NEW YORK (CNN/Money) -
Suffering from post-election withdrawal?
Friday marks the unofficial start of the holiday movie season when at least five flicks, led by the cartoon comedy "The Incredibles" and the bad-boy-finds-love farce "Alfie," arrive in theaters.
For Hollywood studios, the coming weeks are less about spreading neighborly cheer than duking it out with rivals for market share and Oscar nods.
This year's box office competition promises to be close, with Sony Pictures and Warner Bros. battling for first place as measured by domestic ticket sales.
Ringing in the new year as the top-grossing studio of 2004 sounds desirable. But other than bragging rights and a few headlines, what would it give Sony Pictures, a unit of Sony Corp. (Research), or Warner Bros., owned by Time Warner Inc. (Research) and a corporate cousin of CNN/Money?
Turns out, not much.
Top market share says nothing about the indicator that matters most to investors: profits. And when it comes to turning box office revenues into bankable cash, studios are having a tough time. Production costs are rising. Overall ticket sales, even with record prices, are flat.
"Right now studios are just happy to break even at the box office," said Gitesh Pandya, a movie industry analyst and editor of BoxOfficeGuru.com.
Raising the bar
Remember "Titanic," whose eye-popping $200 million production cost in 1997 raised eyebrows?
Well, every year the average cost of making and selling a movie keeps going up. Now, production budgets regularly run upwards of $150 million and their marketing campaigns add another $50 million to $80 million to the tab.
BoxOfficeMojo.com reports that at least two movies this year topped $200 million in production costs alone -- Sony's "Spider-Man 2" and "The Polar Express," the soon-to-be-released Warner Bros. animation starring Tom Hanks.
Including both production and marketing, Warner Bros. has been among the big spenders this year. In addition to "Polar Express," Warner's "Troy" cost $225 million to make and market; "Harry Potter and the Prisoner of Azkaban" cost $180 million; and "Alexander" adds at least $150 million.
For Warner at least, the big bets have paid off. "Harry Potter" rung up $789 million in worldwide ticket sales. "Troy" was facing a loss until foreign audiences came to the rescue, turning the Homer epic into a $497 million blockbuster.
The Walt Disney Co., now ranked No. 5 by 2004 U.S. market share, hasn't been so lucky. It reportedly spent $137 million making and marketing "The Alamo," the early spring sleeper that took in a scant $26 million in global ticket sales. And "Hidalgo" also lost money, coming in about $17 million shy of its production and marketing costs.
What about profits?
Here's the rub: only Warner Bros. and Disney insiders know exactly how much these lavish productions made -- or, in Disney's case, lost.
Trying to pinpoint movie studio profits and losses is a "fool's errand," said Brandon Gray, the president of BoxOfficeMojo.Com. "You can never know for sure" what the actual numbers are.
Studios rarely cough up the numbers, often leaving analysts to estimate results. And when companies do disclose production budgets, it can be anybody's guess which expenses are included, which ones are left out and, if another studio is co-producing a film, how the costs are split.
"There's the 'official' budget, there's the 'rumored' budget, and then there are the various deals struck with exhibitors and the talent," said Gray. "There's a lot of mystery there."
Sometimes a studio doesn't foot the production costs of a given movie, but instead buys the rights or is paid to distribute it. Earlier this year, for example, Lions Gate Entertainment (up $0.02 to $10.02, Research) and two other companies released "Fahrenheit 9/11" after they bought the rights from Disney for $6 million.
Marketing costs are all over the map too.
And when it comes to revenue uptake, the numbers can get more opaque. On average movie theaters keep roughly half of every ticket sold, but even that cut can vary widely depending on the movie and the movie house.
Equity deals with actors and directors can squeeze profit margins further.
And as if this weren't baffling enough, studios use different accounting methods for when a movie flops versus when it hits.
Got the picture now?
Passion for Mel
"All of these deals can be different," agreed Pandya of BoxOfficeGuru.com. "There isn't one formula."
So while Newmarket got kudos for "The Passion of the Christ," a $30 million movie that so far has grossed nearly $610 million around the world, the upstart studio pocketed a mere 10 percent of the receipts, according to Gray. The big winner: director Mel Gibson, with a 40 percent cut.
Another part of the profit calculation problem: home video rentals and DVDs sales have become a bigger moneymaker for studios than box office receipts. Then too there are the merchandising revenues from characters licenses to other manufacturers, such as toy companies.
This much is certain: the studio rankings would look a lot different if status was based on profits, not ticket sales.
Gray said its safe to bet that Warner Bros. and Sony, whose respective big-budget flicks "Harry Potter" and "Spider-Man," were smash hits are among the most profitable studios in 2004.
But a profit ranking would bring some surprises too, said Gray.
Consider Fox Searchlight, the small art house filmmaker. Though ranked No. 13 by market share, Fox Searchlight is making good money, said Gray.
Why? A handful of the studio's art house films have hit, with "Napolean Dynamite" grossing $42 million in ticket sales and "Garden State" reaping $26 million.
The combined cost of making both films? $12.5 million.
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