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A summer to make even Hollywood blush

Box-office sales are setting records - yet recent events show all is not well for the industry.

Standing in line for a Thursday matinee showing of "Big Daddy," Craig, Erica, and Ed Mitchell are seeing their first movie together in 10 years.

"Craig got me out to see 'Star Wars' a couple weeks ago and I had so much fun I had to come back," says father Ed. "We saw so many trailers that were promising, I just chose one and here we are," he says.

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The Mitchells are just one of thousands of families across the nation doing the same. Repeat business from usually noncommittal moviegoers is just one of several reasons that summer 1999 is enroute to smashing all-time records for the box office. Movies have taken in $1.7 billion since early May, compared with $1.32 billion over the same period last year - a 28 percent jump over last summer's record pace.

"What is happening out there is truly amazing," says Paul Dergarabedian, president of Exhibitor Relations, a box-office tracking firm.

"'Phantom Menace' has put people in a moviegoing mood, and studios have barraged the public with trailers, ads, posters, and merchandise. So far, people are eating it up, big time."

Worrying developments

At the same time, however, analysts are decrying recent developments behind the scenes which hint that box-office figures are not translating into thick wallets for most Hollywood filmmakers.

On Friday, two of Hollywood's longest-standing studio heads resigned amid industrywide pressure to boost feeble profit margins by making less-expensive - and thus lower-risk - films. Warner Bros. co-chairmen Robert Daly and Terry Samel shocked the entertainment industry by ending their 20-year reign, one of the most stable in Hollywood.

On top of this, the Screen Actors Guild and the Directors Guild of America recently released a report showing productions are moving overseas, where it is cheaper to film.

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In 1998, $10.8 billion of United States-developed movies and TV were filmed in other countries, a figure up fivefold since 1990.

"When you look at the drying up of outside capital, which has hurt DreamWorks, MGM, Universal, and others, when you look at runaway production costs, when you get beyond the surface [box-office] numbers, you realize that a two-month surge in movie receipts doesn't necessarily mean all is right in the world of Hollywood," says Chris Lanier of Motion Picture Intelligencer, a box-office tracking firm.

To keep production from running overseas, Rep. Mark Foley (R) of Florida announced last Wednesday the creation of a subcommittee of the Entertainment Industry Task Force. He has also introduced an amendment to create pro-business incentives for film production in the United States.

In the meantime, eyes are turning to the second half of the summer, which could generate even more money than the first. Now that the mega-hyped "Phantom Menace" has had its big run, studios will be releasing a variety of major films every weekend through Labor Day.

Even so, this summer's blockbusters have helped other movies. "The only time that 'Phantom Menace' really hurt anyone was opening weekend," says Mr. Dergarabedian. "Since then, the crowds have come back bigger and bigger each weekend."

And word of mouth is particularly good this year, industry analysts say. "The sheer number of people generating buzz and energy by word of mouth is very, very unusual this year," says Warner Bros. Dan Fellman.

Noting several movies have topped the $100 million mark - among them "Phantom Menace," "Austin Powers," "Notting Hill," "The Matrix," and "The Mummy" - Mr. Fellman says the increased interaction of people "telling friends at the water cooler" creates a cross-fertilization that produces a snowball effect.

Whose profits?

Still, other analysts say the amount of movie income generated this summer is misleading.

"The movie industry is $270 million ahead for the season, but $370 million of that is due to 'Phantom Menace,' " says Mr. Lanier.

Slapped with rising production costs, which have been accelerating faster than profits in recent years, many studios have been making fewer films and will have less profit at the end of the year.

"All of the profit from 'Phantom Menace' is going to George Lucas himself, not Hollywood studios," says Lanier. "When you take 'Menace' out of the picture, margins are flat or even down over the previous year."

Theater owners as well made less from "Phantom Menace" than other pictures, due to unique arrangements with Lucas that included demands for the best, biggest theaters, and commitments to run the picture for long periods. Many theaters complained that after crowds sloughed off, their theaters were losing money because they could not drop "Phantom Menace" for fresh films that would draw new viewers.

But the cash is still pouring in.

(c) Copyright 1999. The Christian Science Publishing Society

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