Homepage

News > Fortune 500
    SAVE   |   EMAIL   |   PRINT   |   RSS  
Can King Kong save Hollywood?
Studios hope the big gorilla, Harry and others can lead a box office comeback after a rough summer.
August 19, 2005: 2:57 PM EDT
By Paul R. La Monica, CNN/Money senior writer
Silver screen isn't golden: A box office slump is one reason why media companies Time Warner, News Corp., Walt Disney and Viacom are having down years on Wall Street.
Silver screen isn't golden: A box office slump is one reason why media companies Time Warner, News Corp., Walt Disney and Viacom are having down years on Wall Street.
Photo GallerylaunchSee more photos
Is Harry Potter dead?
Not the character -- the brand. With the world abuzz, one expert says the brand is overexposed. (Full story)
Let's not go to the movies
This could be the worst year for Hollywood in 15 years.
Year Annual box office ch. Annual attendance ch. 
2005* -7.4% -10.1% 
2004 1.4% -1.5% 
2003 -0.5% -4.3% 
2002 11.6% 8.7% 
2001 8.4% 3.6% 
2000 2.7% -3.4% 
1999 7.8% -0.5% 
1998 9.3% 7.0% 
1997 7.7% 3.5% 
1996 7.6% 6.2% 
1995 1.8% -2.4% 
1994 4.7% 3.9% 
1993 5.8% 6.1% 
1992 1.4% 2.9% 
1991 -4.4% -3.9% 
 * YTD through 8/14/05
 Source:  Exhibitor Relations Co.

NEW YORK (CNN/Money) – Darth Vader, Batman and Tom Cruise couldn't do it. Can a bespectacled teenage wizard, a not-so-cowardly lion and an enormous primate lift Hollywood out of its funk?

According to figures from Exhibitor Relations Co., a movie industry tracking firm, box office grosses are down 7.3 percent so far this year and attendance at movie theaters is off 10.1 percent.

What's more, the summer has been an absolute disaster for the big studios so far. Ticket sales from May 6 through August 14 are down 9.5 percent and attendance has dropped 12.2 percent compared to the same period a year ago.

But hopes are high for a bit of a recovery this fall.

Lions and magicians and gorillas, oh my!

"With some surefire hits in November and December, the slump will be forgotten," said Robert Bucksbaum, president of box office research firm Reel Source and an owner of two independent movie theaters in the Los Angeles area.

On November 18, Time Warner's Warner Bros. is releasing "Harry Potter and the Goblet of Fire", the fourth movie in the wildly popular series about the boy magician. (Time Warner (Research) is also the parent of CNN/Money.)

Three weeks later, Walt Disney (Research) is launching what it hopes will become another franchise of successful fantasy films, with "The Chronicles of Narnia: The Lion, the Witch and the Wardrobe." This is based on the first of CS Lewis' seven children's books about a mystical snowy land.

And a week after that, General Electric (Research) subsidiary Universal Studios is releasing arguably the most eagerly anticipated movie of the fall, the remake of "King Kong" by "Lord of the Rings" director Peter Jackson.

Analysts say that these three films are as close to slam dunks as you can get since they all have a massive amount of buzz and, in the case of "Goblet of Fire" and "Chronicles of Narnia", an established base of loyal readers.

"Hollywood will see a nice holiday season," said Matthew Harrigan, a media and entertainment analyst with investment bank Janco Partners. "These three movies are pretty much review proof."

But the industry might have dug itself too deep a hole this summer. So it's probably unrealistic to expect an up year in 2005, according to other movie analysts.

"Hollywood is down versus last year by a significant amount," said Gitesh Pandya, editor of BoxOfficeGuru.com, another movie research firm. "Nothing is impossible but it will take a few surprise blockbusters."

But since most major media stocks have underperformed the market this year, partly because of a weak movie business, there is going to be an increased onus on the studios to deliver huge hits this fall.

"All the studios are under pressure. When the box office is in a malaise, it hurts everyone," said Paul Dergarabedian, president of Exhibitor Relations Co..

Some fear that this might lead to unreasonably high expectations for the fall slate of films. "It's crazy to try and gauge success. If "Harry Potter" doesn't do $300 million, people might consider it a failure," said Bucksbaum.

Is Netflix killing the box office...or bad movies?

There's also the raging debate about what, if anything, Hollywood can do to get more people into theaters. Some argue that film fans are not as eager to go out to see a movie because they can simply wait to rent the DVD from Netflix (Research) in a few months and watch it in the comfort of their own home on their high-definition TVs.

To that end, incoming Disney CEO Bob Iger sparked a controversy earlier this month when he told analysts during the company's most recent earnings conference call that the film industry might need to consider releasing new films in theaters and on DVD simultaneously.

But some scoffed at this notion. In a statement Wednesday, National Association of Theatre Owners president John Fithian pointed out that DVD sales have slumped lately as well.

"It is interesting to note that DVD slow-down has roughly tracked the theatrical window. That is, movies that have done poorly at the box office have tended to fare poorly when released on DVD," he said.

Theater owner Bucksbaum agreed with that statement. He thinks that Hollywood is too complacent.

"Studios get comfortable with trends and forget that things change rapidly. Five years ago, "Stealth" and "The Island" would have been $100 million movies. But tastes change," he said, referring to two notable action movies that flopped this summer.

BoxOfficeGuru.com's Pandya also said that a big problem for Hollywood is that it is a bit slow to adapt, preferring to churn out more action movies, sequels and remakes even when it's obvious that demand is waning for them.

"Hollywood has always been a town that does not like to take risks. They are just more risk averse now than a year ago if not more so," he said. "Studios are still looking to go with the safe bet even if they don't work."

Wait until next year

But the slump is probably a combination of these trends: the shorter wait for movies to come out on DVD and the fact that the quality of many films has been subpar this year, said Dergarabedian.

Still, analysts were optimistic that more serious movies, i.e. Oscar contenders, could lead to a pick up in business this fall. In addition to the expected blockbusters, analysts said that "Proof", "Jarhead", "Memoirs of a Geisha" and the Steven Spielberg-directed "Munich", could wind up being award contenders that also do good box office.

And if King Kong and Harry can't pull Hollywood out of its slump, it's not too early to get excited about next year, with sequels to "Mission: Impossible", "Pirates of the Caribbean" and "X-Men" due out as well as the latest Pixar (Research) movie, "Cars" and the movie version of the popular bestseller "The Da Vinci Code."

"It's becoming more challenging to get people in the theater. When word out of mouth on a movie is not strong, that hurts," said Dergarabedian. "But the summer of 2006 is looking good. Hopefully Hollywood will be back on track."

For a look at media and entertainment stocks, click here.

For Fun Money stories, click here.  Top of page

graphic


YOUR E-MAIL ALERTS
Movies
Box Office
Entertainment (general)
Manage alerts | What is this?