Pic rocks the Warners boat

'Poseidon' fizzle doesn't bode well for studio's event pix

One tentpole does not a studio make — or break. But the failure of Warner Bros.’ “Poseidon” to launch at the U.S. box office points to vulnerabilities in the studio’s bold tentpole strategy.

More than any other industry chieftains, Warners chairman and CEO Barry Meyer and prexy-chief operating officer Alan Horn have been aggressively gung-ho about event films, in the belief that expensive megapics with global reach hold a huge upside in the form of worldwide box office returns and ancillary revenues.

While other majors use a similar strategy, the difference at Warners has been in scope: Up to four or five tentpole event pics per year, a number that would send execs at other studios running for the Hollywood Hills.

For the most part, it’s a blueprint that has served Warner Bros. exceedingly well. The Harry Potter franchise alone has generated billions of dollars. For the first time in its history, the studio ended last year No. 1 at both the U.S. and foreign box offices and No. 1 in homevid. The last time a tentpole tanked was in the fall of 2003 with the bow of “Looney Tunes: Back in Action.”

And in the Time Warner media empire, where management means everything, Meyer and Horn are respected as cool-headed pros.

But the tepid U.S. bow of “Poseidon,” directed by Wolfgang Petersen, has brought into question the extent to which event pics can be mandated and manufactured. If they fail, they fail big.

There are other rumblings for studio’s parent company Time Warner. Some major institutional shareholders may still favor the idea of splitting Time Warner into three parts. The volatility of the Warners tentpole business could exacerbate these tensions.

Horn, for his part, regards the studio’s tentpole operations as “stunningly successful. The suggestion that the experience we are having with ‘Poseidon’ — which I’m still not willing to concede, because it still hasn’t opened in many territories — would affect our tentpole strategy is silly,” he says.

Institutional investors, Horn says, “want to know about quarterly earnings. We have a big company here. They aren’t asking about Poseidon.”

It certainly cushions the blow that “Poseidon” was 50% financed by Virtual Studios, one of the private equity funds on which Warner leans heavily to finance its slate.

But the “Poseidon” opening coincided with the departure of Virtual topper Benjamin Waisbren, though sources at Virtual denied his exit had anything to do with the pic’s performance.

The seagoing film is the first sour note for Warners’ private equity funds, a group that also includes Legendary Pictures, which is backing half of “Superman” and penguin pic “Happy Feet.”

And that money is not about to dry up. Just about every picture on Warners’ upcoming slate, from small to large and everything in between, is being co-financed by Legendary, Virtual or longtime partner Village Roadshow.

They have placed their faith not only in Warners’ tentpole system, but also in the studio’s midrange pics.

“Poseidon” took in a mere $22.2 million at the U.S. box office on opening weekend; it cost at least $150 million to make and easily another $40 million to $50 million to market Stateside.

“I’m not willing to concede ‘Poseidon’ as a failure of great magnitude, but I will agree that the results in the U.S. have been very, very disappointing,” Horn says. “But it doesn’t for one second change my perspective. We will lose money, but less than we have on lower-budgeted films. It will be an acceptable loss.”

There’s still some soul-searching under way on the Warners lot about how the remake of the 1972 prototypical disaster movie “The Poseidon Adventure” went so far off course.

That debate will become much more rancorous should the studio’s other tentpole pics this year, “Superman Returns” or animated “Happy Feet,” underperform. Some executives also consider M. Night Shyamalan’s “Lady in the Water” a tentpole, and there are worries inside the studio about how it will play.

“You ask yourself: Is four or five tentpoles too many? What went wrong? Should you listen to your gut more?” says one Warners exec. “On the flipside, there’s nothing like a tentpole to utilize the whole of Warner Bros. It’s quite something to see. It galvanizes the whole company.”

The “Poseidon” debacle comes as the studio finds itself at a crossroads with its specialty division. Notwithstanding the strong perf of “March of the Penguins,” Warner Independent Pictures got off to a rocky start because of conflict between Warner Bros. Pictures prexy of production Jeff Robinov and Warner Independent Pictures prexy Mark Gill. With Gill out, Robinov now has a chance to shape the unit more to his taste.

The studio already has lined up much of its slate for 2007, including “Harry Potter and the Order of the Phoenix”; Roland Emmerich’s “10,000 B.C.,” a project that had been in turnaround at Sony; and the sequel “Ocean’s Thirteen.”

In remaking “Poseidon,” Warners was hoping to replicate the success that Fox enjoyed with the disaster pic “The Day After Tomorrow,” which took in $542.7 million in worldwide box office receipts. Horn believed the combination of Petersen directing and today’s special effects would make “Poseidon” a winner.

But “Poseidon” had script problems, and the project went through numerous rewrites. “They couldn’t get a cast, and the script was the reason,” a Warners insider says.

With so much at stake, tentpoles put extra pressure on studios to meet release dates, and after a certain point there is little flexibility to move projects around, or scrub them altogether. Last week, Fox did just that with its big-budget “Used Guys.”

“Clearly what happened is (Warner Bros.) needed another tentpole,” the executive says. “They were rushing to get it done.”

Horn, however, says that if there are questions to be asked about why “Poseidon” didn’t work, they have less to do with the production process than with the timing of the movie’s release. Warners has always believed “Poseidon” would play better overseas than here. Petersen’s “Troy,” for example, made far more internationally than domestically.

But because of the World Cup, Warners has delayed opening “Poseidon” in many foreign territories by several weeks. Now, Warners faces the possibility that the negative press associated with the film’s lackluster bow in the U.S. could dent biz overseas.

“Poseidon” also has sparked conversations around town about the perils of remakes. NBC’s reworking of “The Poseidon Adventure,” for example, garnered low ratings when it aired last fall.

“It is a volatile business,” Horn says. “One cannot use that term lightly without taking into consideration that some movies will fail. The problem is that when event pics fail, the press wants to write about them, even though we’ve lost more money on smaller movies that the press never wrote about.”

As an example, he cites the 2004 Olsen twins starrer “New York Minute,” which cost $30 million to make but took in just over $14 million at the box office. It underscores one of the arguments for the tentpole strategy: A big pic has a much better chance of making money in a wide array of revenue streams.

Over the years, WB has pleased Time Warner shareholders with the billions it has reaped from tentpoles such as “The Matrix” trilogy, Harry Potter and epics like “Troy” and “The Last Samurai.”

But when a tentpole tanks, the losses look staggering on paper. “Looney Tunes” cost $80 million to make but grossed just $21 million at the domestic box office.

“Poseidon” also comes on the heels of a shareholder revolt led by Carl Icahn to split Time Warner. Although it was resolved well in advance of the company’s annual meeting on May 19, some institutional shareholders still see the benefits of a possible breakup.

Time Warner spokesman Ed Adler says the studio’s tentpole mandate is not likely to figure into any such discussions. “Not one of our shareholders have come to us with that point of view,” Adler says.

But the studio, like many other majors, is under a new layer of scrutiny. The flood of private equity money into Hollywood has helped studios alleviate risk, but it also has created a new constituency of anxious investors.

Warner Bros. has been the most aggressive in inking co-financing deals with these new funds, enabling the studio to make more movies and at the same time meet budget ceilings imposed by parent Time Warner.

As much as the studio places its hopes in event pics, executives say the strategy is “balanced out” by a diverse slate of midrange productions.

Upcoming releases include Martin Scorsese’s cop drama “The Departed,” Marc Lawrence’s romantic comedy “Music and Lyrics By…,” “The Assassination of Jesse James by the Coward Robert Ford” and Steven Soderbergh’s black-and-white “The Good German.”

The studio also plans to ramp up its comedy lineup, after having enjoyed success with the release of last summer’s “The Dukes of Hazzard.”

Meanwhile, big Warners is working to revamp Warner Independent. Robinov wants the specialty arm to serve as an incubator for directors, whether for favored studio helmers hankering to do a passion project or new talent who could eventually do work for big Warners.

But the biggest change at WIP is in the way the division will be managed. Gill bristled at having to vet every decision with Robinov and wanted more autonomy. In installing his top lieutenant, Polly Cohen, to run the division, Robinov will have a direct conduit to the specialty arm.

Although Cohen has virtually no indie experience, she is widely respected, in part because of her deft management of some of the studio’s top grossers, including some of the “Harry Potter” pics and “Superman Returns.”

As much as changes are being made to its indie arm, though, Warners will continue to be graded on the performance of its tentpoles.

There will be even more pressure on “Superman Returns” to perform when it is released next month, not only for the expectations that are being placed upon it but because it cost well more than “Poseidon.”

All told, Warners has spent $260 million on the Man-of-Steel pic — $200 million on the production budget, another $20 million it will get back in tax incentives from Australia, where the pic was shot, and $40 million in prior pay-or-play deals. Warners has high hopes for Singer’s pic and believes it will post strong returns for the studio.

For now, Horn is ready to take his lumps over “Poseidon.” “If there’s someone to blame, it’s me,” Horn says. “I’m right here.”

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