Record $6.3 bil gross offset by $75.5 mil average pic cost
LAS VEGAS — Worldwide box office increased by 9% and a smaller number of releases generated bigger grosses for the Hollywood majors, according to Motion Picture Assn. of America president Jack Valenti in his state of the industry address at ShoWest 1998 on Tuesday. In the U.S., box office reached a record $6.36 billion in 1997, topping 1996 by 7.6%.
However, the cost to get there was staggering. MPAA data for the average price to produce and market movies ballooned by 26.6% to $75.5 million, the highest annual increase since the MPAA began collecting data in 1980. Production costs alone vaulted by 34% from $39.8 million to $53.4 million. Average marketing costs rose a little more than 12% to $22.2 million, roughly four times the present inflation rate.
During a breakfast press session prior to the address, Valenti pointed out that with “Titanic’s” megabudget excluded from the equation, that reduced the average cost only by less than $2 million.
“Every studio is working toward lowering their average cost,” Valenti said. “The only way to get your profit margins up is to reduce costs. That’s something you can reasonably control. What a picture will do and who will respond to it cannot be predicted.”
He cited “Titanic” as such a film. Both its length and inevitable conclusion mitigated against the sort of audience response it has received. Still, he likened it to Haley’s Comet, arriving once every 75 years. Invoking another movie icon, he characterized costs as “a fiscal Godzilla slouching toward our future.”
Movies buck trend
Titling his speech “Collapse of the Common Wisdom: How Movies Beat the Competition,” Valenti proffered that despite such factors as television, cable, the Internet and myriad other traditional entertainment forms vying for “the eye and ear of the individual viewer,” movies have bucked the trend, increasing admissions domestically by 3.6% to 1.38 billion. Ticket sales also rose by 6% in the European Union, 13% in major Latin American territories and a more modest 2% in Asia.
Valenti noted that his long-held belief that strong indigenous cinemas benefited American movies internationally bore fruit in 1997, and he saluted the frequent moviegoer — someone who sees at least one film a month — who comprises 28% of the general population and 81% of domestic movie goers.
He also noted that the MPAA identified 458 film releases in 1997, up 38 from the prior year. However, its companies released 18 fewer movies, at 197 titles. Average cost statistics did not include acquisitions, only fully financed productions or films in which studios had an equity stake.
Finally, he saluted the audience. Taking exception to an assessment of a pliable public made by filmmaker Jean-Luc Godard, whom he characterized as a friend, he quoted Godard as saying: “When a truly serious film becomes popular, it is the result of a misunderstanding.”
“Audiences are voters, guardians of the nation’s conscience. All nations, not just ours,” said Valenti. “To treat them casually is to give entry to an irretrievable blunder. The platform from which springs the quickening spirit of the American movie is a ceaseless respect for the audience. It’s a secret we are pleased to share with the world.”
1.5 billion by year 2000
National Assn. of Theater Owners president Bill Kartozian said that the organization’s goal of reaching 1.5 billion admissions by the year 2000 could well be met earlier, citing Variety figures of record January and February filmgoing.
A NATO theater survey pegged the average admission price at $4.59, 4% higher than in 1996 and the highest annual boost in the past decade. He noted that annual admission boosts have rarely outpaced inflation and attributed the uncharacteristic hike to the rise in minimum wage. A more likely factor is the declining effect of discount houses as a result of the ability of megaplexes to hold onto popular films longer.
Kartozian said the industry has successfully turned public attitudes around. Perceptions of theaters with sticky floors and high ticket prices are no longer commonplace. Cup-holders and stadium seating are what the public wants, though the latter has provided problems for handicap access — a subject of a current NATO study.
In addressing the current climate of consolidation, he concluded that super chains won’t put smaller operators out of business as longer as the underdog operation keeps pace with new developments. He said that a study also concluded that size would not mean lower rental terms for exhibition giants.
“There is a partnership between distribution and exhibition,” Kartozian said. “The studios want us almost as much as we want them. It’s a mutually beneficial situation as long as the pendulum does not swing too far in either direction.”
ShoWester to Reardon
The opening session also received a boost from the presentation of the ShoWester award to Warner Bros. distribution president Barry Reardon. It marked the first time the prize was given to someone not principally in exhibition, although Reardon began his career with the National Amusements chain and owns a theater in Vermont which is presently playing “Titanic.”
“His word is his bond,” Kartozian said. “He is a true friend of exhibition, a pioneer in the use of the extended length reel.”
Warner Bros. co-chair Terry Semel cited Reardon’s “enthusiasm” and ability to enjoy every day.
Receiving a standing ovation, Reardon was modest about the praise and warm words, crediting co-workers and his family for his success. “It’s a complex business, it’s a ‘we’ business,” he said.
He cited the distribution heads of the other majors as equally deserving and, citing Clint Eastwood’s acceptance of a recent award, said “thanks” and strode off into the sunset, or at least off the stage.