January 1, 2003

When you strip away the phony tinsel,
there’s plenty of real tinsel underneath...

Sometime in the past 20 years I learned that insofar as the film industry is concerned, all perceived knowledge is incorrect. As recently as yesterday I received a call from a colleague asking me to verify the “spin” being proffered by a film company about its expansion of a touted holiday release.

I’ve already forgotten the meticulous, thoughtful rationale. However, as it was being related, I realized that a vital component had been omitted. What the company assumed (and it’s a very big assumption this time of year) was that it could change horses in mid-stream, so to speak, and secure the necessary screens to effect a faster roll-out than had been initially envisioned.

It is true that this time of year always produces one or two films that under-perform and free up thousands of screens. It’s also true that there are probably as many movies that open to better-than-anticipated business and, as in this instance, several limited releases that open to huge numbers and are suddenly much sought after.

In its broad strokes it sounds like a windfall for both the theater owner looking for commercial product and the distributor hoping to capitalize on the first blush of success. But there are a lot of “buts” in the practical application of the theoretical construct. Topping the list are “terms,” what the distributor hopes to secure as an advance against a percentage of the box office and the minimum number of weeks and screens he expects for the title. This time of the year, it’s a buyers market, so the distributor is disadvantaged. He’s also in a tough situation if the seller has a specialized film because it’s less likely that the screen(s) opening up will be appropriate for the picture he’s nursing along. The Solomon-like decision to be made is whether to take what’s available now or hold out for the ideal venue. So, yet another factor is relationships - does the distributor want to jeopardize a long-standing client by forcing him to move up a playdate and push out another film or, conversely, strain an existing relationship by giving the film to a competitor?

In regard to the original query, the notion has validity but achieving it works best in the abstract.

In the coming days and weeks, one will be bombarded by year-end reports that proclaim records, achievements and honors that beneath their veneer lack more than a patina of substance. One should approach all claims during this period with caution and skepticism. Just keep in mind that biggest does not necessarily equate with best or most or any one of a number of other superlatives.

The past year will be profiled as the best ever in terms of movie going. Through the weekend, more than $9.1 billion in tickets were sold and, by my calculation, that translates into approximately 1.56 billion admissions. One has to go back to the 1950s to find greater ticket sales and into the 1960s to find better average frequency on a population basis.

Not to be too curmudgeonly about it, but do any of these records (or quasi-records) translate into bests related to quality or satisfaction? Or, for that matter, are the actual costs of making and marketing movies out-stripping potential profits? These are the hard questions rarely addressed at this or any other time of the year.

Using one yardstick, the following are the best pictures of 2002: Spider-Man, Star Wars, Episode 2: Attack of the Clones, Harry Potter & the Chamber of Secrets, Signs, My Big Fat Greek Wedding, Austin Powers in Goldmember, The Lord of the Rings: The Two Towers, Men in Black II, Ice Age and Scooby-Doo. More people went to see those films than 500 other titles that played in movie houses.

However, according to MCN’s critic’s survey, the best films last year were: Far from Heaven, Y tu Mama Tambien, Talk to Her, About Schmidt, Adaptation, The Lord of the Rings: The Two Towers, The Pianist, Spirited Away, The Gangs Of New York and Chicago. So, as of December 31, the only movie that met both the criterions of popularity and quality was the second episode of The Lord of the Rings.

Now, there is one important qualifier to be added and that is that many of the titles on the critics list have yet to be released nationally. However, my guess is that at the end of the day, the best one can hope for would be the addition of one common title.

Apart from attracting crowds, the top grossers commonly share a number of things. They’re all in the English language and produced by major companies; all but one had production budgets greater than the industry average ($60 million) and most cost more than $100 million; five were sequels or franchises and of the rest, two have new episodes in the works and one is about to spin off into a television series.

The opposing group features two films in Spanish, a third dubbed into English from Japanese, half the films were produced outside the Hollywood studio system, there are two high ticket movies and two more that were expensive by standards in their country of origin. Four of the films were literary adaptations and three more adapted from other sources.

One has to conclude that making quality films is not very high on the studio priority list. The few that do get produced are by dint of cost or involve talent with muscle and determination. What’s evolved is a bottom line cynicism in which kudos derive from gross receipts rather than statuettes and plaques. It’s the short term gain.

An acquaintance is fond of the telling the story that when her father was an executive at Paramount, his big disappointment was the commercial failure of Sunset Boulevard. To his last gasp he cursed Billy Wilder for not listening to advice that would have made the picture a hit. Now, of course, it’s a classic and earns lots of money for the studio from television and cassette sales. It’s probably a better library title than any of the popular successes of the era starring Martin and Lewis, Abbott and Costello, Elvis, Tyrone Power, Doris Day, Glenn Ford or Alan Ladd.

There’s obviously a disconnect between popularity movies and quality films. The chasm between the two has never been greater and that ought to worry the top decision makers in their efforts to generate big numbers and attain double-digit market share. Neither pursuit necessarily translates into profitability.

The success story of 2002 is not any one of Hollywood’s behemoths but a $5 million romantic comedy called My Big Fat Greek Wedding. What its producers will eventually spend in marketing, distribution and promotion is insignificant beside its $225 million domestic and $50 million international box office. It’s being adapted into a television series and has yet to reap the rewards of cable and cassette revenues. Few films can match it on the basis of cost to return. Obviously, there’s The Blair Witch Project but one has to go back three decades to find a comparable studio effort with American Graffiti.

The Harry Potter and The Lord of the Rings movies, Spider-Man and Star Wars will generate in excess of $1 billion in revenues when all the streams eventually flow and trickle back into the studio ledger. They have to be major profit centers to offset the substantial losses to be incurred by The Adventures of Pluto Nash, K-19: The Widowmaker and The Gangs of New York. But does the good wash away the bad?

One current favorite of limiting risk is to partner with another company. Several years back Disney Studios chairman Joe Roth was told to go out and find equity investment on upcoming films. One project the studio had developed but felt had limited commercial potential was titled The Sixth Sense. Roth approached the principals of startup company Spyglass who agreed to pony up half the production cost. However, just prior to filming he returned with a new proposition: Put up 100 percent, you will own it and Disney will take a modest distribution fee (possibly as low as 7%). So, the studio, after spending years developing the project, managed to remove any up front financial risk. The film returned theatrical rentals alone of more than $200 million, mostly to Spyglass. Disney in reducing its up front risk, virtually erased the possibility of all back end rewards.

However, even on more conventional productions, when it comes to profitability there are no easy assessments because the studios don’t open their books to scrutiny. So, while it’s been reported that above-the-line talent received something on the order of 35% of profits on Men in Black II, what exactly was the deal? Did the compensation begin from dollar one or when the studio’s costs where covered? Or was an arbitrary figure, perhaps $100 million, set as the point from which talent participation began. Is the deal based solely on theatrical revenues? Do they have a share of ancillaries? Cassettes? Pay-cable? Soundtrack? Action figures?

One can be certain that the majors protect their best interests ferociously. Still, the nature of these talent deals might mean that what appeared to be hundreds of millions in profit is really only tens of millions. And if finally the profit margin is either so shallow or, worse, non-existent, where will the money come for Sunset Boulevard II?

 

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