Here's to a happy new year at b.o.

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Annual analysis: Looking back at 2006, it's hard not to call it anything but the tough year it was for Hollywood.

Although grosses for '06 topped $9 billion versus $8.7 billion in '05 and admissions rose by around 3%, it wasn't a robust enough recovery to provide any real cheer for the industry. As always, some distributors were more successful than others so opinions will vary studio-by-studio as to just how good or bad a year it was. Nonetheless, the industry's overall modest gains kept Hollywood watching its bottom line more closely than ever. Studios continued to cut back on marketing spending when what they really needed to do was market more aggressively to convince people who aren't going to the movies now that they should be.

Instead of being innovative in developing new ways to market its product, Hollywood continued to support the broadcast television networks by plowing most of its movie advertising dollars into 30-second network spots. This makes increasingly less sense because not only are the networks' audience shares declining, but young people -- who make up the biggest portion of the moviegoing audience -- are watching less network TV these days. Instead, they're spending more of their free time in front of computer screens watching and posting material on sites like YouTube and MySpace.

If we look at the year's top grossing movies, it's clear that what worked best at the boxoffice last year was the tried and true -- familiar franchises, predictable animated family films and movies based on well known best-selling books. Of 2006's top ten movies, five were franchise episodes ("Pirates of the Caribbean: Dead Man's Chest," "X-Men: The Last Stand," "Superman Returns," "Ice Age: The Meltdown" and "Casino Royale"), three were computer animated originals that audiences knew what to expect from ("Cars," "Happy Feet" and "Over the Hedge"), one was a star driven adult drama from a big name director that was based on a huge best-seller and ("The Da Vinci Code," directed by Ron Howard and starring Tom Hanks) and one was a star driven youth appeal comedy original ("Talladega Nights: The Ballad of Ricky Bobby," starring Will Farrell).

The same level of success for the tried and true can also be seen in the next set of 10 leading films of '06. That list includes: two franchise episodes ("Mission: Impossible III" and "Scary Movie 4"), one adult appeal comedy-drama based on a big best-seller ("The Devil Wears Prada"), one original animated feature ("Open Season"), two comedies driven by youth appeal stars ("Click," starring Adam Sandler; and "Borat," starring Sasha Baron Cohen), two romantic comedies driven by major youth appeal stars ("The Break-Up," Jennifer Anniston and Vince Vaughn; and "Failure to Launch," starring Sarah Jessica Parker and Matthew McConaughey) and two dramas driven by big stars and well known directors ("The Departed," directed by Martin Scorsese and starring Leonardo DiCaprio, Matt Damon, Jack Nicholson and Mark Wahlberg; and "Inside Man," directed by Spike Lee, and starring Denzel Washington and Jodie Foster).

You can, of course, read into these lists whatever you'd like to read into them. So, on the one hand, you can conclude that these are the types of movies that audiences really wanted to see last year. You also can conclude that these were the only types of films that Hollywood marketers were able to sell because they lend themselves very well to being marketed on network TV. The more predictable a genre is or the more familiar a franchise is, the more likely it is that a 30-second network TV spot will be able to do the job. Anything that takes even a little explaining is tough to handle in 30 seconds.

So, basically, in '06 Hollywood stuck to doing what it knows how to do -- making familiar product that could be marketed the same way distributors have been marketing movies for the past 20 years. Sure, there were a few changes here and there -- a modest increase in Internet spending and a decrease in newspaper spending, for instance -- but when it came to depending on network TV spots, Hollywood was right there spending where it loves to spend and willing to pay more money to reach fewer people.

Sooner or later some of the smarter marketing guys around town are going to realize how they're limiting their options by continuing to play in the same sand box they got into 20 years ago. In those days, network TV reached a huge national audience, there was no Internet competing for consumers' attention, people were spending more time at home with their families so they were available to view network programs after dinner and newspapers were the only good way to provide details about theater locations and show times. All of that has changed today, but Hollywood continued to market movies in '06 mostly the way it did in 1986.

Movie marketing on network TV is mostly driven by stars. To convey what a movie is about in 30 seconds doesn't allow for a lot of time to explain anything. But if your movie boasts a brand name superstar, people immediately have some sense of what to expect from that film. One of Hollywood's biggest problems in '06 was that some of its biggest superstars started losing their luster.

The superstar front started running into problems in '05 when Russell Crowe threw a tantrum as well as a telephone at the head of a hotel desk clerk in New York who, Crowe claimed, hadn't been helpful to him in placing a phone call to Australia. For a time, Crowe was thought to be in danger of losing his U.S. visa, which would have made it impossible for him to make movies in this country. An undisclosed settlement with the desk clerk plus having some good attorneys on his payroll apparently kept Crowe out of serious legal trouble.

The film Crowe was promoting at the time, "Cinderella Man," turned out to be a boxoffice disappointment, grossing only $61.6 million domestically and placing 42nd on the list of top films for '05. Crowe's next film, "A Good Year," directed by Ridley Scott, opened poorly to $3.7 million the weekend of Nov. 10-12, 2006. It went on to do about $7.4 million in domestic theaters, which didn't even put it on the list of 2006's Top 100 grossing films.

Tom Cruise made headlines by wildly indulging his inner child in '05 while he was supposed to be out promoting "War of the Worlds" for Paramount. Cruise spent most of his time talking about the virtues of Scientology, warning everyone about the evils of anti-depressant drugs and proclaiming his love for Katie Holmes by doing things like jumping for joy on Ophra's TV set couch. The wacko image Cruise created for himself by doing all this didn't do him any good, especially with his core audience of women, many of whom had taken or were taking drugs their doctors had prescribed to deal with post-partum problems. Nonetheless, "War" grossed $234.3 million domestically and was '05's fourth biggest film at the boxoffice.

There was a big difference, however, in '06 when Cruise's "Mission: Impossible III" wound up doing a disappointing $133.5 million domestically, making it the year's 12th biggest grossing film. The franchise's previous episode had grossed $215.4 million domestically in 2000 and was that year's third biggest film.

In a surprise announcement late this summer Viacom chief Sumner Redstone said he was fed up with Cruise's bad behavior and wasn't renewing his production deal with Paramount. Insiders claimed that what Redstone liked even less than Cruise's behavior was how little money Paramount was actually keeping from "MI 3" because of Cruise's rich deal with the studio. Cruise and his producing partner, Paula Wagner, weren't out on the street for very long. They snapped back nicely a few weeks later with a new deal to head and part-own MGM's United Artists label, but reportedly not for the same big money they once commanded at Paramount.

Cruise wasn't the only superstar who ran into trouble in the summer of '06. Mel Gibson made headlines of his own after being arrested in the wee hours of the morning in Malibu for high speed drunken driving. That was bad enough, but Gibson dug himself into a deeper hole by directing an anti-Semitic tirade at the deputy sheriff who had stopped him and who happened to be Jewish, himself. Of course, when Gibson sobered up he apologized and insisted in a "Good Morning, America" interview with Diane Sawyer that he wasn't an anti-Semite.

From there it was off to finish post-production on his new film "Apocalypto" and then to hit the promotional trail to try to convince people to buy tickets.
Disney's marketing team did a great job and got Gibson's picture open in first place to $15 million the weekend of Dec. 8-10. From there, however, it was straight downhill for "Apocalypto," which slid over 46% in its second weekend. Its domestic gross of about $36 million through Christmas weekend should put it in 75th or 76th place for the year. Disney won't lose money on it since Gibson's Icon Productions financed the very violent period piece epic adventure, whose dialogue is in the ancient Mayan language. Icon won't lose money on it either since the company reportedly made it for only $40 million and should be able to recoup from its DVD release.

The last thing Hollywood needs is to see its biggest stars devalued. The basic structure of the modern movie business is that you pay stars the big bucks and indulge their whims because they have a following of fans who can be counted on to line up on opening night to buy tickets to their new films. When superstars become overly controversial and less likable, the whole system breaks down and like Humpty Dumpty there's no putting it back together again.

Crowe, Cruise and Gibson made headlines for different reasons. In fairness to Cruise, his emotional outbursts didn't involve committing a crime and didn't involve making racial remarks. He just came across as a wacky overbearing guy who says and does whatever he feels like saying and doing. Crowe's bad behavior went hand in hand with previous incidents in which he had also displayed anger management problems (like after the British Academy Awards a few years ago when he slammed one of the show's producers against a wall to protest his having cut Crowe's remarks on the taped broadcast). Gibson's anti-Semitic tirade was the most serious of all because it offended so many people around the world, all of whom are potential moviegoers.

In the past, all three of these superstars would probably have suffered less with the public because only a few years ago news of this sort didn't spread as rapidly and as broadly as it now does. It used to be that when someone did something nasty most people never actually saw video coverage of it. If you caught that night's newscast you saw it, but if you missed it that was the end of it. Today, of course, video clips of anything newsworthy live forever on the Internet and anyone can find them without much trouble. Bad behavior by movie stars is accessible to a much wider audience these days than ever before. In today's age of the paparazzi and of the never-ending news cycle, when a superstar makes headlines -- and especially if a mug shot's been taken -- that news travels around the world instantly and is updated for days or weeks to come. So there's much more potential now for bad news to impact negatively on moviegoers everywhere.

In 2006 Hollywood realized that it has a new vulnerability on the marketing front because of potential superstar meltdowns. If Disney had financed "Apocalypto" (which it did not) and if it had cost $100 million-plus to make (which it did not), the studio would have had a major problem.

Those weren't the only reasons '06 was a tough year for Hollywood. The maturing DVD business continued to mature, helped not at all by the launch of competing Blu-ray and High Definition formats for consumers to choose between (recalling those earlier Betamax and VCR videotape format wars). As with movie marketing budgets, DVD marketing budgets around town were also slashed in '06 in response to slowing sales. It's almost as if Hollywood has lost sight of the fact that the reason you spend money on advertising is to persuade people to buy products they otherwise might not buy. Cutting back dramatically on marketing budgets in tough times is a sure-fire recipe for cutting into sales.

Looking ahead, DVD distributors will face new competition from the growth of video on demand services offered by cable companies like Comcast, which already has a sizable VOD operation. With VOD, consumers don't have to go to retail outlets to purchase DVDs nor do they have to wait for discs to turn up in the mail. VOD provides the kind of instant gratification people crave today. It could pose some big problems for Hollywood down the line.

Adding to Hollywood's troubles in '06 were developments on the labor front that put the Screen Actors Guild and the Writers Guild of America, West in the hands of more militant leaderships than was the case in recent years. The possibility of labor strife in Hollywood in the next few years increased significantly in '06.

So, all told, good riddance '06 -- and here's hoping '07 turns out to be a very Happy New Year!

Filmmaker flashbacks: From Oct. 7 and 10, 1988's columns: "Columbia, which has been out of action for too long, is back now with 'Punchline,' which packed a good boxoffice punch when it opened last weekend at four screens in New York, Los Angeles, Chicago and Toronto...It stars Sally Field and Tom Hanks as two aspiring stand up comics...

"'The overall strategy was to treat it as something that's a very special picture -- one that has two very big stars, but two very different types of people,' explains (Columbia marketing president Dan) Michel. 'They have a very different appeal. Sally's appeal skews female and is older. Tom's appeal is younger as well as having strong appeal among young women. This is a different role for Tom Hanks (who) has been seen in the past mostly in light comedy roles. This really is a role that draws on his comedic talents, but also showcases him as a serious actor. Overall, our marketing strategy was to recognize some of these unique elements and to develop a distribution pattern and a marketing plan that addressed them...'

"Also working in favor of 'Punchline' is that Tom Hanks is coming off his great success this summer with 20th Century Fox's 'Big.' Columbia has been successful at generating a great deal of media attention for 'Punchline,' Michel points out, 'but a lot of that is available to us because Tom Hanks is such an exceptional actor. I think what's really at the bottom of all this is a range of performance that will be seen when you compare what he does in 'Big' to what he does in 'Punchline."

"Although 'Punchline' followed 'Big' into release, it was 'Punchline' that was filmed first. 'His performance in 'Punchline' compared to the one in 'Big' is remarkable (in terms of its wide range). I think that has made the press very interested in this picture."

Update: "Punchline" opened strongly in platform release opening Sept. 30, 1988 with nearly $161,000 at 4 theaters ($40,185 per theater). After going wide Oct. 7 with $5.2 million at 753 theaters ($6,914 per theater), it wound up with a disappointing $21 million in domestic theaters. "Punchline" ranked 47th for the year in terms of top grossing films while "Big" was fourth with nearly $115 million.

Martin Grove hosts movie coverage on the broadband television channel www.updatehollywood.com.
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