Gross Behaviour - by Leonard Klady

When $150 Million is Not Enough

In the past decade, creatives have been quoted stating that the suits have taken the "show" out of showbiz or words to that effect. However, it might be more apt to say that the boys in the executive suites have been busy inserting the show in the biz of the film biz.

Confused?

Well, let's put it into perspective. On any given Sunday, for instance, we're treated to a game known as weekend estimates that's as thrilling as anything served up by the NFL. A handful of films jockey for top honors while another dozen attempt for playoff berths in media reporting of what North Americans plunked down money to see in movie theaters. The winner always secures top spot but that doesn't mean the descending titles, Gigli notwithstanding, were losers in this game of high stakes. A film, such as Cabin Fever, can perform better than expected. Or, a limited release like Lost in Translation will generate an exceptional per theater average and Dickie Roberts: Former Child Star will have a very good second weekend hold.

It is a sort of micro managing and the majors are exceptionally good at putting on a happy face. They might even slather on questionably reliable exit polls. The bottom line is to divorce the quality of the product from its performance or audience response. Because there are so many options and a significant change in the lineup from week to week, most pundits don't have the opportunity to examine the bigger picture or reflect on whether the initial appeal of a hot movie evaporated quickly or was sustained in subsequent weeks.

The major companies understandably want to plant the seed that a particular film was successful and popular during its theatrical lifetime in order to boost a movie's value on video, pay-Cable and sundry other ancillary venues. Video boxes will promote the fact that a film topped the charts but what marketers truly love to promote is a domestic box office of $100 million or more.

This past summer 17 movies reported a domestic gross greater than $100 million. A handful of those pictures just managed to push into 7-figure territory in studio reporting but in reality, didn't quite reach the exploitable number. Remember that most companies do not convert the Canadian portion of their revenues into U.S. dollars, so Charlie's Angels: Full Throttle, grossing approximately $12.7 million in Canada, translates into $9.3 million American at the current exchange rate. It's current reported cume is $100.7 million but …

I'm not convinced this creatively conceived addition warrants investigation, but there's no question that it's been arrived at employing smoke and mirrors - a venerable showbusiness staple that pre-dates the movies by centuries.

It's also a bit unclear how Canadian ticket prices impact on the cost of the average ticket that's currently valued at close to $6.00. By my calculation, a film that grosses $100 million sells almost 17 million tickets of which perhaps 6% involves repeat buyers. That would mean roughly 5% of the population sees a movie with a $100 million box office during its theatrical run in North America.

Whether that breaks down to a definition of popular success or not is to miss the point. What the industry has done is implant the notion that a film that grosses in excess of $100 million is a big hit. A film like the recent Legally Blonde 2 with a $90 million box office might get a Miss Congeniality prize but will never wear the tiara.

The problem with creating such a perception of perfection is that something devised in the lab could turn into the movie industry's version of Frankenstein. Logically speaking it makes no sense to spend $10 million to generate a $5 million box office for a film that's grossed $95 million. When you toss in the Canadian component, considerable money is being spent to provide the semblance of a $100 million success - there is nothing literal in the equation and it occurs much too often. In addition to this summer's handful, early 2003 had both Daredevil and How to Lose a Guy in 10 Days eking past $100 million.

Studios do not want to get involved in spending more money than they can retrieve on any movie. However, when they get really close to that 7-figure level, the response can only be described as Pavlovian and no amount of reason can deploy that last push no matter the cost. The creatives that participate in profits understandably bristle when they line up revenues on quarterly statements with costs on those documents. But executives counter that the extra cash outlay is worth it because the film's entered a kind of magic kingdom in which that silly little extra financial millimeter will translate into an immediate and on-going bounty in all those wondrous ancillary arenas.

Back in 1997, I wrote an article in Variety titled: When $100 Million is Not Enough. It was prompted by the disappointing domestic box office record of Batman and Robin, a film that wound up with a North American theatrical tally of $107.3 million. The piece examined the costs of producing and marketing the movie and weighed its theatrical performance and likely revenue from ancillaries (excluding merchandizing) against profit participation and expenditures. It concluded that the balance tipped toward the negative.

Six years later, the ante can easily be raised 50% and has a raft of potential candidates to argue the point that include Terminator 3: The Rise of the Machines, Bad Boys II and The Hulk. What hasn't changed in the intervening years is the industry's $100 million benchmark. On a cost to return basis, none of the trio compares favorably to Old School or Just Married - films perceived as modest successes that have been highly profitable as a result of tight budgeting and the absence of crippling profit participation.

Now a film that grosses in the neighborhood of $150 million will attract around 23 million or 24 million patrons. The number of repeat viewers will vary on a picture-by-picture basis depending on when it's released and its film rating. Still, either number is a significant audience to attract and if the movie is genuinely entertaining the number of people that will see it can double or triple by the time it goes through the cycle of video and DVD release, cable and free TV showings. For arguments sake, let's say that following its debut in prime time television, the film will have been seen by 20% of the population. That's an impressive statistic.

The disturbing element here is that a popular film isn't necessarily going to translate into the sort of financial hit that pays for studio misfires, disappointments and outright failures. It's not simply that tentpole pictures cost too much. There's something else that's difficult to define but might be viewed as the revenge of the bean counters.

In the not so distant past, studios made all manner of movie and were no better at predicting the success of Dog Day Afternoon or the abject rejection of Xanadu. The films, even the expensive ones, cost less than Tom Cruise's current quote and somehow the word got out into the world of their existence without massive ad placements during the Super Bowl. Two or three times a year a studio would hit the jackpot and everyone involved with a picture like An Officer and a Gentleman would be handsomely rewarded while the studio continued to control the lion's share of the profits.

As one pundit observed there are no rewards without risk and this perhaps begins to answer why $150 million might not be enough. Predicting what the public will embrace is an imprecise science. There are no genres, stars or filmmakers with unblemished records. Obviously we are not blind to the fact that a broad comedy has wider appeal than a grim personal saga on its surface and that audiences appear to favor movies starring Cameron Diaz or Matt Damon than those headlining Illeana Douglas or Pruitt Taylor Vince.

Movie going is an emotional and often irrational experience. The chemical composition of a popular movie cannot be found in a textbook and those who would attempt to manufacture a hit are wading into a cynical pursuit that's certain folly. It's worse than an alchemic equation. You can turn lead into gold but it's not cost effective. And you can cast Jim Carrey in a romantic-comedy by an Oscar-nominated writer-director and wind up with The Majestic whether the project began as a personal passion or the inspiration of an executive who smelled hit all over the script.

Nonetheless, rather than being in the business of making all manner of movie, the majors have shifted gears and focused on producing hits. If one consults the actuary tables, one can play the averages and determine that a film that grossed $150 million domestically is likely to spawn a sequel that will minimally have a $100 million box office. A chart will also indicate whether sequels with the same performers, writers and director as its inspiration will fare better in the marketplace. It can tell you whether, based on trend analysis, the movie will have a better or worse gross if opened the same time of year as the original or if its odds improve when moved to another season.

Then, to further reduce one's exposure, the studio can co-produce with an international distributor. It means sharing presumed profits but it reduces initial costs and then there's also higher salaries and profit participation to factor into the budget. When it's all put through the blender, it might well appear that a film will be a success, even if not the runaway hit of the earlier movie. It all works out on paper and one doesn't have to read and respond to a script, a process that might require a non-analytical judgment.

There's no question that sometimes such crystal gazing results in a scenario that fits the current norm. However, the thing about trend analysis is that eventually something will come along that pushes it into an undesired direction. Maybe there were too many action sequels in theaters this summer but, virtually without exception, every film with a number in its title released during the period performed less well than the bean counter's anticipated. The risk had largely been removed but at the end of the run, there was little evidence of the reward.

I'm told that as a result of the financial disappointment of 2003, changes will be made. Franchises will continue to be a top priority on the production schedule but no longer will decisions hinge on talent or prior performance. The new criteria will emphasize the weight of the script, the number of scenes and locations and the numerology of the title.