As big-budget blockbusters dominate cineplex screens this summer, veteran entertainment attorney Ken Ziffren has a warning for the studios churning them out: making money won’t be easy.
The Ziffren Brittenham partner, who doubles as film czar for the city of Los Angeles, told attendees at Beverly Hills Bar Association’s ninth annual state of the entertainment industry address that when “net money” is calculated beyond just box office returns, the odds of profitability aren’t encouraging.
“What’s scary last year is if you do an analysis of all those $100-million-and-up pictures, two to one of them didn’t make a profit,” said Ziffren at the event.
However, Ziffren noted that the studios are as focused as they are on expensive movies because the lower-budget titles have challenging economics as well. “The majors are hellbent for good reason on creating franchises,” he noted. “If you run the numbers, what you see is the profitability of the movie slate is not dependent on what happens in the middle or even the lower end.”
Ziffren ticked off key statistics that show how difficult the studios are finding the box office in 2017, noting a 3-4% decline year-to-date versus 2016, and a more pronounced 12% drop in summer revenues. He said the challenges will only mount for theatricals as Netflix and Amazon ramp up their motion picture business, which he estimated could generate 75-100 titles per year.
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“Picture a Friday night at Netflix,” he said. “That can really hurt the theaters and the majors. What do they do about it? Not much they can do about that. other than make better pictures, and we’re not going to get into that.”
With home-entertainment revenues in free fall, studios are facing mounting pressure to get premium VOD off the ground. Ziffren was critical of the minimum of PVOD experimentation the studios have engaged in over recent years unilaterally. “The only thing you don’t do with major theater circuits is have a test, “he cautioned, adding a prediction that multiple studios will eventually get on the same page. “You either go headlong into it or you stay away.”
Ziffren address a broad range of entertainment-industry issues including the recent move by Disney to get aggressive on the OTT front, which he predicted will prompt studio copycats.
“That movement by Disney in this regard I think will trigger some similar kind of thinking on the part of other major studios,” said Ziffren. “But it would not at all surprise me that 2-3 years from now we would see a Warner Bros. action channel , which would probably fit with the broadcast window, so they would not be selling to cable in that window, they would be selling in effect to themselves.
“Wake up, auditors,” Ziffren warned with a smile.