High price of peddling pix

ShoWest abuzz over mounting marketing costs, film flame-outs

ShoWest always features a lot of industry cheerleading, even amid the current financial woes of many U.S. exhibs. This year, there was actually some good news to applaud — or so it appeared.

The confab’s traditional keynote by head Hollywood cheerleader Jack Valenti trumpeted record box office and admissions in 2001. But what was really interesting were newly released numbers that showed the average cost of producing movies actually went down for the first time in years, while the cost of promoting them rose substantially.

Production costs on major-studio pics dropped 13% to an average $47.7 million in 2001, but marketing expenses rose 13% to an average $31 million. As a result, combined negative and P&A (prints and advertising) costs were down 4% to an average $78.7 million.

Ticket fuel

Last year’s admissions rise was fueled primarily by two ingredients: A good start to ’01 from holiday 2000 releases with strong legs that strode into the New Year, and a hot movie summer including a surprising number of sequels that worked.

Hits notwithstanding, it is important to put the numbers into perspective.

Admissions is a raw statistic that doesn’t account for the total pool of available moviegoers. On a per-capita basis, admissions by average moviegoers (those who go five times a year) remains flat, Valenti said. And bear in mind that admissions are just now returning to 1950s levels despite a near-doubling in the number of screens in the past decade.

Production costs, meanwhile, have dropped largely because corporate parents have been leaning on studios to greenlight fewer of the priciest tentpole pics.

The likes of “Ali” and “Pearl Harbor” will probably always be made, especially thanks to co-financing and foreign money (witness “Terminator 3”). But cheaper genre pics, especially younger-skewing comedies and urban pics, are still in a robust cycle and studio chiefs are bolder than ever about finding new ways to do more with less.

If cost-consciousness has an ill effect on films’ artistic quality, that’s not so much of a problem anymore with the advent of 3,000-playdate releases made possible by megaplex building.

Pics may die quickly after their opening weekends, but they now enjoy a much better shot at opening well because of super-saturation releasing. “Pearl Harbor,” for example, grossed nearly 40% of its total cume in three days.

“It’s not about the movies being bad — though they were,” says New Line marketing chief Russell Schwartz, referring to last summer’s crop. “It’s that more screens are being taken and more people are seeing the movie earlier. This is something we have perpetuated. The question is, how do we cope with the costs?”

The answer, in most cases: Keep spending and hope for a hit. Marketing outlays are likely to grow unabated, thanks to a heavy reliance on TV advertising, which can suck up 80% of a total marketing budget.

Simply put, studios believe they have to shout louder than the next guy if they’re going to open pics successfully in a crowded marketplace — regardless of how much went into the production.

“It doesn’t take much money to make a Big Mac, and they market the heck out of that,” MPAA staffer Rich Taylor said after Valenti’s speech.

But if a fast-food approach to films works wonders for a pic’s opening-weekend grosses, it can’t sustain movies beyond that, Valenti cautioned at ShoWest.

National Assn. of Theater Owners prexy John Fithian objects to the “bizarre tendency” of front-loaded campaigns because it winds up hurting exhibs, who see more revenue the longer a film stays in theaters.

For a business deriving nearly one-quarter of its revenues from concessions, however, all that foot traffic in the first weekend isn’t all bad. And the total of 1.49 billion admissions was almost 5% ahead of the previous year and better than even “Titanic”-aided 1998 levels — an encouraging feat given the nation’s embattled state.

“A lot of people thought that after Sept. 11 the movie industry would go into the tank,” Valenti said in his speech. “The opposite has happened. Instead of being confined in their homes, (Americans) went out to be entertained.”

The MPAA admissions comparisons use a slightly higher B.O. total for last year — $8.41 billion — than in some calculations. But org’s average domestic ticket price calculation of $5.65 is roughly in line with previous estimates.

NATO’s Fithian notes many foreign territories also marked admission gains last year, with Japan seeing the highest number since 1986 at 160 million, and France and the U.K. showing gains of 10% and 9%, respectively.

“Exhibition depends on good movies and good movie houses, and not on the state of the general economy,” he says. “In a year of worldwide recession, a record number of movie tickets were sold in many territories. That trend is continuing in 2002.”

Fithian lauds a lower industry screen count in ’01: a total 35,459 screens and roughly another 3,000 in Canada. That compares with a recent U.S. high of about 37,000 screens and a comparably higher number in Canada, as North American exhibs conducted a furious competish to roll out new megaplexes and expand individual marketshare.

“Admissions went up and screen count went down; taken together, those trends are fueling an economic recovery in American exhibition,” the NATO topper says. “Despite the record box office numbers and the improved financial condition of our companies, exhibitors must move forward cautiously. We must learn our lesson and not return to the days when we built on top of each other and failed to close older properties fast enough.”

(Dade Hayes contributed to this report.)

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