based solutions to racially biased market outcomes (across all markets).200 For example, interested corporations could create additional subcompanies for creating alternative production and distribution patterns in non-competitive markets.

Corporations experiencing discrepancies between lack of minority supply and a strong demand for certain products could, of course, expand the network of distribution of those products. Further, outside corporations and individual actors could, in theory, respond to corporate intransigence by entering into the marketplace and creating and/or distributing new supply to fill the needs of the existing market base. Similar to the NFL’s approach to coaching vacancies, corporations could contractually agree to hear a minimum number of “diversity” proposals per year or to implement market diversification strategies in markets that have been identified as underserved.201 And, as shall be discussed later, it may very well be that advanced technology – developed after the period of analysis in this Article – may prove to be a silver bullet for racial bias in film distribution.

200 For a broader discussion of the benefits of using “market-like instruments” because of the inapplicability and failure of “command and control” regulations like Title VII, see Robert Cooter, Market Affirmative Action, 31 SAN DIEGO L. REV. 133 (1994) at 134-36. 201 The NFL’s approach is a rare, but notable example of using the threat of a lawsuit (and the potential discovery that would inevitably ensue) to achieve a contractual remedy in a non-competitive market. Thus, though the lawsuit might itself have failed, the public relations implications of the lawsuit forced the NFL to seek a more market-based solution to the problem, creating the “Rooney Rule”. See N. JEREMI DURU, ADVANCING THE BALL (2011). 71 Working Paper: DRAFT – DO NOT CITE

Each of these market-driven strategies requires no government oversight or even substantive additional expenditures. Instead, by negotiating and contractually assigning new responsibilities and options, entrepreneurs who recognize discrimination in non-competitive markets stand both to reap impressive profits and drive larger economic growth.202 Within previously non-competitive markets, for example, financial services and banking, the wave of post deregulation competition substantially increased racial equity across a variety of metrics.203

E. Antitrust Enforcement as Solution

The direct nexus between antitrust law and discriminatory practices remains relatively unexplored as a viable remedy. However, there are some scholars—

Professors Ian Ayres and Robert Cooter amongst them — who have presciently invited a discussion of the connection between racially disparate market impacts, highly consolidated industries, and antitrust remedies. Although these academics have touched upon the relationship between competition and inequality, their works remain solicitations for further inquiries into the practical application of antitrust law to issues of discrimination.

Professor Ayres posits that anti-competitive conduct should be addressed in the law because such conduct gives rise to racially imbalanced results.204 Ayres characterizes the perceived opposition between civil rights laws and the free market as a historical misunderstanding, arguing instead that “disparate impact law can complement antitrust and consumer protection law to make markets more competitive

202 In a larger context, this discrimination extends to the economic development of a variety of markets and is not limited to non-competitive markets. See, e.g., Keith Hylton and Vincent D. Rougeau, Lending Discrimination: Economic Theory, Econometric Evidence and the Community Reinvestment Act, 85 GEO. L.J. 237 (1996). 203 See, e.g., Ross Levine, Racial Discrimination and Competition, NBER Working Paper Series 2 (2008). 204 Ian Ayres, Market Power and Inequality: A Competitive Conduct Standard For Assessing When Disparate Impacts Are Unjustified, 95 CAL. L. REV. 669 (2007). 72 Working Paper: DRAFT – DO NOT CITE and more equitable.”205 Perfect competition, according to Ayres, forces decision-makers in a given industry to adopt policies based on substantive factors because rival firms create the need for efficiency, not speculation.206 However, the problem facing industries where inefficiency has lead to racially disproportionate outcomes is that the benchmark for competition is either extremely low or unenforced by the government.207

As Ayres explains, the risk associated with relaxed competitive standards in insulated industries is the unequal treatment of racial minorities.208 While this disparity is deplorable, the absence of “the same equal protection norm[s that] undergird the social concern with both civil rights and antitrust discrimination” offers an opportunity to import the arm of antitrust law into the arena of racial discrimination.209 Currently, meeting competition means doing as little as the market requires. This affords monopolies and oligopolies the defense of claiming that their minimalist practices were consistent with what was economically required given the level of competition. As

Robert E. Suggs points out, these minimalist practices often manifest themselves in the use of racial stereotypes to skirt rising costs associated with the acquisition of information.210 In markets where the façade of competition glosses over the absence of meaningful engagement, and where firms can implement market stereotypes without fear of reliability and efficiency, antitrust law can “restrict disparate impacts that are caused by anti-competitive conduct” without overstepping its bounds.211

205 Id. at 674. 206 Id. at 676-677. 207 Id. at 677. 208 Id. 209 Id. at 679. 210 Robert E. Suggs, Poisoning The Well: Law & Economics And Racial Inequality, 57 HASTINGS L.J. 255, 287 (2005). 211 Ayres, supra note *** at 720. 73 Working Paper: DRAFT – DO NOT CITE

Although Ayres does not therein intend to fully detail the practical implementation of antitrust law for the purpose of negotiating obstacles posed by racial bias, his insight as to the relationship between anti-discrimination and antitrust law invites a discussion of how competition laws can have a pragmatic effect on discriminatory practices in the marketplace.212 Simply put, the potential union of antitrust and anti-discrimination is not “a mere marriage of convenience.”213

In the current political environment, the threat of a reinvigorated DOJ interested in the nexus between antitrust and race might force more significant voluntary market action. Studies discussed earlier in this Article and elsewhere suggest that one of the

‘evils’ common to the destruction of competition is racial bias. If the purpose of the

Sherman Act is “to secure equality of opportunity and to protect the public against evils commonly incident to destruction of competition,” antitrust enforcement could be seen as clearly applicable to discrimination claims or as an integrated component of anti- discrimination law.214

F. Market-Driven Solutions - Rebuttal

Finally, a brief word regarding market failure. There are some scholars who suggest that since markets have failed to correct for this problem in the past, the market-based solutions proposed herein are unlikely to be implemented. Therefore, they suggest, traditional legal remedies will provide for swifter justice. Alternatively, others correctly identify that “cognitive bias” may play a role in the decision-making process.215 But, this problem need not be so rigidly formulated. It may be that markets

212 Id. at 720. 213 Id. at 674. 214 Ramsay Co. v. Associated Bill Posters of U. S. and Canada, 260 U. S. 501, 512 (1922) 215 Although cognitive bias is not explored at length here, it may be the case that cognitive bias of decision-makers interacts (in the statistical sense) with the relatively anti-competitive market structure, 74 Working Paper: DRAFT – DO NOT CITE have in fact not been fully aware of these racial inequities and their causes, and research alone can propel markets forward. Another reason may be that large organizations, insulted from pure competition, may have no reason to question their assumptions about their core consumers. If film distributors and (to a lesser extent) theater chains have historically believed its customers harbor racial bias, they may be particularly resistant to change even in the face of contradicting evidence.216 In any case, it is imperative that major distributors and chains, for their own sakes, determine just why biased outcomes continue to exist and whether they are indeed most efficiently maximizing the profit that each side so desperately wants.217

If it is true that industry-wide phenomena and racial-bias in market outcomes are not easily susceptible to mass-litigation, then the best way to solve intractable race-bias problems is through industry-level analysis and market-based solutions derived either from within or by gentle prodding from antitrust authorities. There are not many markets that are highly visible, highly consolidated, and left untouched by traditional anti-discrimination laws – but the Hollywood production and distribution system is one of them – for now.

V. CONCLUSION

Rethinking the nexus between industry consolidation and market discrimination may prove more rewarding in the modern era as a method to reducing racial inequality thus exacerbating the problem. More work must be done to engage this interaction and explore the intersection of these two areas. 216 See, e.g., IAN AYRES, SUPERCRUNCHERS 112 (2007) (briefly describing cognitive deficiencies of decision makers and explaining that “once we form a mistaken belief about something, we tend to cling to it. As new evidence arrives, we’re likely to discount disconfirming evidence and focus instead on evidence that supports our preexisting beliefs.”) 217 See, e.g., Susan Sturm, Remedying Organizational Discrimination at 242 in LEGALITY AND COMMUNITY: ON THE INTELLECTUAL LEGACY OF PHILIP SELZNICK (Robert Kagan, Martin Krygier, and Kenneth Wilson, eds. (2002) (describing how some large organizations have responded to marketplace inequity or perceptions of internal decision-making bias by adopting “a process of data gathering and analysis to identify the patterns of decision making that risk producing bias.”) 75 Working Paper: DRAFT – DO NOT CITE and disparities in commercial outcomes. In this Article, a first step in that direction, I have shown that competition in Hollywood, if it could be classified as such, has been extremely limited and results in both racially biased and inefficient outcomes. The net harm as a result of that lack of competition has been a persistent and unique form of racial bias that has not been adequately remedied and shows (at least during the period studied here) little signs of abating. The long-arm of antitrust law forced a small amount of industry change some sixty-odd years ago, but results since then have proven that the initial pro-competitive legal remedies failed to accomplish their objectives or simply caused a shift in industry organization leading to market domination by the major studios repackaged in slightly different forms. Evidence gathered for this Article makes clear that prior to technology and consumer demand creating a large market for producers to bring content directly to consumers without the need for distributors, the industry was characterized by racial impasse in the film distribution process. To test how the rapid change in technology and demand in recent years might change distribution outcomes, more study is needed.

Therefore, in an upcoming work applying the principles and conclusions of this

Article, I trace developments in the period 2001-2010, particularly focusing on whether radical changes to the industry brought by technology and refined modeling reversed the trend of racially-biased outcomes shown here. In addition, I work to develop some additional theoretical perspectives regarding the role that individual racial preferences might play in structuring product markets and the extent to which corporations might steer products in an attempt to match or mimic consumer preferences. Finally, with the perspective of recent events, e.g. conditions imposed on the Comcast / NBC Universal merger, I ask whether antitrust law has indeed finally begun to be recognized as an

76 Working Paper: DRAFT – DO NOT CITE additional tool in the arsenal for achieving racial equality in commerce and across markets.218

Judging from the data analyzed here and the consistent failure of studios and distributors to correct with market feedback, it seems likely that in the period between

2001-2010, it would take a perfect storm of past, present, and future distribution fiascos before distributors recognized the scope of the problem and the inefficiencies that result therefrom. That unlikely perfect storm or series of market-jarring events, were it to be produced as a film, might be best entitled “Waiting for a Precious Greek Millionaire.”219

218 Bob Fernandez, How Comcast Sealed the NBCU Deal, Philly.com, 23 Jan. 2011, http://articles.philly.com/2011-01-23/business/27044733_1_nbcu-deal-comcast-shareholder-largest-cable- distributor/ (last visited January 2011). 219 This title refers to the movies “Waiting to Exhale”, “Precious”, “My Big Fat Greek Wedding” and “Slumdog Millionaire” – all of which were underdistributed and thought to have little or no box-office potential and ended up becoming some of the post profitable movies of the past twenty years. 77 Working Paper: DRAFT – DO NOT CITE

APPENDIX

DATA NORMALITY AND RELATED CONCERNS

Examination of computer-generated normality graphs and residual plots demonstrated that the data, when appropriate, supported the application of a general linear regression model. The residuals seem evenly distributed yielding an expected value of zero, thus they are unbiased. They are also uncorrelated, meaning that no discernable pattern is observed in the plots. The residuals also satisfy concerns about homoscedasticity.220

VARIABLE DEFINITIONS AND EXPLANATIONS

Movies: demographic information for a total of 274 movies spanning the years 1990 – 2000 (the “Decade”) was collected. The 274 movie database contains more than 100 films featuring minority actors in leading roles. To ensure a wide range of distribution in key variables within the database, all movies with available demographic information and released on more than 500 screens between May 1997 and August 1998 were included in the database.

Monthly (Top) 15: Continuous data (in millions) for the total box office collected during the month of the film’s release.

Running Time: Continuous variable measuring length of time that the movie plays on each screen. A longer running-time means that the movie can be shown on less screens per day, therefore less per-theater revenue would be expected for longer movies.

Maximum Theaters: A continuous variable measuring the maximum amount of theaters to which a film was distributed. A large number here indicates a studio’s prediction that the movie will be a “blockbuster.”

Rated R: Whether the movie was given an “R” rating by the Motion Picture Association of America (MPAA). Movies with R ratings are expected to generate less box office revenues.

BOX OFFICE STAR VARIABLES

To qualify as a box office star, an actor had to a) have appeared in a previous movie during the period b) between 1990 and 2000 that c) placed in the Top 20% of all movies released and d) which also generated more than $60 million in box office revenues. When the previous movie contained an ensemble cast without a primary solo performance, the actor was not included.

220 The inclusion of three box-office large release flops and four mega-hits would have called these distributions into question. Therefore, to ensure that the glr model’s assumptions were met, when appropriate and prior to the regressions, key attributes for the movies Titanic, Men in Black, Independence Day, Major League III, and The Lost World were removed to ensure a reliable analysis. 78 Working Paper: DRAFT – DO NOT CITE

White Male Star: Whether the movie includes a white male box office star in a lead (starring role). This list contained: Bruce Willis, Michael Douglas, Harrison Ford, Anthony Hopkins, Jack Nicholson, Kevin Costner, Daniel Stern, Keanu Reeves, Nicholas Cage, Mel Gibson, Sylvester Stallone, Dustin Hoffman, Brad Pitt, Arnold Schwargenneger, Robert DeNiro, John Travolta, Robin Williams, Joe Pesci, Stephen Segall, Tommy Lee Jones, Sean Connery, Tom Cruise, Jeff Goldblum, Leonardo DiCaprio, Woody Harrelson, George Clooney, Tom Hanks, Pierce Brosnan, Jim Carrey.

Black Star: Whether a box-office star who is also Black or African-American starred in the movie. The list contained: Morgan Freeman, Will Smith, Eddie Murphy, Martin Lawrence, Samuel L. Jackson, Wesley Snipes, Whitney Houston, Denzel Washington, Whoppi Goldberg, Danny Glover, Michael Jordan.

Woman Star: Whether a box-office star who is also a woman starred in the movie. The list contained: Julia Roberts, Whitney Houston, Cameron Diaz, Whoppi Goldberg, Meg Ryan, Jodie Foster, Drew Barrymore, Rene Russo, Michelle Pfieffer, Sharon Stone, Vanessa Williams, Sandra Bullock.

Min. Lead: Whether a lead character (by screen time) is self-identified or press- identified as Black/Latino/Asian-American.

Woman Lead: Whether a lead character (by screen time) is a woman. This variable included women box office stars as well as those without previously successful movies.

Minority Co-star: Whether a co-starring character (by screen time) is self-identified or press-identified as Black/Latino/Asian-American.

African-American Co-Star: Whether a co-starring character (by screen time) is self- identified or press-identified as Black or African-American.

Comedy (COMEDY): Whether the movie was advertised or reviewed as a comedy in popular press. Press accounts and reviews were generated from Entertainment Weekly and Videohound.

Majority Minority: Whether the movie’s main characters were primarily members of ethnic minority groups. For this variable, more than half of the ten most significant (by screen time) characters were members of ethnic minority groups. For example, Denzel Washington’s performance in Philadelphia would not qualify, but Malcolm X would.

Romance: Whether the movie was advertised or reviewed as a “love story”, “romance story”, or “romantic comedy” in popular press. Press accounts and reviews were generated from Entertainment Weekly and Videohound.

Box-Office Gross: Total U.S. gross revenues reported as of February 2001 for all tickets sold at all showings of the movie.

Per-Theater Gross: The total U.S. gross revenue divided by the maximum number of screens the movie was shown on – based upon a count of total theaters.

79