November 22, 2005

I guess it is time to stop equivocating… and then to shut up…

I can't really explain the relentless media obsession with pushing the end of cinema as we know it. I certainly understand why the town is endless abuzz with paranoia… always has been, always will be… But it is a…

LIE.

One of the main reasons you should know it is a lie in your gut is that the spinners of this web now change their stories every couple of months, so that when one misleading spin catches up with record numbers, they find another way to say theatrical is in trouble. First it was Weekend vs Weekend. Then it was The Year. Then it was Ticket Sales. Now it is all that and the iPod.

Patrick Goldstein, in one of his most embarrassingly self-exposing comments says, "When everybody is exaggerating about the same thing, you know something bad is happening."

Well, no… you don't.

What you know is that some people are being forced to face a softening DVD market and increased corporate pressure and need an excuse. In fact, Patrick also offers up the list of things that are going on that disprove his theory.

"Disney just reported a $313-million loss for films and DVDs in its fiscal fourth quarter. Sony has had a disastrous year, with only one $100-million hit ("Hitch") among a string of costly flops. DreamWorks not only has had theatrical duds but also saw its stock plummet when its "Shrek 2" DVD sales fell 5 million short of expectations. Even Warners, the industry's best-run studio, laid off 400 staffers earlier this month."

All are true. (Well, actually the DreamWorks quotation is a lie… DreamWorks Animation is a separate company from DreamWorks, and the death of DreamWorks, which oddly wasn't included, was caused by overspending on both Lemony Snicket's A Series of Unfortunate Events and The Island, but was foretold years ago with nine-figure losses in the TV production unit.) And none of them have anything to do with new technology or big screen TVs or Tivo or iPods or expensive movie theaters.

Disney's writedown on Miramax woud have happened in any marketplace in any year. Get over it.

Sony had only one $180 million romantic comedy, yes. It also had wins in Are We There Yet, Guess Who, The Exorcism of Emily Rose, Bogeyman, and The Gospel. And it had four big movies tank. But can anyone really try to blame Bewitched, The Legend of Zorro, Stealth, and Zathura on anything but bad choices by the studio? Two sequels to movies so old that no one in the demographic remembers them. A meta TV remake that was called The Stepford Wives last year. And a mediocre CG air chase movie with no stars. Good decisions. Really, horrifying as it is to acknowledge it, Paramount has done better with films that are as bad or worse. It's a terrible year. But why?

DreamWorks Animation speaks more to the real reason for hysteria that no one wants to say out loud… DVD - you know, that thing you watch at home on your big screen TV - is maturing after just 5 years and is no longer a guaranteed home run every time. Budgets rose to match the success of DVD sell-thru and now, the industry has to adjust back on production and marketing costs. But we knew that was coming last year, the year before, etc. And if you didn't, you were buying into another run of hysteria.

And Warner Bros.' belt tightening has been created by Carl Icahn, not theatrical. Patrick might want to call it the "best run studio," but last year's hype - that WB was all about tentpoles now and how great that is - is about to be crushed under the weight of a badly mismanaged, duck-amuck-budget production of Superman Returns.

Patrick goes on to express another major misconception about how business works… and particularly the film business:

"This only highlights the biggest crack in the system: that most of the movies in theaters don't deserve a theatrical release, at least not by the rules of today's game. Until the DVD and pay TV money kicks in, they're money losers. Yet the studios are forced to spend more marketing money every year to chase after increasingly resistant moviegoers, then go dark for months before spending another big chunk to remind people the DVD has arrived."

Why don't people get that there is a reason for this that has nothing to do with slumping theatrical? When studios budget movies and project ultimates, they are not throwing darts blindly at a wall. All the way back in 2000, when Pearl Harbor was greenlit at $135 million, it was the highest greenlight in movie history. And Disney's bacon ended up being saved by the just emerging DVD sell-thru business.

Just two years later, four movies were released that cost more than the $135 million high mark. In 2003, there were seven such films! There were seven again last year, and two of them were over $200 million, though not greenlit as such.

Amazingly, 2005 is already down in this category, with only six films expected with budgets of more than $135 million. Only King Kong is expected to exceed $200 million in production costs.

There are seven productions of more than $135 million due next summer alone. All six majors have at least one. And WB has two. When Bryan Singer was hired for Superman Returns, the budget was already over $200 million and on its way up, up and away.

You cannot budget a film that costs $150 million to make and $100 million to market, not to mention the many gross attachments that so many of these projects have, and expect to make profit in theatrical. It's not a slump… it's math. If you have to make $450 million to break even, you are throwing magic dice. But the DVD revenue is counted in from the start and has been the security blanket. But that blanket now has holes. Good morning, Hollywood. You're blaming the wrong technology… and discounting more than 50% of your overall income per film.

And studios "forced" to spend more on marketing? It has nothing to do with "resistant moviegoers." Really, if I ever heard a worse lie in this business, I can't recall. Sounds like an aging starlet rationalizing another shot of collagen or a guy explaining why he needs to spend $30,000 a month on high-end hookers. Stop lying to yourselves. Good marketing still works. Bad marketing still fails.

No doubt, there are films that are almost impossible to sell. But then the fault lies either in the choice to make the film or the budget at which it was made.

Are these same consumers "ad resistant" when you are selling DVDs or home entertainment systems or iPods or whatever crap is selling best this year? Are you nuts?

No... you're just full of shit. Yes, ad trends change. You can't sell enough Pocket Fishermen to pay for TV time anymore. Change the product to something with a higher price point. Yes, we know that a pretty actress and water dripping from the walls doesn't sell horror movies anymore. So how did the sell for The Exorcism of Emily Rose work? Because it was the same teen girls who went to The Grudge who bought 85% of Emily Rose's tickets. I guess their ad resitance was down.

The idea that "today's game" is much different than the old game in terms of what deserves to be released is foolish and arrogantly driven by unacknowledged hindsight. Here is a blast from the "good old days" of the recent past. Sorry if this stirs up too many bad memories for some of you.

In 2001, the major studios (then including MGM and DreamWorks) released twenty films that grossed less than $20 million domestic.

Summer Catch - $19.8 million
The Pledge - $19.7 million
Saving Silverman - $19.4 million
The Last Castle - $18.2 million
Max Keeble's Big Move - $17.3 million
crazy/beautiful - $16.9 million
Original Sin - $16.5 million
3000 Miles To Graceland - $15.7 million
Josie & The Pussycats - $14.3 million
Freddie Got Fingered - $14.3 million
The Tailor of Panama - $13.7 million
Osmosis Jones - $13.6 million
Tomkats - $13.6 million
American Outlaws - $13.3 million
Anti-Trust - $11.3 million
The Curse Of The Jade Scorpion - $7.5 million
Say It Isn't So - $5.5 million
Monkeybone - $5.4 million
Bubble Boy - $5 million
Just Visiting - $4.8 million

This year, there have been just seventeen so far… but keep in mind that this includes the MGM dumps by Sony and the expanded theatrical-to-DVD strategy for titles like Disney's The Heffalump Movie that wasn't really in play in 2001. (Also, a couple of the titles still have a chance at passing $20 million.)

But the "good old days" ugliness doesn't stop there. Here are 25 more major studio movies that tanked when compared to expectations and budgets in 2001…

Joe Somebody - $22.8 million
Angel Eyes - $24.2 million
Hearts In Atlantis - $24.2 million
Sweet November - $25.3 million
Captain Correlli's Mandolin - $25.5 million
Crocodile Dundee in Los Angeles - $25.6 million
Someone Like You - $27.3 million
The Majestic - $27.8 million
Riding In Cars With Boys - $30.2 million
Final Fantasy - $32.1 million
Driven - $32.7 million
Black Knight - $33.4 million
Evolution - $38.3 million
Bandits - $41.6 million
Domestic Disturbance - $45.2 million
K-Pax - $50 million
Ali - $58 million
The Wedding Planner - $60 million
Spy Game - $62 million
The Mexican - $67 million
Swordfish - $60 million
A.I. - $79 million
Atlantis - $84 million
America's Sweethearts - $93 million
Planet of the Apes - $180 million

So which of these films "deserved to be released" by today's standard, 2001 standards, or any standards?

A 2005 slump issue? Only three $50 million romantic comedies last year: 50 First Dates, Along Came Polly, and 13 Going on 30.

Even a film like Must Love Dogs, which claims to have cost just $30 million and did $60 million worldwide, is just a borderline moneymaker.

You cannot budget a romantic comedy with the expectation that it will gross more than $50 million. And at that price, you still need to gross $90 million worldwide to break even. How many romantic comedies made more than $50 million domestic this year? Two. One was Hitch, which was a true phenom starring the biggest star in the world today, and the other was Bewitched, which got to $130 million worldwide, which puts it right at the edge of red ink after DVD and other ancillaries.

It's not a changing world that is changing the business. Last weekend was the highest grossing non-summer weekend in history… and the third highest grossing weekend overall. Audiences aren't staying home in droves. And if Patrick wants to know why teens think there is something wrong with the movies, he ought to looking the mirror and remember that if a teenager hears something enough, they will parrot it.

Who has kids who don't want to go to the movies? Show of hands! Teens who don't want to go twice every weekend? Come on… someone… anyone?

All that said, the greatest pressure on the business is not lack of customers… it is the corporate ownership.

The corporate pressure at Warner Bros.' parent company, Time-Warner, now has rumors of Carl Icahn trying to push out Richard Parsons. Cuts at WB are nothing in that light. Howard Stringer is trying to bring a Sony, for whom the movie business is suddenly the strongest of their divisions, into the new millennium. General Electric has only started clamping down on Universal. (The most overt evidence of G.E.'s disinterest in the Hollywood Old Boys network is the unwillingness to allow Ron Meyer to save face for S, K, and G even if it costs an extra hundred million or two over real value.) Viacom is splitting Paramount and the MTV Networks into its own company for only one reason… to try to raise the stock price.

The two calmest places in town are Disney and Fox. It's no coincidence that Disney is being most aggressive about new technologies, as Bob Iger tries to prove he's the new sheriff in town. And News Corp is okay with Fox, so long as it makes money and doesn't get in the way of world domination.

But it is endlessly stunning to me that people like Patrick, who are smart and experienced in watching this game, get sucked into this idiotic hype about the end of theatrical.

Yes, there are some big problems out there. Theatrical exhibition is not on the list.

There are other stupid ideas that keep cropping up.

"Thanks to instant messaging and BlackBerries, bad buzz about a bad movie hits the streets fast enough to stop suckers from lining up to see a new stinker."

So why aren't we seeing massive Friday-to-Saturday drops that are out of line with historical norms? And why do I get the feeling that Mr. Goldstein's idea of a "stinker" is not the same as any teen?

"People increasingly want to see movies on their terms, today on a big TV at home, tomorrow on an iPod or cellphone."

As anyone with a teen knows, they are consumption machines. But does anyone really think that kid wants to watch a movie on an iPod? Not a trailer for a movie… but a 100-minute movie… on a 2.5-inch screen… or on a cell phone with a 1.5-inch screen? To what degree will we all strain our own understanding of reality to appear to "get what the kids want?" And haven't we learned enough times that chasing equals inevitable failure?

You want to talk about how you could just sell shit with enough marketing in years past and now you can't?

Explain Thunderbirds… First Daughter… Chasing Liberty… New York Minute… The Girl Next Door last year, just to name a few. Or in reverse, explain grosses for The Fantasic Four or The Longest Yard in this impossible summer.

Cool CG sells with enough marketing? How much different is Stealth from The Flight of The Phoenix? Is Alexander more wanted than Kingdom of Heaven? Was Catwoman less of disappointment than Elektra? Do you want a $58 million grossing The Chronicles of Riddick on your P&L statement?

And exactly how did Hitch out gross I, Robot, which cost about twice as much to produce?

The fact is, too many people have too many motivations for keeping slump hype going. "It's not my fault" is the most often uttered phrase in studio offices and kindergartens all over town.

And doesn't it make you a little paranoid when our hometown columnist in our hometown paper chooses to write about how true the hysteria is just days after the biggest non-summer weekend of all time? People at the L.A. Times have taken to calling me "The L.A. Times Hater." I don't hate the player. I hate the game.

I had a long chat this morning with a journo who LOVES all this "Hollywood is Dying" stuff. Why does he love it? Because he loves the idea of turmoil. It makes him excited. It gives him something to think about. It vindicates him for thinking that Hollywood is a turgid hole filled with self-loathing morons. To lose is to win.

The last thing I ever want to do is to write, "I told you so" in these web pages.

I've been writing about the danger of shortening windows for eight years now… and suddenly, the panic bell has gone off… and people are scrambling for "solutions" that make them feel less responsible when the responsible answers are right in front of them. Lengthen the windows again. Agree amongst yourselves. I know that this would require admitting that the Mutual Assured Destruction of the last five years in particular was wrong. But better now than doing it from your home office when you don't have a job and Susan Lyne is in charge of your "TV network formerly known as a movie studio."

Unfortunately, I suspect that every time something positive happens, for quite a while, you will get the reflexive, "but look over here… there is another hole in the dike" story.

The only good news is that we in the media are not in charge. And for all intents and purposes, studio execs are not in charge either. The world votes with its dollars. The corporate parents of these studios will force a change in the profligate spending that is about to mar 2006. And technology will move forward as it always does.

DVRs, not iPods or web downloads, will dominate the next generation of film business. Eventually, DVRs will merge with your DSL lines to create true film on demand. But the price per purchase will be low. Studios will make pay networks out of their film libraries. And consumers will pay incrementally more for their filmed entertainment.

That is, unless the industry chases the short money down the primrose path and destroys the exhibition system little by little until theatrical really is a specialty business. At that point, 50% of the payrolls will be cut. And we really will be stuck with NBC's The Poseidon Adventure instead of Wolfgang Petersen's Poseidon. And some will hail it as a great moment. Without the political baggage… movie communism. In other words, 1969 all over again.

And hey, that was good for 5 years of special movies. I guess if we're lucky, we'll still be in Iraq too. Then movies will be REALLY good!

Stupid.

Patrick is right in bringing up "The Tipping Point," but only by mistake. The tipping point for home entertainment was five years ago when Blockbuster failed to make DVD into a rental business. But if people keep repeating this lazy dangerous lie of a sea change in the business - instead of acknowleging that new technology can positively affect only one major market, home entertainment - the lie can tip and become the truth.

And now, I am spent. And sick. And tired.

Fear trumps facts.

And it isn't just in Hollywood.

But it sure is popular here.

Lazy. Dangerous. Lie.

E-ME.