Studios pull back on marketing but not production
LAS VEGAS — The major studios have finally made a dent in the soaring cost of marketing.
According to industry data released Tuesday at ShoWest, the cost of selling movies was reduced 12% last year after a whopping 28% increase the year before.
Production costs, meanwhile, were down slightly last year, which meant the cost of making and selling the typical Hollywood picture was still a formidable $98 million.
All this was revealed by MPAA prexy Dan Glickman, attending his first ShoWest confab.
The bottom line: The costs to produce and market films dropped 5% in 2004 to $98 million per picture, according to the org’s annual economic report. That’s slightly lower than last year’s $103 million, the highest on record.
Six months into his tenure, Glickman’s presentation of the industry market statistics marked his highest- profile appearance since replacing Jack Valenti.
Negative costs held steady at an average of $63.6 million per film, down a tad from $63.8 million in 2003.
Slight B.O. bounce
At the box office, results were mixed for the year, with grosses growing by just 0.5% to $9.54 billion while the number of admissions dropped 2.4% to 1.54 billion.
“The bottom line is the industry is healthy,” Glickman said in a press briefing on the report. “We’ve had growth — not radical growth, but the trends are positive.”
Though admissions dropped in the U.S. for the second straight year, National Assn. of Theater Owners president John Fithian noted 2004 marked the third year in a row that more than 1.5 billion tickets were sold. “The last time we did that was in 1959.”
He also applauded Hollywood’s production of family-friendly fare, noting that PG-rated films — bolstered by hits such as “Shrek 2,” “Harry Potter and the Prisoner of Azkaban” and “The Incredibles” — outgrossed R-rated pictures in 2004 for the first time in decades.
“PG films are much more important to our members’ business than R-rated films,” the NATO topper said, urging studios to release fewer R pics.
“I’m not saying we don’t need R pictures,” Fithian said. “We just don’t need 500 of them.”
But he was also quick to praise the biz generated by R-rated pics like “The Passion of the Christ” and “Fahrenheit 9/11.” “Controversy is good at the movie theater,” he said.
Glickman noted domestic grosses have exceeded $9 billion three years in a row and added that box office has increased by $6 billion over the last 20 years.
He also pointed to figures showing 28% of Americans go to the movies at least once a month, up from 25% the previous year.
In a year marked by the success of films like “Passion” and “Fahrenheit” that drew nontraditional auds, the MPAA reported those who said they never see a movie in theaters dropped by 3% to 24%.
The average cost of a movie ticket was $6.21 in 2004, up 3%. “Part of the reason we believe admissions are strong is that the ticket price remains affordable,” Fithian said.
The NATO topper did find reason to worry about the increase in movie screens again in 2004 to 36,652, up 657 from the end of 2003. Harking back to the wave of bankruptcies that swept through the U.S. exhibition biz a few years ago, Fithian called the increase “not incredibly dangerous but slightly ominous” and urged exhibs to close down their aging theaters as they build newer and better houses.
Cuts in studio marketing expenses came across the board. Television drove last year’s big gain, but network TV spending, the studios’ biggest single marketing cost, was down 0.7%, while spot TV was down 2.4%. Newspaper spending nudged down 1.1%. Costs associated with trailers and the Internet, however, crept up a bit.
Spending per picture on specialty films by the studios dropped even more dramatically. The MPAA figures showed the total studio cost (production and marketing) of a film released by divisions like Fox Searchlight, Sony Pictures Classics and Miramax dropped 40% last year to $39.6 million, down from $61.6 million in 2003.
The decreased costs reflect the slower activity at Miramax in 2004 springing from its conflicts with management at the Walt Disney Co.
Production spending was cut the most dramatically on these specialty films, from $46.9 million per film in 2003 to $28.2 million in 2004. Marketing costs fell to $11.4 million per pic from $14.7 million.
Aside from his No. 1 priority — combating film piracy — Glickman avoided grand statements about the way Hollywood does business, leaving it to Fithian to make most of the analysis. In addition to lauding the production of family films, Fithian expressed caution about the impact of shortening windows between theatrical and homevideo releases.
At times, Glickman seemed much more comfortable discussing the lobbying aspects of his MPAA gig than industry issues, largely deferring to Fithian on onscreen advertising or the box office. At the press briefing, Glickman repeated the claim he made on Monday that 2004 was the first year ever that foreign box office surpassed domestic receipts, only to have Fithian quickly point out his error. (An MPAA rep later clarified that Glickman was referring to grosses for member studios, but said even in that more limited category, foreign grosses had surpassed domestic before as well.)
While Glickman brings a very different style to his job than his predecessor, he also brings different expertise. One issue on which he said he will be vocal in coming months is winning access to China for Hollywood films.
“China is a tough nut to crack,” Glickman said. “My experience (as secretary of agriculture) is you need both a carrot and a stick approach. I intend to be working with our government to responsibly use our stick.”
He added, “Now is the time to strike and I hope to be in the batter’s box — and not strike out.”
(Dade Hayes in Las Vegas contributed to this report.)