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Because the studios are trying to respond to a clear audience demand for more material that's fresh and unpredictable, they are greenlighting riskier fare. The results this fall were disastrous. A spate of fall movies crashed and burned, movies that if they had been produced and marketed at the independent level might have worked.

Twentieth Century Fox released Curtis Hanson's family drama "In Her Shoes," starring Cameron Diaz, and the twisted Marc Forster thriller "Stay," starring Ewan McGregor; Warner Bros. Pictures failed with Niki Caro's feminist drama "North Country," starring Charlize Theron, and Shane Black's well-reviewed "Kiss Kiss, Bang Bang"; Paramount Pictures released Cameron Crowe's $54 million "Elizabethtown," starring Orlando Bloom, and "The Weather Man," starring Nicolas Cage. None are working at the boxoffice.

These films were all worth making. But they were too expensive for what they were. And the studios don't know how to market them. "They can get away with marketing tentpoles," says one marketing maven, "but with the smaller pictures, they don't have a clue."

Personal filmmakers such as Crowe, Wes Anderson ("The Royal Tenenbaums") and Paul Thomas Anderson ("Punch Drunk Love") shouldn't be making movies at the studio level. (And even a proven commercial writer-director like James L. Brooks shouldn't spend $80 million on a movie like "Spanglish.") They should be doing it the hard way on the indie side, with the right cast and shooting schedule. They're spoiled. No filmmaker in his right mind wants to give up the fat studio gravy train. But the studios need to wake up and recognize what business they're in.

What makes 2005 a watershed year is that the message of the marketplace, where the boxoffice is down some 8% over last year, rang loud and clear. And the smartest people in Hollywood are scrambling for answers. (The others are insisting that nothing is wrong.) "Fundamentally, this is an industry in transition," ICM chairman Jeff Berg says. "Every studio has to rethink itself. Change is hard when existing systems are in place that are used to doing business a certain way."

The heads of the studios are paid to figure out where the market is going and what audiences want to see two years in advance. Each studio has $1 billion allocated, more or less, to plunk down on producing about 20 movies a year. They bet their stacks of chips on the movies that will go forward.

The heart of the problem is that the studios do one thing really well. They know how to throw their enormous resources at making and marketing event movies. Their primary job is to find tentpoles. These are the powerful drivers for the rest of their slate. Warners has Harry Potter, Batman and Superman. Universal Pictures has "The Bourne Identity." Paramount has the "Mission: Impossible" series. Sony Pictures has Spider-Man and now MGM's James Bond. Fox has its X-Men. Disney has its animated family features like "Chicken Little."

It is justifiable for a studio to spend hundreds of millions on a real potential revenue generator, banking that it will surely satisfy the masses of moviegoers around the world. The trick, though, is to launch the tentpole in the first place: a movie that is so satisfying to all four audience quadrants (men and women, old and young) that it generates a franchise. In order to get that movie, the studios will put the best writers, directors, stars, effects and creative teams on board. And they will shower the marketplace with advertising, promotion and hype to get people to see it. The problem now is that, as one agent puts it, "a generation of viewers is not buying the dog food."

Once a studio actually launches a tentpole -- which is a bitch to do -- they can ride it for a few films assuming they don't mess it up. For example, if Sony wanted to turn the sequel to a sexy romp like "The Mask of Zorro" into the PG family film "The Legend of Zorro," they should have telegraphed that to the audience instead of selling Catherine Zeta-Jones busting out of her bodice. Audiences were confused. The studio also should have recognized that selling "Zathura" as a sequel to the 10-year-old "Jumanji" was a mistake. Whoever argued in favor of changing the title and selling the movie as an original was right. But it's always much harder to start from scratch. The trouble with such would-be blockbusters as Sony's "Stealth" and DreamWorks' "The Island" is that they don't always work.

So many movies try to be tentpoles -- and fail. It's the equivalent of striking out when you're trying to hit a home run. You can't afford to do that every time at bat. Tom Pollock, the ex-chairman of Universal Pictures (who now runs Montecito Pictures with Ivan Reitman), tells his students at the University of California at Santa Barbara that the studios invest too much in one-shot movies that never will yield any sequels.

That's because the studios have become so accustomed to throwing money at the movies they want to score with that it's impossible for them to give up their free-spending ways. They also rely on foreign boxoffice and DVD sales to pull them out of the red. And instead of cutting back on costs and banking on what they really believe in, they bring in partners to cut their risk.

Sony justifies spending $85 million on "Memoirs of a Geisha" -- which could well be an Oscar contender but is an unlikely cash cow or sequel generator -- by bringing in Spyglass Entertainment as a partner.

To follow Pollock's argument, only tentpoles justify outlays of serious studio cash. Everything else should be cheap genre fare: comedies, thrillers and horror movies. Basically, that's the business that the wildly successful Lions Gate and Dimension are in. But these indies do what they do for a price. They and the studio "indie" subsidiaries, such as Fox Searchlight and Focus Features, are equipped to pay less for everything.

As Paramount reconfigures its specialty film division, which John Lesher is taking over, it should be able to take a movie like "Elizabethtown" and shrink its budget in half.

In Hollywood, there's a studio price and an indie price. There's a two-tiered system in place. On the studio side, the top movie stars cost $20 million against a share of the gross, and the top directors command $10 million (unless you're Peter Jackson coming off "The Lord of the Rings").

Movie stars know the rules today: Sucker the studios into paying your price and go to the indies for the quality parts that will sustain your career. If you're George Clooney, you recognize the value of putting yourself in quality work that will stand the test of time.

No studio is going to admit the obvious: They can't afford to make all their movies at top-tier prices. And if they only make a few tentpoles a year, what are they going to do with the rest of their slate? None of the studios is willing to slash the fat from their motion picture divisions. When Warners instituted job cuts, they got rid of two top people from Warner Independent Pictures, the one division they should be beefing up.

The best way for the studios to make the tricky one-shot movies in the "middle" that are neither tentpoles nor genre flicks is to beef up their acquisitions departments and let the indies make those movies for a price. They can pick up movies from studio suppliers like Mandate Pictures ("The Grudge," starring Sarah Michelle Gellar) or Sidney Kimmel Entertainment (the upcoming "Trust the Man," starring Julianne Moore), which can produce commercial movies at far less than studio rates. For the studios, indie producers who can consistently deliver low-cost commercial movies, such as Mandate's Joe Drake, SKE's Bill Horberg and Michael London ("Sideways"), are worth their weight in gold.

Reader comments

I represent Shane Black. I thought your article today was very well stated. I agree with everything in it. There is just one clarification I would like to offer. You mention "Kiss Kiss, Bang Bang" with other films, stating "None is working at the boxoffice. These films were all worth making. But they were too expensive for what they were. And the studios don't know how to market them." "KKBB" was not an expensive movie. It cost 15 million to produce. A very low budget for what is an action/buddy movie, all of it shot in Los Angeles. Shane and I are absolutely thrilled and appreciative that Warners and Joel Silver got the movie made. Now if we could only get Warners to aggressively market it, like Focus marketed "The Constant Gardener" and "Pride & Prejudice." Or the Weinsteins marketed "Derailed." Oh, well... Without any advertising (small newspaper ads excepted, and apparently some Internet ads), "KKBB" is doing well in the few screens it is playing on --per screen average is very good, word of mouth is terrific, with some great reviews. -- David Greenblatt This is probably fodder for a longer discussion, but I don't agree with you. I think no one knows where the next "tentpoles" will come from, so the studios should keep experimenting. The problem is not with the cost of the films (by the way, Charlize took a big cut on "North Country," and that picture was not particularly expensive by any measure, not much more than "Sideways," which cost $21 million), the problem is with the lack of flexibility and imagination the studio marketing divisions are using to sell the pictures. I bet the marketing costs for "North Country" are going to be very high, because the marketing divisions did not know how to get to the audience that, once it came out, loved the picture. The companies should be looking for new ways of approaching the audiences, and the focus should not be in cutting the prices of the talent that gets a movie made every few years or has a vision. We are facing a third-world business model now, with the haves and the have nots, and I don't think that is healthy for the business, or the people in it, either. -- Linda Lichter Loved your "Risky Business" article today. It's about time someone wrote the truth. I will say this, however, "Stealth" and "The Island" mostly faild because they had no movie stars in them. (Only people who are compeltely closed off from the real world think EM, SJ and/or Josh Lucas are movie stars. You will be hard pressed in finding real honest-to-God moviegoers who know or care to know who they are). Why isn't anyone writing about the boxoffice disaster that "Jarhead" has turned out to be? $27.7 opening followed by two consecutive 60% drops and a total that will struggle to hit $63 million. The movie cost $75 mill before marketing. Sony gets killed every week, but "Jarhead's" failure goes unmentioned?! -- Steve Here's what I think/know based on my day-to-day travails in the biz. I cannot get a film financed or distributed unless I have names. Names that can be marketed. I want to make a film for $15 million, the studio tells me they won't get involved unless I have actress "A" and the budget is $35-40. But I know I can make it for $15-20 million with Actors "B1" and "B2." No, the agents for those actors won't go for that budget as they want it at $40 million so their actors can get more $$ (Or, more for the agents.) The studios then balk at that budget for those actors. I am preparing an offer for actress "A1," a fair offer at that. The agents are already balking because they want more. So I offer them the entire package. They still want more and the studio says no.... So the studios complain that the boxoffice sucks. Well, there are no real "actors" that can open a film today ... most are too old and there are no projects written for them. And the younger actors have no clout. And the agents are screwing with producers. We then try to do an end run around the agents, and if the actor says yes, then boy do the agents make life hell - ex. - the actor NEVER has an open slot for the film! Now here's something I discovered. There are 77 million women born between 1946 and 1964. They and their male compatriots control over 70% of the disposable income in this country. Yet no films are made or marketed to them. I made one. Was told that it was "too mature." I've shown the film at festivals where theaters had to add more screenings, and others had near riots because people couldn't get in. (Santa Barbara Film Festival). One actress won a Globe and was nominated for an Oscar for a previous film, and her review for this film was that she was better in this than the other! Even today, when people see it they love it. Was it distributed? No. Why? Because the powers that be didn't want, let me rephrase that, didn't know how to market it. How do you expect young marketing execs to know what to do when they have no concept of who the audience is? So, I tire of the studios complaining, the agents just being agents, and the trash that they all come together to make. (Oh, did I mention the cliques that work together to make sure that even more trash gets made?) But, I will never, ever, give up. Tent poles, schment poles. We're all independents ... just some a little less than others. -- Wil Fabrizio Bravo on the most lucid and insightful studio industry profit strategy and structure article I have ever had the pleasure to read. And believe me, I've read them ALL. Also, Tom Pollock is among the brightest past or current studio executives you could have hoped to meet. That is why last week he received the Louis B. Mayer Motion Picture Business Leader of the Year Award from The DeSantis Center for Motion Picture Industry Studies at Florida Atlantic University (of which I am the founding Director, and the late Robert Wise was founding Chairman). -- Bruce Mallen, senior fellow at the Center for the Digital Future at USC's Annenberg School of Communication Submit your comments