Synergy Chase Is Fruitless if Content Gets Left Behind

Remember the good old days when movie studios made movies? Sometimes even good ones? Today movie studios are tiny cogs in giant entertainment conglomerates, where much of the energy that used to go into filmmaking now goes into building franchises and creating synergy.

Unfortunately, with all this empire building, corporate tycoons often forget that movies aren’t hamburgers and French fries--people still want some steak with their sizzle. It’s a message disgruntled audiences were sending in 2001--if Hollywood cares to listen.

Like books, plays and music, movies rely on content: They’re stories built around drama, laughter and emotion. That’s one key reason why the movies from this past summer were so bad: Even the teenagers in my neighborhood were appalled by the flimsy story lines and dim-bulb pyrotechnics of films like “Lara Croft: Tomb Raider,” “Final Fantasy,” “Planet of the Apes,” “Osmosis Jones,” “Swordfish” and “Evolution.”

Silly us: We want to go out and see a movie. The studios aren’t making movies, they’re making vertical integration vehicles, something that can safely go into theaters and come out the other end in some new moneymaking form--as a video game, TV show, soundtrack album, theme park ride, action figure or McDonald’s soda cup.

But even as a business proposition, it’s hard to sell action figures if the movie designed to promote them turns out to be a dud. So despite all of the hoopla in recent days over Vivendi Universal’s acquisition of USA Networks and its installation of Barry Diller as the conglomerate’s new chief executive, success in the movie business has less to do with synergy, vertical integration or any of the other buzzwords popular today than it does with the most old-fashioned concept of all: content.

One high-level executive I spoke to last week suggested, heretically, that “Harry Potter” would’ve made essentially the same amount of money if it had been released by tiny Lions Gate instead of AOL Time Warner. What really mattered, he argued, is that J.K. Rowling created a great literary property and that Warners was smart enough to acquire it before anyone else. It’s great to have the distribution clout to create platforms that can exploit a corporation’s media content, but turning a popular book into a movie franchise is a content decision, pure and simple.

For all the talk of “Harry Potter” benefiting from AOL Time Warner synergy, when it came time to make a lucrative TV deal for the movie, AOL sold “Potter” to ABC, not the WB television network, because ABC was the highest bidder and saw the movie as the kind of invaluable TV content that attracts tons of advertising.

In Hollywood, the model studios are the ones who create the best content. A prime example is Universal Pictures, which has had no equal in the past few years. The film company had $925 million in domestic box office this year with only 12 major releases and did another $1 billion in business overseas. It’s not only created hits, but used its success to attract partners to promote its hot properties.

For a teen movie, there’s no more potent marketing tool than MTV--it’s why Britney Spears’ record company recently struck a deal with MTV Films to release her new film, “Crossroads.” But MTV needs Britney too. To sustain its image as the hip spot for teen consumers, it embraces the pop culture icons that have a patina of cool. So when Universal was the studio with the cool films, MTV was a willing partner--even though MTV is part of the Viacom empire that owns Paramount--providing mega-promotional support for youth-oriented Universal hits like “The Fast and the Furious” and “American Pie 2.”

Universal recently renewed its promotional alliance with AOL, getting even better terms than AOL’s sister movie companies. Why? Because people subscribe to AOL because of the value of its content. Having Universal’s hit films on display attracts eyeballs as well as demonstrating that AOL will give equal promotional treatment to rival media companies’ content.

No one’s saying synergy and distribution clout aren’t valuable, especially when it comes to launching new cable channels. Disney recently paid nearly $5 billion for the Fox Family Channel, a huge markup from what it cost to start the business. Imagine what Vivendi cable TV assets like the USA and Sci-Fi channels will be worth if they perform as well as Viacom channels like Nickelodeon and MTV, which have served as a launching pad for movies like “Rugrats” and “Beavis and Butt-head.”

Nickelodeon has been plugging “Jimmy Neutron: Boy Genius” on the TV network all year, not only promoting the movie--which grossed a tidy $14 million in its opening weekend--but also building awareness for a “Neutron” TV show next year.

But without content, synergy has little value. Twentieth Century Fox had incredible access to family viewers through its Family Channel, but the studio’s family films were such stinkers--remember “Titan A.E.”--that the tie-in was wasted. Likewise with “Final Fantasy: The Spirits Within,” which was largely designed as a marketing tie-in for Sony’s PlayStation II, a computer game that has made far more profits for Sony than any of its recent movies. But when “Final Fantasy” bombed, all this synergy went to waste--even the best promotional platform is worthless without something valuable to promote.

No content is more valuable than family films, which enjoy an incredibly long life span; my 3-year-old is just as happy watching “The Wizard of Oz” as “Monsters, Inc.” If you look at the phenomenal performance of this year’s crop of family films, you have to wonder why studios make so few of them. Of the 15 films that topped $100 million this year, six were family films. Three of the five $200-million hits were family films: “Harry Potter and the Sorcerer’s Stone,” “Shrek” and “Monsters, Inc.” What makes those numbers even more staggering is the success-to-failure ratio: Studios only made 15 family movies all year--seven were bona-fide hits.

Other big family moneymakers this year were “Spy Kids,” “Cats & Dogs” and “The Princess Diaries.” All three were made on modest budgets, will turn sizable profits and could spawn sequels. Why did family movies do so well? “One reason was that the studios just didn’t make many family films, so the demand far outstripped the supply,” says Paul Dergarabedian, head of Exhibitor Relations Inc., which tracks box-office performance. Family films are especially profitable in home video. When the DreamWorks film “Shrek” made its home-video debut in early November, it sold a record-breaking 2.5 million DVDs in three days. When “The Mummy Returns” came out on home video this fall, consumers spent roughly $90 million buying and renting the video in its first week of release, comfortably surpassing the $68 million the film made in its opening weekend in theaters.

When you hear people say--as Diller did until recently--that the movie industry is a terrible business, with its thin margins and exorbitant talent deals, they’re not talking about the DVD bonanza. It’s doing for movies what CDs did for the record industry in the early 1990s: getting people to buy something they already own--and pay more money for it. DVDs cost roughly $5 more than VHS tapes, which is almost all profit.

Old films sell nearly as well as new ones. Disney sold 1 million copies of its new “Snow White and the Seven Dwarfs” DVD in its first day of release. Universal Home Video just had the biggest quarter in video history, generating $1 billion in consumer dollars from the release of five films, including “Shrek” (Universal distributes DreamWorks’ product on video), “The Grinch” and “The Mummy Returns.”

“It used to be that if you loved a movie, all you could buy was a T-shirt or a soundtrack album,” says Universal Home Video president Craig Kornblau. “But with DVDs, you get all the inside stuff. ‘Shrek’ has a voice studio where you can record your voice over your favorite characters. ‘Mummy Returns’ shows how mummies are made. ‘The Grinch’ lets you see Rick Baker’s makeup magic. There’s a lot of rich new content to go along with the movie itself.”

There’s that word again: If anything is to be learned from the corporatization of movies, it’s that valuable content creates enormous dividends all along the food chain. Universal Home Video is riding high because its film division made “The Mummy” and “The Grinch,” not “Town and Country.”

So my advice to Diller is that if he wants to create value for Vivendi, he should focus as much on content as on vertical integration. The movie business doesn’t need another corporate overlord like Viacom’s Mel Karmazin, who when asked by one of our reporters this year for his thoughts about his company’s movies and TV shows, brusquely replied: “Who’s No. 1? Who’s No. 1?” Call me old school, but in the long run, the real winners in the entertainment business are not the people obsessed with synergy, but the people who create the best original content.

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“The Big Picture” runs every Tuesday in Calendar. If you have questions, ideas or criticism, e-mail them to patrick.goldstein@latimes .com.