Movie ticket sales hit record
In Hollywood, the math is never simple.
Worldwide box-office revenue rose to record levels last year, the studios' main trade group said Wednesday -- but a closer look at the numbers suggests a murkier picture of movie industry strength.
Movie ticket sales climbed to $9.6 billion in the U.S. and Canada and $26.7 billion globally, both logging 5% increases that demonstrated a "healthy" industry, said Dan Glickman, chairman of the Motion Picture Assn. of America.
The report tends to downplay the actual cost of making movies, however, along with currency fluctuations that benefited Hollywood because of the free-falling U.S. dollar.
For major studios, the average cost of producing and marketing a movie grew 6% to a record $106.6 million, the MPAA said. But that number -- based on a survey of trade group members such as Walt Disney Co., 20th Century Fox and Paramount Pictures -- reflects only the $70.8 million the MPAA said studios spent on a typical production and the $35.9 million they shelled out to advertise it and make prints.
Not considered was the tens of millions of dollars that outside partners such as Relativity Media, Legendary Pictures and Dune Capital Management spent to co-finance dozens of big movies, including last year's "300" and "American Gangster." Studios are turning to partners such as hedge funds and banking firms to share in many of their productions, a strategy that limits their risk but also their potential profits.
Billions have poured into Hollywood since 2004, with all of the big studios and several of the smaller ones taking on partners for at least a portion of their films.
The MPAA has continued to tally only the investments by the studios, a calculation that analysts say glosses over the true expense of making movies.
Outside investors funneled $1.3 billion into studio productions released in 2007, according to Global Media Intelligence, a media research firm. Including that cash, the average film cost $81.6 million to make, said Roger Smith, a GMI analyst -- or 15% more than the MPAA calculated. As a result, the trade association's figures "understate how much costs are out of control," he said.
The MPAA's annual survey has shown production costs flat to slightly down from 2004 through 2006, "a time when they were going through the roof and everyone knew it," Smith said. Increases were masked because studios' partners assumed a greater share of production costs, he said.
