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Oscars turn studios green
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February 13, 2001: 11:33 a.m. ET
Universal, Sony parents likely to benefit financially from award nominations
By Staff Writer John Chartier
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NEW YORK (CNNfn) - The parent companies of Universal Studios, Sony Pictures, Disney and USA Films stand to reap big gains from the Academy Award nominations announced Tuesday, even if their films do not win the coveted Oscar.
Films produced by all four studios were nominated for Best Picture of 2000. That will likely translate not only into a big boost at the box office, but also sales from home video releases, pay-per-view cable sales and other related sales, particularly for companies with cable television holdings, analysts said.
Typically, the studio that produces the winning film can expect a 10-to-15 percent revenue boost for the year, Gerard Klauer Mattison & Co. entertainment analyst Jeffrey Logsdon said.
 Universal Studios, a unit of Vivendi (V: Research, Estimates), placed two Best Picture nominees, "Erin Brockovich" and "Gladiator," which it co-produced with closely held DreamWorks SKG.
"Crouching Tiger, Hidden Dragon" from the Sony Pictures unit of Sony Corp. (SNE: Research, Estimates) also got one of the coveted nominations, as did "Chocolat" from Walt Disney Co.'s (DIS: Research, Estimates) Miramax Films and "Traffic" from USA Networks (USAI: Research, Estimates) USA Films.
"The direct benefit to them is through the box office, which not only benefits that revenue stream, but also home video, pay TV and the like," Prudential Securities entertainment analyst Katherine Styponias said. "Indirectly, it benefits them because it potentially drives the right talent to them."
However, that high caliber talent -- in the form of a Julia Roberts or Russell Crowe -- costs more money, Styponias said.
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Advertising and marketing costs have also skyrocketed in recent years, rising 9 percent each year between 1995 and 1999, Styponias said. Although that has cut into studio profits, it's not enough to offset the pot of gold that accompanies an Oscar nomination, especially since movie production costs have somewhat stabilized in recent years.
"The cost of producing movies has stayed in check the last couple of years," Styponias said. "Marketing costs have gone up, but it's still a benefit because it feeds a nomination for a studio that's part of a larger conglomerate such as a cable network."
Logsdon said top actors and actresses will gravitate toward the studios which pay more. Therefore a winning studio has the bucks to spend on top talent.
 But that talent, whether it be actors, directors or writers, is getting more expensive and is taking a bite out of profitability. A top-tier actor high in demand can command as much as $20 million a picture, Logsdon said. And although the per-picture price has remained fairly steady in the last few years, stars are demanding, and getting, a cut of the film's profit in addition to their regular compensation.
"The economics of filmmaking have not improved over the last few years," Logsdon said. "Obviously the more revenue streams the merrier. The problem is it doesn't take talent very long to tap into that."
Although studios typically do not break out how much they earned from a film following an Oscar nomination, Styponias said the benefits are substantial.
"Historical studies would probably show you could get a 10-to-15 percent boost in revenue for the top film of the year, and it drops off precipitously from there," Logsdon said, adding those figures vary depending on when during the year the film was released.
Much of the box office revenue can come from overseas sales as theater distribution in other countries generally lags U.S. distribution, he said.
Although films are generally money-makers for big studios, they comprise just a fraction of a media company's overall earnings. For instance, Disney made $110 million with its film division last year compared with the company's overall $1.1 billion in profit.
The real movie profit comes from owning the rights to a vast library of films, which are released on video and offered on pay television.
Vivendi shares slipped 42 cents to $70.98 in Tuesday morning trading. Disney shares gained 21 cents to $32.72, and Sony's American Depository Receipts were down 27 cents to $73.24. Shares of USA Networks were up 44 cents to $22.62. 
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