Movie box office receipts and attendance reached new highs in 1994, but the industry's chief trade group said Tuesday that the average cost of making and marketing a studio picture has skyrocketed to $50.4 million, squeezing profit margins in an already-risky business.
The average production cost last year mushroomed to $34.3 million, up 14% from 1993's $29.9 million, based on the 168 films released by member companies of the Motion Picture Assn. of America. Advertising, marketing and print costs increased to an average of $16.1 million per film, from 1993's $14 million.
"Where is the industry version of the balanced budget amendment?" MPAA President Jack Valenti asked in his state of the industry speech, delivered Tuesday to a record crowd of more than 8,000 exhibitors and distributors at the 1995 National Assn. of Theater Owners' NATO/ShoWest convention.
Valenti called the $50.4 million--the investment a movie must make just to break even--"a beast of a number." Referring to bloated star salaries, Valenti said, "People are demanding more money for their services, so the fact is costs are going up."
Rising costs, he said, "must be reckoned with. Tough judgment calls have to be made."
According to a survey of a couple of years ago, only two out of 10 U.S. movies recouped their cost from the domestic market, Valenti said. The real growth area, he and others at the convention stressed, is the foreign marketplace, which now accounts for 41% of all revenues, including theatrical, video and television. For the first time, international theatrical revenues eclipsed domestic revenues in 1994, with the split 52% to 48%.
"We'd be dead without the international marketplace," Valenti said.
Valenit, an eternal optimist and industry cheerleader who says it gives him a "Maalox moment" to think and talk about spiraling costs, was quick to trumpet the fact that domestic box office last year reached a record $5.4 billion, up 5% from the previous high.
But with a downturn in moviegoing in the first quarter of 1995--off about $90 million from the pace of early 1994--distributors and theater owners are hoping for an about-face this summer, with such potential big earners as "Batman 3," "Crimson Tide" and "Pocahontas."
Valenti cautioned that quarterly estimates can be misleading. "In 1992, the first quarter was down 8.2% and we wound up 1.4% above the previous year," he said, adding that the first quarter of 1993 was off 5% but that the year ended up 5.8%.
Last year set a record for blockbusters--films grossing more than $100 million at the box office, or more than $50 million in film rentals (the portion of the box office take returned to the distributor).
For the first time, Valenti said, nine films reached that rental plateau in one year, with two--"Forrest Gump" and "The Lion King"--topping $100 million.
But all of this big business says little about the overall profitability of movies last year. Estimates of what studios earned from ticket sales relative to their costs are almost impossible to determine because those figures are so closely guarded and often misrepresented in Hollywood.
Rising costs notwithstanding, Valenti pointed out that the good news for the industry is that despite competition from TV, cable and video, theatrical attendance reached a high of 1.29 billion last year--up 5% over 1993 and the highest level since 1960's 1.30 billion. The all-time high was in the pre-TV days of 1946, with 4.06 billion.
Bill Kartozian, president of the theater owners group, said he is encouraged by the increase. The organization hopes to increase movie attendance to 1.5 billion by the year 2000.
The average admission price last year was $4.17, an increase of less than 1% over 1993's $4.14, he said.
Other upbeat news for the industry is that the number of people who go to the cinema once or more a year is at the highest level in five years, reaching almost 160 million, up 20% since 1989.
Frequent moviegoers, who go once a month or more and who represent 30% of all moviegoers, account for 81% of all ticket sales. But those moviegoers are going less frequently and all moviegoers are purchasing fewer tickets, Valenti said.
The increased attendance is coming from the over-40 crowd, whose share of total admissions climbed to 36% from 23% in 1993.
According to MPAA studies, Latinos are the fastest-growing moviegoing segment. The ethnic group, which represents 9% of the U.S. population, accounted for 12% of attendance last year, compared to 1990, when Latinos were 7% of the population and accounted for 11% of attendance.
Fewer blacks went to the movies last year. Representing 11% of the population in 1994, they accounted for 12% of attendance in 1994, down three percentage points from 1990.