EACH WEEK THE DIRE NEWS keeps pouring in: Box office numbers are up first 12%, then 15% — all this before the summer blockbusters hit the theaters. The public seems to be clamoring to see movies. Any movies. It’s downright amazing.You would think Hollywood’s studio chiefs would be elated, but think again. Sure, they’re pleased that the box office is humming, but they also fear what it portends. The problem, they realize, is that the vaunted media conglomerates that own the studios are all panting for air as their share prices keep plunging. Vivendi Universal last week said it lost $15.3 billion in its first quarter, and that was considered good news relative to the $54.2 billion quarterly loss rung up by AOL Time Warner. So what does all this mean for the studios? Simply this: A couple of years ago, the media titans were complaining that risks were too high and margins too thin in the movie business. Rupert Murdoch was busily shopping his film operation without success. Then the world changed. The TV business crashed. Internet fantasies dissolved. As the “new economy” disintegrated, suddenly the long-disparaged “old economy” seemed a lot more attractive. Over at AOL TW, things like movies and magazines suddenly took on a new glow. The mega-companies clearly had to shift gears, but how? CEOs searching for pedestrian answers to business problems usually turn to the fabled Harvard Business School. Four Harvard prodigies recently won a $20,000 prize from Goldman, Sachs by recommending the following epiphany to AOL TW: Stop emphasizing synergy and focus instead on maximizing the profits of each individual business unit. No kidding. Next thing we know, some kid will tell Jean-Marie Messier to stop giving speeches about cross-promoting “The Mummy.” WHAT ALL THIS MEANS for the studio chiefs, however, is far from amusing. Their mandated revenue goals inevitably will keep going up. Their corporate bosses already are looking at the hot “franchise pictures” like “Harry Potter” and saying, “Make more of these.” Forget all those dicey dramas about grown-ups and their problems. Of course, all this pre-supposes that franchises can be produced on an assembly line like a Ford Taurus. “The movie industry has learned that they’re producing a consumer product,” intones Richard Bilotti, a media analyst at Morgan Stanley. The rub: The success of movie franchises cannot be as pre-ordained as Wall Street seems to think. “Whenever you have a mix of business and art, you can’t deal with it as if it were purely business,” observes Lorenzo di Bonaventura, the astute president of production at Warner Bros., who presides over some of the most imposing franchises. Di Bonaventura caught some flack from his then-superiors when he optioned “Harry Potter” for $500,000, then hired a $1 million writer (Steve Kloves) to adapt it. It was merely “a children’s book,” he was told. IN POINT OF FACT, modest expectations surrounded most projects that are now considered “franchises” — “Men in Black,” “Austin Powers,” “American Pie,” for example. And that illustrates the basic flaw in the lofty stratagems being advanced by the mega-congloms. Most hit movies are inadvertencies, not the result of Harvard Business School blueprints. The common denominator of most of the films honored at the Academy Awards this year was that they were financed by the companies of last resort. No one was lining up to make “The Lord of the Rings” or “A Beautiful Mind” or “In the Bedroom” or “Moulin Rouge.” They were high-risk ventures, not pre-programmed tentpoles. All of which explains why the bountiful box office returns make studio chiefs so nervous. Their bosses, they realize, want big numbers. They don’t just want hits — they want hits that can be replicated and cross-promoted and mass-produced. Success is terrifying, isn’t it.
- Triptyk Studios, New York, New York
- Petrol Advertising, Burbank, California
- Bridgewater Associates, Westport, Connecticut
- Company Confidential, Aspen, Colorado
- Save the Children, Fairfield, Connecticut