Play it again, Shrek

If something can be gleaned from the movies in 2004, it was that the sequel can be mightier than the sword, at least at the box office. And the DVD is the mightiest of all.

While “Troy” managed a muscular overall gross thanks to foreign revenues, it was no match for “Shrek 2,” “Spider-Man 2,” “Harry Potter and the Prisoner of Azkaban” or “The Bourne Supremacy.” And “Alexander the Great” may have been doomed even without decidedly mixed reviews. Then there was Mel Gibson’s “The Passion of the Christ,” the year’s biggest surprise and third-highest grosser.

For the year just ended, rival tracking firms reached different conclusions on the total box office. Nielsen EDI estimated Sunday that box office would reach $9.2 billion, better than last year but shy of the record $9.3 billion set in 2002. EDI bases its year on a business period that for 2004 was shorter than the calendar year. Exhibitor Relations Inc., which bases its calculations on the calendar year, estimated total box office of $9.4 billion, which would beat the record set in 2002.

Either way, however, admissions were down because of ticket-price inflation (an average cost of $6.22 versus $6.03 in 2003), most observers agreed, although official industry figures as tabulated by the Motion Picture Assn. of America won’t be released until March.

Exhibitor Relations reports the number of tickets sold last year was 1.51 billion, down almost 2% from 2003. Attendance of 1.54 billion in 2003 was off almost 4% from the modern benchmark of 1.6 billion set in 2002.

That means domestic moviegoing has declined more than 5.5% over the past two years.

But domestic theatrical box office represents only part of the overall movie-revenue picture that includes DVD and videocassette sales and rentals as well as international box office, which this year probably will rise to more than $10 billion.

Fueled largely by DVDs, “combined consumer spending on home video will end up somewhere north of $25 billion, up from a little over $22 billion last year,” said Scott Hettrick, editor in chief of the trade publication DVD Exclusive.

Although that projection includes DVD and VHS sales and rentals, DVDs make up the bulk of the number with more than $16 billion.

That means “DVD sales alone are well in excess of box office this year,” Hettrick added. It was the second year in a row that has happened. Annual sales of the discs last year hit $11.9 billion, for the first time surpassing North American box office.

Add all those together and gross revenues come to something in the neighborhood of $44 billion or higher. About half, maybe a little more, will flow back to the studios.

That doesn’t include sales of movies to broadcast and cable TV and other ancillary markets.

Even with the decline in attendance over the last two years, a glance at statistics on the website of the National Assn. of Theater Owners reveals that moviegoing attendance is higher in the last three years than in the ‘90s and earlier, and in the last 15 years attendance has risen eight times versus seven years in which there were declines. Including 2004’s drop, there have been three times when moviegoing declined two years in a row. In the same 15-year period, grosses declined three times.

But historically, attendance hasn’t fallen for more than two years in a row in the last 15 years. That means the odds for 2005 are that business will increase, if only modestly.

“After box office declined last year for the first time since ‘91, this year has rebounded somewhat,” noted Paul Dergarabedian, president of Exhibitor Relations Inc. “It may be that the industry has reached a point at which it’s not going to be possible to see the kinds of increases it posted from 2000 through 2002.”

“In 2002, revenue went up more than 20% compared with 2000,” he said. “Attendance also had risen by about 12%” over the same two-year period.

But in 2003, with no sleeper hit like “My Big Fat Greek Wedding,” and no “Spider-Man,” “Star Wars” prequel or Harry Potter movie, revenue and attendance suffered.

Even this year, “it wasn’t until ‘Passion’ came out in February that business started to turn around,” Dergarabedian said. The success of Gibson’s film about the final hours of Christ stunned the industry. No major studio had been willing to release it, so Gibson turned to Newmarket Films to handle distribution in this country. Another film that had distribution problems, “Fahrenheit 9/11,” was also a surprise hit. And without the half a billion dollars in box office that those films represent, Dergarabedian said, the industry would be ending the year in much worse shape than in 2003.

The coming year, however, looks brighter, at least on paper.

“Planets are aligning for ’05 to be a big year,” Dergarabedian said, pointing to “Star Wars Episode 3,” Steven Spielberg and Tom Cruise’s “War of the Worlds,” Peter Jackson’s “King Kong,” Christopher Nolan’s born-again “Batman Begins” and Mike Newell directing “Harry Potter and the Goblet of Fire,” the first time a Brit has taken a crack at the adventures of the boy wizard and his friends.Studio distribution executives agreed that prospects for the coming year look good.

“I’m very bullish on the business overall,” said Jeff Blake, chairman of worldwide distribution for Sony Pictures Entertainment, which ended the year as No. 1 in domestic box office with an estimated $1.31 billion.

And not just because the movies look encouraging.

“There’s a wide range of people going to the movies, much wider than in the past,” Blake said. “Just a few years ago, it was mostly teenagers and young adults. Obviously those are still an important part of the audience as frequent and repeat moviegoers. But there is now a much wider range -- adult, family, specialized pictures.

“Look at the success of ‘Sideways,’ ‘Kinsey’ and ‘Closer.’ The business has made tremendous progress. There also are more G, PG and PG-13 movies. The highest-grossing movie of the year [DreamWorks’ ‘Shrek 2’] was PG. And G used to be a bad word.”

The high cost of making and marketing movies, which last year rose to an average of about $103 million per picture, according to the MPAA, remains a concern. Part of the reason that average is so high is that costs involved in producing “event” pictures can hit anywhere from $150 million to $200 million -- plus another $20 million to $40 million for marketing.

“Some movies become worldwide event pictures that require significant amounts to launch, so we spend the money on them,” Blake said, but “there is good, profitable business in producing multiple titles for adults.

“The bulk of our business at Sony was in midrange or lower-cost pictures. Look at ‘The Grudge,’ ‘White Chicks,’ ‘Christmas With the Kranks.’ Those are really solidly profitable pictures in the midrange of production budget with midrange marketing costs.”

Even if business goes up in the coming year, “The domestic market place is a very mature business,” Dan Fellman, president of distribution for Warner Bros., pointed out. With grosses of an estimated $1.2 billion in 2004, “We’re No. 2 behind Sony for domestic.”

While in the U.S., “you’ll find very few theaters being built without others being closed,” Fellman said, “they are building new theaters everywhere else in the world. International still has a lot of growth, in theatrical and in DVD.”

As an example of the differences between domestic and international, Fellman cited “Ocean’s Twelve,” which he said is running about 12% behind “Polar Express” domestically. “Internationally it’s running about 40% ahead.... I would say that the worldwide number for ‘Twelve’ will exceed ‘Eleven’ because of international.” Fellman agreed that 2005 looks as if it could be a very good year, with attendance regaining at least some of the ground it lost.

“It’s very possible. There’s ‘Star Wars,’ ‘Batman,’ ‘War of the Worlds,’ ‘King Kong,’ ‘Charlie and the Chocolate Factory,’ ‘Harry Potter and the Goblet of Fire.’ ”

Disney, which has endured a turbulent year with disappointments at the box office and internal drama at the corporate level, ended 2004 with two hit movies, “The Incredibles” and “National Treasure” and an estimated total of $1.17 billion as of Sunday, in third place at the box office.

“For us it’s just another year of consistency,” Chuck Viane, Disney president of distribution, observed wryly, “nine out of 11 years of more than $1 billion. We’ve learned to accept the dark spots and keep working, knowing that the sunshine is always just around the corner.”

As for whether attendance might reverse directions in 2005, Viane said, “I think everything about it is going to be a big year. The final ‘Star Wars,’ and for us ‘Chronicles of Narnia,’ ‘Hitchhiker’s Guide to the Galaxy,’ ‘Herbie: Fully Loaded’ (the updated ‘Love Bug’ movie) and ‘Chicken Little.’ ” The latter film has a lot riding on it as the company’s first full-fledged foray into computer animated movies and its only animated movie of the year now that Pixar’s “Cars” has shifted to summer of 2006.

“People are worried that there’s not an obvious ‘Passion’ or ‘Fahrenheit 9/11’ on the horizon,” he said, but “every year something comes out of nowhere and pops up with really big numbers. Every year.”

Bruce Snyder, president of distribution at Fox, noted that the industry managed to increase revenues for the year without a “Lord of the Rings,” which gave each of the last three years a significant boost. This year -- in addition to “Spider-Man 2,” “Harry Potter and the Prisoner of Azkaban” and “Shrek 2” -- included the independent film almost no one predicted would be a blockbuster, “The Passion of the Christ.”

“Specialty films really seem to have come of age this year,” Snyder said, “not just for us with [specialty film division Fox] Searchlight and ‘Kinsey,’ ‘Sideways’ and ‘Napoleon Dynamite,’ but everybody had niche movies that did well, little movies that just chug along,” such as “Finding Neverland,” “The Notebook” and “Closer.” This year is also bound to offer surprises, Snyder said. “You never know when a ‘Passion’ will come along.”

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Biggest box office draws of 2004

The Top 10 movies at the domestic box office in 2004 ...

Film: Domestic gross (in millions)

Shrek 2: $436.7

Spider-Man 2: $373.4

The Passion of the Christ: $370.3

The Incredibles: $251.5

Harry Potter and the Prisoner of Azkaban: $249.4

The Day After Tomorrow: $186.7

The Bourne Supremacy: $176.1

Meet the Fockers: $163.4

Shark Tale: $160.7

The Polar Express: $155.2

... and at the international box office

Film: International gross (in millions)

Harry Potter and the Prisoner of Azkaban: $540.3

Shrek 2: $455.3

Spider-Man 2: $410.4

Troy: $364

The Day After Tomorrow: $355.8

The Incredibles: $262.5

The Passion of the Christ: $241.0

I, Robot: $202.2

Van Helsing: $180

Shark Tale: $150.1

Source: Nielsen EDI Inc., studios, Icon Productions, Variety and Boxofficemojo.com

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Weekend box office

Preliminary results (in millions) based on studio projections.

*--* Movie 3-day gross Total Meet the Fockers $42.8 $163.4 Lemony Snicket’s A Series of Unfortunate Events 14.7 94.8 The Aviator 11.2 31.1 Fat Albert 10.7 33.9 Ocean’s Twelve 9.2 106.9 National Treasure 7 154.8 Spanglish 6.3 31 The Polar Express 5.7 155.2 The Phantom of the Opera 4.8 16.3 Darkness 4.5 16.5

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Source: Nielsen EDI Inc.