Hollywood's Fake Math

Thanks to Transformers, studios claim it’s the best summer box office of all time, but Kim Masters says the numbers are lying. Can James Cameron and the Twilight sequel save Fall?

Paramount Pictures

You can preach the box-office numbers round or you can preach them flat. But really, you have to preach them flat.

Hollywood can proclaim that this was a record-breaking summer with about $4.4 billion in ticket sales, but that number is deceptive. Revenue was up thanks to increased ticket prices. And yet, attendance at the movies is down or at best even for the year, depending on how you crunch the numbers.

“When those movies have an extra 20 minutes with all these effects, that’s huge. Transformers was such a complicated story that it could not be told in two hours and 10 minutes?”

Comparisons are cloudy because Labor Day came later than usual this year, adding another week to the summer season. Box-office analyst Paul Dergarabedian of Hollywood.com dealt with this problem by lopping off the numbers from this past weekend so he could compare 18 weeks of summer this year with the same number of weeks from previous years. Predictably, analysts in-house at the studios say that’s not fair. They simply included revenue from this past weekend in their calculations, which makes for slightly rosier numbers but isn’t quite fair, either.

But the bottom line, according to Dergarabedian, is that moviegoing this summer was not especially good—in 11th place if you look at numbers for the past 12 years. (Using his calculations, there were about 571 million tickets sold this summer.)

Dergarabedian finds this especially disappointing since the year started out so promising. At the end of the first quarter, box-office revenue was up 15 percent over the same period last year. Now the margin for the year has been carved to something under 8 percent. “I’m a proponent of the recession fueling movie-going and to some degree, I still believe that,” Dergarabedian says. “But you still have to have the movies to back that up.”

In other words, despite an impressive $400 million for the Transformers sequel, this summer did not produce a Dark Knight, which is the second-highest grossing movie of all time behind Titanic. If revenue is to remain ahead for the year, it looks as though the business will have to rely on a few movies that stand out as potential blockbusters. In October, Sony has This Is It, the film based on footage of rehearsals for Michael Jackson’s ill-fated final tour. In November, Summit Entertainment has Twilight sequel New Moon. And in December, of course, there’s Avatar, James Cameron’s first movie since Titanic, carrying a big price tag and huge expectations as a leap forward in the 3-D experience. (Between that and the Alvin and the Chipmunks sequel, Fox looks poised to walk away with Christmas.)

There are always some surprise winners and maybe the year will manage to deliver some sort of record. But a former studio chief says that would be about as encouraging as the “good” news about the economy overall. The studios face a problem of declining audiences, just as the broadcast networks do, and they will have to undergo some kind of reinvention. It’s not that the business is hopeless, this executive says, observing, “There’s billions of dollars floating around here, so somebody likes something.” But the major studios still haven’t gotten serious enough about slashing costs. “They’ve got to look like sleeker animals,” he says, “or they’re going to look a lot like the woolly mammoth, sliding over toward the tar pit.”

The studios have already cut back on fees for stars (and the fact that some of the summer’s biggest hits— The Hangover and Up—were hardly star-driven would suggest that was a good place to start). But this executive says the studios also need to drive down the cost on those effects-driven popcorn movies that deliver the biggest grosses: “It’s about saying, `Do you mean $200 million was not enough for you to make this fucking movie? You need $230 million? I don’t understand. And why is this movie two-and-a-half hours long?’ When those movies have an extra 20 minutes with all these effects, that’s huge. Transformers was such a complicated story that it could not be told in two hours and 10 minutes?”

Another veteran Hollywood executive believes that cost-cutting alone will not save all the studios and the herd will have to thin. While Fox, Warner Bros., and Disney appear vital, weaknesses at the other studios—especially Universal and Paramount—lead him to conclude that the day is approaching where “there aren’t six major studios anymore.” Neither studio appears to have much hope for any holiday success; Paramount has only two releases this fall—Jason Reitman’s Up in the Air and The Lovely Bones, based on the Alice Sebold novel, set for release between now and the end of the year.

Lovely bones. Isn't that all you get after the mammoth slides into the tar pit?

Kim Masters covers the entertainment business for The Daily Beast. She is also the host of The Business, public radio's weekly program about the business of show business. She is also the author of The Keys to the Kingdom: The Rise of Michael Eisner and the Fall of Everybody Else.