Commentary: Too much money is Hollywood's big problem

Movie glut fueled by cash is bad news

Movie money: In most industries there's no such thing as having too much money.

Well, that's not the case in the movie business. As crazy as it sounds, Hollywood's real problem is that it has too much money. Movies offer investors a potential upside that's unbelievably attractive when things work out. And with the global movie marketplace generating the kind of grosses it now does, the return on movie investments can be overwhelmingly better than anything other than discovering a new oil field. Unfortunately, all that investment capital from the far corners of the Earth makes possible the production of many more films than the industry should be releasing.

On the face of it, however, you'd think that having the money to make 500 some movies a year would be a good thing. After all, the more movies that get made the more jobs there are for actors, directors, producers, writers, cinematographers, editors and everyone else whose name flies by at the speed of light when the end credits roll.

Moreover, having a ton of movies out there sounds like something that should be good for theater owners who have so many megaplex screens to fill these days. And it should also be good news for moviegoers hoping to find great entertainment that's worth the $100 or more that an evening for two at the movies costs these days when you consider all related expenses. Of course, that's not what results from today's overflowing distribution pipeline.

Having a hundred or more movies a year beyond what the system actually needs works against the stability of the film industry by driving up marketing costs, increasing production expenses and creating a glut of product that prevents many films from playing long enough in theaters to find their audiences.

These issues are complicated and easily misunderstood. Let's start with marketing costs. The more crowded the marketplace is, the louder you have to shout to be heard. And when we're talking about marketing, having to shout louder translates into having to spend more to get your message across. Although the broadcast networks deliver lower and lower audience shares, they somehow still manage to command higher and higher prices for their time.

This year viewing levels benefited from the combination of the Olympics and the political conventions and are now expected to surge thanks to the Presidential election. That's created a spike in what it costs to market movies on national television. Given Hollywood's dependency on network TV as a marketing tool, that means distributors' leaner and meaner marketing budgets barely cover the network buys necessary to obtain the minimum level of ratings points considered essential for their campaigns. That leaves less and less money available to put into Internet advertising and new digital alternative media, two areas Hollywood should be making greater use of than it now is.

If there were less product in the marketplace, distributors would be less pressured to shout louder and louder. But the way things now stand there's no hope for success if a film's distributor doesn't have deep pockets to cover the cost of a competitive marketing campaign. Just how crowded is the current marketplace? When you look closely at release schedules you find there are even more movies fighting for moviegoers' time and money than you thought was the case.

This weekend, for instance, there are four wide releases opening -- Focus Features' dark comedy "Burn After Reading," directed by Joel & Ethan Coen and starring George Clooney, Frances McDormand, John Malkovich, Tilda Swinton, Richard Jenkins and Brad Pitt; Overture Films' suspense thriller "Righteous Kill," directed by Jon Avnet and starring Robert De Niro and Al Pacino; Lionsgate's comedy drama "Tyler Perry's The Family That Preys," written and directed by Tyler Perry and starring Alfre Woodard and Sanaa Lathan; and Picturehouse's dark comedy "The Women," written and directed by Diane English and starring Annette Bening, Jada Pinkett-Smith, Meg Ryan, Debra Messing, Candice Bergen, Eva Mendes, Bette Midler, Cloris Leachman and Carrie Fisher.

In case you think four wide releases on one non-holiday early September weekend is pushing the envelope, consider the even more crowded conditions on deck for the weekend of Oct. 3-5. That non-holiday weekend will see seven wide releases hit theaters hoping to find their audiences. The group includes: Warner Bros.' western "Appaloosa," directed by Ed Harris and starring Viggo Mortensen, Ed Harris, Renee Zellweger and Jeremy Irons; Disney's comedy "Beverly Hills Chihuahua," directed by Raja Gosnell and starring Jamie Lee Curtis and Piper Perabo; Miramax's drama "Blindness," directed by Fernando Meirelles and starring Julianne Moore and Mark Ruffalo.

Also, Universal's biographical drama "Flash of Genius," directed by Marc Abraham and starring Greg Kinnear, Lauren Graham and Dermot Mulroney; MGM's comedy "How to Lose Friends and Alienate People: directed by Robert B. Weide and starring Simon Pegg and Kirsten Dunst; Sony's romantic drama "Nick and Norah's Infinite Playlist," directed by Peter Sollett and starring Michael Cera and Kat Dennings; and Vivendi Entertainment's comedy "An American Carol," co-written and directed by David Zucker and starring Kevin Farley and Kelsey Grammar.

Now distributors can argue that all these films are targeted to different core audiences and, therefore, it doesn't matter that they're going out head-to-head, but who are we kidding? Having seven wide releases on the same weekend isn't going to help any of them. With so many new titles fighting to generate awareness in the marketplace, moviegoers are likely to wind up confused and overwhelmed.

The crowded weekends I've just cited aren't unusual examples that I went out of my way to find. They're typical of the log-jammed weekends Hollywood's fielding these days. Having so much product in the marketplace works against all films because it enables theater owners to kick out movies that don't get off to a rip roaring start at the boxoffice. Years ago films were given time to find their audiences after good reviews were read and favorable word of mouth started to spread. Theater owners recognized that it took time for people to get up to speed about new films and then to make time to see them.

Today, films live or die based on their opening weekend grosses and the principal reason for that unfortunate situation is that theater owners know there's an unending stream of product in the distribution pipeline. If a film opens and doesn't immediately connect with its audience exhibitors figure what's the point of keeping it around to see if it catches on when there are lots of other films coming that they can book that might do big business from the get-go.

Of course, if exhibitors didn't have this pipeline of product to tap into, they'd be more inclined to hold on to pictures they felt had a shot at succeeding. Right now, however, there's no incentive to do so. Years ago when theater circuits started building megaplexes with 24 or 30 screens the media applauded that change in part because it would provide smaller auditoriums where smaller films could play alongside much bigger product. What they didn't envision was that these smaller films would wind up competing desperately for a handful of screens and the mainstream hits would take over six or seven or more screens in a megaplex and provide staggered performances to accommodate opening weekend crowds.

It's a concept that on the face of it makes sense because it means people don't get turned away when theaters are full. Another screen is opened up and everyone's able to buy a seat. What that does, however, is eliminate the old spillover effect that benefited other films in the marketplace because people who'd made the effort to get to a theater and couldn't buy a ticket to their first-choice film would typically buy a ticket to something else rather than turn around and go home.

The real effect of making room for everybody on opening weekend is that a film's grosses are front-loaded. This is great for exhibitors' concession stand sales, but it's not so great for their split of boxoffice revenues, which typically favors exhibitors later in a movie's run and distributors during the first few weeks in theaters. Although in recent years there have been some changes in terms of how ticket sales are split early in the run for some films, for the most part early success still benefits distributors more than it does exhibitors.

About the only people who really benefit from today's super-abundance of money to make movies are filmmakers, actors and below-the-line craftsmen. All this money creates jobs, many of which are filled by people living in Southern California. The writers' strike was a vivid example of just how much movie related money flows into the L.A. economy and how devastating it is to suddenly see it slow to a trickle.

It goes without saying that people who get paid for making movies won't agree with the view that Hollywood would be better off making fewer films. In fact, having so much production underway because it can be funded helps drive up the price for filmmaking talent. The more films there are, the more you have to pay to get the best people because they have so many alternatives.

It's really just wishful thinking to suggest that Hollywood should cut back on production, but it's a concept that's already enjoyed some limited success. Disney was smart enough to do this a few years ago and, as a result, it reduced its outlay not only for production but also for marketing because there were fewer titles to make and market. They don't seem to have missed having the marginal titles that went by the wayside.

Earlier this year when Time Warner folded New Line Cinema into Warner Bros. and closed its Picturehouse and Warner Independent Pictures labels, it sounded like that would reduce the amount of product in the system. It won't because new well funded major independent distributors like Overture Films and Summit Entertainment are now a source of very competitive wide releases, Lionsgate is continuing to grow and MGM is reinventing itself as a production company.

The recent news that the government of Abu Dhabi is plowing $1 billion-plus into making movies in partnership with top Hollywood players suggests the distribution pipeline will be even more crowded in the future. Add to this the $500 million that's likely to reach Hollywood through DreamWorks' in-the-works deal with India's Reliance Big Entertainment and then throw in a handful of big-money private equity and Wall Street hedge fund deals that will manage to get done -- with more difficulty than would have been the case a year ago, but done nonetheless -- and it's clear that today's movie glut is here to stay.

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