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In the late 1940s and early ’50s, Hollywood studios began to reconsider — and in several cases pulled —their financial support of the Academy of Motion Picture Arts and Sciences’ annual Oscars ceremony, fearing they had created a monster. Outsiders were increasingly questioning the legitimacy of the Oscar selection process, given that it was only logical that Academy members under contract to a specific studio would vote in blocs for that studio’s top priorities. Stars were demanding to appear in art films instead of pure commercial plays, because the former were likelier to yield Oscar recognition. And in 1949, in the midst of major economic hostilities between Hollywood and the British film industry (the U.S. and U.K. were embroiled in a trade war), the Academy voted its top prize, best picture, to a foreign film, England’s Hamlet, for the first time.
The Academy managed to survive by raising its annual membership dues, holding a fundraising drive and even licensing its organization’s name to Bulova watches. Then, ahead of the Oscars ceremony in 1953, the ultimate celebration of movies was saved from such humiliations by the new medium many had feared would kill it: television. NBC paid $100,000 for the exclusive TV broadcasting rights to the show — big bucks in those days for the Academy, but small fries for NBC — and overnight the Academy went from being a beggar to being flush.
Seventy years later, this may sound like ancient history. But it’s a useful reminder of just how dependent the Academy is on the money it generates through licensing the Oscars to a broadcast network — ABC, since 1976 — and helps to contextualize why the Academy, coming off its lowest-rated Oscar telecast ever, recently announced controversial programming decisions for the 94th Oscars. On March 27, the Academy intends to present eight awards — documentary short, film editing, makeup/hairstyling, original score, production design, animated short, live-action short and sound — during the hour before the live telecast and then drop slightly edited versions of those presentations into the live broadcast later (implicitly arguing that nobody will miss a sound mixer’s walk from his or her seat to the stage).
Make no mistake about it: This decision was driven by ratings concerns.
The Academy and ABC refuse to publicly discuss the terms of their deal, which was renewed in 2016 and runs through the 100th Oscars in 2028. But sources in the know tell The Hollywood Reporter that it calls for the Academy to receive a guaranteed annual licensing fee of about $100 million, with the potential for considerably more on top of that through revenue sharing tied to the sale of commercials. Ads on the Oscar telecast always sell out, but at what price? The dollar figure that can be charged on the open market is generally tied to the ratings of the previous year’s telecast, which is one of the things that triggered concern this year.
According to financial disclosures, the Oscars brought the Academy about $131 million in 2018, 2019 and 2020 and $117 million in 2021. Meanwhile, the Academy’s functional yearly expenses in that time span have ranged between $103 million and $115 million. In other words, the revenue sharing tied to commercials makes the difference between the organization breaking even and turning a profit.
Insiders tell THR that the Academy has accumulated a sizable endowment over the years — in the neighborhood of $500 million — but also has a growing portfolio of liabilities, not least the nascent Academy Museum, which is a separate nonprofit organization (the Academy Museum Foundation) but which the Academy would feel compelled to bail out if it fell upon hard times. While the Academy is not required, by its deal, to adhere to telecast changes that ABC may desire, it generally does so because it knows that the amount it can secure for its next TV contract will be tied to its performance during this one.
Sources say the relationship between the Academy and ABC has not been openly acrimonious, but they note that Bob Iger, who until recently was the CEO of ABC parent Disney, had frank conversations with Dawn Hudson, the outgoing CEO of the Academy, about the fact that ABC had bought a show that was generating 30 to 40 million viewers per year, but since then had plummeted in the ratings.
The 2021 telecast — which was significantly pared down and held at LA’s Union Station, rather than at Hollywood’s grand Dolby Theatre, due to COVID considerations — attracted just 10.4 million viewers. And because it was objectively a lesser show than the Academy had produced in the past, ABC requested, and was granted, a financial accommodation by the Academy.
ABC’s fingerprints have been increasingly visible in other ways, too. The network’s longtime late night host Jimmy Kimmel emceed the Oscars in 2017 and ’18. This year, Tracee Ellis Ross, star of ABC’s Black-ish, announced the Oscar nominations. And all three hosts of this year’s ceremony have direct connections of their own: Regina Hall had a recurring role on Black-ish and more recently appeared on Nine Perfect Strangers for Hulu, which is co-owned by Disney; Wanda Sykes has been associated with Black-ish; and Amy Schumer has a show, Life & Beth, coming to Hulu.
The Academy’s 54-person board of governors — most of whom represent branches of members whose corresponding Oscar categories are the ones TV viewers are not particularly interested in — had no independent desire to treat some categories differently than others. They were well aware that, in announcing plans to do so, they would come in for a beating, having attempted a similar change in 2018, when they were coming off another Oscars with record-low ratings. At that time, they were slammed so savagely that they ended up backtracking. This time, they concluded, it was necessary to amputate a limb in order to save a patient.
Alex Weprin and Kim Masters contributed to this report.
This story first appeared in the March 2 issue of The Hollywood Reporter magazine. Click here to subscribe.
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