04 Jan Film Fund-amentals: The Box Office Report for 2011

The great thing about financial figures in the film industry is the way they give any analyst a healthy exercise in fiction. The production figure to most major movies is really just a set of rough averages, and often the count is rounded off (either up or down depending upon the wind direction) to the nearest imaginary mark. As for box office figures, well, between the routine under-reporting by the theaters and standard over-estimates from the distributor, the final result is largely an experiment in the theory of relativity.

So the box office figures for 2011 were still being sorted out, along with the various excuses, mutual blaming, general rounds of finger-pointing and bogus claims of victory. For example, Paramount Pictures is already claiming to be the number one film company in gross for the year with $5.17 billion in US distribution ($17 billion global). Of course, they spent something in the neighborhood of $1.4 to $2 billion in production and, most likely, several more billions in promotion and distribution, which means that the US box office roughly paid their costs and the rest became profit thanks to the current generosity of the global market. But it is still a profit (though made the hard way).

This is something you’ll want to keep in mind while looking at the current report from Box Office Mojo of the top ten major box office hits of 2011. Especially the fact that the vast majority of box office is now being generated overseas, often by a margin of 2 to 1 or even 3 to 1. Likewise, the actual rate of return is pretty thin due to the cost of production (a more detailed critique on this and other issues can be found in Mike Fleming’s excellent piece at Deadline.com).

Add to this debate the increasing panic about the box office slump in 2011, and the mix becomes  increasingly volatile. How big is the slump? A good question with lots of different answers. Basically, it is the worse seen in 16 years, though the official estimates are varying anywhere from 3 percent to 6 percent. Unofficially, the sky could be the limit.  Around the middle of 2011, the slump was closer to 12 percent and the overall figures since then don’t support the concept that there has been much improvement. Privately, I have a suspicion that the real slump is more than 12 percent, but I’m still having to sort out a tangled mess of figures. Thanks in part to the ticket price differences between regular screenings, 3D, IMAX, and other variations, distributors have more room to confuse the issue.

But the long and the short is that the Hollywood approach to the tent pole production isn’t working (don’t believe me, just check out a solid article by Oliver Lyttelton at IndieWIRE).  Of course, 2011 is the year that the majors started making noise about reining in the budget and gearing themselves toward a higher degree of financial responsibility. Sort of. Well, kind of, depending on how you define responsibility. Like an addict, Hollywood is planning to deal with negative news by banking heavily on the next round of tent pole productions. They’re attempting to pull back from film budgets of $250 million. But trimming down to $230 million isn’t exactly a major feat of responsible budgeting. It’s more like the alcoholic who decides that he will stick to a steady daytime diet of beer and save the whiskey and vodka for his nighttime drinking.

In contrast is the list of the biggest indie box office movies of 2011. In the number one slot is Midnight in Paris with a global take of $117.3 million. Made for an estimated $17 million, Woody Allen’s return to glory made roughly ten times its, cost which is much more than most major studio productions for the year. Unfortunately, what IndieWIRE doesn’t exactly mention in their piece is that it was all downhill from there. At number 2 on the list is The Descendants, which was probably made for around $20 million (total guesswork, since I cannot locate a budget figure for the film) and is slowly limping toward $40.3 million gross. Number 3 is The Tree of Life,the Terrence Malick meaning-of-life epic that lots of viewers couldn’t figure out. Made for $32 million, it took in a global return of $32.9 million. This could represent the Great Circle of Life, but it sure ain’t a profit.

2011 was a pretty poor year for indie movies in theatrical release. But it was also the year that new markets began to bloom as the VoD business made significant inroads into distribution. The 6th edition of the Deloitte: State of the Media Democracy study is due out at any moment, and advance reports present a clear movement among American consumers (once known as “the audience”) toward digital platforms. The concept of digital distribution has been lurking for years (Peter Broderick has been providing advice on digital distribution longer than some people knew it existed), but 2011 is the year it became a major commercial item.

So 2012 will undoubtedly be the major breaking point between the mainstream media and the indie industry. Hollywood is determined to dig itself in and rigidly stick with the current tent pole model. The indie system has been pressed to the wall and has virtually nowhere to go but online. In many respects, the indie system is better suited for digital distribution than the Hollywood model. Or at least it is better suited for it as long as the Internet remains a level playing field. This is part of the reason why the Stop Online Piracy Act has become such a major battle line. This is also why — regardless of the SOPA outcome — this fight will continue throughout 2012 in one form or another.

And it is another reason why the current divisions between the major companies and the indie system are beginning to resemble a war between heavy dinosaurs and fast little mammals. This war was first fought 65 million years ago. The little mammals survived, so you can guess who didn’t.

-Dennis Toth Copyright (C) 2012 All Rights Reserved