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And All That Money Goes to ...

Tabulating the economic value of the Oscars may be confounding, but one estimate tops $600 million

March 09, 2003|Michael Cieply and James F. Peltz | Times Staff Writers

Is Oscar turning into a billion-dollar baby?

During the last decade, escalating studio marketing campaigns have transformed Hollywood's favorite awards ceremony into a high-stakes seasonal industry that stretches from early September, when hopefuls debut at the Toronto Film Festival, into the following spring, as companies chase their winners with self-congratulatory advertisements.

But calculating the financial effect of the Oscars has baffled even the experts. "Given the closed-mouth nature of this industry, you don't get really good numbers," said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp.

Kyser has estimated that the Academy Awards contribute at least $61 million to the regional economy, boosting spending on services that range from limousine rentals to Botox treatments for stars.

Kyser concedes that his assessment is probably low, however, and says much of the Oscars' value may come from a "nonquantifiable" glamour factor the ceremony brings to Los Angeles.

What's more, the regional count ignores the reality that the Academy Awards is a global event with economic consequences that ripple across the country and overseas, from the box-office bump for some nominees and winners to the expected nationwide spike in takeout pizza sales on Oscar night, which will be March 23 this year.

Putting a hard dollar figure on such a far-reaching event is more guesswork than real accounting exercise. But an informed estimate of how much real economic muscle there is in Hollywood's big night -- based on interviews, documents and a certain amount of informed supposition -- pegs Oscars-related activity at nearly $650 million annually.

Some players fret that awards-related spending may contract next year, when the Academy of Motion Picture Arts and Sciences plans to shorten the campaign season by moving its prize ceremony to late February.

But the overall Oscars economy appears poised to keep growing toward the billion-dollar mark, as studios and their expanding specialty film divisions, such as News Corp.'s Fox Searchlight or a unit to be launched this year by AOL Time Warner Inc.'s Warner Bros., push an increasing number of pictures into the race.

At present, the Oscars business adds up, very roughly, like this:

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The academy's piece:

$50.7 million

Fully 95% of the film academy's operating budget last year came from the $47.4 million in income directly from the Oscars event, most of which was provided by Walt Disney Co.'s ABC network as a license fee for the awards telecast. According to the group's annual report, $21.9 million went back into ceremony expenditures. An additional $8.9 million went to administrative expenses, and still more to educational and charitable activities.

But the academy's take doesn't stop with the fees. As of last June, the 6,400-member organization had tucked away almost $84 million in long-term investments, most of which came from previous Oscars shows. In 2001, a good year, it realized $8.4 million in gains; last year, which wasn't good, it lost $1.8 million. In calculating typical financial fallout from the Oscars, it seems appropriate to average the two, which comes to $3.3 million. That gives a total of $50.7 million, even without counting the possible appreciation in the group's Beverly Hills real estate holdings, bought largely with Oscars cash.

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Studio spending:

$54 million

Film companies are tight-lipped about their spending on Oscar campaigns. But interviews with executives provide a credible framework for gauging overall marketing expenditures.

Campaign professionals say about eight films are typically backed by war chests of $3 million to $5 million each, while one or two, by tapping ad dollars from the film's general release budget, can spend as much as $8 million. Back in the pack, they say, about a dozen campaigns are supported by about $1 million each, and the next 20 will pony up, say, $100,000 apiece.

Eight pictures at an average of $4 million yields $32 million. One wild card at $8 million bumps the total to $40 million. A dozen at $1 million pushes that number to $52 million, plus $2 million for all those also-rans, which brings the grand total to an entirely plausible $54 million.

And where does all that money go? The largest component of that spending, say insiders, is advertising in the Hollywood trade papers, which are regarded as the most efficient way of communicating with academy voters.

Publishers of both Variety and the Hollywood Reporter declined to disclose their Oscars-related ad revenues. But assuming the trades rely on the awards cycle for what insiders estimate is 35% of about $90 million in combined annual ad revenue, they would pull in $31.5 million.

Of the rest, much finds its way to the Los Angeles Times and the New York Times. A series of splashy, two-page Oscar-oriented ads in both papers would quickly add $5 million.

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