risky business

Studios' strategies differ as glut grows

The MPAA delivered its 2006 report card this week, and the headlines were upbeat. After losing ground in 2005, the domestic boxoffice staged a modest comeback in 2006, rising by 5.5% to $9.49 billion for the year. But don't break out the champagne just yet, because there are disquieting trends afoot.

With private investment money continuing to pour in to Hollywood and new distribution entities opening their doors, a growing product glut is developing. Last year, 607 films flooded the theatrical market, an increase of nearly 11% compared with 2005. Since 2002, the year that set the modern-era record for individual admissions, the increase in the number of films pouring into the multiplex is even more dramatic — a jump of 30%. Of course, a lot of those films are micro-movies, making non-hit-and-run stops in movie theaters on the way to the DVD shelves. Even so, the number of new movies from the six MPAA studios rose by nearly 7% between 2005 and 2006.

Intuitively, it would seem that the industry should be scaling back its releases. That's the tack that Walt Disney Studios chairman Dick Cook took last year when he announced that his studio was downsizing to focus on 12-13 pictures a year, with an emphasis on Disney-branded movies. (Last year, Disney's Buena Vista distribution arm fielded 19 titles.) Of course, it's a little easier to put all your eggs in fewer baskets when one of those baskets is the upcoming "Pirates of the Caribbean: At World's End."

Fox Filmed Entertainment, in contrast, is doubling down. 20th Century Fox released 24 movies last year, while its specialty division, Fox Searchlight, handled 13. Its bets are calculated, though. While Fox, like all the majors, is still busy erecting several big tentpoles a year, it's also targeting more and more midrange movies to specific audiences. It has struck a deal with Philip Anschutz's Walden Media to produce family films and launched the Fox Atomic label to produce and release as many as eight films per year aimed at young adults — call them MyMovies for the MySpace crowd.

Shrewdly targeted movies also are on tap for new distributor Overture Films, headed by CEO Chris McGurk and COO Danny Rosett, who recently added more muscle to their team with the addition of marketing veteran Peter Adee. The company is Liberty Media's entry into the theatrical arena with a goal of producing eight to 12 movies per year that will eventually migrate to Liberty's Starz cable channels.

Addressing the product glut, McGurk explains, "There are two classes of movies out there: quality films with fully integrated distribution and movies that are just being released." He intends to stake his claim in the former group, forgoing general-audience movies by aiming for specific niches with films budgeted in the $25 million range. Noting that the studio world has constricted with Paramount Pictures' purchase of DreamWorks, McGurk sees opportunity despite the clutter in the market.

That's much the same game plan that the new CBS Feature Films unit, formally launched this week, appears to be pursuing as it ramps up to produce four to five films per year in the $10 million-$50 million range, all assured of eventual play on CBS' Showtime.

The growing competition sure looks forbidding, but one caveat comes from Mark Urman, theatrical division head at indie ThinkFilm, which will increase its output this year over the 21 films it nurtured in 2006. "It's not as congested as it seems," he says. "In the old days, an art film could play in one theater for 52 weeks. Now because everything, whether it's successful or not, is on DVD in four months, more releases are moving through theaters more quickly than ever."

All those movies are kind of like salmon swimming furiously upstream. No matter how smart the business plans, the reality is going to be brutally Darwinian.
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