The fall of once-mighty Miramax has to do with Disney's failure to understand the business of innovation
Miramax Films is dying. The onetime Oscar darling, which produced best picture nominees for 12 straight years, didn't win a single Academy Award last year. This year it didn't warrant a nomination. And in January, Disney (DIS) ceased Miramax's independent administrative, marketing, and distribution functions and closed its offices in New York and Los Angeles. It's a shocking fall for the studio, a decline that can teach us a lot about innovation and about the way in which companies inadvertently drive out that which they so desperately seek. Executives all want more innovation. They also do all they can to kill it. Disney bought Miramax in 1993, when the upstart producer and distributor had a few word-of-mouth hits such as The Crying Game and Sex, Lies and Videotape to its credit. Disney provided some much-needed cash and stability, while Miramax founders Bob and Harvey Weinstein provided the innovation. The combination worked. On the strength of Disney's money and Harvey's legendary golden gut, Miramax became one of the most influential studios in Hollywood. Ousting the Weinsteins
But by 2005, Harvey's intuitive approach brought the studio into conflict with then-Disney CEO Michael Eisner. After a bad-tempered, public dispute over both creative and budgetary issues, the Weinsteins were out, Disney suit Daniel Battsek was in. Battsek, Eisner figured, could bring costs in line and operate in a much more reasoned, reliable way. And so he did, to ever diminishing returns. None of the Miramax films released since 2005 have come close to matching the box office grosses of hits such as Pulp Fiction (1994, $213 million worldwide) or Chicago (2002, $306 million worldwide). None has generated the kind of controversy-driven buzz of Trainspotting or Kids. And none has captivated the Academy of Motion Picture Arts & Sciences the way The English Patient (nine Oscars) or Shakespeare in Love (seven Oscars) did. The really interesting thing here is that the success of the Weinsteins' movies is neither mystical nor unexplainable. Nor is the failure of post-Weinstein Miramax. Miramax succeeded because Harvey developed a strategy for thinking about the movie industry while others fumbled. Miramax ultimately failed because Disney rejected Harvey's approach and didn't have anything with which to replace it. In the 1990s, Miramax developed a successful heuristic for producing hit movies—a way of thinking about the mystery of what audiences want to see—that gave the film house a better shot at success than the blind guesses of its peers. It wasn't a perfect process, but it gave the Weinsteins the confidence to choose films, pick winners, and move ahead. The nature of innovation is that we can never prove a new idea in advance of its implementation. But we can try to shorten the odds. And that's what Miramax did. Its biggest and most influential hits came when they took small risks on unproven filmmakers (Gus Van Sant, Quentin Tarantino, Kevin Smith) and hot-button topics (The Crying Game, Kids). The Weinsteins invested in young filmmakers—and gained loyalty in return. Tarantino, for instance, followed Harvey to The Weinstein Co. His latest film, Inglourious Basterds, is nominated for best picture at this year's Oscars, one of 13 nominations secured by The Weinstein Co. (tied for the most for any single studio). Scientific Approach
Later, Miramax also began to invest in more expensive, prestigious films—but again, it appears they did so with some rules in mind, viewing the marketplace differently from their competitors. Other studios looked at the small successes of filmmakers such as James Ivory and Ismail Merchant (A Room with a View, Howards End) and did one of two things: dismissed them as dull, period, Oscar-bait corset pictures that would never make more than $20 million or tried to make their own dull, period, Oscar-bait corset pictures in hopes they would make $20 million. Miramax instead used the modest success of Merchant-Ivory films to build another heuristic: take material with a built-in audience, geared to women, then ditch the corsets to get men in to see the movie too. Miramax's biggest successes on this front were The English Patient, based on a Booker Award-winning novel, Shakespeare in Love, written by playwright Tom Stoppard and starring 1990s' It Girl Gwyneth Paltrow, and Chicago, based on the popular Broadway musical. All made a killing at the box office. Note: The nature of a heuristic is that it stops short of an absolute rule; it gives us a better shot at success but doesn't guarantee it. A heuristic is well enough formed to allow us to act on it, but may not be clear enough that we can fully articulate it to ourselves or others. And that may well be where the breakdown between the Weinsteins and Disney took place. Harvey didn't have an algorithm, a sure-fire mechanism for success. And as time went on, other studios copied the approach, diminishing the appearance of Harvey's unique vision. Why did Miramax fail when the Weinsteins left? Did the heuristics stop working? Maybe, but the evidence suggests that the new Miramax simply stopped using them. Battsek's job was to bring costs in line and produce more reliable results—a scientific management approach in an unscientific business. Miramax films released in 2009 included titles such as Adventureland, Cheri, and Everybody's Fine, movies that could have been released by any studio. Perhaps Eisner and Battsek simply assumed that Harvey had no method behind his madness—or, if he did, they couldn't figure out what it was. Other studios seem to have broken the code, though. Consider Focus Features, which has produced controversial (Brokeback Mountain, Milk) and prestige (Atonement) pictures and has taken gambles on unproven filmmakers (Sofia Coppola's Lost in Translation)—all to tremendous success. Perhaps even more than the Weinsteins' own The Weinstein Co., Focus is the new Miramax.