The numbers behind the industry.
Sunday a global audience, second in size only to the Super
Bowl, will watch television's most lucrative infomercial—the
82nd Annual Academy Awards. For some three and a half hours,
interspersed with clips from currently-available movies,
Hollywood's most publicized stars will ecstatically award
the winners 13-inch-high gold-dipped statuettes known the
world over as the Oscars.
initial purpose of this gala event, which the studios created
along with the Academy of Motion Picture Arts and Sciences
in 1927, was, in the words of its main architect Louis B.
Mayer, "to establish the industry in the public's mind as
a respectable institution." But it was also designed to
market and create "stars." Mayer was cofounder of Metro-Goldwyn-Mayer,
one of Hollywood's most successful studios during its Golden
Age (1930s-1950s), and is known as the father of Hollywood's
"star system" of marketing.
the stars will be out Sunday night, but to further enhance
its global audience this year, the Academy has doubled the
number of Best Picture nominees. Even with this expansion,
attention remains focused on two polar-opposite films: Kathryn
Bigelow's "The Hurt Locker," and James Cameron's "Avatar,"
both of which have garnered eight other Oscar nominations
Hurt Locker" is a reality-based film about a squad of courageous
American soldiers who defuse bombs under horrendous conditions
in Iraq. By Hollywood standards, it is a very small movie,
costing only $15 million to produce and another $15 million
to publicize and distribute. And although critically acclaimed,
it sold only $18.5 million in tickets worldwide. With theaters
keeping roughly half of these box-office sales and the distributor
deducting its expenses off the top, it is deeply in the
red. Nevertheless, for many among the Academy's nearly 6,000
voting members, it represents the kind of intelligent realism
that Hollywood is capable of making for an adult audience.
on the other hand, is a fantasy-based movie about alien
life forms who need to be rescued from neocolonialist corporate
exploitation on a planet called Pandora. The film, enhanced
by brilliant visual effects, may be the most expensive ever
made. According to a top executive at Fox, it cost over
$225 million to produce and another $150 million to publicize
and distribute—a number that has been hyped to as much as
a half-billion dollars.
the cost, "Avatar" has been an immense success, selling
a record-breaking $709 million of tickets in the U.S., where
it is shown in 3D as well as the traditional 2D format,
and more than twice that amount overseas, where it's shown
mainly in 2D. For Rupert Murdoch's 20th Century Fox, which
gets its distribution fee off the top (as well Dune Entertainment
and Ingenious Partners, the private equity funds that provided
60% of the financing, and James Cameron's production company,
Lightstorm Entertainment) it is a veritable El Dorado.
film's success at the box office has also excited hopes
that its 3D visual effects will restore the Golden Age of
movie attendance, a time before television when two-thirds
of Americans went to the movies in an average week. Nowadays
less than 10% go to a movie theater in an average week.
overall box-office numbers, however, provide little grounds
for such optimism. "Avatar" no doubt has enriched many theaters
charging a premium for the 3D experience, but it did so
largely at the expense of theaters showing other movies.
In the eight weeks that "Avatar" dominated U.S. box-office
receipts (Dec. 18 to Feb. 11), total movie attendance increased
by about 6%.
even if the audience resurgence is no more than a pipe dream,
"Avatar" represents for many in the Academy the idea that
Hollywood's ultimate salvation lies not in superior story-telling
and acting but in eye-popping visual effects, stunning animation
and state-of-the-art 3D projection that immerse the audience
in the illusion.
of box office receipts, Hollywood's major studios have a
sure-fire engine for making money from viewers who don't
regularly go to the movies. It's what the studio calls its
"library," which contains the rights to all the movies and
television series that it has ever produced or acquired.
By relentlessly licensing and selling the rights to these
titles, studios harvest money from home audiences decades
after a film plays in theaters.
for example, the Time Warner library. It has more than 45,000
hours of feature movies, cartoons and TV episodes, dubbed
or subtitled in more than 40 languages, that it licenses
to pay-TV, cable TV, satellite telecasters and television
stations in more than 175 countries. These titles are often
bundled in take-it-or-leave-it packages (a practice that
is prohibited by U.S. anti-trust laws in distributing movies
to theaters), which helps optimize profits. In 2009, just
the television distribution part of this operation brought
in more than $2 billion, according to one source at Warner
Brothers. A revenue stream this lucrative, even after paying
residuals to guilds, labor and other participants, would
be enough to pay for most, if not all, the costs of Warner
Brothers's new movies.
of course, also pull in huge revenues from the global sale
and rental of DVDs. (Technically, newly released titles
are not included in the library for two years.) Even though
DVD sales of movie titles and TV series are now waning,
on the horizon is another promising revenue stream: digital
rights for Internet delivery. While at present these rights
provide little more than pocket change for studios, future
revenues are due to explode with the proliferation of smart
phones, netbooks, tablets, game consoles and other such
gadgets. In any case, as one Viacom executive recently told
me, "No studio could stay solvent for long without a library."
the studios' libraries, the reality-based money machines
that boost the bottom line, do not receive accolades or
even a mention at Sunday's Academy Awards, it isn't that
their value is unappreciated. It's because Hollywood's real
genius is understanding that its audience prefers illusion
to reality. The stars shine brightest on Oscar night. And
that's show business.ess.
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