Suddenly
it seems TV is running the movies.
Last week, Robert Iger, former head of ABC, got Michael
Eisner’s spot at Disney. This week, Gail Berman left
Fox TV to join another new refugee from television, Brad
Grey (former head of Brillstein Grey Entertainment) at Paramount.
And the co-president of Paramount’s parent, Viacom,
is Tom Freston, one-time head of MTV. The story is similar
at Sony, Fox and Time Warner Entertainment & Networks
Group, where former TV executives have taken over top jobs.
No
one should be surprised, because the key to understanding
the New Hollywood is this: what used to be a business centered
in movie houses has been transformed into a business centered
at your house. The humble home-entertainment business outpaces
the glitter and glamour of red carpets and movie stars.
In
Old Hollywood, prior to 1948, the studios owned or controlled
movie houses. In New Hollywood, studios or their corporate
parents own or control the main television conduits. Indeed,
the major studios’ corporate parents now own all six
broadcast networks — NBC, CBS, ABC, Fox, UPN, and
WB. They also own almost all the principal cable networks,
including ESPN, HBO, and CNN.
Underlying this transformation is a singular reality: the
adult population no longer goes to the movies on a regular
basis. In 1948, over two-thirds of Americans went to the
movies weekly. Now barely 10 percent of Americans go in
an average week — and most of them are teenagers.
Where is today’s mass audience? On any given night,
over 90 percent of the population is at home watching something
on a television set. So Hollywood followed its audience
home.
The
six major studios go to great length to conceal the different
components of their revenue streams from the public and
even from financial analysts. The rationale given by one
top executive is “to avoid showing Wall Street how
volatile the movie business is and how tricky are its profit
margins.” They may also want to to keep agents and
stars in the dark about where they should be demanding the
highest participations.
But
I got the numbers, from a studio executive, that each of
the major studios furnishes to their trade association,
the MPA, including the detailed breakdown of the money they
actually receive, country by country, from movie theaters,
home video, network television, local television, pay television
and pay-per-view.
The
numbers tell the story. Ticket sales from theaters provided
all the studios’ revenues in 1948; in 2003, they accounted
for less than 20 percent of the take. Instead, home entertainment
provided 82 percent of the 2003 revenues. Further, print
and advertising costs eat away most if not all the theatrical
revenues, but the studios retain most of the money they
garner from home entertainment.
All of this has transformed the way Hollywood operates.
Theatrical releases, despite the blinding allure they hold
for the media, now serve essentially as launching platforms
for videos, DVDs, network TV, pay TV, games and a host of
other products. And New Hollywood’s line of succession
now runs through television and other home entertainment
executives.
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