Is America's dream factory set to implode?
The cost of making movies is soaring while box-office revenues are sinking. Several major theater chains are in Chapter 11 bankruptcy. A major actors' strike is looming, which could make theaters go dark for months. And Washington is lashing out at moviemakers for marketing violence to kids.
Despite all the doomsday scenarios, several leading industry watchers answer the above question with a single word: Baloney! (Others prefer, "piffle," "balderdash," or "poppycock.")
Looking at the longer trend of how Hollywood has weathered economic, creative, and political cycles, they say the long-term health of America's entertainment capital is solid, even upbeat.
"Despite the fact that a number of ... crises seem to be hitting Hollywood all at once, I wouldn't shed a tear just yet," says Robert Bucksbaum, president of ReelSource, which publishes an industry newsletter. "There are very many reasons why Hollywood is now, and will continue to be, doing just fine."
To be sure, this summer's box-office intake was well below last summer's - $2.73 billion compared with $2.99 billion (down 8.7 percent). But that may be an unfair comparison, some analysts say, especially because last summer included the release of "The Phantom Menace," which took in $435 million.
"The media have been unrealistically hard making much of this drop," says Martin Grove, an industry analyst for Hollywood Reporter Online. "In the absence of a 'Star Wars,' and the same number of hit films that were targeted to older women [including 'Runaway Bride' and 'Notting Hill'], this summer's fare was very well attended."
He notes that 11 films made more than $100 million, just like last summer. And a host of blockbusters - from Robert Redford and Will Smith in "The Legend of Beggar Vance" to Jim Carrey in "How the Grinch Stole Christmas" - are slated for now through Christmas.
"Hollywood has still had the second-best summer ever and has a very strong quarter coming," says Mr. Grove. "They can't set a record every season."
On the other hand, many analysts say the problems surrounding theater chains are serious. But the real reason theaters are less full is not bad moviemaking but rather years of overbuilding. When exhibitors sell off their money losers, they add, high profits will return.
Since May, exhibitor chains such as Silver Cinemas, Regal Cinemas, Carmike, and Loew's Cineplex have announced debt restructuring or are seeking waivers from loan agreements. Edwards and United Artists have filed for Chapter 11 protection from debtors.
"The whole industry rushed ahead to build megaplexes beginning about 1995, and we built too many," says Rick King, vice president for corporate communications at AMC Theatres in Kansas City, Mo. Some 37,000 screens are now available, about 10,000 more than are needed, he says.
"We have a little shakeout period to endure until this overcapacity situation gets resolved," he says, noting that smaller theaters will probably be among the first to go. "But I don't see a disaster brewing by any means."
Some of the concerns have risen simply as a result of the election cycle. The criticism that arose out of the recent Federal Trade Commission report showing a pattern of marketing inappropriate movies to underage youth, will largely melt away after November, observers predict.
"This is a classic, election-year bashing," says Douglas Gomery, who teaches the history of film economics at the University of Maryland in College Park. "Washington loves to damn Hollywood for political purposes, but when it comes to doing anything, they never do."
In the long term, possible strikes next year by the Writers Guild of America and the Screen Actors Guild present the most dire picture, with theaters going dark. There have even been reports of studios rushing films into production to beat the strike.
Yet throughout the past 100 years, even the longer strikes have lasted only about four to six months, not enough to do lasting damage to studios. Many analysts suggest the strike will have minimal impact, and some say it is not inevitable.
"I don't think a strike will impact that negatively on the bottom line for Hollywood," says Grove. "They have a lot of material now, and I don't see them running dry for a long time."
Not everyone is sanguine about the health of Hollywood, though. One of the greatest concerns is the rising cost of making and marketing films.
"My calculations tell me that while box-office [revenue] is flat and going down, costs are rising by about 20.6 percent," says Chris Lanier, president of Motion Picture Intelligencer. "The economics of movies have been in tough times and are headed for worse."
Other analysts, however, say Hollywood makes a profit by tapping other sources: merchandise, videos, cable rights, and overseas intake.
"The figures that Hollywood quotes for income from a movie are about one-fifth of what they eventually make," says Professor Gomery. "And they keep such a tight rein on those other figures that no one can get to them."
Such secrecy is important, say others, in keeping both politicians and striking workers from getting too much leverage.
"Profit margins are always miraculously way down when labor contracts are coming up," says Grove. "The studios are simply not going to be out there trumpeting what a profitable business they have."
(c) Copyright 2000. The Christian Science Publishing Society