Week Of December 18, 2006 - Mon / Wed / Fri

December 18, 2006

When Sunday morning's long expected press release about Sony Releasing breaking the record for the best year ever, I can't say I was surprised. But what did turn my head was a quick look at the year Sony has had.

This is only the third $1.5 billion domestic year for a studio in history. The first was Sony in 2002. They only had seven movies that grossed over $50 million, but one was Spider-Man ($404m). The next was Disney in 2003, the year of the first Pirates of the Caribbean ($340m) and Finding Nemo ($305m). Buena Vista is about $40 million off of another such year, but it doesn't look like Apocalypto will get it there, but if it does, the power of the push will be $423 million in Pirates of the Caribbean: Dead Man's Chest doubloons. .

Sony did it this year without a $340 million movie… without a $300 million movie… without at $250 million movie. The high domestic grosser of the year for Sony is The Da Vinci Code with "just" $218 million. They had three other $100 million grossers, but they were all between $135 million and $150 million.

The studio's ten titles between $40 million and $100 million (which actually tops out at Open Season's $84 million) made almost the same amount as the $100 million four.

In other words, there was balance in the game. Sony released 28 movies this year between Columbia, Tri-Star, Screen Gems, and Revolution. Right now, 14 made over $40 million and 14 made under $40 million. This balance will soon be upset as The Pursuit of Happyness and The Holiday join the high end of that list. But unless Pursuit cracks $100m (and I actually think it will), three-quarters of those titles are under $100 million and just a quarter over. A dozen films were outright flops… out on strikes. But the group that "made it" is made up equally of singles, double, triples and home runs (no grand slams).

Welcome to the future of Hollywood.

Of course, this is not an analysis of profitability. And it is not to say that Sony is not disappointed with some of their over-40s. But the new record holding gross for a studio in a year belongs not to the Massive-Hit-&-The-Supporting-Cast we've seen in the past. You don't need to be the Yankees anymore. You can win big playing National League style ball.

And then there is Disney where, as noted earlier, they are going to come very close to the $1.5 billion mark. They show another mode of getting there, that others might emulate.

Disney only released 17 new/non-IMAX films last year, 11 fewer than Sony. About half of their domestic gross from new titles this year was made on two titles, home franchises, Pixar's Cars and Pirates of The Caribbean 2. $667 million. (For those of you trying to do the math, about $100 million of this year's revenue was holdover money from last year's December titles.)

Only six titles all year grossed under $40 million… less than half the "losers" than Sony.

There are nine titles in that "middle class." But the way Disney has re-imagined itself, only one or two of the titles are "problems" financially. And even in the under-40s, The Wild and Annapolis are the only two that might be red-inkers. (Apocalypto was paid for by Gibson and Disney was in for P&A, which they get out first, which should work out.)

Besides The Wild, the kind of Disney Animation miss that Team Pixar is expected to eliminate in future, the question mark movies for the studio were their three moderately successful "adult' titles, The Prestige, The Guardian, and Déjà Vu. (All three grossed in the 50s.) Everything else was on target for families and kids.

Even if you eliminated Pirates 2, Disney would have had a billion dollar domestic, successful year.

But both of these companies belie, it seems to me, the notion that the future of a successful movie studio is in mega-movies and tiny movies and nothing in between.

Even looking at this year - which is currently the second highest domestic grossing year in history - versus the #1 year ever, 2004, shows a shift towards a nichier business.

The 100th highest grossing film of each year generated $22.5m and $22.9m dollars… very close. But the composition of the films in that 100 are quite different.

In 2004, there were 24 $100 million grossers.
In 2006, there will be 18 $100 million grossers max (we're at 16 now)

In 2004, there were 18 titles that grossed between $50 million and $99 million.
In 2006, that number doubled, with 36 films in that range to date and another 1 or 2 expected to join that group

In 2004, there were 24 titles between $30 million and $49 million
In 2006, there were an almost identical 26 films in that range

In 2004, 16 films grossed between $20 million and $30 million
In 2006, there were 29 films in that range

In 2004, there were 29 releases from majors that grossed under $20 million
In 2006, there were 33 releases from majors that grossed under $20 million

So you can see, there is not much change among the abject failures. But there are more low-end studios grossers that are jumping past $20 million… there are a lot more films in the $50 million - $99 million range… and there are fewer $100 million grossers. But still… near equally big years.

Obviously, there is always a problem with such a small sample on which to hypothesize. But the trend I see is clear. Studios know how to market their crap. Even in the problematic area of theatrical release, increases in the per-film revenue is viable. But most importantly, studios' best chance at increasing profits is to lower costs, not to keep aiming for mega-hits (at least not more than one or two a year).

Studios, which are often a couple steps ahead of the media, figured this out and are now doing just that. Another thing really worth noting about the Sony year is that they had only two films on the entire year's schedule that cost over $100 million and only four more that were budgeted at $80 million or more, two of those being the animated films, which the studio hopes are the start of their own family franchise business..

At Disney, the only $100 million-plus budgets were for their top two films, both franchise projects. Déjà Vu is their third highest budget film with nothing else over $60 million this year.

Warner Bros has been held up at Tentpole Central. This year, they greenlit three $100 million-plus budget films amongst the eighteen total titles. With two titles still to be releases, six of the sixteen to-date have grossed under $30 million domestic. And their highest grosser to date is Superman Returns, which crawled to $200 million over 18 weeks.

The trouble here is that while Pirates, Cars, Spider-Man, and The Da Vinci Code with Tom Hanks were pretty much locked to be hits, the 20-year-later return of Superman and a remake of The Poseidon Adventure were not. A George Miller penguin movie comes pretty close to a lock, though it hasn't been as huge as expected by many (including me).

And this next summer will be another fascinating living experiment. May is a month of hardcore franchises (Spider-Man, Shrek, Pirates) while June is loaded with wannabe franchises. For instance, did anyone notice that Shrek 2's fourth weekend gross is more than any Sony animated film has opened to as of yet and that Sony has put a film in that slot following Shrek The Third? Do they really want to be behind the fourth weekend of S3 with their next animated film? Will Fox really be able to get Fantastic Four 2 rolling in the wake of Pirates 3… especially if the third on the series is better than the last?

But the key to Fox's year is more likely to be Reno 911!, The Simpsons, and AvP2, more than simply relying on their tiny tentpoles.

Maximize. Don't Overspend. Hit Singles That Can Stretch Into Doubles & Triples.

Risk... but only at a price.

The future.

E Me.

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