“We believe there is little chance of the negative revenue trend reversing in the coming years,” commented the report’s New York-based author Roger Smith.
“New technology will not deliver anything like the revenue initially predicted, and as DVD sales continue to decline and the cost of making movies increases, the message is simple: the Hollywood studios must begin a serious attempt to rein in costs, like News Corporation’s Fox has done, if they are to survive.”
GMI is dedicated to delivering research for institutional investors in the U.S. Its first report strikes a warning note for the hedge funds and private equity players that have been co-financing studio production slates over the past couple of years.
It suggests that DVD revenues, which rose by 75% between 1999 and 2004, have fallen for the past three years. In the first half of 2007, this decline accelerated further with a 12.5% drop in U.S. DVD sales, mirrored by a similar fall in international sales.
With DVD providing the lion’s share of studio profits, that has punched a hole in the business model for big-budget production, at a time when the cost of “gross participation” deals for actors, directors and producers has risen to $3 billion in 2006, double the level of five years ago.
According to the report, “While the studios are currently in negotiations with writers, actors and directors over fees, these salaries are not the main issue; the current cost of producing, casting and advertising in the present environment simply exceeds the likely returns.”
BROADWAY BOX OFFICE HIT BY STRIKE
Unlike the slow-burn aftereffects of a Hollywood strike, a Broadway work stoppage has instant box office repercussions.
The stagehands' walkout called at 10 a.m. Saturday wiped out weekend perfs for the majority of shows on the boards, knocking the performance tally for most of those productions down to four or five for the week ending Nov. 11.
Taking into account estimated grosses for "Young Frankenstein," total Rialto cume went down about one-third from the prior frame, falling about $6 million to $12.5 million.
That's rough -- particularly for shows with low advance sales, plus all those limited-run plays that recently began perfs -- but it's not quite the catastrophe that will be felt if the strike continues and wipes out all the coming week's shows.
FOOTBALL GIVES HUGE RATING FOR ALL NETWORKS
ABC, NBC and Fox all had something to boast about on the second Sunday of the November sweep, with a strong NFL game carrying NBC to victory on the night among young adults. Football, in the form of an overrun, also helped Fox's animation lineup score above-average results, while ABC remained potent with its entertainment series.
According to preliminary nationals from Nielsen that include same-day DVR playback, ABC's "Desperate Housewives" stood as the night's top show (7.2 rating/16 share in adults 18-49, 18.5 million viewers overall), rising week to week thanks in part to a stronger lead-in from "Extreme Makeover: Home Edition" (5.3/14 in 18-49, 15.1 million viewers overall). And closing out the night in good fashion was "Brothers & Sisters" (5.0/13 in 18-49, 12.5 million viewers overall), which continues to retain more of its "Housewives" lead-in than a year ago.
NBC is expected to win the night thanks to its "Sunday Night Football" contest between the San Diego Chargers and Indianapolis Colts. The down-to-the-wire game, which ended around 11:40 p.m. ET, is projected to deliver roughly a 6.8 rating/17 share and 16.6 million viewers overall.
Earlier in the evening, Fox didn't get its hoped-for boost from the big NFL game between the Dallas Cowboys and New York Giants, as the contest ran only about 10 minutes into primetime and its conclusion lacked any real drama. Still, the net's NFL overrun and postgame show averaged a winning 5.5/15 in 18-49 and 13.8 million viewers overall on Fox affiliates from 7 to 8 p.m., leading into a good score for "The Simpsons" at 8 (5.1/13 in 18-49, 10.6 million viewers overall). After "King of the Hill" fell off at 8:30 (3.7/9 in 18-49, 7.7 million viewers overall), "Family Guy" perked up nicely at 9 o'clock (5.4/12 in 18-49, 10.4 million viewers overall), and "American Dad" was above average at 9:30 (4.0/9 in 18-49, 7.9 million viewers overall).
CBS, lacking a football presence, was a distant fourth place in key demos, led by "The Amazing Race" (3.1/8 in 18-49, 10.5 million viewers overall), which dropped off quite a bit from its football-inflated season premiere of the previous week. Also a bit sluggish was "Cold Case" at 9 (3.0/7 in 18-49, 12.9 million viewers overall), while "Shark" (2.6/7 in 18-49, 11.5 million viewers overall) came in about on par with recent outings.
CW continues to be an afterthought on Sundays, with new drama "Life Is Wild" barely registering at 8 o'clock (0.4/1 in 18-49, 1.4 million viewers overall).
Preliminary 18-49 averages for the night: NBC (7:30-11 p.m.), 5.3/13; ABC and Fox, 4.9/12; CBS, 2.8/7; Univision, 1.2/3; CW, 0.5/1.
In total viewers: NBC, 13.5 million; ABC, 13.2 million; CBS, 12.0 million; Fox, 10.7 million; Univision, 2.9 million; CW, 1.3 million.