08 Dec Film Fund-amentals: Rose-Colored Glasses

Like any sane person, I hate to keep beating a dead horse. So why does Pamela McClintock at Variety keep propping up the same smoldering corpse. OK, it seems to be her job to keep insisting that Hollywood is having a swell year despite all obvious signs to the contrary. But you would think the swarm of flies covering this beast would at least dampen her enthusiasm.

As you may remember, this past August McClintock did an article explaining how the domestic box office for 2009 was up by just over 5 per cent. Since the report didn’t seem to fit the observable data, I did a quick check of her own figures. It turned out that she had some problems making needed adjustments to these figures, and once the adjustments were made, the actual box office for 2009 was running behind 2008.

Now she is back with a new report, and guess what – the figures for 2009 are fantastic. Through the roof! Hollywood is breaking its own record! Ticket sales have shot to the moon! The money is rolling in and everything is beautiful. I don’t know why so many people are getting laid off and fired at the moment. This year has been great.

OK, let’s put aside for the moment any questions about what they’re smoking at Variety (but it has to be some really serious, heavy shit). As you can see from my previous blog piece on this issue, there are a couple of key figures completely omitted in her analysis. First and foremost, the actual cost of tickets has risen this year by an average of 28.2 per cent. So the current claim of an 8 per cent increase in box office is pretty meaningless once you adjust it for this increase in admission. Due to this sharp increase in the ticket price, the income level should have spiked in a similar manner. There is only one reason why it didn’t. Because the increase doesn’t really exist. The exact opposite is actually the case.

Neither Hollywood nor Variety likes to make adjustments to these figures. I fully understand how they feel. I don’t like to make them either. The work is no fun and the results are often pretty grim. Every time I deal with this issue, I can only think of that line at the end of Planet of the Apes (the original one with Chuckie Heston), when the head honcho orangutan warns Heston about the Wasteland: “You won’t like what you find.” I don’t think the hairy son-of-a-gun was talking about the Statue of Liberty. He was really referring to Hollywood budget figures.

Which is the other problem that nobody is talking about in these reports. The evidence does not support the claim that the box office has actually gone up, but production costs have skyrocketed. The average major movie now costs anywhere from $200 to $300 million. Basically, they’re averaging about $150 to $200 million at the box office (domestic). I’m not really a math whiz, but there’s something here that’s not adding up. Granted, a lot of extra profit is garnered through DVDs (though the sales and rentals are currently in steep decline) and foreign release (which in some cases is actually producing better results than the current US market). But the math still doesn’t really work in any rational, sane manner.

The current situation is pretty straightforward. The box office is basically hovering around a flat line position (at best) and has not received the intended boost from the increase in admission price. In turn, the soaring cost of major productions is not really returning the overall revenue that the studios expected. Oh sure, not every tent pole movie was going to make the kind of high returns they wanted. But the majors thought that the overall average would balance out. The current data simply does not support this idea. Granted, the tent pole movies have fiscal figures with so many zeros attached to them that most calculators blow up trying to do the math. But it’s a safe bet that once these figures are calculated (which we will do at the end of the year), the loss column will be long.

Meanwhile, the majors are slipping, and they seem genuinely mystified by the process. Universal has a long slate of future titles (gee, right through 2012), but they’re also undergoing a form of corporate restructuring that could easily turn the company on its head. Fox is tied to the increasingly strange ways of Rupert Murdoch and what is starting to appear as his gradual unraveling of various key parts of his global empire. Only Warner and Disney appear to be basically sound. So why are there so many rumors circulating at Disney about more impending layoffs and a season of bad tidings? Much the same is true at Warner. My basic hunch suggests that only Paramount and Sony may actually be positioning themselves for survival (by accident if not by strategy). My innate cynicism suggests that they still have a chance to blow it as long as they follow the Hollywood model.

There’s that old Chinese proverb about living in interesting times. It’s more of a curse than a blessing, since the interesting times tend to be filled with chaos and turmoil. Where Hollywood is concerned, 2010 is promising to be an extremely interesting time.