Fiscal Conservatism Grips Shaken Movie Studios

By Frook, John Evan | THE JOURNAL RECORD, September 13, 1991 | Go to article overview

Fiscal Conservatism Grips Shaken Movie Studios


Frook, John Evan, THE JOURNAL RECORD


By John Evan Frook Los Angeles Daily News LOS ANGELES _ To get an idea of how movie production strategies are changing these days, consider "Night Ride Down."

Long in development at Paramount Pictures Corp., "Night Ride Down"

is an action-adventure screenplay that at one time was considered a perfect vehicle for A-list star Harrison Ford.

Yet Paramount jettisoned the movie last month because its budget was "headed north of $46 million" and "could have ended up as a huge write-off," said new studio chairman Brandon Tartikoff.

No wonder there was concern. Paramount Communications Inc. took $35.4 million in second quarter write-offs, including charges from "Godfather Part III" and "He Said, She Said."

Paramount's decision to pull the plug on "Night Ride Down" is viewed as a harbinger of Hollywood's new conservatism, as the studios come to grips with 1992 production plans against the backdrop of a weak economy.

"Companies may be a bit more tentative in what they decide to produce," said Marc Platt, president of production for Orion Pictures Corp. "They are more cost conscious, striving to produce only those films they are sure will be highly successful in the domestic theatrical market."

The studios have been talking about holding down production costs for at least a year. But after months of posturing, the concept of cost containment appears to be catching on.

It's being handled, though, in various ways. Some studios are holding down on the number of movies produced, while others are trying to mount smaller movies that steer away from star salaries.

Attorneys from the studios confirmed that talent brokers such as International Creative Management and Creative Artists Agency Inc. have been put on notice _ expect fewer movies in development and production during 1992 and forget about raises for writers, directors, actors and actresses until they are involved in major hits.

Universal Pictures and 20th Century Fox are expected to downscale production next year, while Walt Disney Co.'s Hollywood Pictures and Touchstone Pictures continue to aggressively trim the bottom line. Orion and MGM-Pathe Communications Co., both cash strapped because of financial problems, have scrapped most of their production plans in 1992.

Entertainment attorney Peter Dekom said it is a function of the corporate landscape.

"Each studio has a different financial problem," Dekom said, "just as cash flow (diminishes) and financing tightens."

David Davis, an analyst with Paul Kagan Associates Inc., said the studio's conservative production plans are a result of the recession coming home to roost in Hollywood.

According to the trade publication Daily Variety, box-office revenues were $3.18 billion through Aug. 26, compared with $3.32 billion for the like period a year ago.

David Londoner, a movie analyst at Wertheim Schroder & Co., estimated that in 1989, the eight major studios took in $1.2 billion in operating profits. He said he believed that that figure dropped to $1 billion in 1990 and could fall another 15 percent this year, although Londoner said he expected that industry efforts control costs might bear fruit.

In 1990 the average film budget was $26.8 million, according to the Motion Picture Association of America, up from $23.5 million in 1989 and million in 1988.

Marketing costs rose to $11.6 million in 1990 from $9.2 million in 1989 and $8.5 million in 1988. Costs are expected to rise again this year, according to one executive at a major studio who declined to be named.

At the same time, ticket sales dropped to 1.06 billion in 1990 from 1.13 billion in 1989. And this year is down a bit from last year.

Even home video sales _ a mighty contributor to a studio's bottom line _ are off 6 percent, Davis said.

But Frank Price, chairman of Columbia Pictures Inc. …

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