What I Learned about Tech and Business from Tyler Perry

image

When I tell people I used to work for Tyler Perry there are overwhelmingly two reactions. The first is the number of people around the world who haven’t ever heard of him or his work. The second reaction is laughter or condescension:

“The guy who dresses like a woman?”

“The guy who makes those black films?”

“The guy who puts his name in the title of all his films?”

Yes. That guy.

Regardless of whether or not you think he’s a creative genius, he is a genius of a different type and a lot smarter than people seem to give him credit for, especially when it comes to business.

First, some background. I only worked for Tyler Perry Studios briefly  from 2006 to 2007. It was just after he had closed a deal for $200 million dollars to build his studio in Atlanta and produce his first set of TV Shows, HOUSE OF PAYNE and MEET THE BROWNS, for TBS. I was a Sound Designer and Audio Engineer at the time and not involved in any business dealings so nothing I’m saying here is confidential. In fact, much of what I write here can be discovered through a few searches on Google, Wikipedia or Variety.com.

In any case, through following Perry over the years and reflecting on my own observations at his studio, I learned a lot that I later used to find success in the tech industry.  What are some of these lessons?

1- He Knows the Business He’s In

The secret to Tyler Perry’s success is really in that second group of people I mentioned. The smug people who underestimate him.

The first lesson I learned is, rarely are successful people in the business of the things their critics think they are.

People think Tyler Perry is in the business of pleasing the public or critics. He’s not. He’s not even in the business of speaking to his ‘niche’ audience. No, Tyler Perry is in the business of making movies that earn returns for his financiers. Yes, he speaks to an audience he understands but he’s always been smart enough to focus on what matters most which is the bottom-line.

But what makes him stand out, is that people at every level are always underestimating his ability to do one thing because of their opinion about how poorly they feel he does another. In this case, because they don’t get or simply don’t like his films, they often assume they will flop. When they don’t, not only has he succeeded, but he’s surpassed expectations that were probably unfairly low to begin with.  He knows this and uses it to his advantage. 

2 – He’s Bankable

At Goldman Sachs 10,000 Small Businesses they use the term ‘bankable’ to describe people and companies who are attractive to investors. In other words, people who prove they will use money wisely and therefore attract more money.

There is a saying that goes, “A good engineer is someone who can do for $1 what any idiot can do for $2”. In this regard, Tyler Perry is a good engineer.

His first film DIARY OF MAD BLACK WOMAN woman only cost $5.5 million dollars to make. It went on to gross over $50 million.

Many of the methodologies Steve Blank described in ‘The Lean Startup”, I watched Perry apply to his work in TV and Film. Prior to having the money to actually produce feature films, he just set up a camera and FILMED THE PLAYS ON STAGE!! Frugal innovation that would make even Navi Radjou proud. It was the sale of those homegrown DVDs and related merchandise and tickets that originally gave him his first big financial successes. This also proved he had an audience that was hungry and unspoken to.

It was these numbers that convinced Lionsgate to back him for his first few films. It was the success of those films that lead TBS to back him for TV syndication deal for his first two TV Shows, which lead his deal with Oprah’s OWN network and so on.

He essentially sold his first TV Show, HOUSE OF PAYNE, into syndication before he produced a single episode. This was smart for many reasons. First, it gave him the money up front to produce the show, which would go on to build his brand over the next five years. Second, because his deal with Lionsgate also underwrote his studio, this asset dramatically cut costs on producing the TV show (and all his subsequent TV shows and movies). Third, because TBS put the money up for a syndicated show, we ended up shooting and editing the entire series (which ended up being 7 seasons long) in just over a year. One year!

Why? Because the longer you shot a show, the more costs you have.  Staff, insurance, on screen talent, if it took 7 years to produce the show, you’d have to pay for all of those for 7 years. By doing it all in barely over one year, that’s essentially 1/7th the cost for the same amount of money.  That money he reinvested into producing other content which at that point could be sold for all profit.

The fourth amazing thing about that deal was the fact that he completely de-risked the entire process of launching a successful TV show in the first place.

Syndication means that a TV show will go on to air and ideally generate profit for the TV Network that purchased it for years. Usually syndication deals only work with popular, proven shows that have amassed huge followings when they originally aired. Shows like BIG BANG THEORY, SEINFELD, and CHEERS. Rather than run the risk of HOUSE OF PAYNE airing and not being that successful, by selling it directly into syndication he ensured that, regardless, his product was sold. It’s a bit like starting a business with a guaranteed exit.

There are a lot of people who try to argue away Tyler Perry’s success because of they don’t like his creative choices.  But they fail to realize that there are plenty of people who have talent who don’t survive in business. Talent isn’t always bankable, generating profit is.

3 – He’s Consistent

More than the fact that he knows how to operate leanly and still generate profit, the reason why investors continue to back his projects is the fact that he’s so amazingly consistent. He has NEVER lost money on a film.  Not a single one.  In fact, almost all of his films made all their money back on the first weekend, Which is crazy given that in Hollywood’s eyes he’s still relatively ‘new’ (he’s only been directing for around 12 years).  This is in comparison to an industry full of big name directors who have lost tons of money on various projects.

Here is a list of the movies Tyler Perry has made throughout his career and their box respective office earnings (and cost where I could find it):

Title / Budget / Opening Weekend / Total Earnings (in millions)

  • MADEA GOES TO JAIL Unknown/$41M/$90.4M
  • MADEA’S WITNESS PROTECTION $20M/$25.3M/$65.6M
  • MADEA’S FAMILY REUNION $6M/$30M/$63.3M
  • WHY DID I GET MARRIED TOO?  $20M/$29.2M/$60M
  • WHY DID I GET MARRIED?  $15M/$21.3M/$55.1M
  • MADEA’S BIG HAPPY FAMILY $25M/$25M/$53.3M
  • A MADEA CHRISTMAS Unknown/$16M/$52M
  • TEMPTATION Unknown/$21.6M/$51.9M
  • I CAN DO BAD ALL BY MYSELF $13M/$23.4M/$51.6M
  • DIARY OF A MAD BLACK WOMAN  $5.5M/$21.9M/$50.3M
  • MEET THE BROWNS Unknown/$20M/$41.9M
  • FOR COLORED GIRLS Unknown/$19.4M/$37.7M
  • THE FAMILY THAT PREYS Unknown/$17.3M/$37M
  • GOOD DEEDS Unknown/$15.5M/$35M
  • DADDY’S LITTLE GIRLS $10M/$13M/$31.3M
  • THE SINGLE MOM’S CLUB Unknown/$8M/$15.9M

This data is gathered from the IMDB page on Perry.

My initial reaction is holy cow, MADEA GOES TO JAIL made $90 million dollars! Combined his movies have made $792.3 million dollars. That’s just theatrical releases and doesn’t include merchandise, DVDs and Blueray, his TV and licensing deals etc. No wonder he keeps making Madea movies!

Beyond that, if he were an entrepreneur or a venture capitalist Perry’s track record would be the equivalent of a like 9.3 of 10. (This assumes THE SINGLE MOM’S CLUB may have lost money since it was a theatrical release with big talent but relatively low earnings. The rest almost certainly did not lose money based on what they ultimately earned.)

It’s actually stupid to bet against a guy who performs this consistently.

4 – He Bets on Himself

I’ve talked a lot about how much money Tyler’s work generates in this post. While the arts aren’t always about profit, being able to finance your own work means you don’t need anyone’s approval to get stuff done.

From what I understand, Tyler Perry is still 100% in control of all his own work. This is similar to how Mark Zuckerberg has built Facebook into a public company valued at over $50 billion dollars without ever giving up more than 51% ownership. It means that nothing happens at Facebook without Mark’s say. He controls the show.

Likewise, with Tyler Perry, he’s the world’s most successful independent film-maker. He never gave up control. Lionsgate is an independent film distribution company and it largely backs independent film projects.  By working with them instead of anyone else, Tyler insured that he never really gives up creative control of his work.  

This means he doesn’t have to go to the Weinstein Company or Sony or anyone else to ask for money to produce anything. He has enough personal wealth, and enough credibility and success to convince people to back his projects himself.

In fact, the way Tyler’s films are backed tend to resemble venture capital deals more than typical film deals. He proposes a project, investors put up money, he does the project and returns their capital at some multiple of what they originally gave him. That’s the whole bankability thing at play. But because he reinvested his early money to build his own studio, there are far fewer middle men to pay. This means the costs of making a film or show are far lower for him than they would be for anyone else not in his position which allows him to take greater risks on projects.

If he was working within the studio system, he’d have a much harder time convincing “The Studio” that his projects were the right movies to make in the first place. Studios tend to want to make a lot of changes to scripts and they inflate costs because to them, putting more money into fewer projects is more efficient.  But what that does is greatly diminish their tolerance for risk. This is why they spend even more money developing and retaining A-List stars who they then cast.  The assumption is that A-List talent leading well financed film projects is far more likely to succeed than a bunch of unknowns in smaller budget films. This, as a rule, is usually true. Unfortunately for writers and directors, this ultimately means they have less control over projects that are backed by big Studios.  When you hear some directors talking about how hard it is to get controversial films made, it’s because they are asking permission from people at major film studios who are inherently risk-adverse. The Studios want to finance money makers, and they will do everything in their power to ensure everything they produce is such. For them ‘controversial’ means alienating, and alienating audiences isn’t helpful if you’re trying to get the most people possible to go see a film.

The equivalent in the startup world would be the entrepreneur who successfully bootstraps a series of companies, versus entrepreneurs who only rely on venture capital.  Neither way is wrong and both can lead to great success but the boot-strapper can take greater risks because he or she has less people to answer to.

5- He’s Obsessive and Detail Oriented

Now you might ask yourself how on earth I could learn anything from a film director if I was working in the audio department. At most film studios, you’d be right. The sound designers usually don’t work too closely with the director.

I’m not sure what it’s like at his studio now but back then, initially I probably saw Tyler Perry once a week (which is a lot). He wanted to change the music, he hated the laugh tracks I added, he wanted some dialogue to be louder, he made suggestions on sound effects. It wasn’t just the audio department, he’d go into the writers room and rewrite portions of the script himself. He’d be on stage with the actors helping them with their performance. He’d supervise video edits. He was in accounting. He was in props. He was the lunchroom with the interns.

The point is, he wanted to know what was going on at every level of his business. While it sometimes it felt like micromanagement, it was ultimately because he cared.

On top of that, he was used to doing a lot with a little. When you build something from nothing, you aren’t used to the people around you chipping in to make things happen. This is because people tend to assume you’re going to fail, and therefore you aren’t worth going out on a limb for. As the founder you know differently, you bet on yourself and you double-down on yourself. This means you’re going to make sure everything gets done.

At Tyler Perry’s studio I saw both sides. Initially he was always there making sure everyone was doing everything. This is completely unsustainable for any business. You have to delegate to scale. As he got more comfortable with the people around him, and saw that we were all actually doing good work (and better work if he left us alone 😉 he backed off. He was able to delegate and ultimately start doing multiple things at the same time.

While that ‘founder anxiety’ probably still rears its head every now and then, to be successful at his level you have to learn to let go. Regardless of the business you’re in, this is a good management skill to develop.

6 – When the Rules Aren’t in Your Favor, Make New Rules

While Hollywood has about 100 years on Silicon Valley, the film and tech industries have a lot in common. Both have very insular communities at “the top” which make it hard for newcomers to break in, both require access to capital or financing that not everyone has access to, both require more than just creative talent to be successful, and whether it’s intentional or not, a lot of people feel like many forces conspire to keep them out of the industry at all.

When faced with a tough environment like this, there are two options: fight the system or work outside of it.  As far as I’m concerned, Tyler Perry provides one of this generations best examples of a businessman who worked completely outside of the system until the system couldn’t ignore his potential for profit. At that point he had the leverage to basically do whatever he wanted.

From what I can see of his career, Tyler Perry rewrote all the rules that lead to his success because the old rules would have completely prevented it. While that isn’t always easy, it’s necessary for anyone who wants to succeed when the odds are stacked against them.

Sometimes fighting the system in place is a futile effort because you as a lone individual usually can’t change an establishment fast enough to also benefit from the change. If your goal is to make it easier for the next generation that’s one thing, but if your goal is to change it and play in it at the same time, that’s almost sisyphean.

So the lesson here is that when you feel the rules of a system are working against you, one option is to stop working in the system altogether.  There is more than one way to do anything.

If you can’t raise venture capital as an entrepreneur perhaps because you feel decimated against or any other reason, then double-down on what you do have.  Changing the entire venture capital industry is hard, it’s not impossible but it’s likely not going to be a battle worth fighting if you need capital tomorrow.

If you have an idea for a product or company, bootstrap as far as you can. Do what you can to prove that customers are ready for that product.  If you still can’t convince investors to back you, then use that demand to partner with other businesses who can help you get your own to the next level. You never know, you might build a massive business without backing, in which case you’re in the best place to be.

But most importantly, don’t let the fact that the system wasn’t designed in your favor prevent you from trying at all. Not trying is not challenging and not being challenged is exactly what any establishment requires to preserve its status quo.

Market Atlas receives support from the Knight Foundation’s Prototype Fund

My newest project, Market Atlas, just received support from the Knight foundation for our efforts to bring clarity, visibility, and reliability to African financial market data. Our vision is to create value for private equity investors, journalists, researchers and the public sector by helping to improve the financial infrastructure of the continent.

Last night Nate Silver beat Dean Chambers to become the new President of Statistics.

Launching The Human Face of Big Data

Launching The Human Face of Big Data

The goal of the Vibrant Data Project (#vdat) is to enable a massive democratization in our collective ability to convert data into personal and social good. How can we enrich a Vibrant Data Ecosystem that increases access to economic opportunity, protects civil and political rights, improves environmental sustainability, increases human health and wellness, and sparks radical advances in science and education?