Oz the Great and Powerful

Even as the biz prospers financially, blockbuster dependency stifles innovation at the majors

Rupert Murdoch is not an affectionate man, but he loves newspapers. As he prepares for the split of his newspaper publishing holdings from the rest of his empire, the Murdoch decree was that the publishing side would be debt-free as it goes solo with some $2.6 billion in initial funding.

(From the pages of the April 2 issue of Variety.)

Murdoch’s generosity prompted me to wonder: Would any of his rival media conglomerates spin off a movie company (rather than a newspaper one) with a handsome capital infusion? Such an entity, if well managed, would likely yield a far healthier return than the newspaper business.

Except that the media hierarchs by and large have lost their passion for the movie business. Talk to any of them about the state of the industry and you hear a lot of grumpy dialogue.

Their mood is reflected in a long article in the Economist titled “Split Screen,” which quotes several CEOs in setting forth the predictable list of gloomy projections: Revenues are flat, costs are rising, the “business model” is broken. In short, the movie business has lost its luster — at least to the major corporations entrusted to own them.

All this ignores a few assorted facts, such as: Box office last year was at record levels, overseas audiences are expanding, theater multiplexes are springing up, the downturn in homevideo is stabilizing, the VOD market is growing and Netflix, Amazon and other entities are injecting new revenue streams into the mix.

As Wall Street analyst Michael Nathanson smartly pointed out in a recent Nomura research report, the cuts that major studios have made
in release schedules and overhead have much improved their bottom lines. Looking at film activity at Time Warner, News Corp., Disney and Viacom, he noted that film revenues dropped by $3.7 billion from 2007 to 2012, but operating costs also dropped $3.4 billion, which means that profit margins now exceed 2007 levels.

I find that the principal source of apprehension among the studio czars, when pressed, is that they’re emotionally locked into a tentpole dependency — a film genre that not only defies cost controls but also seems to be running out of inspiration. In short, superhero fatigue is setting in. “Can the major studios still make magic?” Manohla Dargis asked in The New York Times recently, arguing that recent tentpoles like “Oz the Great and Powerful” embodied “an infuriating jumble of big money, small ideas and ugly visuals.”

More and more, the studios seem to be desperately scrounging for tentpole material — the stuff that would guarantee automatic public awareness. But the inventory of renowned comicbook titles has been all but exhausted and some of the existing franchises like Harry Potter, Batman and Spider-Man have run their course.

Execs like Sony’s Michael Lynton and Disney’s Alan Horn have fought valiant but frustrating battles to bring down the escalating costs of vfx but acknowledge that it’s a losing battle. Directors of blockbuster films keep pressing for budgets that are fatter even as their storylines become thinner.

The “fun factor” in the film business has largely been lost of late. Michael Eisner, who had a legendary reign at Disney, was a man who greatly enjoyed himself and who tried to make having fun a cornerstone of his management philosophy. His generation of CEOs demonstrated a passion for filmmaking and filmmakers. Significantly, Eisner is planning to get back into the film business.

It was almost a century ago when Louis B. Mayer dedicated his studio in Culver City. His “dream factory” had little going for it except for his big dream. His assets amounted to less than $100,000; there was not even a Goldwyn in Metro Goldwyn Mayer because Sam Goldwyn had defected. Will Rogers, the guest of honor, was an hour late because he’d forgotten about the ceremony.

It has been said that an era ends when it runs out of dreams. Could that be said about today’s Hollywood?

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