June 7, 2005


Study shows G-rated fare more profitable (Hollywood Reporter, 6/07/05)

A new study set to be released Tuesday shows that family-friendly movies are more profitable than R-rated films, throwing more fuel onto the fire of the long-running debate over sex and violence in entertainment -- and whether it sells.

The survey was commissioned by the Dove Foundation, a Grand Rapids, Mich.-based group that advocates wholesome family entertainment. According to its Web site, its advisory board includes radio talk show host Laura Schlessinger and "Touched By an Angel" executive producer Martha Williamson.

In a follow-up to a 10-year study commissioned by the foundation in 1999 -- which found that between 1988-97 the average G-rated film made eight times the profit of an R-rated picture -- an extension of that study found that trend continuing and expanding.

The new, expanded study examines the revenue and production costs for 3,000 Motion Picture Assn. of America-rated theatrical films released between Jan. 1, 1989, and Dec. 31, 2003, using the 200 most widely distributed films each year based on the number of theaters.

"While the movie industry produced nearly 12 times more R-rated films than G-rated films from 1989-2003, the average G-rated film produced 11 times greater profit than its R-rated counterpart," said Dick Rolfe, the group's founder and chairman.

No one will think you're cool if you make decent films.

Dumb Money: The madness of movie advertising. (Edward Jay Epstein, June 6, 2005, Slate)

Consider the perverse logic of Hollywood: In 2003, the six major studios—Disney, Warner Bros., Sony, 20th Century Fox, Universal, and Paramount—spent, on average, $34.8 million to advertise a movie and earned, on average, just $20.6 million per title. Even if the studios had made the movies for free—which, of course, they didn't—they would have lost $14.2 million per film on the theatrical run, or what the industry calls "current production." Given the fleeting attention span of the target audiences (mainly TV-watching teens) and the unmemorable nature of the ad copy, the studios believe they must show the same ad on the same programs at least eight times in order to draw an audience. As a result, the studios spend more to lure a teenager into a theater than they receive at the box office, which is reminiscent of the joke about the idiot in the garment business who "loses money on every sale but makes it up on volume."

The moguls who run New Hollywood are anything but idiots, however, so, after I was given access to studio budgets, I asked a very savvy executive at 20th Century Fox how the studios recover this huge advertising expenditure. He explained that big opening-weekend numbers, even if they are expensively acquired, may pay off in later markets—specifically video, pay-TV, and foreign release. At that time, the year 2000, he was right: Video chains like Blockbuster mechanically pegged their orders, which could range from 1,000 copies to 300,000 copies for a single title, on the results of the theatrical opening. So did pay-TV channels, such as HBO. And, since movies were typically released overseas many months after their American debuts, studios could use impressive U.S. box-office numbers to wrangle more advantageous play dates in foreign markets.

Since then, however, the digital revolution has radically changed the movie business. The video rental market, which had been the studios' cash cow as late as 2000, is rapidly disappearing. It's been replaced by the business of selling DVDs in which a handful of mass retailers, such as Wal-Mart, account for most of the studios' revenues. Unlike the video chains that rented videos, the big retailers don't simply peg their orders to a film's box-office results. Instead, they view DVDs as traffic-builders: The stores use them to lure in the relatively well-heeled, plasma-screen-purchasing customers—who are usually not the so-called LICs (or low-income consumers) who are recruited by ads for movie openings. As a rueful Sony marketing executive pointed out, "Unfortunately, our teens are not always who they want." [...]

Does Hollywood need to remain so out of synch with reality? At present, the studio marketing arms have become exceedingly efficient at stampeding weekly herds of teens to multiplexes and producing impressive numbers. But if that amazing trick turns out to be not worth its average $34.8 million price tag, studios will have to consider different strategies. The most obvious one would be to eliminate the long interval between a film's opening and its release on DVD. Also, if the studios aimed at the much larger and more profitable DVD audience, they would not need to spend so much on the teen herd. In this regard, Mark Cuban and Todd Wagner, who own the Landmark Theatres chain, the distributor Magnolia Films, and the high-definition cable channel HDNet, have announced just such a radical strategy. They will finance six movies directed by Steven Soderbergh and release each one simultaneously in movie theaters, pay-TV, and on DVD. To follow suit, the Hollywood studios might also need a different class of movies.

Posted by Orrin Judd at June 7, 2005 4:02 PM

Hasn't Michael Medved been saying for years that revenues from G and PG ratings blow the doors off the income from R-rated movies? And of course, the highest grossing R-rated movie is The Passion, hardly standard R-rated fair.

Posted by: Ed Driscoll at June 7, 2005 4:26 PM

"...Mark Cuban and Todd Wagner, who own the Landmark Theatres chain, the distributor Magnolia Films, and the high-definition cable channel HDNet..."

This is one of my biggest problems with Hollywood. These guys are producing the movies (giving them ownership), distributing the movies (control over it's release), and they own the theatres to which they'll be distributed. They are in direct competition with other film-makers who aren't distibutors (so they have to find one) and who need to distribute to theaters that will give their films a fair showing.

Movies stink because a small handful of people control all the product, distribution and access.

Very un-American IMO.

Posted by: kynna at June 7, 2005 4:29 PM

The Passion should have ended once and for all the argument that Hollywood loves to make that they shouldn't be criticized for all the sex & violence in movies because "that's what you the people want." The studios obviously don't have a clue--heck, they probably thought that that Crusades movie that just bombed would draw in the same moviegoers who made Mel a billionaire...

Posted by: b at June 7, 2005 4:43 PM

within 5 - 10 years studios and actors will be replaced with s/w. bet on it.

Posted by: cjm at June 7, 2005 5:16 PM

The future of all film is in home viewing anyway - expect DVD (or digital download) to be released same day as theater release in the near future. This will help alleviate the problems of your concern kynna.

The quality of home viewing equipment and the convenience of the home viewing experience is outpacing the theater and will soon overtake it.

With $30 I can do one of two things:
a) go to the theater with kids in tow, wait in line, sit in a crowded theater surrounded by teenaged kids engaging in fisticuffs and oral sex, miss half the movie taking the kids to the can and the water fountain. . .
b) buy the film on DVD, own it forever, watch it in the comfort and safety of my own home as many times as I please with the ability to pause and rewind. . .

The choice is simple and as more folks get better home equipment the theater will be relegated to a gathering place for teenagers engaging in illicit activities. 2 of the last 4 movies I attended at the theater I have had to leave and get a refund because I couldn't watch the film due to the in-theater distractions.

Posted by: Shelton at June 7, 2005 6:59 PM

Sorry, no home theater can do justice to the Imperial Cruiser coming into the shot.

Posted by: Sandy P. at June 7, 2005 7:06 PM

Uh, no, Sandy.
I have a projection system, 120" diagonal in 4:3 or 110" in 16:9 widescreen. That's a picture of about 6' x 8' or 4.5' x 8'. Seated 12'-13' from the screen, that's about, um, HUGE in your field of vision.
Throw in 6.1 surround sound, with 150W subwoofer.

Yes, it does do justice to an Imperial Cruiser. And the Red October on it's undersea canyon run.

Posted by: ray at June 7, 2005 8:09 PM

"within 5 - 10 years studios and actors will be replaced with s/w. bet on it."

I'm sure hordes of people would be happy to place such wagers, if you'd bother to actually spell out whatever in the world "s/w" is supposed to stand for.

Posted by: SP at June 7, 2005 9:40 PM

Kynna is wrong. Distribution and exhibition was legislated out of the hands of the moguls back in the 30s, right?

Did this result in crappy movies? Not sure. Were the movies crappy beforehand? Some were, some weren't.

Will a re-convergence (like that proposed by Cuban and Co) result in better movies? I maintain that anything might result in better movies. I haven't paid full price to view a movie in a theater in over a decade, so I have a dim view of the entire medium.

But Cuban and his scheme is protested vociferously by Hollywood, by distributors and by exhibitors... so they must be doing something right.

PS: My own theory as to why movies stink? They cost too much to make. We'll see a significant rise in the quality of movies as the cost of production plummets. If you think that everyone who deserves to helm a picture is currently able to do so, you are dreaming.

Same goes for TV. There's so much money at stake that the blame/credit must be spread out over thousands of suits. When the credit is spread so thinly, it's easy to escape blame. When the blame is spread so thinly, it ain't worth the paltry credit to actually make sure that something worthwhile gets done. Thus you have mediocrity on a grand scale.

Posted by: Brian McKim at June 7, 2005 10:08 PM

Although theorectically possible, it is very unlikely that vertical integration can give a company market power. Disney/ABC is a nice example of this. Disney originally said that content was king and that it didn't need to buy a network. Then Warren Buffet twisted Eisner's arm and made him buy ABC and Disney talked about how the merger would ensure that Disney had a customer for its product, and ABC boasted about how it would have first shot at Disney's shows. But this type of synergy never works. Once Disney owned ABC, it found that it wanted the best shows for ABC, regardless of whether they came from Disney, and Disney wanted the strongest broadcast partner for its shows, even if that wasn't ABC.

As it turned out, the merger would have been a disaster for Disney -- ABC has been a money pit -- except that it has been making money hand over first on ESPN, which ABC owned but which doesn't benefit at all from having Disney as a corporate parent.

Posted by: David Cohen at June 7, 2005 11:27 PM

> spell out whatever in the world "s/w" is supposed to stand for.


Posted by: Jorge Curioso at June 8, 2005 12:26 AM

Huh. Strange abbreviation, considering that the word "software" doesn't contain a virgule ("/").

Stranger still is the idea that actors would be replaced by software. Replaced by virtual actors, created by people using software, sure. But "replaced with (software)" is an imprecise construction, certain to confuse many readers.

Posted by: SP at June 8, 2005 12:40 AM

Correction to Kynna and Brian: the legal decisions that stopped studios from owning theaters happened in the late '40s-early '50s. Thus the Golden Age of Hollywood ('30s-'40s) occurred in that "un-American" situation!

There is at least one problem with the G-vs.-R figures: very few low-budget films are G-rated because the only market for G-rated films is the mass market, which requires huge budgets. On the other hand, there are significant niches like horror, cheesy straight-to-video action, etc. where audiences prefer R to G, and producers can make profitable films with much lower budgets. All those R-rated B-movies no doubt skew the numbers.

But OJ's point is true: it's not hip to make family pictures, and most young filmmakers want to be hip.

Posted by: PapayaSF at June 8, 2005 1:44 AM

PapayaSF, the article states they analyzed only the films that got wide theater dist., so that would rule out most of those cheesy small R films you mentioned.

Posted by: RC at June 8, 2005 9:20 AM