Movie Production Spending Dips, but Marketing Costs Rise, Valenti Says

LAS VEGAS —  The average cost of producing a major studio movie declined slightly in 1998, but the drop is little comfort to Hollywood because the cost of marketing those films soared 13% in one year, the chairman of the Motion Picture Assn. of America told theater owners here Tuesday.

Jack Valenti, in his annual assessment of the industry’s finances, said the average cost of producing a film at the seven major studios declined by $748,000 to $52.7 million in 1998, a minuscule 1.4% drop over the previous year.

“I don’t count that the end of all anxiety,” Valenti told a roomful of reporters before his address at the NATO/ShoWest convention, “but, hell, the trend is down, and I’ll buy that any day.”

Valenti said he believes production costs are coming under control because studio executives are adopting a more “disciplined approach” to setting their production budgets.

Studios have found, though, that they are virtually helpless at controlling the rapidly escalating costs of advertising, especially on TV.

In 1998, according to the MPAA, the average cost of marketing a movie jumped to $25.3 million from $22.3 million in 1997.

“That’s very simple to figure out,” Valenti explained. “Advertising on television and newspapers and all the other panoply of ways to persuade [people to go to the movies] have just gone up. There’s nothing we can do about it.”

But despite the cost issues that perpetually trouble Hollywood, movies are enjoying a boom time in the United States, Valenti said. According to the MPAA, $6.95 billion was taken in at the U.S. box office last year, a 9.2% increase over 1997.

There was a 6.7% gain in the number of admissions during 1998, according to the MPAA; 1.48 billion tickets were sold, the largest number in 40 years.

Valenti’s comments before the National Assn. of Theatre Owners came one day after 20th Century Fox studio chief Bill Mechanic characterized the film business as “schizophrenic.”

“This is a year of [box office] records, both in America and abroad,” Mechanic said in a luncheon address before the theater owners. “It’s also a year of record losses at parts of many companies. It’s a year when more movies grossed $100 million than ever before, but it’s also a year when there were more movies that cost $100 million that made $100 million.

“It’s a year when seven of the top 10 films of the year did not have a $20-million actor or actress or a major gross director. It’s also a year when more actors were paid $20 million and more directors were paid gross. It’s also a year in which, in the face of all this, Sony agreed to pay writers gross.”

(Last month Sony signed a first-look deal with about 30 top screenwriters giving them up to 2% of the profit on any film they made for the studio.)

Mechanic also noted that while theater chains are building mega-plexes seemingly everywhere, some exhibitors are struggling to survive.

Looking back on 1998, Mechanic recalled that “Titanic” broke the $1-billion mark in worldwide ticket sales but that it was also a year in which “two-thirds of the movies produced didn’t earn . . . a profit overseas.”

Mechanic said Hollywood is moving into an era when the blockbuster might be redefined. Just as “Titanic” appealed to a broad section of the moviegoing public, studios can find success by making more “peer event movies” that target market groups. “The First Wives Club,” for instance, appealed to older women.

“If you agree that not all movies have to be aimed at the widest audience, you also have a chance to reduce your costs and make movies, hopefully, that aren’t as safe and aren’t as boring,” he told the theater owners.

Mechanic, who green-lighted the most expensive movie in Hollywood history--”Titanic,” at more than $200 million--said all the studios are to blame for chasing the “big-budget, big-star vehicle.”

“I’m not arguing against the use of big stars, since in the coming year or so we are working with Tom Cruise, Tom Hanks, Sean Connery, Leonardo DiCaprio and Harrison Ford, among others,” he said. “I’m only cautioning against the overuse and over-dependence. . . . The days of the $20-million player with 20% of the gross may finally be coming to an end. In fact, it is only the international arena that is keeping the doors open as wide as they are.”

In its annual report, the MPAA found that 28% of Americans now go to the movies once a month and that they account for 83% of the tickets that are sold.

Demographically, moviegoers ages 12 to 24 now account for 37.4% of movie admissions; those 40 and older are next, with 35.3%; and those 25 to 39 account for 27.4%. But the fastest-growing age group of moviegoers is the over-40 crowd.

Whites comprise 71% of moviegoers; Latinos and African Americans account for 11% each; all others account for 7%. Whites are the fastest-growing moviegoing group, and Latinos, the second-fastest.

The National Assn. of Theatre Owners released its own 1998 statistics Tuesday, showing that the average ticket price in the U.S. was $4.70, compared with $4.59 in 1997.

The number of theater screens nationwide now stands at 34,168, a net increase of 2,303 over 1997.

Exhibitors also announced that because of recurring complaints from patrons, the studios have agreed to reduce the level of sound on their trailers.