LAS VEGAS -- A valedictory glow surrounded MPAA president and CEO Jack Valenti's annual -- and final -- appearance at ShoWest 2004 as he offered Tuesday an accounting overview for last year, which saw domestic boxoffice revenue level off at $9.49 billion, down just 0.3% from 2002's record haul of $9.52 billion.

Actual admissions dropped further, dipping by 4% from 2002's 1.64 billion to 1.57 billion. But Valenti offered the caveat: "Remember, in order to find any range of admissions that compared to 2003, you have to go back 48 years, to 1955, before television and cable."

The audience of exhibitors focused on the fact that Valenti plans to retire in a matter of months -- National Association of Theatre Owners president John Fithian called Valenti's swan song at the annual exhibitors' convention "a bit of a sad day" -- and so arguably the most startling statistic of the past year was nearly overlooked in the outpouring of warm feelings.

In 2003, the average cost of making and marketing a movie for the MPAA's seven member studios rose above the $100 million mark for the first time in history. Negative costs per film climbed to $63.8 million, an 8.6% increase over 2002. And the cost of prints and advertising soared to $39.05 million, a $27.5% increase over 2002, which the MPAA attributed to significant increases in the cost of television advertising.

It was the steepest annual increase in production and marketing outlays since 1997, when the average figure increased by 27%.

In 2003, negative costs rose even more steeply for the majors' specialty divisions, such as Miramax Films, Fox Searchlight and Sony Pictures Classics, as well as affiliated companies like New Line Cinema. Their average production cost rose to $46.9 million, an increase of 37.7% over the previous year.

Moviegoers, however, weren't asked to shoulder much of that burden. According to NATO, the average ticket price in the United States in 2003 was $6.03, up just 4% from 2002.

Coining a new metaphor, Valenti attributed the spiraling costs to "the cost tapeworm wiggling so energetically in film production, nibbling, chewing, eating the fiscal molecules of the business." He called on studio executives to make budget discipline "a fervid priority."

That suggests the MPAA companies are feeling a profitability squeeze -- at least in terms of domestic theatrical revenue, though rising DVD/VHS sales and rentals are offsetting the pinch. But, speaking to reporters, Valenti, as head of a trade association, steered clear of speculating on the profitability of his member companies. "We don't get into the profitability," he said.

The major studios did manage to squeeze more boxoffice dollars out of individual titles in 2003. While the total number of new films released increased from 449 in 2002 to 459 in 2003, the number of new films released by MPAA companies declined from 220 in 2002 to 194 in 2003. As a result, the average gross for an MPAA release increased from $32.8 million in 2002 to $41.6 million in 2003, a 27% improvement.

As he addressed exhibitors crowded into the Theatre des Arts at the Paris hotel, Valenti, marking the 37th time he has appeared before theater owners to offer his annual report, took the long view.

Even though 2003 boxoffice finished slightly below 2003's record levels, he said it was "the second-largest total in the history of the movie industry. To maintain that ascendant level of boxoffice takings is a creative and marketing feat on a heroic scale."

Throw the $10.85 billion in international boxoffice into the pot, and Hollywood's worldwide boxoffice for 2003 totals $20.34 billion.

Adopting an even broader perspective, Fithian pointed out that theater admissions increased 71% from 1970 to 2003. During that same period, the U.S. population increased by 43%.

In Valenti's view, 2003 had to be judged "a good year" -- particularly in light of what he called "the onslaught of competition for the eye and ear of consumers, (which) is a lacerating catalog of rivalries and marketplace antagonisms."

In terms of entertainment options, movies must compete with 108 million homes that have TVs, 98 million with VCRs, 47 million with DVD players, 67 million with computers, 62 million connected to the Internet, 22 million with broadband, 74 million with cable, 40 million with pay cable, 25 million with digital cable and 20 million with satellite TV.

Even with all those competing distractions, statistically speaking, each U.S. resident attended on average at least five movies per year for the fifth year in a row. The average admissions per capita for U.S. residents was 5.4 million in 2003, down slightly from 5.7 million in 2002.

The statistical average doesn't reflect the true demographic makeup of the moviegoing audience, of course. The highest percentage of frequent moviegoers, who see more than one film a month, remain those in the 16- to 20-year-old age group. But the age group that saw the most increase in business in 2003 was that of 50- to 59-year-olds, which increased by 20% from 2002.

Meanwhile, on the exhibition front, the scene remained stable. According to NATO's figures, the total screens in operation numbered 35,774, a minor decrease from 2002's 35,837. The total number of theaters also contracted slightly. The 2003 figure was 6,060 sites vs. 2002's 6,145.

But the window during which theatrical features have the field to themselves continues to narrow. According to Fithian, the video/DVD window narrowed from five months, four days in 2002 to four months, 23 days in 2003.

Valenti paid tribute, though, to the moviegoing experience, testifying to its ability to compete with even the most elaborate home video systems.

"What you offer consumers is an epic viewing experience and an alluring social adventure they cannot duplicate in their homes -- stadium seating, huge screens with luminance, the sensuality of digital sound, unknown but enthusiastic companions of a single night -- all responding to the skills of cinema artists who can make you laugh or cry or hold you in suspense," Valenti rhapsodized.

Despite the popularity of such R-rated films released in 2003 as "The Matrix Reloaded," "The Matrix Revolutions," "Terminator 3: Rise of the Machines" and "Bad Boys II," PG-13 movies continued to drive the list of the year's top 20-grossing films. While the four R-rated movies among 2003's top 20 represented 20% of the films in that group -- a far cry from 2002, when no R-rated fare cracked the top 20 -- 12 PG-13 films dominated the list. And the G-rated "Finding Nemo" sat atop the pile with its $339.7 million in domestic ticket sales.

Speaking with reporters before his address, Valenti continued his campaign against piracy, which the MPAA estimates results in $3.5 billion in lost revenue a year. His main concern, he said, is that the increasing availability of broadband and growing ease in downloading films will spur a new wave of illegal copying.

"We've got a moat around the movie industry, and that moat is the time needed to download a movie," he said of the current situation.

The battle also is being fought in movie theaters, which are looking to legislators to pass stronger anti-camcording legislation. Presently, six states outlaw camcording of films, bills are pending in 14 other states, and three are sitting on governors' desks.

Valenti defended his concern that led the MPAA to attempt to institute a screener ban last year. After realizing that screeners had become a source of piracy, he said it would have been "stupid that we would be the architects of our own demise." But, he added of the controversial measure that was ultimately ruled anti-competitive by a federal judge, "If I had to do it all over again, I would have shaped it differently."

Looking forward, he added: "The MPAA is no longer going to be involved in any policy about screeners in the future." He said those decisions would be left to the individual member companies.

Valenti came the closest he has yet come to putting an actual timetable on his pending retirement from the post he has held since 1966.

Observing that the search for a new MPAA head is now in the hands of the executive search firm Spencer Stuart, Valenti offered that a replacement might be found in two or three months, though a spokesman for the MPAA later cautioned that no fixed date is yet in place.

"I look at this with mixed emotions because when you've done something so long, it's difficult to tear yourself away from it," Valenti said.

Speaking to the exhibitors, the 82-year-old Valenti -- whose tenure has bridged such issues as the creation of the rating system, battles of blind bidding, trade negotiations and the contentious screener ban -- volunteered his own epitaph.

"I can sum up for you in two words my greatest accomplishment in that long tenure," he said. "Those two words are: 'I survived.' "

At the conclusion of his remarks, Valenti was acknowledged with a prolonged standing ovation.