MPAA: Specialty films see rising costs

2007 the best year on record for box office

Studio specialty divisions are no longer low-budget arthouse arms: Last year, the cost of production for specialty pics rose a whopping 60% vs. an 8% rise for major-studio titles.

Those were just a few of the eyebrow-raising numbers from the Motion Picture Assn. of America’s annual state-of-the-union roundup, which was released Wednesday.

The MPAA report showed that it cost an average of $74.9 million to produce and release a specialty film in 2007. Production costs spiked 60% over the previous year to $49.2 million, while the average cost of advertising increased 44% to $25.7 million.

By comparison, the average cost of producing a studio film last year was up 8% over 2006 to $70.8 million, while the average cost of advertising was up 4% to $35.9 million.

The MPAA also reported that worldwide box office reached an all-time high of $26.7 billion in 2007.

Domestically, admissions were flat, with moviegoers buying 1.4 billion theater tickets in 2007, the same as ’06.

However, a rise in ticket prices brought domestic B.O. to a record-breaking $9.6 billion, up 5.4% over 2006 (and 3.9% over the previous record-holder, 2002).

Hollywood scored its best summer on record, with four tentpoles surpassing $300 million domestically for the first time ever. The top 10 summer movies grossed an average of $248.3 million, up 23% from the previous year’s average.

Conversely, the bottom 10 performed just as poorly as 2006’s 10 worst.

In a conference call, MPAA topper Glickman stated, “From the threat and eventual reality of a writers strike to the global impact of film theft to concerns over the economy, the film industry faced significant challenges in 2007. But, ultimately, we got our Hollywood ending.”

The rise in the specialty-division numbers reflect the fact that their films are more directly under the purview of the parent studio, with such $30 million-plus titles as “There Will Be Blood” and “No Country for Old Men” pointing up the big jump from the $10 million-and-under budgets of pics a few years ago.

Glickman said that while studios and niches spent more in 2007, the investment seems to have paid off. He also noted that studio specialty films dominated the Oscars, culminating with a best pic win by the Coen brothers’ “No Country for Old Men.”

The MPAA report does not survey MGM or other indie production houses, only the six member studios and their affiliated specialty units. Nor does it factor in that portion of a studio or specialty unit production budget that is provided by private equity money through the various slate financing deals in place throughout Hollywood. That means the average production budget could be higher than reflected in the MPAA report, although Glickman stressed the report provides a fairly good picture.

Many have griped about the glut of product hitting theaters in 2007, but the total number of new films released — 509 — was actually down from 2006, when there were 599 new releases.

Studios released 179 movies in 2007 compared to 203 in 2006; indie companies upped their number, releasing 411 (18 more than in 2007).

Of the top 20 films last year, 80% of the films were rated PG-13 or PG, while there was a slight increase in R-rated titles.

The biggest item on studio ad budgets, accounting for 24% of the total, was spent on “other media,” which includes cable TV, radio, magazines and billboards. Majors spend the second-highest amount (21.8%) on “non-media,” which includes production/creative services, exhibitor services, promotion and publicity, as well as market research. Network TV media buys are the next biggest category.

Glickman highlighted the fact that studios continued to spend more on Internet advertising in 2007, or 4.4% of their ad budgets. That’s a threefold increase over the last four years. He also referred to an upcoming MPAA and Yahoo report suggesting that people investing in content delivery systems for their homes aren’t shunning the multiplex; in fact, they are likely to go to four more movies a year than the average person.

Also, he pointed out that the Web is now influencing consumer film choices almost as much as traditional media: 73% of people do research on the Internet before going to the movies, while about 75% of moviegoers rely on TV and radio.

Seeing movies in a theater remained a favorite American pastime in 2007, with people going an average of eight times in 2007. He said a night at the movies was a more popular outing for American families than trips to theme parks and sports combined, as well as more affordable.

Among ethnic demographic groups, African-Americans were the only demo that went to fewer movies last year.

The average ticket price for an individual in 2007 was $6.88, while it cost a family of four $27.52 on average for tickets. That’s a gain of 5% over 2006.

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