High Costs Could Torpedo Films, Valenti Warns

LAS VEGAS — Calling the growing cost of making movies “a fiscal Godzilla slouching toward our future,” Jack Valenti, president and CEO of the Motion Picture Assn. of America, announced here Tuesday that the average cost of producing and marketing a studio movie last year rose to $75.6 million.

The figure, which represents the biggest one-year jump since the MPAA began keeping tabs, tops the 1996 figure of nearly $60 million, Valenti said at the opening of ShoWest ‘98, the annual convention of theater owners, vendors and movie business folk. Productions costs rose a record 34%, he said, and marketing 12.2%.

Valenti warned that while in general the state of the industry looks bright, runaway costs threaten to derail even the most creative studio chief.

“In an odd and unfathomable way, we are bearing witness to a collision of contradictions,” Valenti said. “As the American movie rides an ascending curve throughout the known world, it is being pursued with malignant fidelity by total costs. It is a terrible confluence of hope and terror which confronts every studio, every producer, every production company.”

During a breakfast with reporters before his speech, Valenti said that “Titanic,” the $200-million-plus saga of the world’s most famous sunken ship, couldn’t be blamed for skewing the cost estimate.

“If you take ‘Titanic’ out, it only goes down a couple million,” he said of the film, which was financed by 20th Century Fox and Paramount Studios. He also dismissed the suggestion that the success of “Titanic”--14 Oscar nominations and $1 billion in worldwide box-office receipts in just 11 weeks--would lead to more films with astronomical budgets.

“If you think of all the Prozac and the Maalox that was taken over at Fox and Paramount this last year, I don’t think you’re going to see too many $200-million pictures,” he said. “I think ‘Titanic’ is the movie equivalent of Halley’s Comet. A picture like that comes along once every 75 years.”

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Valenti said he thought another movie was more likely to be the fiscal model for the future: “The Full Monty,” the $3.5-million comedy, distributed by Fox Searchlight, that has grossed more than $200 million worldwide. But to curb costs, studio chiefs must figure out a way to rein in creative talent in a way that Valenti called both “congenial and firm.”

“Ten years ago, agents ran the business. Today, it’s bankable talent,” he said. “If Spielberg wants to film the Laguna Beach phone directory, he can do it. And he’ll probably make a pretty good movie out of it, too. But I don’t think ‘The Full Monty’s’ budget-to-profit quotient is being lost on people.”

Valenti looks at the industry with what he calls “wide-lens optimism” and, standing before ShoWest’s 3,400 registered guests, he ticked off a few of the reasons.

More Americans went to movie theaters in 1997--1.4 billion--than in any year since 1959, he said. With an average ticket price of $4.59, according to a survey of 16,000 theaters conducted by the National Assn. of Theater Owners, total domestic box-office receipts soared to $6.4 billion, a record.

(In this case, however, Daily Variety has suggested that Valenti is being a little too optimistic. By its analysis, last year’s U.S. box-office take was $5.8 billion.)

Valenti also offered some statistics on who is going to movies. So-called “frequent movie-goers,” who go to a movie theater at least once a month, comprise 28% of the U.S. population and 81% of total admissions, he said.

Broken down by ethnic group, whites account for 66% of admissions, Latinos 15%, blacks 13% and “other” 6%. Latinos are the fastest-growing group of movie-goers, he said, increasing their admissions 22% in 1997 over the previous year.

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The hot topic at the convention this year is the potential impact of a series of recent mergers and acquisitions among theater circuits. Companies involved in the mergers may seek to negotiate more favorable film-rental rates with the studios because they are larger. Smaller theater owners are wondering whether such leverage could benefit them. And everyone is asking if the consolidations will lead to higher ticket prices.

William Kartozian, president of the theater owners association, suggested Tuesday that mergers could work against price hikes because there will be less competition between theater owners to try to please the studios with fatter ticket revenue. He also predicted, however, that even the biggest circuits would not necessarily be able to drive down rental rates.

“Some of the larger circuits [today] pay higher film rentals than some of the smaller ones,” he said. In general, he said, the entry of Wall Street investors into the theater business is a good thing.

“Our value has been recognized. We are now seen as a steady, reliable, cash-producing business which everyone acknowledges is here to stay. We’re on a roll.”