Why Studios Don't Pay to Make Movies Anymore (Analysis)

The Associated Press, Thursday, December 13, 2012, 12:10pm (PST)

The Hollywood Reporter -- This story first appeared in the Dec. 21 issue of The Hollywood Reporter magazine.

Hollywood film studios have evolved so dramatically during the past decade that it feels as though some are making movies almost reluctantly. As one producer puts it, "Studios are becoming marketing and distribution service companies." Aside from prebranded franchises and sequels, asks another veteran producer, "What is our business about?"

The basic characteristics of a major studio seem simple: the ability to develop, finance, market and release films around the world. "That's not easy to do because it goes to [reaching] other cultures, other languages," says Disney Studios chief Alan Horn. But given the staggering costs of making and marketing films -- not to mention the fact every studio is now part of a larger entity that demands quarterly profits -- it's hardly surprising that nearly half of all studio films released in 2012 had a major financial backer footing at least part of the bill. And even with the partners, certain studios seem almost allergic to making all but the most surefire tentpoles.

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A glance at the numbers conveys at least part of the story: Disney released 13 movies in 2012; 10 years earlier, it released 22. Sony Pictures released 18 titles this year compared with 31 titles in 2002. Not every studio shows such a big drop-off; Fox and Universal have fluctuated in the past 10 years, but the source of the money behind those movies has changed.

Against that backdrop, THR asked executives, filmmakers and agents informally to evaluate the major studios in terms of their commitment to the movie business. Warner Bros. was ranked at the top of the list. The town is anticipating management changes in the weeks ahead, but few expect its culture to change dramatically. Sony also was high on the list, but many note that it seems to be operating under tight fiscal constraints imposed by its troubled parent. At Fox, many saw a difficult culture under former co-chairman Tom Rothman, but it's not clear what to expect from Jim Gianopulos now that he's alone at the helm. There is uncertainty at NBCUniversal as well, since its owners at Comcast have openly shopped for new management and many believe the film studio simply is not a priority for the cable giant.

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Disney also is a complicated equation. Some ranked its live-action studio low, arguing that it now makes films to sell merchandise or drive theme-park attendance. But Horn calls that "unfair." The studio is "the only one that has an identifiable brand that represents a relationship, a covenant with the audience," he says, noting that Disney also is the only major that fully finances all its pictures.

The other studio vying for last place in THR's survey is Paramount, which released only two small films this summer. Vice chairman Rob Moore says that has created the wrong impression. "Anyone can look at 2013 and see we are as much in the game as any other major," he says.

While the terms are debatable and some if not all of the studios are in transition, starting on the next page are charts of activity at the majors depicting how many movies each developed, financed and released in calendar year 2012.

First up: Sony

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Sony

Co-chairman Amy Pascal probably is the most filmmaker-friendly studio chief in town. She says a “multi-label strategy has been the cornerstone of our approach, which has led to our highest-grossing slate ever with more than $4 billion [in box-office grosses] and nine No. 1 films in 2012 to date.” Sony has denied rumors that the studio is for sale, but it gave up half of George Clooney's The Monuments Men to Fox and allowed favorite son Adam Sandler to set up his next project, The Ridiculous Six, at Paramount. Problems at parent Sony Corp. have been tough for Pascal, says a source: “In the past, Amy was about emotion and supporting the artist.”

Next page: Disney

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Disney

An exec close to the studio says it functions “like a marketing and distribution company for other hubs.” (But what hubs! Marvel, Pixar, Jerry Bruckheimer and now Lucasfilm.) Studio chairman Horn says production president Sean Bailey can make three to nine movies a year. And a midbudget project like 2013's Saving Mr. Banks, about the making of Mary Poppins, shows that some are not about selling lunchboxes.

Next page: Universal

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Universal

Chairman Adam Fogelson points to the studio's Oscar hopeful Les Miserables as an example of a film “not designed to sell toys” that was made for a responsible price (about $61 million). Universal's financial partnership with Elliott Management (formerly Relativity) ends in 2013, and the studio is looking for a replacement. And an agent gripes that “it's hard to judge that studio until [owner Comcast] either backs this team or gets someone else.”

Next page: Warner Bros.

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Warner Bros.

The studio gets high marks for making franchises (The Dark Knight Rises) and throwing the dice on iffy bets like Argo. “I'm proud that we are a filmmaker-centric studio that works with both established and new talent,” says chief Jeff Robinov. Warners hedges with partners Legendary Pictures and Village Roadshow, which in November re-upped its deal worth $1.1 billion. But, says one agent, “They're not like others that say, &lsquoIf you get financing, we'll distribute it for you.' ”

Next page: Fox

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Fox

Rothman has only been gone since September, but “the whole tenor of Fox has changed,” says an agent. “We're feeling them being very aggressive.” Gianopulos says that despite the studio's reputation for frugality, it has always made bold moves (see Avatar). He says the studio's vision will be more of the same, to a point. “We've always had a culture of fiscal responsibility but seek to strike the right balance,” he says. “It's a balance of risk. When you're up in these numbers, it's still a pretty scary and challenging business.” Fox hedges its bets through a massive investment by the funds Dune (it has a piece of nearly all Fox movies) and Ingenious and various arrangements with New Regency. It maintains its emphasis on strong overseas distribution. “We believe in the value and importance of the international market,” Gianopulos says. Distributing movies for outside companies like DreamWorks Animation, which signed a five-year deal in August, only helps Fox maintain a huge and efficient overseas operation.

Next page: Paramount

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Paramount

Many see it as barely in the studio business. But vice chair Moore points to a profitable mix of big plays such as the Star Trek and Transformers films and small movies that can be promoted through other Viacom properties (for example, Katy Perry: Part of Me paired with MTV). The studio has a steady partner in David Ellison's Skydance , which has invested in Jack Reacher, the next Star Trek and the troubled zombie epic World War Z. The studio fully finances movies inside $30 million and seeks partners on the bigger ones.

Related article on THR.com:

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