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The Heat Was On

Hey, Chicken Little, the sky didn’t fall on the movie industry after all.

At the top of the summer season, with a record number of expensive event movies competing for the same box-office dollars, Hollywood braced for a blood bath.

But every one of those movies, with one gaping exception, will probably make money for the studios.

“The business is very healthy right now,” said Casey Silver, chairman of Universal Pictures, which released the hit sequel “The Lost World: Jurassic Park,” directed by Steven Spielberg. “Our company had a very profitable summer, and we’re not the only one.”

Potentially, a record 10 movies will have grossed $100 million or more at the domestic box office by the time summer officially wraps over the upcoming Labor Day weekend--and two, “Lost World” and Sony Pictures’ “Men in Black,” each raked in more than $200 million.

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Sony dominated the summer with an astonishing series of hits; Walt Disney Co. fared well, thanks in part to the season’s only real sleeper, “George of the Jungle”; Universal and Paramount contributed one major title each to the mix; and Warner Bros. attracted less money than expected, especially from its valuable “Batman” franchise. Meanwhile, 20th Century Fox--awash in red ink from “Speed 2: Cruise Control,” the summer’s biggest loser--no doubt wishes it had sat out the season. MGM did stay on the sidelines.

Although the movie business did not, as many predicted, drown in a sea of losses, overall profits are unquestionably being blunted by the bloated costs of producing and promoting the event films.

“The gloom and doom doesn’t apply to what’s happening at the box office, but to what it costs to run this business,” said Tom Sherak, senior executive vice president of Fox Filmed Entertainment. “The movie business is as hot as it’s ever been. Exhibitors have taken in more money this year than they ever have. The only thing that’s wrong is we should be making more profits and we’re not, because of the costs involved.”

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Although total domestic box-office sales from Memorial Day through Aug. 10 are on a par with last year’s ($1.8 billion versus $1.79 billion) and could surpass 1996’s take of $2.17 billion, there also was a record number of films costing $80 million to $100 million or more, for which the average marketing expenditure (for U.S release alone) was about $40 million.

The studios typically release these “big guns” during the lucrative summer season, when ticket sales account for nearly 40% of the year’s total box office.

“If these films made the same basic gross as they did last year, the costs have to make this a less profitable summer for the industry,” Disney Studios Chairman Joe Roth said.

Robert Friedman, vice chairman of Paramount Pictures Motion Picture Group, said there was a blood bath this summer--it was just of a different sort.

“It was the lack of profits people were counting on as opposed to physical losses,” Friedman said.

Some executives suggest that for the most part, summer was so overcrowded with similar fare that even some of the hits wound up leaving potential box-office dollars on the table because competing movies collided.

“There were too many high-profile movies in the marketplace at the same time cannibalizing each other, to the extent that they cost each other 15% to 20% of their potential gross,” said Michael Rosenberg, president of Imagine Entertainment.

Friedman agrees that a number of movies “under-delivered because of so much competition in the market.” Referring to what he calls “the second-week casualty rate,” Friedman notes that several big movies, including “Lost World,” “Batman & Robin” and “Speed 2,” experienced dramatic drops in their second weekend in release.

Bob Daly, co-chairman of Warner Bros., believes that the “Batman” sequel was greatly hurt in its first two weekends by competition from Sony’s romantic comedy “My Best Friend’s Wedding” and the action movie “Face/Off,” released by Paramount and co-financed by Disney.

“There’s no doubt that if there had been one or two fewer pictures in the summertime, everyone would have come out better,” Daly said. “But it wasn’t a disastrous summer. Most of the movies that came out had a following.”

Several executives attribute the big drop-off to a new phenomenon: Many of these movies now play on so many screens--sometimes upward of 5,000--that audiences tend to see them in their debut weekends.

“You can’t have it both ways,” Roth said. “If you play on 5,000 screens, you can’t not expect a significant drop-off.”

Jeff Blake, president of distribution at Sony Pictures, concurs: “Do you know anyone who waited in line for ‘Men in Black’? Selling out used to be a good thing because it meant you’d get word of mouth. Now everything is so zoned into the opening weekend that your films don’t play as long and you can’t milk them.”

The sharp rise in production and marketing costs argues for updating the traditional definition of a summer blockbuster--a movie that grosses more than $100 million, racking up profits for a studio after its costs are recouped and theater owners take their cut.

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Take “Batman & Robin.” Even though the fourth installment in the series grossed more than $100 million to date, its results are so far disappointing because it cost more than $200 million to make and market. Similarly, the studio’s “Contact,” directed by Robert Zemeckis and starring Jodie Foster, has so far grossed $83 million, but it cost about $90 million before marketing. “Conspiracy Theory,” which opened with less than $20 million this weekend, had a production budget of about $85 million.

The two Nicolas Cage action movies, “Face/Off,” and Disney’s “Con Air,” which also logged box office of about $100 million apiece, cost $90 million and $80 million, respectively, just to produce.

To be sure, ancillary, merchandising and future overseas sales for big action movies and franchise films such as “Batman” or “Hercules"--also considered a disappointment domestically--will flow in long after these films are out of U.S. theaters.

Daly said that “most of the pictures with $100 million in domestic box office will be profitable” once all worldwide revenues are counted. He includes “Batman” in that group, though many of his competitors would argue that Warner will be lucky to recoup its costs, let alone make a profit.

Although movies such as “Men in Black” and “Lost World” were also costly to make and promote (each upward of $140 million), they’re bona fide franchise blockbusters that will generate hundreds of millions more dollars around the world for years to come.

A film such as “My Best Friend’s Wedding,” which cost $42 million to produce and has grossed about $113 million to date (more than “Batman”), will be highly profitable for Sony, as will Disney’s family movie “George of the Jungle,’ which cost $50 million to make and is expected to gross about $100 million domestically and sell 10 to 12 million video units. “George” will be particularly profitable for Disney because it doesn’t have the high-cost participants typical of big-star vehicles such as “My Best Friend’s Wedding,” which features Julia Roberts.

Although there are still three weekends to go before the official end of summer, last weekend saw the release of the season’s last high-profile title, “Conspiracy Theory.”

John Krier, whose firm Exhibitor Relations Co. tracks box-office results, said two factors that contributed to this summer’s bonanza were “better product after midsummer and the absence of the Olympic competition.”

In contrast to the sluggish first half of summer, the studios had little to complain about. Except Fox, that is. Sources estimate that “Speed 2" will ultimately lose between $65 million and $85 million, based on domestic grosses of $50 million and projected overseas grosses of $100 million.

Warner Bros., which is having an atypical down year with such money losers as Ivan Reitman’s “Father’s Day,” didn’t exactly have the kind of summer it had wished for, with “Batman” falling short of expectations.

“It would be a lie to say I wasn’t disappointed,” said Daly, noting that his original estimates were in the neighborhood of $140 million to $150 million domestically. But “I guarantee you” will see a profitable movie in “Batman,” said Daly, an assertion he bases on expected foreign revenues, a major television sale and merchandising sales.

Daly said that even before the movie’s opening, Warner received $50 million in guarantees against 10% of the projected wholesale merchandise sales. “At the retail level, that’s over $1 billion, and we’re estimating our take to be approximately $70 million, which is about what the last ‘Batman’ did.”

Other expensive Warner movies, including “Contact” and “Conspiracy Theory,” also disappointed.

Roth said he’s pleased with Disney’s summer despite “Hercules” having under-performed domestically. “That doesn’t mean it won’t be unbelievably profitable,” he stressed, once video, foreign and merchandising sales are counted.

Universal will make a strong profit on “Lost World,” though original estimates for the sequel’s domestic run were more in the $275-million range.

Paramount, which will share the worldwide revenue with Disney on its only entry, “Face/Off,” probably changed the course of summer for every studio by switching the release date of Jim Cameron’s “Titanic” to December when the film wasn’t ready.

“That gave more pictures room to perform,” one studio chief said.

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By a long shot, Sony ruled the summer.

As of today, the studio will have set an industry record for the biggest summer box office ever, with about $500 million in ticket sales. “Air Force One,” which hit $111 million this weekend, “Men in Black” and “My Best Friend’s Wedding” could potentially collect an additional $100 million through Labor Day weekend. Hands down, Sony will wind up the top distributor of 1997, eclipsing Disney’s previous record of just under $1.2 billion.

“It’s been a great experience for everybody here,” said Blake, adding that “the market will always expand to accommodate big, high-profile films that capture the imagination of people, and it’s a pretty unforgiving market for films a notch below that.”

Although Sony--which had a dismal summer last year--can celebrate, the one with the most to crow about profitwise is director Steven Spielberg.

His shares of “Men in Black” and “The Lost World” dwarf everyone else’s earnings combined.

It seems plausible that the unexpected success of summer 1997 will encourage studio heads to green-light more expensive event pictures for future summers.

But as “Speed 2" proved on one hand and “My Best Friend’s Wedding” and “George of the Jungle” proved on the other, it’s hardly a certainty that you need to invest more to make more.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

More Hits Than Misses

The movie business has turned in a strong performance this summer. Some industry analysts had predicted disaster because a record number of films costing $80 million to $100 million-plus to make were scheduled for release. (Marketing costs averaged an additional $40 million each for the high-profile titles.)

COSTS ARE RISING . . .

Estimated production costs:

Batman & Robin: $175 million-plus

Speed 2: Cruise Control: $150 million-plus

Men in Black: $90 million

Air Force One: $90 million

Face/Off: $90 million

Contact: $90 million

Hercules: $85 million

Conspiracy Theory: $80 million

Con Air: $80 million

The Lost World: Jurassic Park: $80 million

. . . AS IS REVENUE

The summer box office overall is expected to be up from last year. Memorial Day through Labor Day domestic box-office totals for the last five years:

1997: $2.20 billion-plus (projected)

1996: $2.17 billion

1995: $2.18 billion

1994: $2.21 billion

1993: $2.13 billion

WITH GROSSES ALSO UP . . .

A record number of films will have grossed more than $100 million in the United States by the time summer wraps:

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Film To date Projected (millions) (millions) Men in Black $218 $240 Lost World 225 230 Air Force One 111 175 My Best Friend’s Wedding 113 120 Face/Off 105 112 Batman & Robin 105 110 Likely to Top $100 Million Con Air $96 $102 Hercules 89 100 Contact 83 105 George of the Jungle 76 105

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. . . THERE ARE

MORE WINNERS

Biggest Moneymakers

Men in Black

Lost World

Air Force One

My Best Friend’s Wedding (cost $42 million to produce)

George of the Jungle (cost $50 million to produce, with no profit participants)

Biggest Disappointments

Batman & Robin

Hercules

Biggest Loser

Speed 2: Cruise Control (estimated loss to Fox: $65 million to $85 million)

Big winners this summer have been “Men in Black,” top, and “Air Force One.” The big loser was “Speed 2,” bottom.

Sources: Exhibitor Relations Co., industry sources


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