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Zelnick: Numbers are power in H’w’d

As talent agencies become more sophisticated in their financial analysis of the movie industry, “Talent is grabbing an even larger piece of the pie” of gross margins, 20th Century Fox president and chief operating officer Strauss Zelnick told a luncheon audience yesterday.

“Why? There’s one reason. Talent has better representation and better information.”

Zelnick said since agencies now have the expertise to put together the same computer models as the studios and so can better evaluate the net profit margins earned by films, they have more leverage in contract negotiations. “They know my numbers as well as I do,” he said.

So when he walks into a meeting with top talent agents, Zelnick said later to illuminate the point, hefinds them equipped with their own computer spreadsheets.

“The most significant negotiations definitely involve people on both sides of the table with equally sophisticated statistics,” he said. However, he wouldn’t cite specific examples of computer-to-computer battles.

Zelnick was the featured speaker at a luncheon held at Jimmy’s restaurant yesterday sponsored by the Century City Chamber of Commerce. He gave the audience of 120 entertainment exex, lawyers and accountants, among others, several lessons in movie economics, predicting the studios would become “bigger and bigger entities,” with creative talent “taking on more of their own destiny” through studio-financed boutiques similar to former Fox movie chairman Joe Roth’s Caravan Pictures at Disney.

And he came prepared. Addressing the topic “The Business of Filmmaking in the ’90s,” the Harvard-educated Zelnick (J.D. and MBA) brought along a huge chart to illustrate how the relationships between studios and indies will change over the next decade. “I see the business growing significantly, but it’s going to get tougher,” he warned.

Zelnick reviewed what he perceives to be the faults behind “Hollywood’s conventional wisdom,” particularly when it comes to tying general economic trends to box office business.

He also punctured the myth that studios thrived during the Depression. In his research, he said, he found “almost every movie company went bust in the Depression. People went to movies in the Depression, but not enough.”

After completing computer runs where he attempted to find a correlation between box office business and economic indicators such as the change in the Gross National Product, Zelnick concluded there was none. “I think it’s convenient for movie executives to blame the economy,” he said.

He also said that Fox, compared to many of its competitors, has become an efficient manager of overhead. “In the last 20 years, our business is better run ,” he said, pointing out that because business exex like himself are now running studios instead of writers and producers, “we’ve become more efficient.”

He said Fox, like its competitors, was looking for new media, new markets and franchises. Zelnick said the safest bet for the future was on the success of pay-per-view, and was decidedly less enthusiastic about interactive technology.

“People don’t want to interact with entertainment, they want to interact with games,” he said.

He views the former Soviet Union, because of its cultural roots, as a major growth market for Fox, which operates in 57 countries. “Our product is currently pirated over there (the former Soviet Union) and hugely successful. We’re just not seeing any of the profits,” he said, drawing chuckles from the audience.

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