Animation a Big Draw for Studios

When Disney’s newest animated feature, “Mulan,” debuts next month, there will be the inevitable comparisons to “The Lion King.” Should business fail to soar to the lofty heights achieved by what is still considered to be the most profitable movie of all time, the demise of feature animation will once again be reported. And, as with the death of Mark Twain, those reports will be greatly exaggerated.

Since Disney almost single-handedly revived the once moribund area of feature animation over the past decade, it has grown to become a viable, thriving industry with a regular flow of product every year, not only from Disney, but several other studios. “It has become a mature market,” says one senior Universal executive. And as with every industry that has matured, some of the rules have changed.

The monumental success of “The Lion King” skewed expectations for the animation business and the film has been held as a yardstick rather than the aberrational phenomenon it actually was. Each subsequent Disney animated feature has been regarded as a virtual sequel. Because they barely reached $100 million in domestic box office (versus “Lion King’s” $325 million) Disney’s most recent efforts, “The Hunchback of Notre Dame” and “Hercules,” have been perceived as the beginning of the end of the audience’s interest in animation.

Neither movie attracted as large an adult audience as “Lion King,” or even “Pocahontas.” Despite stylistic innovations on both films, the musical comedy-drama nature of the films gave off the air of “formula,” says one industry insider. “They felt cartoony,” says another.

Nonetheless, with foreign sales (both grossed approximately 150% of their domestic take abroad, according to one Disney executive) and other ancillary revenues the two films brought in “$200 million in profits to Disney,” according to Merrill Lynch analyst Jessica Reif Cohen.

“I wouldn’t be unhappy with a ‘Hercules’ every year,” says 20th Century Fox domestic film group Chairman Thomas Sherak, whose studio recently made its first serious attempt to enter the feature animation fray with the moderately successful “Anastasia.”

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Over the past decade not only has the animation industry roared back to life, but it has fanned in several directions. Virtually every studio is now dabbling in theatrical animation--everything from Disney-style family entertainment (Fox’s “Anastasia”) to more adult-oriented fare (Paramount’s “Beavis and Butt-head”). Television hits like “The Simpsons” (now more than a decade old), “King of the Hill” and “South Park” have been arguably more popular with adults than with children and have done a great deal toward easing the resistance grown-ups once had toward theatrical animation.

The sword of broader acceptance, however, cuts both ways. When animated movies were rare, creating the sense of an event around each particular arrival was easier. As each year brings greater animation variety, the business is coming to more closely resemble live-action.

“Audiences have become more sophisticated and more discriminating,” a DreamWorks executive says. “Releasing an animated movie is no longer an event unto itself.”

Moreover, studios like Disney and Universal, which have had the greatest success with animation titles, are now competing with themselves. Both studios’ video divisions generate substantial income from animated titles made directly for video--either original properties or sequels to motion pictures. Disney has released video follow-ups to such films as “Beauty and the Beast” and “Aladdin” among others. Universal has a similarly active video division, headed by Louis Feola, that capitalizes on known quantities like “An American Tail” and “The Land Before Time.”

“We’ve identified direct-to-video programs as a major strategic growth opportunity with an emphasis on family films and animation,” Feola says.

As with every maturing industry, costs have risen and the challenges of marketing have intensified. The cost of an animated feature has climbed to $100 million, according to Reif Cohen. And while the major animation purveyors could once count on a guaranteed cushion from video sales and related product merchandising to shore up box-office receipts, these alternative revenue streams are no longer guaranteed.

Take merchandising, for instance. “At one time merchandising led the way,” says the DreamWorks executive. “But there’s been a huge backlash because retailers feel they’ve been sold movies and licensing programs for movies that didn’t deliver.”

The bonanza of related products and tie-ins with such films as “The Lion King” (not to mention TV’s “The Simpsons”) created a false sense of invulnerability for the studios. But “Mulan” and DreamWorks’ holiday release “Prince of Egypt” will have to generate excitement at the ticket booth before retailers will consider stocking related products.

“Retailers didn’t do well with ‘Pocahontas’ and, especially, ‘The Hunchback of Notre Dame,’ ” reports a source close to Disney. And while Disney executives refused to directly comment, one source at the studio admitted, “We got burned a couple of times because everybody jumped the gun [on merchandise]. We’ve held back on ‘Mulan.’ The picture’s got to prove itself first.”

In the area of promotional tie-ins, the big guns like McDonald’s and Burger King “sometimes make their commitments two or three years in advance,” says the Universal senior executive. Back in the days of “The Little Mermaid” or even “Aladdin,” Disney had little competition for these contracts. Today there are not only more animated films seeking endorsement, but also live-action spectaculars such as “Godzilla” and “Star Wars.”

While it didn’t reach Disney-like gross levels in the U.S. (about $60 million and twice that abroad), “Anastasia” was Fox’s first animated release to make a significant impact.

The start-up costs for the studio were substantial, admits Sherak, both in the creation of a quality animation film and marketing it to get visibility. (Disney launched a reissue of “The Little Mermaid” as a counterattack.) “It cost us a lot of money, but you have to spend a little extra to start the company out.”

“Anastasia” stuck close to Disney’s time-honored musical romance element. But Fox will go in a different direction with “Planet Ice,” adding a sci-fi element to animation. It’s tentatively scheduled for late 1999 release.

Warner Bros. next week will try to reestablish itself in animation with “Quest for Camelot,” another musical romance. Whatever the outcome of that film, Warner Bros. plans to stay in the animation business, according to Sandy Reisenbach, executive vice president of marketing and planning. “We’re committed to animation,” he says in response to industry talk of WB abandoning the area. “We hope to have a regular stream [of animated films], as many as one a year.”

The most formidable potential rival for Disney is DreamWorks, whose principals Jeffrey Katzenberg and Steven Spielberg have had substantial success with animation in the past. As with Fox, the costs of creating an animation division far exceed “Prince of Egypt’s” reported $70-million budget. Those costs--for equipment and personnel--will be amortized over future films.

DreamWorks has been endeavoring to build the same kind of “event” aura on “Prince” that Katzenberg became famous for when he was selling animated films like “Beauty and the Beast” at Disney. As with “Mulan,” the musical elements are being de-emphasized and the dramatic nature (read, more adult) nature of the biblical tale is being stressed. Next year’s “Antz,” a computer-generated animation effort, starring Woody Allen, will also seek to attract a more sophisticated audience.

“Prince of Egypt” is a major risk, the fledgling studio’s executive admits. Adds a rival studio executive: “If ‘Prince’ doesn’t work theatrically, there’s no other market for it [that is, video and merchandising].” For just as the release of animated films has become more regular throughout the calendar year, it is now prey to many of the same rules as live-action films.

“There are no shoo-ins anymore,” says WB’s Reisenbach.