Friday, May 17, 2013

Will Blockbusters Go Bust This Summer?

The movie business is notoriously fickle. As screenwriter William Goldman has said "nobody knows anything" about the economics of making films. Every film is an economic adventure, and most of them don't make money no matter how hard studios and producers try. Getting name stars, directors, screenwriters, none of that guarantees success. You can open big and flog four weeks later; and you can open small and build a following week by week that finally puts you over the top 10 weeks out. But you can't predict any of this.

The fabulous success of Jaws got studios thinking about blockbusters, expensive films with jazz effects and wide appear that rake in megabucks. Ever since then Hollywood's been chasing the blockbuster, lining them up in the summer, and betting the farm on them. It seems to have worked. Sorta. Will the magic run out this summer?

According to Doug Creutz, the senior media and entertainment analyst for Cowen & Company: “Of the expensive action and animated movies, we’ve never had a summer where more than nine did well, and often it’s fewer. This summer you’ve got 17 blockbusters coming out between May and July, 19 if you add August,” which he said is the most crowded release slate in recent memory. “Is this going to be by far the biggest summer box office in history? Maybe, if they’re all great movies, but it’s not likely.”

Studios have been shifting their resources toward what are variously called blockbuster, event, or tent pole movies for years — the big-budget movies intended to help studios make up for their less profitable films. By and large, the strategy seems to have paid off. “We haven’t seen many tent poles blow up,” Michael Nathanson, a media analyst and managing director at Nomura. “But this summer could be the breaking point. There may be some big write-offs on some of these films.”
The summer knows. But it's not telling, not yet. Stay tuned.

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