January 3, 2003

THE LESSONS OF 2002
Jump to Part II

Let’s start with the most important lesson of all… the one that is the most easily forgotten… Hollywood doesn’t operate on a continuum.  (You thought it was “Nobody Knows Anything.”  Do I look like Bill Goldman?) 

Rules change with the movies… everything changes with the movies.  It’s about the movies, stupid.  It’s always about the movies!!!

We are in an era that is becoming remarkably similar, ironically, to the Hollywood studio system of the past.  Many of the details are very, very different.  But the commoditization of films feels like a blast from the past.  People used to go to the movies and the star system did have an effect on business, but most films are filler, not doing too badly or too well, grist for the mill. 

Of course, in this era, no one sees anything as grist for the mill.  Every film is going to be THE film.  Every film could break out or crash-n-burn.  But realistically… nah!  If a studio releases a dozen films over the course of a year, three will hit, three will stiff and six will be right around breakeven.  A “great” year has five hits… a “disastrous” year has just one. 

We are all so busy tracking everything all the time, it’s easy to forget that one or two films are really what will make the difference for each studio.  Sony’s balance sheet without Spider-Man would look quite different.  New Line’s story is Lord of The Rings, just as Warner Bros.’ is Harry Potter.  And, amazingly enough, it looks like the black ink on Miramax’s balance sheet will be dependent on the profits from LOTR this year, as it was last year.  One movie controls them all, indeed.

But it’s hard to maintain perspective.  Every weekend, tens of millions of dollars are spent to convince us that this weekend’s movie is The One, and the marketing effort is usually a spin on success-based trends from recent years.  Entertainment Weekly is not wrong when it cites trends when they see three of something happening.  What’s wrong is that people in the industry, and who follow the industry closely, remain so unimaginative.

What’s the great lesson of My Big Fat Greek Wedding?   Here you go… there is an audience out there for sweet, old-fashioned, loving, family comedy.  You want to know what lesson is not there?  The lesson that a sweet, old-fashioned, loving, family comedy will make $225 million or $200 million or $150 million again anytime soon.  Ain’t gonna happen.  Is the TV series from this film going to succeed?  It will depend on the quality of the TV show.  Period.  Exclamation point.  The advantage that MBFGW: The Series will have is that it will be sampled.  It’s not going to show up and get a 7 rating. But if the show isn’t good, it won’t survive.  And if it is, there is a good chance that it would have with or without the movie.

You want a lesson from 2002?  Marketing departments have learned to exploit pre-existing brands brilliantly.  There were 22 films that opened with more than $30 million this year.  22! 

Now here is the tough question for you, dear reader… is that a lot or a little? 

It certainly seems like a lot at first glance.  But nearly two-thirds of last year’s weekends (34) did not have a $30 million-plus opener.  Talk up My Big Fat Greek Wedding all you like, but of the likely twenty-four $100 million movies that were released this year, all but six opened over $30 million.  (Yes, four films that opened over $30 million will not hit $100 million domestic - Blade II, The Scorpion King, Red Dragon and Panic Room.)

So what lesson is Hollywood supposed to take from all of this?  22 is a lot of $30 million openings.  Let’s say that next year, there are going to be 25.  Is that what this industry is all about? 

There were 56 movies last year that grossed between $30 million and $100 million.  Only 4 of them opened with less than $10 million.  Two of the films (One Hour Photo and MBFGW) platformed and the other two (About A Boy and Gangs of New York) started with relatively small screen counts.   There’s a lesson… don’t try platforming in this era, unless you are following an Oscar qualifying run with a January expansion a la Miramax.

Another 57 - 60 films will make between $10 million and $30 million domestic. 

Obviously, the bigger the gross, the less the chance that the film will be a financial failure.  But there are fiscal failures at every level… and financial successes as well.  The determining factor for real success, and not just hype success, is profitability.

 
PART II

The lesson that Hollywood needs to learn… and not just at the end of 2002… is that we are living and working in a world not dissimilar from Las Vegas.  But before you get that cat-who-ate-the-canary grin on your face and giggle, “The house always wins,” think again.  What is wrong with the film business – and it is so ironic, given the massive numbers of accountants and lawyers who line the hallways of the studios – is that there is no house in this scenario.  Everyone is a gambler… everyone is a john… everyone is a sucker.

In Las Vegas, they know exactly what the game is.  Their take is generally less than 10 percent of what is gambled.  That number shifts, hour-to-hour, day-to-day.    But it always works itself out.  The casinos are big machines.  They are designed, like the film business, to make you think that there is gold in them thar’ tables.  People will win big.  People will lose big.  But at the end of the year, 10 percent… 10 percent… 10 percent…

When you talk movie numbers with people in L.A., they often rail on about how the studios are lining their own pockets in the process, taking insane expenses off the tops of budgets that are little more than devices to screw percentage players out of ever seeing a dime on even the most profitable movies.  And I say… who cares?

Obviously, if you have monkey points on a movie, you care a lot.  But it is a micro issue… the lives of individuals.  The micro lessons are the provenance of lawyers and agents.  Hollywood is sucked into the game of looking at everything on a micro scale far too often.  After a few years in control of a studio, most studio chiefs have that problem in a big way… they get possessive of the machine and start to think that they are visionaries.  But the simple truth is, vision is 1% or 2% of what is going on with studio heads.  And yes, that couple of points is enough to make heroes and villains.  But it’s not the point. 

Studio “overhead” is spent.  Yes, there are very well paid executives getting their piece of the action in this convoluted, insane system.  But they are the same as furniture, the same as camera cranes, the same as real estate.  It’s not to say that their creativity doesn’t matter.  It is that the wild swing of enthusiasm, like a blackjack table, always comes back into balance.  Always. 

What was Jerry Bruckheimer’s most profitable film last year?  Not the $199 million domestic grossing Pearl Harbor, but the $109 million domestic grossing Black Hawk Down.  His most profitable film in 2000?  Remember The Titans. 

THE LESSON OF 2002 THANKS TO SONY WAS:  You Can’t Build Your Balance Sheet On A Bunch $100 Million Budgeted Movies.  Spider-Man was the dream of every studio executive ever born.  They would have been thrilled had the movie done $250 million.  But $430 million?!?!  A wet dream.  And then, the wet blankets… Stuart Little 2, Men in Black II and XXX.   One movie, about $180 million in costs all-in and about $400 million in profits.  Three movies, about $450 million in costs all-in and about $40 million in profits.   From a 220% profit on one tentpole to just 70% on a summer of tentpoles.  Now, a 70% return in the movie business is still something to crow about. 

The lesson to walk away with – If you have more than two $100 million budgeted movies on your schedule in one year, you are doomed to end up eating it. 

Another lesson – Don’t make the image deal over the fiscal deal.  There was nothing brave or inspirational about greenlighting Men in Black II.  Only an idiot could really say a $190 million domestic grosser underperformed.  However, even using the most generous guesses on the accounting structure for the film, the breakeven had to be somewhere around $250 million - $300 million worldwide.  So where was the upside?  In perspective, they got away with it.  But why would you invest hundreds of millions of dollars just so you can “get away with it?” 

A decade ago, you would greenlight a MiBII in order to boast your studio’s profile.  Ironically, the best example of that remains Tri-Star’s even more unrecoupable investment in Hook, over a decade ago.  In the warp of time, the results were almost exactly the same.  Hook’s $120 million put it in sixth place for the year, back when T2 (also released by Tri-Star) was the top grosser with $205 million.   MiBII will come in at #8 or #9 in a world where there will be seven or eight $200 million-plus movies.  Both films had huge gross players.  T2 was the summer tentpole and Hook was the holiday tentpole.  But the most profitable film for Columbia/Tri-Star was City Slickers, the relatively inexpensive cowboy comedy from Castle Rock (a.k.a., the people who brought you Pluto Nash). 

THE LESSON OF 2002 THANKS TO WB WAS:  You need to protect your brand(s).  It’s hard to argue with the idea of WB in recent years, which has been to act as a releasing company for a number of producers who find financing elsewhere, limiting exposure and increasing the possibility of profit, while putting out a modest slate of in-house financed product.  The trouble is this… people start to see the WB symbol and cringe, considering the load of crap that has come out with the WB name on it.  In L.A., we may understand that Pluto Nash is not really a WB film.  But in Buttfuck, Nebraska, all they see is the big shield.  Additionally, the massive numbers of films on the release schedule has stretched the marketing, advertising and promotions departments too thin and unless a film is given Matrix or Harry Potter-like attention, it’s hard to break through. 

Again, it is not a continuum.  There are only so many bullets in the gun.  It’s not a slight on the talents of the people who are making the effort – or even against the ones who are not.  Getting a guy to engage sexually three or four times in one night may be a challenge.  Getting him to engage a dozen times is a virtual impossibility.  

And there is one more “brand’ issue.  WB owns Superman, Batman and many other cartoon franchises.  The current effort to resurrect – on the big screen – the classic WB animation characters is great.  And would be in any market.  Likewise, Superman and Batman are cash machines in any market.  It doesn’t require a Spider-Man to tell you that.  WB was the leader in superhero franchises for a while.  And now, they are in stasis.  Get back to work, folks.  As terrible a movie as Batman & Robin was, it didn’t kill Batman off… it just dented the franchise a little.  People aren’t dumb.  They understand change.  Superman and Batman are gold mines.  Spider-Man is a gold mine.  The Hulk should be a gold mine.  A modern Wonder Woman could be a gold mine.  Do it. 

And one more superhero note: groups are more difficult.  If Fox wants to maximize profits, it would spin off a Wolverine movie, perhaps with cameos from some X-Men, but send Wolverine off on his own.  A group comic is great for comic people.  But as a film, it creates a self-narrowing market.  Comic Book Movie is writ large.  But give the world Hugh Jackman as a savage action hero who happens to have claws and there is a real chance that they will build the same kind of personal relationship with him that they have with Superman, Batman, Bond, Indiana Jones, etc.  In the original Star Wars series, only one character used The Force throughout.  Harry Potter is The One.  So is Neo.  Think about it.

THE LESSON OF 2002 THANKS TO UNIVERSAL WAS:  Quality and good marketing doesn’t always spell success.  Four films in my Best of 2003 group came out of Universal’s summer.  Three of the four made about $120 total and the fourth made that by itself.  The films were all conservatively budgeted and each was well-received… but they just didn’t fly off the shelves.  The best opening of the less successful trio was $14 million.  The Bourne Identity opened to a slightly shocking $27 million and still delivered longer legs than people saw.  Had About A Boy, Undercover Brother and Blue Crush gotten sampling twice the size of what they did, they probably all would have been $100 million movies. 

And so the lesson is insanely frustrating!  Even for quality films, it is all about that opening weekend.  Quality makes the difference between, say, About A Boy converting its $8.6 million start into $41 million as opposed to, say, Crocodile Hunter or The New Guy, which each opened with more than $9 million each and hit $28 million. 

How does a marketing department answer the question of how to fix the problem?  Hindsight is 20/20 and loaded with excuses.  And the fixes are seen – again – on a continuum and not on a film-by-film basis.  Just how much can you spend on TV advertising for About A Boy and have it mean anything?  How many kinds of messages can you sell the movie with and have it mean anything?  (My eternal answer… one.  More than one message to any single constituency – I do believe that it’s okay for MTV spots being different than CBS primetime spots – is death.  The secret of Miramax’s Oscar strategy is that it is also a brilliant business strategy… it allows them to platform product that is difficult to market and to feel out the marketplace and their ad strategy without looking wishy-washy in the eyes of the media that they are counting on to sell their movies without huge TV buys.  But I digress…)

Universal’s year was a tale of two lessons.  The lesson in the fall was that you can get your films to open and still have them underperform based on those increased expectations.  Especially if the are R-rated.  I was probably a little rough on The Scorpion King, which did manage $90 million without a real movie star to open it and with the potential moviegoers pigeon-holing it as “just the action sequences from The Mummy without the sweet story that made that franchise fly.”  Scooby-Doo’s opening was as much as shock as its eventual $153 million gross, so it somehow got a pass.  But the R-rated quartet of Panic Room, Blade II, 8 Mile and Red Dragon all opened with over $30 million and only 8 Mile (with a $50 million start) got past $100 million (to $115 million).  Two of the films are clearly going to be profitable, one being 8 Mile, the highest grossing R-rated film of the year.  And the other two will probably squeak by in the end.  But is that the point of the exercise.

The irony is that I think Universal has been the most interesting studio to watch in the last couple of years.  Right now, the horror how of transition is really causing lots and lots of grief… again.  But the every same people who had a tough luck year in 2002 are going to be the toast of the town again when Ang Lee’s The Incredible Hulk grosses $280 million in May.  (Note to Hulk watchers… I finally saw the in-theater poster for the film… not surprisingly, The Hulk is going to look just like a giant, green Eric Bana with bad hair… duh!)

THE LESSON OF 2002 THANKS TO DISNEY WAS:  No one notices anything else when the boss is in trouble.  The stories about Sweet Home Alabama were all about Reese Witherspoon, not Dick Cook’s smarts in getting the walking blonde franchise to come to Disney for a film.  Lilo & Stitch didn’t get the media attention it deserved.  And the stunning thud that was/is Treasure Planet was muffled by the sound of Thomas Schumacher clearing out his desk a few weeks before release.  Good luck in the year of the westerns, gang.

THE LESSON OF 2002 THANKS TO 20^TH CENTURY FOX WAS:  Spectacularly unclear.  Titan A.E. and Monkeybone clearly demonstrated that Fox had to get out of the animation business… until Ice Age showed up.  Spielberg and Cruise assured massive summer numbers… until Minority Report became only the 9^th biggest grosser of the summer and solidified its current status as an overlooked underdog of a film.  (Spielberg in Champaign-Urbana???  Only Ebert could pull that off!  I’ll “settle” for an Overlooked Film Festival retrospective of Samantha Morton’s 2002 output along with a visit from She Who Walks Above The Ground.  Roger showed Jesus’ Son a couple of years ago and Billy Crudup showed up, so…) 

Fox’s 2002 was an example of “the house” settling in.  Solaris hurt.  Ice Age was a pleasant surprise.  The rest was right down the middle, with happy moments like Drumline and slight disappointments like Unfaithful.  And the entire year was still covered in the pixie dust of Moulin Rouge. 

The greatest irony of Fox is that it hasn’t changed, conceptually, much from Bill Mechanic’s reign.  A few big movies… a few spicy additions that are cheap and could break out… and almost no “middle movies” (budget $45 - $75 million). 

THE LESSON OF 2002 THANKS TO MGM WAS:  No matter how good your marketing team, you need movies that people want to see.  They only had one of those this year, Bond, and it broke new box office ground for the franchise. 

THE LESSON OF 2002 THANKS TO DREAMWORKS WAS:  They can’t all be great years.  Seven releases, three money-makers, two iffy ones, two failures (one of which was so cheap it didn’t matter.)   2002 is a memory.  The studio got some more money in its coffers and now we’ll see what they do with it.  DreamWorks is the home of the individual.  And now, they’ll be good and rested.

THE LESSON OF 2002 THANKS TO PARAMOUNT WAS:  You can be “The House.”  Everyone will accuse you of being boring, especially in a down year.  They will forget that We Were Soldiers did $78 million and that Changing Lanes got well-deserved raves.  And they won’t bother to note that Jackass: The Movie and Martin Lawrence Live: Runteldat go right against your grain, but will probably be the most profitable films the studio has this year.  But the stockholders won’t care.   It’s not quite how I would choose to be “The House,” but if you offered Sony execs in Japan the studio balance sheet for Paramount’s last five years versus their own, you can be sure that they would happily take boring.  (You can also be sure that the Japanese are thrilled to be Number One this year… they are market share obsessives over there.) 

THE LESSON OF 2002 THANKS TO NEW LINE WAS:  Two rings can control them all.  Keep those cards close to the vest and no one is going to beat a pair of aces.  No doubt, they love their About Schmidt and will push hard to make it into a big success as well.  But three of the nine films the studio released this year were holdovers from years gone by, four others were urban targeted (though John Q hoped to cross over and Blade II did cross over to teen boys) and then there were the two.  Rings and Goldmember will gross over $500 million domestic, generate about $800 million in returns to the studio and actually put over $400 million cash into New Line’s pocket… which AOL will quickly pick, but that’s another story. 

THE LESSON OF 2002 THANKS TO THE ART HOUSE MINI-MAJORS WAS:  There is always room at the table.  Jim Schamus’ Universal-based Focus Features is the success story of the year, putting out six great movies, three good ones and even having old fingers in the Solaris pie.  A remarkable re-debut.  Meanwhile, without Bingham Ray’s UA output, MGM’s hallways would have filled with crickets.  And Bingham’s films were quality, pretty much across the board.  Paramount Classics seems a little underfunded on the marketing side, but they got a lot of very good, smart pictures out into the marketplace this year.  Fox Searchlight is having a terrific year with an even better 2003 on the way with pictures from Neil Jordan, Jim Sheridan, Alex Proyas, Danny Boyle, John Malkovich and James Ivory.  IFC has lost Bob Berney, but it will try to follow-up the year of the hugely-seen My Big Fat Greek Wedding and the hugely-acclaimed Y tu Mama Tambien.  Sony Classics continued to show great taste, though they had a hard time cracking the box office charts with their quality product with 18 films in release.  (More proof of balance… the films and the marketing remained up to snuff… fate will out.)  Lions Gate had a lot of titles in play and couldn’t quite get the toughest ones out there, but they did make the movie world safe for S&M (Secretary) and painful female self-examination (Lovely & Amazing).  And Artisan focused on two of the best little films of the year, really getting behind Roger Dodger and Standing In The Shadows of Motown.

Of course, Miramax is still the big daddy on the block.  They released 27 films out into the world.  20 of them, good or bad, sunk like stones.  And the other seven are all holiday releases that none of us can shut up about.  Funny world, isn’t it?  What’s the lesson?  Miramax is different.  The Weinsteins run their company just like gamblers… johns… suckers.  But somehow, they always get a couple of their horses across the line first… almost always in the eighth or ninth race.  It is remarkable.  What’s the lesson?  Kids, don’t try this at home.

So there you have it… the entirety of 2002 in just under 4000 words… welcome to 2003.

READER OF THE DAY:  MS NOT NBC writes: “The REAL lesson of My Big Fat Greek Wedding is the real untold story of 2002, possibly of the last decade: that everyone in this town is well and truly and irrevocably and undeniably an imbecile.

Consider this: you're a studio executive. Tom Hanks walks into your office and sez, "My wife really loves this  play and wants to make it into a picture. The budget is $5 million." Now, let's overlook the fact that you've probably spent more than that on trailers. What do you say? Well, if you're like every single exec in this biz, major and independent, you say "thanks, but no thanks."

ARE YOU INSANE?????

Tom Hanks wants five mill to make a movie and you turn him down? Even if the picture turns out unreleasable (a very remote possibility), you've done the biggest star in Hollywood a huge favor and HE OWES YOU ONE!!

But that's exactly what happened. They had to cobble the money together from three other sources as well as their own pockets, and the rewards were reaped by tiny companies most people have never heard of.

So as far as I'm concerned, the #1 Underreported Story of 2002 was that the entire industry said "no" to Tom Hanks. (And I'll bet you every single one of those decliners is dismissing it as "a non-recurring phenomenon," even as they green-light their next "can't-miss" debacle.)

E ME:  What are your lessons of 2002?