The numbers behind the industry.
Hollywood Facts and Fictions
After four months of reporting declining attendance at the
American box office, the New York Times made the case in
August that Hollywood had lost touch with its adult audience
by producing too many cartoonlike amusement-park movies
for teenagers. "Hollywood's box office slump has hardened
into a reality," the article grimly concluded, raising
the prospect that, in order to improve ticket sales, Hollywood
would produce more movies that appeal to adults.
Before shouting hallelujah, it's worth looking more closely
at the "reality" behind the story: the 2005 box-office
numbers. While it's true that overall box office receipts
are down so far in 2005—theaters took in 8 percent
less money in the first nine months of 2005 than they did
in the same period in 2004—the box-office revenues
for the major Hollywood studios—Fox, Sony, Warner
Bros., Disney, Paramount, and Universal—are up. So
is their share of the box office, and so is their revenue.
January 2005 to September 2005, the movies of the six Hollywood
studios earned $4.7 billion compared to $4.5 billion in
the same period in 2004. Their share of the American box
office rose from 68 percent in 2004 to 75 percent in 2005.
(Click here for all the studio numbers for the past nine
months.) The big losers were independent studios who specialize
in more adult movies, such as Lions Gate and Newmarket Films,
and the so-called "studioless" studios, DreamWorks
and MGM, which suffered 40 percent box-office declines.
(Studioless studios are verging on extinction as MGM is
in the process of selling itself to Sony and DreamWorks
is desperately attempting to sell itself to Universal or
Moreover, the reason that some studios did not do as well
in 2005 is that they had too few, not too many, amusement-park
films for juveniles. Sony, for example, had no Spider-Man
3 to match the $373 million U.S. box-office gross it had
from Spider-Man 2 in 2004 (Spider-Man 3 is scheduled for
2007). DreamWorks had no Shrek 3 in 2005 to match the $476
million U.S. box-office gross it garnered from Shrek 2.
On the other hand, the studios that scored the biggest box-office
gains in 2005, Fox and Warner Bros., generated them through
amusement-park movies such as Star Wars—Episode III:
Revenge of the Sith (Fox) and Batman Begins (Warner Bros.).
the overall audience for movies in decline, the lesson of
2005 is that the studios need youth-oriented franchises
supported by massive advertising budgets to fill theaters.
As a top Sony executive explained, "Franchises are
the name of the game." He added that one reason Sony
bought MGM was to get its James Bond franchise. Once established,
a franchise that appeals to youth enables studios to acquire
merchandising tie-ins from fast-food chains and licensing
commitments from toy and game manufacturers—all of
which help promote the film. The huge advertising budgets
that merchandising partners contribute, which can exceed
$100 million for a single movie, are especially important
in an era of declining audiences.
The drop in the audience in 2005 is hardly a new phenomenon.
Since the advent of television in 1948, the movie audience
has declined in most years. Annual ticket sales have fallen
from 4.6 billion tickets in 1948 to 1.6 billion last year,
even though the U.S. population has doubled. The studios,
recognizing that most of the former habitual moviegoing
audience is at home watching television—and soon their
iPods—create audiences for each of their movies through
advertising on television, an enormously expensive—and
risky—enterprise. To make it work, the studios look
for a group of people that both regularly tune into TV programs
on which the studios can afford to buy commercials and who
can be motivated by a 30-second ad to leave the comfort
of their houses to go to the multiplexes. And for better
or worse, that means teenagers.
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