Doing the Hollywood Math: What Slump?
By LORNE MANLY
SCANNING the weekly box-office reports has been a mighty sobering experience in 2005, the litany of gloom seemingly blurring into one recurring headline: Moviegoing Plummets Again. But a closer look at the movie business, in all its global reach and various outlets, tells a different story. "It's still a healthy business," said Stacey Snider, chairwoman of Universal Pictures.
Yes, in an age of hundreds of cable channels, video games and other distractions, the domestic box office so far this year is down about 6 percent from the same time period in 2004, and off from 2003 and 2002 levels. But the money flowing into the coffers of movie studios is greater than ever.
Special-effects-laden blockbusters, from War of the Worlds to the "Harry Potter" franchise, show no sign of weakening. The home-video market - namely the sale of movie DVD's - remains strong here and is more robust overseas. The overall global marketplace, in fact, for the first time accounts for more than half of the studios' annual revenue, and growth from emerging markets like Russia are expected to widen that divide.
Executives in Hollywood, however, are not Pollyannaish about the future. "The audience has become much more discriminating about what they go to," said Michael Lynton, chairman and chief executive of Sony Pictures Entertainment, adding that "it's the middle that has gotten hurt."
American moviegoers are increasingly passing up the chance to hoot and holler in the dark with hundreds of strangers if the films are not big events or smaller genre ones. The number of movies in the $100 million to $200 million box-office range has fallen dramatically the last two years. As a result, executives at the major studios are more closely scrutinizing midrange films - those with budgets from $50 million to $75 million.
In addition, domestic DVD sales have slowed from their gangbusters growth rate of a few years ago. But the slack has been taken up by the surprisingly strong performance of television DVD's like "Seinfeld" and straight-to-DVD movies like "Lion King 1Â½." And most of the money made off of these DVD's goes to the same entertainment conglomerates that own the movie studios.
To Ms. Snider and others in the film industry, the possibilities of the on-demand world - one perfectly customized to a viewer's life - offer Hollywood the next big leap forward. Videocassette recorders did not, as feared, become the Boston Strangler of the movie studios. And while VHS may be near death's door, the rise of the DVD has more than made up for that disappearing revenue. "There's always been something to replace it that's groovier," Ms. Snider said. "Portable, wireless devices are pretty irresistible."
But two significant obstacles confront the studios before they will see substantial incomes from making movies available to watch anytime on a big-screen television or tiny iPod: piracy and pricing. In other words, show business won't be good business if you pick their pocket, or they pick yours.
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