Hit & Miss: How the Recession is Affecting Hollywood Even as Ticket Sales Rise

With the unveiling of the new School of Cinematic Arts building that I discussed last week and the continuous on campus construction projects it would appear that USC is recession proof. Unfortunately despite an increase in ticket sales, Hollywood is not. In the last few days the economic crisis and its long term effects have been the hot topic among entertainment bloggers so it is with much consternation that I turn my focus back to the industry. As with most Americans, I am worried about the situation and the impact it is having on my career choice and my ability to make a living after graduation. Even though there have been several hit films released since January, including this week’s The Fast and The Furious 4 which far surpassed expectations, companies continue to lay off employees and scale back production schedules. However during my search of the blogosphere I came across one writer who was less concerned about the viability of the film and television business than what certain hit movies are currently representing to studio executives in this time of strife. In a post entitled “Down Economy = Dumbed Down Movies/TV? Stop the Inanity!” Mark Harris, the author of The Final Cut blog on Entertainmentweekly.com, dissects the industry’s definition of escapism, the dangers lurking behind the box office boom and why producers are underestimating their audiences. Elsewhere in the blogosphere, Kim Masters, a contributor for The Daily Beast delved into how the recession is affecting actors' salaries and perks in a post entitled “Haggling With the Stars.” Both articles analyze the recession as it applies to a particular facet of Hollywood rather than trying to broadly cover its affect on the whole industry. I responded to both blogs on their individual sites (linked above) but for convenience I will include my comments below.

“Down Economy = Dumbed Down Movies/TV? Stop the Inanity!”
Comment

Thank you for your comprehensive post regarding the general effects the recession is having on the entertainment business and specifically its impact on the quality of films that are being produced now and in the future. I agree with your assessment that the industry is using the success of recent undeserving “comfort food” movies, just to further the “Hollywood agenda — a desire to shun challenging material in favor of easily replicable formula product — disguis[ing it], offensively, as a capitulation to popular demand”. I also concur that contrary to what insiders think and have deduced from recent box office returns “pop culture has more of a responsibility to be stimulating, exciting, engaging, and even challenging, not just anesthetizing” during these times of economic hardship. People desire a break from the stress of their daily lives but this does not mean they want to see bad entertainment. All films are a form of escapism but does that justify low rent humor and gag jokes? How is simplicity or stupidity a means of coping with our problems? Today in the age of technology, with the internet enabling communication at lightning speed and the expansion of the public vs. private sphere via a myriad of social networking sites I believe people have a greater capacity for knowledge, it takes more to shock them and they are better able to understand complicated plots and multiple story arcs. In order to really engage viewers you need to keep current and reflect this greater breath of information and technology. As you so aptly point out the depression era boom in ticket sales was partly a result of the addition of sound. This new ambitious technology attracted viewers because it added a new dimension to film, enhancing the subject matter and enriching the storyline. As I mentioned in a previous post, 3-D has been this recession’s new addition but its high price tag has impeded its success as exemplified by Twentieth Century Fox, who is refusing to contribute to the cost of 3-D glasses for its upcoming releases.

However if it is true that audiences want more out of their pop culture offerings, how does one explain the recent success of Paul Blart: Mall Cop(pictured above) and Knowing? You say that there will always be audiences for the “mindless crap” but the large turnout for the above mentioned movies seems to indicate there may be another phenomenon in play. Do you think it was the lack of options at the box office that boosted these numbers or is there more to this story? If audiences are indeed becoming fonder of the mindless, where does that leave the more sophisticated viewers? Is there no longer pop culture content that can satisfy them? I contend that there are still talented directors like the Coen Brothers, Sam Mendes and Quentin Tarantino who continue to explore exotic stories, breach the mainstream, and push boundaries. However in the face of high costs and R ratings and the seeming success of inexpensive to produce slapstick will there be continued demand for and funding of the type of innovative and insightful films they make?

“Haggling With the Stars”
Comment

Thank you for your interesting article about the effects of the recession on actors, their salaries and their celebrity perks. For years it seemed outrageous the amount of money, and additional benefits i.e. private planes, massages, personal chefs etc. that were being demanded by stars and “after years of impotent promises to choke off rich deals with talent, the studios are finally making it happen.” As you correctly assess “the global financial crisis has given them the lever to do it” and it also gave them the urgency. Even so, I am actually surprised at how swiftly and thoroughly this transformation has occurred. This time last year Scarlet Johansson refused to attend the Cannes Film festival to premiere her project Vicky Christina Barcelona because the studio was not willing to meet her demands to stay in a separate hotel, have a private chauffeur and pay for her private makeup artist. Perhaps it was because no one missed Scarlet at this particular event that she herself got a wakeup call to tone down her own antics. However, I am still aghast that both she and Mickey Rourke are making far less money for their roles in Iron Man 2 than one would expect for actors of their stature. Even with price cuts being made throughout the industry, Scarlet Johansson(pictured alongside and image of the Black Widow which she will be playing in Iron Man 2) is a very famous actress and Mickey Rourke was the it-boy of Hollywood this year, nominated for best actor at almost every awards ceremony for his role in The Wrestler. Even if their parts in Iron Man 2 “buff up their images” and secure “possible future roles in films featuring their characters” it is hard to imagine them taking these roles for so little money when they have the Hollywood clout to be fielding bigger offers every day. But perhaps that is the problem. While the movie business is still doing well in this down economy, the corporations that own the studios are suffering tremendously. Given these financial woes, less films are going into production, which means fewer roles are available for actors. Do you have any information on whether Johansson or Rourke have been receiving offers to do other movies or is the competition too fierce and their prices too high that most producers are turning elsewhere? Do you believe that more parts are being offered to unknown actors to save on expenses? Although newcomers do not have the same box office draw as well established celebrities, they can be hired at a much cheaper cost. Lastly, do you think these substantial cost cutting measures will affect the various genres of film or do you think it will be limited to this type of comic-book movie, where studio heads “feel like whoever they put in a part is fine?” In the case of the latter the Studio has a stronger advantage in negotiations versus in smaller movies where the actors, rather than long beloved characters, are the audience draw and therefore will be better positioned to demand a higher salary.

Project Presents: For the New Pilot Season, AFTRA Is In and SAG Is Out!

Last year’s crippling writers’ strike is still fresh in the minds of both Hollywood power players and the American public who witnessed all new and original television content disappear practically overnight. True, each show had a few episodes in store that were shot prior to the strike, which the producers were able to economically debut at varying intervals to maximize the number of weeks remaining before the shows went into indefinite repeats, but overall the strike’s effects were devastating to both the industry and the media-consuming public alike. No one wants a repeat of what transpired, especially in the present economic downturn, but with SAG, the Screen Actor’s Guild, and the AMPTP, the Alliance of Motion Picture and Television Producers, currently unable to reach an agreement in their negotiations of SAG’s new contract, this remains a real possibility. Even more troubling than their failure to reach an agreement is the success of AFTRA (The American Federation of Television and Radio Artists) in signing a separate agreement last summer with the AMPTP in lieu of teaming up with SAG to negotiate jointly as it has previously done. As a result of AFTRA’s success and SAG’s unresolved negotiations, those in charge of the approaching 2009 pilot season are increasingly choosing AFTRA contracts over those of SAG. Fifty of the seventy pilots that have been greenlit for filming and network presentation are doing so under AFTRA—sending a message to SAG that they better settle negotiations quickly, or lose out on the season altogether. The more AFTRA shows are made the less power SAG has to negotiate with now and—if AFTRA becomes the increasingly popular choice beyond this season—in the future. Indeed, there are already indications of a more permanent utilization of AFTRA contracts in primetime television

Whereas in the past there was a clear distinction between the two unions—AFTRA represented television and radio artists and SAG solely covered feature film contracts—recently both unions have begun taking on projects in all three categories, blurring the distinctions between each while simultaneously expanding the competition for jobs. What makes AFTRA so appealing to Hollywood executives right now is the security it offers. For almost a year SAG has been plagued by infighting due to dissenting opinions within its own bureaucracy. Richard Verrier points to the strides SAG is making to address and ameliorate their internal problems, specifically by ousting Doug Allen, the former chief negotiator and a strong advocate of striking, in the hopes that his removal would bring a resolution of the negotiations, but as of yet no progress has been made. However, with the television world securing alternatives and moving forward without SAG, even if the organization were to strike, they have lost much of their bargaining power. The best strategic tactic any union has is the ability to picket, but as the general population felt with the writers, television is where the audience first experiences the impact. While the industry recognizes the immediate ramifications of a motion picture actor’s walkout, because it means shutting down production on all films, the American public and international audiences do not see any tangible effects for one or two years, when new movie debuts cease. The film content slated for 2009 and 2010 has already been shot, and studios will have to release them on schedule in order to keep revenue flowing. Absent the backlash from the general population that affected the writers’ negotiations, SAG would have difficulty gaining an upper hand by imposing a boycott. Furthermore, during the writer’s walkout last year, Dave McNary wrote in Variety that the support of SAG and the Director’s Guild was key in solidifying a WGA (Writers Guild of America) win; yet according to Patrick Goldstein, SAG would not get much support right now because of the recession, but more importantly he argues that “when the WGA went on strike, there was a true sense of solidarity with other guilds, notably SAG, based on the feeling that the studios had pushed things too far…the WGA had the high moral ground. SAG today doesn't have similar support.” If the perception of intransigence on the part of SAG members persists and if the union’s reputation as being difficult to deal with continues there might very well be a repeat of AFTRA dominance even after SAG has worked out its issues.

What may in the end cement AFTRA’s return to primetime dominance is its positive impact on the bottom line. All AFTRA projects are required to be shot on non-film mediums, which led to its success in the 1960s and 1970s when recording multi-camera comedies on video was the norm. When the cost of film processing declined shortly thereafter the industry shifted back to celluloid. However with the current boom in HD technology and the new RED camera, a digital tool that looks like thirty-five mm, going back to alternative formats for television seems like a smart and convenient way to cut one to two percent of production budgets without cutting production value or jobs. Cheaper costs mean more profit for the networks and studios, which is important right now especially with online downloading and video streaming stealing television viewers and advertisers. The most important thing is to keep the industry working and delivering to its audiences, who have been faithful. Since the beginning of 2009, movie ticket sales have been up17.5% and theater attendance has risen 16%, indicating that while the rest of the country is experiencing the hard hits of the recession Hollywood is booming. Accordingly, studios should be investing in new projects, but the possibility of a SAG walkout is keeping them at bay, worried that a strike could push Hollywood into financial crisis. If this were to happen, a backlash would most certainly ensue, leaving SAG even more alienated than it already is. In the end, money talks, and it will continue speaking long after SAG has a new contract. The best suggestion to SAG would be to keep negotiating, settle quickly, and avoid any disruptive strikes, because in this town, when you’re out, you’re out.

Seeing in 3-D: The Challenges of Creating a Film Renaissance in a Recession

Since its inception, the film industry has used innovative new technologies such as feature length narratives, sound and color to attract movie theater goers. When television drew audiences away from the movies, early 3-D films and cinemascope and widescreen formats were implemented to appeal to the public and lure them back into theaters. Today’s leading film executives are hoping that new 3-D films will once again entice viewers to get off their couches and computers and head back into the multiplexes. Though by no means a new technology, 3-D films— which have been mostly non-existent in mainstream Hollywood for almost twenty years, but have enjoyed prominence in IMAX— are now experiencing a resurgence in popularity and industry focus. In part this development results from the success of the IMAX 3-D release of The Polar Express in 2004 and last year’s smash hit Disney’s Hannah Montana/Miley Cyrus, The Best of Both Worlds 3D Concert Event which grossed over seventy million dollars. The Jonas Brothers, also successful Disney protégés, are following in the footsteps of Miley Cyrus by currently promoting their own IMAX 3-D Concert which will be released on Feb. 27th. The 81st annual Oscars -which will take place this Sunday- nominated two 3-D films, This Way Up and Bolt for best animated short and best animated feature length film respectfully. Additionally, Coraline(poster pictured above), an animated short being praised for its unique visuals and integrated use of 3-D debuted at number three at the box office its opening weekend and has remained in the top five, averaging the second highest grossing per screen revenue. In the summer of 2008 at the Intel Developed Forum (IDF) Jeffrey Katzenberg announced that 3-D is the “greatest innovation to occur in the movie business in 70 years,” and the great success of theses films does seem to support his claims but overall box office attendance still remains down and industry reliance on new 3-D films as their economic savior seems doubtful and almost irresponsible. As the economic crisis deepens the costs of creating these films, distributing them, and equipping multiplexes with the technology to screen them continues to grow. These increase costs have contributed to the rise in 3-D ticket prices at a time when the public is being seriously challenged by the current state of the economy. While film has always been a tool of escapism from the hardships of life it is doubtful that the 3-D renaissance will have the same opportunity to succeed as Katzenberg and others envision given the realities of the current recession.

The Polar Express 3-D film was screened at IMAX theaters but now that the film industry is promoting 3-D films as the new norm— with the upcoming releases of Monster vs. Alien, Avatar, G Force, Up, Final Destination 4 and the current releases of My Bloody Valentine and Coraline, all in 3-D,— regular multiplexes must adapt to the new digital 3-D technology or risk loosing substantial business. Even small independent theaters, which operate in specific market niches, are becoming 3-D equipped in order to remain competitive with other movie theaters and elaborate home entertainment systems. While 3-D is being exalted as the new frontier theaters are putting themselves at risk by investing in these expensive technologies before there is proof that 3-D is sustainable and not a passing fad.

In the fall of 2008 as AMC, Cinemark and Regal, the three largest theater chains in the US, were seeking to borrow money for digital 3-D conversion the world economy went into financial meltdown and the multimillion dollars worth of credit they needed disappeared, leaving only 22% of the 5,620 designated screens converted to 3-D digital. This left theaters ill equipped to receive the 3-D films they were meant to exhibit in the coming months and left studios without exhibition spaces for their films. With the release dates of multiple 3-D films quickly approaching the film industry went into panic mode trying to devise a way to still achieve wide releases(and thus profits) when only about 1,200 screens nationwide were 3-D ready. This disaster echoed the words of Knowledge @ Wharton who voiced fear in 2008 that theaters would not be ready in time for the influx of 3-D films. At the end of January, Paramount stepped up and is offering to pay “a specified "virtual" print fee to theater owners that convert at least 50% of screens to digital; the fee is higher for screens converted to 3-D”. Under this plan at least 2,000 screens should be 3-D ready in time for the films’ premieres and although studios planned for a larger screen count per the original conversion plan they are making it work and hoping that their bottom line isn’t too negatively impacted. Paramount itself is taking a huge risk financing these theaters but it is also hopefully leading a trend in Hollywood that others will follow. By financing 3-D and thus digital conversion it is preparing for Hollywood’s eventual shift to (film-print -free) digital exhibitions that will ultimately cost studios less money printing the film.

RealD is the industry leader in both converting 2-D theaters to 3-D and supplying equipment for 3-D filmmaking. Filmmakers are spending an extra $10-15 million dollars using this technology in their films and theaters are spending about $100,000 to upgrade a single screen from a standard 2-D to 3-D theater with an annual licensing and maintenance cost of about $25,000-30,000 per screen. The burden of these costs is being increasingly passed along to individual moviegoers who are expected to pay premium ticket prices for these films. While a normal 2-D movie has an average ticket price of $7.18, 3-D movie tickets had an average price of $15 in 2008 and they are expected to rise.

Back in 2007 Foxnews.com reported that Regal Entertainment Group said “moviegoers made no complaint about paying premium ticket prices [for 3-D] that were $2.50 to $4 higher than regular tickets”. Web Users disagree. Andrew James of rowthree.com was outraged by the $2 rental fee he was unexpectedly charged upon arriving at the theater to see Coraline. Even more troubling was Marina Antunes, who spent $30 for a ticket to My Bloody Valentine. Audiences are already feeling the pinch of raised movie tickets prices, and these additional 3-D charges could be their breaking point. By increasing their output of 3-D films studios expect a larger return, but by releasing so many 3-D movies studios may be driving audiences out of theaters with their premium prices.
Additionally, the draw of 3-D as an experience unique to the theater is quickly disappearing. Next3d.com is advertising HD quality 3-D content available at home through the X-box system. They claim that their technology could be ready as early as this spring and interest in such technology will only increase as moviegoers once again crave cheaper at-home alternatives to movie theaters. More importantly, studios and production companies themselves will need to utilize such technology in order for audiences to screen their 3-D films at home since the majority of movie studios make their revenue from DVDs sales and television licensing deals. It is ironic that studios must have a part in developing and utilizing the very technology that will ultimately draw its audience away from theaters.

Jeffrey Katzenberg honestly believes a new age of cinema is upon us. "The first [was] when movies went from silent films to talkies, and the second is when they went from black and white to color," he says. "And I believe what we are facing as an opportunity today is as great as either of those were.” He predicts that in "less than a handful of years," the great majority of films will be made and shown in 3-D. 3-D movies were always where the medium of film was thought to be headed and they will have their day, whether it is now or after the economic crisis. With a dozen 3-D films being released this year 2009 will be the year of 3-D irrespective of their individual success. However the question remains will 3-D be able to sustain itself after 2009, after its novelty has worn off and its technology has been spread to the masses? Only time and maybe Three Dimensional glasses (pictures above)will tell.