Hoping for a bigger payoff from ‘Crash’

Thanks to Lions Gate Entertainment Corp. and federal laws requiring companies to disclose meaningful developments to investors, we can all get a “Crash” course in Oscar economics.

Last week, the parent of film distributor Lionsgate publicly disclosed to Wall Street that its profits would be crimped in 2006.

One reason: The company is spending “an additional $2 million” to promote director Paul Haggis’ “Crash” during the stretch run of the best picture race that ends March 5 with the Academy Awards.

The operative word here is “additional.” That’s because it’s double what the company had already spent to promote the movie for various awards. All told, Lions Gate is expected to spend $4 million to campaign for a film that cost only $6.5 million to make.

What’s interesting about last week’s disclosure is that it may be the only time anyone has had to publicly own up to how much cash is being thrown around to buy Oscar votes.

Hollywood studios are usually loath to talk about what they spend on campaigns. It’s all about art, or so the line goes, even though the rest of us know it’s about money and ego.

Truth be told, “Crash” is still probably one of the cheapest campaigns out there.

Estimates on some Oscar efforts (think Harvey Weinstein) over the years have been as high as $15 million to $20 million. The big guns don’t have to mention those expenditures because they are immaterial to the bottom line at media giants -- you couldn’t even buy execs a new Gulfstream V for that price.

Of course, no one ever admits to spending that much anyway. That’s why every story reporting numbers in that range will inevitably include an anonymous denial from a source everybody knows works for the studio.

Lions Gate is a small independent company where $2 million actually means something -- 3 cents a share on earnings. By comparison, at Warner Bros. parent Time Warner Inc., 3 cents a share is somewhere north of $130 million.

According to Lions Gate Theatrical Films President Tom Ortenberg, the company decided to pony up money for a campaign last June, after “Crash” was well received by critics when it opened in May.

By early January, Lions Gate had spent $2 million on trade ads and other promotions. The studio’s most audacious move was sending out 130,000 DVDs to members of the Screen Actors Guild.

It looked more expensive than it was. Ortenberg said it cost only $220,000 -- 60 cents each for the discs, which were wrapped in cellophane, plus mailing costs. “Crash” received SAG’s best movie ensemble award, and now has probably been seen by virtually every voting member of the Academy of Motion Picture Arts and Sciences.

Just before Oscar nominations closed, Lions Gate earmarked an additional $500,000. After “Crash” scored six Oscar nominations -- best picture, director, original screenplay, song, editing and supporting actor for Matt Dillon -- $1.5 million more was budgeted.

On a conference call with analysts Friday, Chief Executive Jon Feltheimer called spending the extra $2 million a “prudent investment.”

Here’s why: Feltheimer estimates an Oscar win could provide a windfall of as much as $5 million to $10 million because Lions Gate would sell more DVDs and get more money when “Crash” is shown on TV. Then there’s the intangible message to filmmakers you want to do business with that you will go to bat for good films.

Still, one analyst asked, “why do you think that’s efficient spending?”

Maybe it’s me, but it seems a little unfair to hold someone’s feet to the fire over $2 million to promote an Oscar contender.

It’s less than 25% of what Walt Disney Chief Executive Bob Iger took home last year. I’ve yet to hear an analyst slip in a question during a Disney conference call about whether the company’s executive paychecks are “efficient spending.”

Lions Gate won’t talk specifics about where that money is going, but it’s known the strategy involves spending it largely in Los Angeles to “win” the city. Think of it as Oscar equivalent of Ohio in the 2004 presidential election.

The studio then hopes that New York votes that don’t go to “Crash” will be split among “Brokeback Mountain,” “Good Night, and Good Luck,” “Capote” and “Munich.”

Part of the logic for focusing on L.A. is that it has a higher proportion of actors, who like ensemble films because they underscore how valuable actors are to directors.

And, at a time when runaway film production is a sensitive issue, it probably doesn’t hurt that “Crash” is about Los Angeles and was shot here, whereas leading rival “Brokeback Mountain” was shot in Canada.

It’s entirely possible that “Crash” gets steamrolled by films released by divisions of gigantic media companies that could easily outspend Lions Gate in any Oscar arms race.

Still, there’s no “Crash” and burn here for Lions Gate. The company has already won the financial and cachet rewards a nomination brings.

Home teams

In recent years, Hollywood’s Oscar nominees have mirrored the trend toward runaway production of films to cheaper shooting locales such as Canada. At the 2003 ceremony, only one best picture contender was shot in Hollywood -- Hollywood, Fla.

This year, Los Angeles was home to “Crash” and “Good Night, and Good Luck.” “Brokeback Mountain” and “Capote” were shot in Canada, while “Munich” was shot almost entirely in Europe.

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James Bates is deputy entertainment editor at the Los Angeles Times. He writes Behind the Screens as a regular column for The Envelope (theenvelope.latimes.com), The Times’ awards website.