The Hits Keep on Comin’ and so Do the Misses

Hollywood is on track to break its all-time box-office record, with more than $7 billion in receipts expected by the time the year ends.

So why do so many people with a financial stake in the movie business still hate it?

The answer lies in the inherently volatile nature of the expensive, high-risk end of the business, where three steps forward in box-office hits is all too often accompanied by two steps backward in turkeys.

Nowhere is that clearer than at Universal Studios Inc., where relative newcomers Edgar Bronfman Jr., head of parent Seagram Co., and his second in command, Seagram Vice Chairman Robert Matschullat, remain highly skeptical of the rewards versus the risks of the movie business.

Universal has had three big hits this year in “The Mummy,” “Notting Hill” and “American Pie”--each grossed more than $100 million domestically. Hoping to stem persistent rumors that it may abandon the film business, the studio this week put out a news release crowing that it is enjoying its best box office in 17 years.

Given the studio’s lull in the previous two years, Universal is clearly seeing better times. It also has raked in profits this year from two films released in late 1998--”Patch Adams” and its share of “Shakespeare in Love,” which it co-financed with Miramax Films.

But left unsaid is that the more than $350 million in total profits that “The Mummy,” “Notting Hill” and “American Pie” will potentially generate--the bulk of which will be realized over the next three years--has to pay for more than $200 million in losses from such expensive flops as “Mystery Men,” “EdTV,” “For Love of the Game,” “Dudley Do-Right” and “Virus.”

The hype over this year’s record box-office numbers masks the reality that plenty of movies created a lot of red ink.

The culprit is high production and marketing costs, especially when movies cost more than they should. Both “EdTV” and “Mystery Men,” for example, cost more than $70 million to produce and tens of millions to market, despite neither film boasting big stars. Their combined loss: about $110 million.

The studio’s recent release, “For Love of the Game,” starring Kevin Costner, is likely to wind up about $35 million in the red, with “Dudley Do-Right” losing about $30 million. But the biggest turkey was probably “Virus,” a movie Universal had a half-interest in. Universal’s share of the loss on that film is expected to amount to $35 million.

Universal isn’t the only studio experiencing the yins and yangs of the movie business.

The Hollywood studio with the fewest losses this year--just one so far--is Paramount Pictures, which for the past few years has cautiously shielded itself by routinely sharing financial risks with outside partners. Even so, the studio took a hit of more than $20 million on its Steve Martin-Goldie Hawn remake of the comedy “The Out-of-Towners.”

At the other end, Columbia Pictures has had a long string of losers since the year began, including “Idle Hands,” “Jakob the Liar” and “Muppets From Space.” Those losses offset the profits from the breakout comedy hit “Big Daddy,” which has grossed more than $160 million, and a couple of respectable performers like “Blue Streak” and “Cruel Intentions.”

Disney hit the jackpot with “The Sixth Sense” and its animated feature “Tarzan” and expects to see profits on “Inspector Gadget” and “Runaway Bride,” which it owns half of with Paramount. But the studio will take a loss of at least $30 million on “The 13th Warrior” and smaller setbacks on such expensive flops as “Instinct,” “The Other Sister” and “My Favorite Martian.”

Warner Bros. scored with “The Matrix”--expected to gross about $400 million worldwide--and “Analyze This” but absorbed such high-cost disappointments as “Wild, Wild West,” “Deep Blue Sea,” “Message in a Bottle” and the much-hyped “Eyes Wide Shut,” starring Tom Cruise and Nicole Kidman in the late director Stanley Kubrick’s final film.

An out-of-the-stratosphere hit like “Star Wars Episode 1: The Phantom Menace” and profitable films like “Entrapment” and “Never Been Kissed” overshadowed 20th Century Fox’s full slate of films this year, among them “Office Space,” “Pushing Tin,” “Brokedown Palace” and “Ravenous.” While their production and marketing costs were relatively modest, all will lose money.

New Line Cinema has had a similar year, with the smash hit “Austin Powers: The Spy Who Shagged Me,” which grossed more than $200 million domestically, followed by such bombs as “Drop Dead Gorgeous,” “The Astronaut’s Wife,” “Detroit Rock City” and “Dog Park.”

Financially ailing Metro-Goldwyn-Mayer’s biggest hit this year has been “The Thomas Crown Affair,” grossing about $67 million domestically, but the better part of its releases were money losers like “At First Sight,” “The Rage: Carrie 2” and “The Mod Squad.”

In less than three months, expect Hollywood to congratulate itself on how it broke last year’s all-time box-office record of $6.95 billion. According to Paul Dergarabedian, head of Exhibitor Relations Co., 1999 is expected to wind up about 5% ahead of ’98 with an estimated bounty of $7.2 billion to $7.3 billion.

But Hollywood’s bean counters and production execs know that such numbers are meaningless if you don’t look at profit. It’s not the green you take in at the box office, but whether the color’s black or red on your balance sheet when it’s all over.