Whenever I write about media companies such as Disney (NYSE: DIS) and News Corp. (NYSE: NWS), there is a theme that I constantly go back to in regard to the profitability potential of these businesses. It centers on compensation of celebrity talent. I just don't get why so much money is thrown toward stars in the form of cash up-front and back-end participation. As far as I am concerned, content is always a gamble; one never knows what's going to be a hit and what's going to flop around like a dying fish on the boardwalk. And stars just don't seem to guarantee that anything will be a hit; likewise, a project devoid of stars can do gangbuster business.

That's why I utterly loved an article I read from The Hollywood Reporter. It's a lengthy expose on the correlation between box-office success and star power. This is truly one of the best pieces I've perused on the subject, and I just have to highlight it to those interested in the economics of Hollywood. Boiling it down to the essentials, it basically states that the youthful audiences of today care more about concepts than they do about stars, and authors Steven Zeitchik and Borys Kit collect some statistics to back their thesis up. Further, they point out simple existential observations that CEO's of media companies must take to heart; for instance, Tom Hanks might bring in the crowds for Cast Away, but he did nothing for The Ladykillers. Then again, was Hanks the reason Cast Away was such a hit? Was it the screenplay? Was it the premise? Could you have put the guy who plays Jigsaw from the Saw series in the starring role and have had as much success with him as you did with Tom?

There's no way to answer this question, unless you can invent a device to see what an alternate reality would look like. However, it seems reasonable to me that CEOs of Sony (NYSE: SNE), Viacom (NYSE: VIA), and General Electric (NYSE: GE) -- remember, GE owns Universal -- must finally relate star power to shareholder value. If they can get their studio heads off the cracklike addiction of chasing big stars with large deals, then profits at the studio divisions will surely increase. Budgets and marketing expenses are going through the roof, and something has to give.

Here's what studios need to do: they need to see if any given project can pass the Cloverfield test. What is the Cloverfield test, you ask? Anyone who has seen this excellent piece of cinematic genius will know exactly what I'm talking about. The Cloverfield test (which could probably also go under the name Blair Witch Project test or Saw test) essentially finds out if an idea is so strong that you can't imagine any star being necessary for its success. If it passes, then go for it. If it fails, then either say bye-bye to the project or, at the very least, don't give in to temptation to try to cast big stars in it for the sake of selling international distribution rights.

Incidentally, while I've mostly been referring to movies here, the same can be said for television shows as well. If Time Warner (NYSE: TWX) and CBS (NYSE: CBS) want to hatch another hit show on The CW, they don't need to spend a lot on expensive stars and/or costly producers to find the next high-rated program; they merely need to ensure that the idea surrounding the show is strong, innovative, and appealing to the masses. This goes for any network, and interestingly enough, it's been reported that Fox took into consideration the expensive talent costs of the recently-canceled Back to You program starring Kelsey Grammer, as well as rating trends, when deciding on the show's fate.

Hopefully every media CEO has read this Hollywood Reporter piece and will be inspired to generate actionable initiatives from it. Concentrate on good concepts, not expensive star deals, and watch as the bottom line improves...

Disclosure: I own shares in Disney and General Electric; positions can change at any time.