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The Hollywood Squeeze

Tension mounts and budgets shrink as the movie business comes to term with the recession

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In Hollywood this summer, it seems even the jokes are less funny. What’s the status symbol of the ’90s? goes a hot one currently making the industry rounds. A job, is the grim reply.

After more than a year of falling box office, budget cutbacks, and diminished expectations, the movie industry has settled into one of its glummest moods in two decades. ”We used to pass out development deals like baseball hats,” says one dispirited studio executive. ”Now all we do is go through the motions. We don’t buy anything.”

”Everything’s less fun in this climate,” complains Ron Bernstein of the Gersh talent agency. ”Costs have skyrocketed, movies are in a lull—it’s a thin, fallow period.”

Of course, bemoaning the movie industry’s dire economic straits has always been a popular pastime in Hollywood. But a look at some recent trends in the business shows that this time there is ample cause for the gloom:

*FEWER PEOPLE ARE GOING TO THE MOVIES. Since ticket sales hit a peak of $5.033 billion in 1989, both theater attendance and revenues have been steadily declining. Despite a handful of summer hits (see sidebar on page 29), 1992’s box office receipts are running 5.6 percent behind 1991’s lackluster returns.

*FEWER MAJOR MOVIES ARE BEING MADE. The leading studios have launched only 60 films so far this year, compared with 81 by this time last year. Although they will try to make up the difference by acquiring independently made films, the reduction in big-budget projects means a serious drop in the cash that flows through the entire production business.

*ACTORS ARE LEARNING LESS. The Screen Actors Guild reports that after falling a modest 2 percent in 1991, earnings for its members working in film and television dropped another 2 percent in just the first six months of this year-an ominous sign that the income falloff is gathering speed. Comparable drops have been reported by the Directors Guild of America and the Writers Guild of America.

*SMALLER COMPANIES ARE STRUGGLING OR FAILING. Orion Pictures is languishing in Chapter 11. Carolco Pictures (Terminator 2) is trying to sell off assets in a desperate effort to avoid the same fate. Cinergi Productions, having come out with only one movie, the $55 million Medicine Man, in its three years of existence, reportedly is expected to lay off nearly 20 people. Even at lean outfits like A&M Films (A Midnight Clear), president Dale Pollock says, ”It has never been more difficult to make a movie.”

With the nation still trying to emerge from a prolonged recession, it may be tough to generate much sympathy for workers in the high-glitz, high-paying film business. In fact, with revenues from home video and international distribution still healthy, there’s no sign Hollywood will be subjected to wholesale layoffs. But that doesn’t stop the complaining. In an industry that revels in its own excesses, even trimming extravagances seems to go against tradition.

It isn’t as if no one saw all this coming. ”A tidal wave is now hitting Hollywood a tidal wave of runaway costs and mindless competition,” Jeffrey Katzenberg, chairman of Walt Disney Studios, wrote in his famous leaked memo of January 1991. And though Katzenberg was hardly applauded for his belt- tightening fervor at the time, his words were prophetic: With costs rising and revenues falling, the profits of the major studios declined to an estimated $800 million in ’91, after hitting $1.2 billion in 1989.

Getting a grip on the skyrocketing costs of moviemaking quickly became an obsession in Hollywood’s executive suites, though the effects of the cutbacks have only recently become visible to those outside. Even spendthrift Sony Pictures, which released some of the most expensive star vehicles of ’91 (Hudson Hawk, The Prince of Tides, Hook), has begun to reflect the new cost-consciousness. The company’s TriStar division has released just four pictures this year. And its Columbia arm has been widely rumored to have placed a hold on the acquisition of new projects.

Columbia chairman Mark Canton, however, insists that the studio never instituted a total freeze. ”As the summer began, we took a look at what we were already developing in-house. We took a breath,” he says. ”But we have 12 movies coming out between now and the end of the year. We’re spending our money, but I want us to be judicious and selective.” The studio certainly hasn’t given up on big stars with big salaries: It recently announced it will produce the next Arnold Schwarzenegger vehicle, The Last Action Hero, for which the star is reported to command a $15 million salary. Still, Canton vows, ”It’s not going to be some $50-60-70-million movie. More in the $40-million-and-below range.”

At Universal Pictures, the budget for 1993 releases has been cut by 25 percent. The studio says it won’t reduce the number of movies it makes; it will simply spend less for the entire slate. ”There’s really only room on the schedule to do one or two big movies,” says its chairman, Tom Pollock. ”We’ll still be doing (Steven Spielberg’s dinosaur thriller) Jurassic Park. But we have to be very tough on budgets.”

”The studios are taking a two-tier approach,” says David Davis, an industry analyst with Paul Kagan Associates. ”They’ll still be making one or two big projects for the summer and the Christmas season. But then they’re making a whole slew of $10-15-20-million films. They’re backing away from middle-tiered films.” In other words, expect more Wayne’s Worlds and Unlawful Entrys, and fewer Boomerangs and Death Becomes Hers.

As studios tighten up the money spigot, the pressure is felt by everyone, from actors to gofers. ”Work is down drastically,” observes screenwriter Michael Mahern (Mobsters). ”People are grabbing any gig they can get.” ”An artist who was used to making $1 million maybe today has to take $500,000 or $750,000,” says a leading agent. ”He’s free to accept or decline the deal, but a lot more people are accepting than declining.”

”The mood is definitely downbeat; people are more willing to sit tight in a job they may not necessarily like,” says one development executive who was recently laid off from a successful production company. She remains upbeat, though. ”The job market should pick up after Labor Day,” she says.

Some aren’t waiting for the pendulum to swing back. After Avenue Pictures (Drugstore Cowboy) closed its distribution arm last spring, its distribution head, Yale Popowich, decided to pursue a different dream: He’s going to med school to become a pediatrician. ”You have to really love the movies to be able to ride out the lean times,” he says.

Still, downsizing has its boosters. ”The overexpansion of the mid- to late ’80s is still being worked off,” says industry analyst A.D. Murphy. ”All that is part and parcel of getting back to a better fighting weight.” The diet may already be working. The Walt Disney Co. reported that its earnings climbed 33 percent in its most recent quarter. Predicts analyst Davis, ”If box office levels remain close to last year’s, the (profitability) of the ’92 films should pick up, since the average cost should be less.”

But even though Hollywood may be able to squeeze more profit out of its movies by cutting costs, its real challenge may be more fundamental: making movies the public adores. ”The recession may have highlighted or exacerbated the crisis in Hollywood,” says producer Peter McAlevey (Radio Flyer), ”but it’s really a creative crisis. You have studio executives who are no longer sure they’re in touch with the audience; you have corporate executives pounding on them to cut costs. And so they cut back on development to be safe.” If a more cautious corporate mentality results in more cautious movies, the current downturn could be self-perpetuating.

Still, it’s worth remembering that a couple of mega-hits on the order of Home Alone or Dances With Wolves would be all it would take to put this year’s tally back on a par with 1989. And that would be the end of talk about permanent recession and creative malaise—at least until the next slow year.

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