Film Fund-amentals: First Quarter Report

Somewhere in Los Angeles, an army of spin doctors is working hard to present the current box office report in a positive light. After all, just last weekend the movie Hop played much better than anyone in their right mind thought possible. So maybe there is a silver lining out there somewhere.

Or maybe not. The figures for the first quarter of 2011 are still rough, but first indications are that the box office is down by at least 20 percent. Though some of this drop is artificially caused by the insanely high box office from Avatar (which was still playing strong a year ago), there is definitely a problem at the theaters. The kind of problem that reminds us that if the movie industry were a real business, heads would roll.

But since it isn’t exactly a real business, the blame game is in full swing and the fault is not with anyone who runs the industry. No way. In fact, it’s the audience’s fault. The lousy penniless jerks are not willing to pay top dollar for the crap that Hollywood makes. Nooooo! They just sit around the house watching Hollywood crap on Hulu or Wooloo or whatever they call it. Of course that also means that Hulu is doing extremely well with a newly projected 2011 profit mark of $500 million.

Which explains the other odd phenomenon of the first quarter. Everybody is now dashing into digital distribution. Despite an extremely hostile reaction from the National Association of Theater Owners, four major Hollywood studios will start a limited run of video on demand via DirecTV and Comcast. Meanwhile, Miramax is preparing to sign for a five-year arrangement with Netflix. Of the major companies, only Paramount is still resisting the lure of VoD distribution. Officially, they are concerned about piracy issues. In reality, Paramount’s parent company, Viacom, is deeply involved in a variety of developments with VoD (even though they’re still obsessed with trying to sue YouTube). So Paramount’s resistance is a tad bogus (though it plays well to the theater owners who are getting gob-smacked no matter what).

On the other hand, almost everybody in Hollywood is ganging up on Netflix. Most studio executives are both contemptuous and in fear of the digital industry (the infographic “American Movie vs. Tech Industry” from the Alltop website is extremely accurate on this point). Likewise, Hollywood is desperately trying to figure out how to deal with major changes in the audience demographics due to age and ethnicity.

The changing audience demographic may prove to be a bigger problem than even the digital divide. The current film industry is hopelessly locked into the young male model. Most notably, the business is focused on white males between the ages of 12 and 25. OK, they want girls around the same age, but basically the hardcore focus is on the young male audience (they just assume that the girls come along for the ride). But current studies have shown that the young audience (especially the teenage audience — the digital effect hits hardest in this zone) is dropping, while the older audience is staying about the same (in some cases, slightly rising). The result is that the American movie audience is aging. Hollywood knows this. They’ve been talking openly about it. They are trying to think in this new direction.

Which is why Disney has picked Jennifer Garner to play the Agatha Christie sleuth Miss Jane Marple. They are pursuing the Christie material because they know the core fan audience consists of adult readers (and PBS viewers) who are middle-aged and up. Disney seems to have a faint impression that the character is suppose to be “mature” (OK, she’s supposed to be somewhere in her 70s). Jennifer Garner is 38 years old. By Hollywood standards, she is old. They see this as a win-win bit of casting that will play really well to the… well, teenage boys between the ages of 12 to 25. The demographic model may be crumbling, but Hollywood just can’t break out of some old habits.

But also the ethnic makeup of the audience is changing. The African-American audience has previously been viewed primarily as a market of “Urban” gang-banger flicks. Increasingly, it has become a surprisingly strong market for comedies and family dramas. Love him or hate him, Tyler Perry has steered the Urban market into diverse directions, and Hollywood is still trying to figure out how he does it (here’s a clue: He has an audience and delivers the goods).

The Hispanic audience is also rising fast. At the moment, the effect is most noticeable in the realm of TV (we don’t even have cable and still get several Spanish language stations). Very soon, this is going to be a major force in movie demographics. It already is in major parts of the Southwest. A careful study of the 2010 U.S. Census Report is a must for every studio executive. But at the moment, they’re not paying any real attention.

So the first quarter of 2011 is over, and the results indicate that the current state of rampant silliness as a business model will continue in its bizarre downward spiral. At least for now. Thank goodness the film industry is not a real business. After all, in the real business world some of these companies would be going broke about now.