Hollywood relying more on franchises

Growing ad costs, piracy leading to increased reliance

It appears that Hollywood's riding high, coming off a record-setting year at the boxoffice, won largely on the broad backs of threequels, tentpoles and franchises that racked up $9.62 billion in the U.S. in 2007. That's 5% more than the '06 grosses, and 4% better than the previous high-water mark in 2002.

After a sleepy start to '08, with Dr. Seuss' Horton Hears a Who being one of the only real moneymakers, Iron Man jetted onto the scene, to the tune of a stunning $100 million-plus opening weekend. Where expectations had been modest, they're now turning to hopes of another stellar year.

So, it's all good on the movie front, right? Weeelll . . .

At no time have the major studios felt so pressured from so many quarters. Consumers are pickier than ever, showing that they'll gladly choose the Internet, music, sports or their DVRs and HDTVs over a trip to the multiplex. Though the box office numbers were precedent-setting last year, attendance figures were basically flat. That means the bottom line increased because the cost of going to the movies went up, not because more people bought tickets.

The cost of advertising on TV, still Hollywood's ad medium of choice, continues to creep up even as the audience declines, with the recently ended May sweeps clocking 7 million fewer viewers per night compared with pre-writer's strike November. Studios are demanding more for their spending, such as integration into storylines of scripted and reality shows, while using everything from widgets to out-of-home campaigns to try to make an impression on bombarded consumers.

The global problem of film piracy is an ongoing concern, taking a billion-dollar bite out of studios' pockets, while the cost to produce and market movies keeps climbing, on average $106.6 million per picture, according to the Motion Picture Association of America.

Meanwhile, the bottom has seemingly dropped out of the independent film market, with '07 coming up with only a few profitable entries in that category, most notably the Oscar-nominated dramedy Juno.

Where studios once nurtured indie movies and the in-house boutique divisions that released them, at least one major, Warner Bros., has scuttled that business all together. The studio recently shut down Warner Independent Pictures, home of box office and awards champ March of the Penguins, and Picturehouse, which released critical favorites La Vie en Rose and Pan's Labyrinth.

Consolidation that's hit other industries has arrived in Hollywood, too. Warner Bros. gobbled up its sister studio, the mini-major New Line Cinema, as a cost-cutting measure. Hundreds lost their jobs as production, marketing, publicity and other functions will be rolled under the big studio banner.

It's All About the Big Tent Event ���As studios trim their overall output--a move Disney publicly announced several years ago and its competitors have since followed--they're more reliant than ever on big spectacles with blockbuster potential that are aimed at pulling people away from other entertainment.

Proven commodities, whether on the big or small screen, in comics or toys, will take precedence because they're easier to sell than an unknown entity, and they are tie-in and merchandise friendly.

Paramount Pictures and Marvel Studios have already announced an Iron Man sequel, along with superhero fare like Thor and Captain America. Also in the hopper for Paramount: G.I. Joe, Transformers 2 and the next Star Trek.

Beginning to see a pattern?

"Studios are trying to hedge against the potential downside by launching movies with built-in awareness," said Paul Dergarabedian, movie analyst and president of box office tracking firm Media by Numbers. "They have a one-week window where they have to have a killer opening because some other movie is right behind them."

Anything successful is worth revisiting, as Fox will do for Ice Age: Dawn of the Dinosaurs, Night at the Museum 2 and X-Men Origins: Wolverine. There will be another Narnia, scheduled for next summer, along with more Harry Potters, Fast and Furious racers, lovable green ogres and Bond adventures.

As added incentive to luring consumers off the couch, studios are ramping up their production of movies in 3-D, with DreamWorks Animation and Disney promising a raft of such fare and theater operators scrambling to install the needed technology. So-called red band trailers, always deemed too racy for the multiplex, will start making appearances this year in front of R-rated, NC-17 or unrated movies. Theater chains are spiffing up their own act as well, developing interactive ads and gaming to go along with entertainment-heavy preshows.

You Scratch My Brand, I'll Scratch Yours ���It's a jungle out there, so studios are scouring for help to promote their wares, with corporate tie-ins taking on a weightier role. Their involvement can add tens of millions of dollars to a movie campaign, and the executives who make those deals have become go-to players in the marketing machinery.

"Because there are so many movies in the marketplace at the same time, you can't miss any opportunity to remind the consumer about your movie," said Mimi Slavin, svp-domestic promotions at Warner Bros., where Pizza giant Domino's, in its first feature film link, joins General Mills, Nokia, Hershey, Comcast, Microsoft's Xbox and the California Milk Processor Board to hype this summer's Dark Knight. "Partners help you create that sense of 'bigness.'"

Gathering marketers like Burger King, 7-Eleven, Kmart, Hasbro, Symantec, Country Music TV, mall retailer GNC and others is vital to making noise for a tentpole like Universal and Marvel's upcoming remake of The Incredible Hulk, which comes four years after the Ang Lee-helmed Hulk was released to disappointing box office.

"If they're done creatively and meaningfully, they can substantially help you open a film," said Stephanie Sperber, evp-Universal Studios Marketing Partnerships. "It's an incredibly tough climate, and our marketing budgets aren't limitless. Partners give the kind of support that we couldn't even buy."

At a time when there continues to be heat from watchdog groups on fast food, candy, soda and snack tie-ins with family movies, studios are stepping up their search among other categories like automotive, wireless, retail and online.

As advertisers get closer to studios and their content, there could finally be a breakthrough in linking A-list talent with brands. Will Ferrell has been a pioneer in that area, appearing in character in Old Spice and Bud Light ads to promote the comedy Semi-Pro this spring. Though the movie flopped, the ads got noticed, with industry mavens hoping others may follow suit and see those co-branded spots as invaluable film promotion.

Horse Race ���There's a cyclical nature to this derby, with the top five or six studios routinely trading spots and ending up neck-and-neck in the annual market share battle.

Last year, Paramount ended up on top with a 15.5% market share and $1.49 billion at the box office, buoyed by Shrek the Third and Transformers. Most recently, the studio launched the surprise hit Iron Man, and Indiana Jones and the Kingdom of the Crystal Skull quickly picked up $150 million around its Memorial Day debut.

Warner Bros., sporting the latest Harry Potter, along with Will Smith's I Am Legend and the out-of-nowhere hit 300, came in a close second with $1.42 billion, according to Nielsen EDI. Pirates, Ratatouille, Enchanted and National Treasure: Book of Secrets pushed Disney to third place, while Sony placed fourth but had the highest-grossing movie of the year in Spider-Man 3. Universal and Fox ended up a hair apart, with winners like The Bourne Ultimatum and Alvin and the Chipmunks, respectively.

Heading into this summer, during which studios haul in more than 40% of their annual grosses, Fox and Warner Bros. sit atop the heap. (Sony's third and Disney's fourth). With a major event film scheduled nearly every weekend, the order is likely to flip-flop a dozen times before the dust settles.