When the Olympic torch was lit earlier this month, Hollywood watched its box office go up in flames. Moviegoing dropped more than 20% as four new films--Disney's Kazaam, MGM's Fled, Universal's The Frighteners and Columbia's Multiplicity--withered in a dreadful midsummer conflagration.
It would be easy to say all eyes were on Atlanta, but the film industry has problems that won't end with the closing ceremonies. "The movie business isn't bleeding to death, but it's bleeding," says Herbert Allen Jr., the entertainment industry's eminent investment banker. It wouldn't appear that way from the resounding success of such megahits as Independence Day and Twister, but Hollywood's economics are a mess. Last year the industry brought in $5.5 billion, and through the first half of this year ticket sales are up 14% compared with 1995, according to the Exhibitor Relations Co. Inc. Trouble is, the number of films in wide release has risen 13% over last year even as the cost of making and marketing films rose sharply. Not only did the competition for filmgoers' dollars get stiffer, some executives contend that the quality of the films declined as the studios scrambled to shove more and more product into their pipelines.
Already several studios are taking the obvious solution and cutting back the pace of production. But that won't be enough; they face other difficulties that will be harder to address. Costs are soaring so dramatically that it's getting tough to make a buck. "Every day I have two choices," says Peter Chernin, chairman and chief executive of Fox Filmed Entertainment. "One is to make a series of absolutely insane deals and the other is to make no movies at all."
Trimming the number of films is simpler than cutting production and advertising budgets. Ironically the most aggressive trimmer has been Disney, the same company that started the more-is-better strategy a few years ago. Studio chairman Joe Roth says the company will cut its output from 35 movies a year to 18; creative types are already bracing for a Disney downsizing.
Others are following the same script. DreamWorks--the fledgling entertainment company founded by Steven Spielberg, music mogul David Geffen and former Disney studios chairman Jeffrey Katzenberg--originally planned to release three films in 1996 and five in 1997. But don't go running to the multiplex: DreamWorks has put only one film in production. "It's a very, very crowded marketplace, where films are going to be pushed out of theaters," Geffen says. "It's sane to make fewer films."
Katzenberg was part of Team Disney when the studio began to ratchet up. At the time Disney did not own a network or any other pipeline into viewers' living rooms. The company calculated that it needed to become a dominant supplier of programming so that it wouldn't be squeezed out by rivals like Fox and Time Warner, which owned cable systems or other outlets for their own movies. Once Disney stepped on the gas, some of its rivals followed suit. Soon a glut of pictures was fighting for screen space. The result: opening-weekend carnage.