2006 TO BE A MAKE OR BREAK YEAR FOR HOLLYWOOD

Movie Industry Grapples With Box Office Declines and In-Control Consumers

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LOS ANGELES (AdAge.com) -- This is a make-or-break year for Hollywood.

“One down year is an anomaly, but two could be a trend,” said Paul

Many predict that studio marketing dollars will continue to migrate away from TV and toward the Internet, grassroots events and guerrilla marketing.
Dergarabedian, president of box office-tracking firm Exhibitor Relations Co. “This year is really a turning point.”

Keenly aware of the 7% drop in movie attendance in 2005, studio executives are pinning their hopes on a better slate of films to draw consumers back to the multiplex. But industry watchers say the business has more far-reaching problems that a few good films can’t necessarily fix as in-control consumers turn to entertainment alternatives like Netflix, the Internet and on-demand programming.

Box office down
With box office down and costs up -- the average Hollywood film now costs about $65 million to produce and another $35 million for prints and advertising -- this could well be a watershed year as executives are forced to rethink some of the traditional tenets of the business. Among them: cinemas getting first crack at releases; top acting talent getting sweetheart deals; and rethinking the hallowed concept of tent-pole movies.

Moreover, pundits predict that studio marketing dollars will continue to migrate away from TV and toward the Internet, grassroots events and guerrilla marketing.

Theater chains, responding to criticism, will also upgrade their facilities and try to improve the experience. “Movie theaters will realize they are not in the exhibition business, but are in the entertainment business,” said Mark Cuban, who owns the art-house Landmark Theaters.

One of the hottest issues is whether studios will consider releasing features on DVD, on pay TV and other platforms at the same time the movie launches in theaters now that the movie-going experience is under fire and the window between feature and DVD releases continues to shrink.

Simultaneous release to DVD
“I don’t see major studios doing day and date release for theatrical yet,” said Mr. Cuban, a billionaire entrepreneur whose 2929 Entertainment has pioneered a model that releases films on the big screen, on DVD and on pay TV simultaneously.

Aside from discussing simultaneous releases, studios are shedding other ingrained practices. Studios are asking some talent to forego deals where top stars share in a film’s box office grosses, and are now agreeing to fork over revenue only if and when a film turns a profit.

Some things won’t change. Studios, whose 2006 projects have been set for some time, will rely as they’ve done in the past on high-profile event movies, those big-budget films that are supposed to prop up their schedules and buffer them against the inevitable flops.

Among the big bets are Warner Bros.’ “Superman Returns,” Walt Disney’s “Pirates of the Caribbean: Dead Man’s Chest,” Universal’s “Miami Vice” and “Casino Royale” and Fox’s “Eragon.”

Ten-pole movies
Executives still see these films as the way to generate excitement and draw the masses to the box office even though sure-fire megahits like Universal Pictures’ “King Kong” underperformed relative to cost. “Having tent-pole movies and franchises gives you a solid base -- it takes some of the pressure off if you have good anchors,” said Tom Ortenberg, president of Lionsgate Releasing.

Lions Gate, one of the only remaining independent studios in Hollywood, is honing its franchises, planning a February release of another Tyler Perry movie called “Madea’s Family Reunion,” and fast-tracking a sequel to the recent hit “Hostel.”

There will be more than a dozen computer-animated movies this year, a record amount that’s more than double any past year. The recently-released “Hoodwinked,” the first of the crop, performed much better than expected with $16.8 million during its opening weekend.

Among the family animated movies this year are the anticipated Pixar creation, “Cars,” its last film under the current Disney distribution agreement; Fox’s sequel, “Ice Age 2: The Meltdown”; Sony’s first foray into the genre with “Open Season”; and Dreamworks’ next potential kid-and-adult magnet, “Over the Hedge.”

Actio and thrillers
Action and thrillers will be in full view. May alone is packed with enough big-budget fare to move the box office needle, if films like Paramount’s “Mission: Impossible 3,” Warner Bros.’ “Poseidon,” Sony’s “The Da Vinci Code” and Fox’s “X-Men 3” live up to their hype.

And though they’ve been criticized for lack of imagination, studios are continuing to launch such fare as “The Pink Panther,” “Scary Movie 4” and “Big Momma’s House 2.” Still, a few sequels -- “Underworld: Evolution,” “Sin City 2” and “Jackass 2” -- could bring in reliable business, just as their surprisingly successful predecessors did.

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