The Reel Truth

Hollywood claims the sky is falling. To which we say, Puh-lease

He will tell you that the real money comes from DVD sales, not from theatrical release. He will tell you that theaters would prefer to let people into movies for free so they can sell more popcorn and hot dogs and soft drinks, which is where exhibitors really make their money; but since studios don't make a cent from concessions, prices go up and audiences go down. He will tell you that studios don't really depend on foreign sales to make up their deficits; after all, the U.S. box office is still the dominant money machine, providing more than 60 percent in ticket sales worldwide. And he will tell you that even though Universal claims King Kong cost more than $200 million to make, it probably cost the studio next to nothing, once you figure in subsidies provided by the New Zealand government and German tax shelters and other pre-sold licensing rights. Telling audiences how much King Kong cost was just part of its pre-release hype -- a wowee stat aimed at impressing those who want to be part of a garish, expensive spectacle.

So, sure, the movies may have seemed terrible this past year -- 2005 was, after all, the year of The Dukes of Hazzard, Bewitched, Be Cool, Domino, and other lavish disasters -- but there are awful movies every year, just as, in the case of Murderball, there are always critical darlings that tank with the public. (None of the year's likely Best Picture Oscar nominees will have cracked the $100 million barrier.) If people are indeed staying away, it's because they just don't want to see any movies -- not now, anyway, not when they can avoid sticky and dingy multiplexes filled with ringing cell phones; not when they can spend the price of a ticket on a DVD 90 days after opening day; and not when they can see something on their plasma TV or computer screen or iPod whenever they want.

You don't even need a big hit to be a big hit: Mark Urman says it just doesn't matter that Murderball did poorly at the box office, because he'll make his money elsewhere -- specifically, on DVD. (In that top-secret report Epstein cites, DVD sales for the first quarter of 2005 were up $550 million -- from $2.7 billion to $3.2 billion.) That's why Urman plans to start releasing DVDs mere weeks after the movies hit theaters, which saves him time and money pimping the product -- it all gets rolled into one giant ad campaign, after all.

"What we know about our customers is not that they won't go to the movies if they know it will be on DVD soon," Urman says. "Au contraire -- what we know about our customers is they will see it when they want to, if they want to, and how they want to, so I say let it all happen at once."

Mark Cuban and Todd Wagner, through their production companies HDNet Films and Magnolia Pictures and 2929 Productions, are already doing that very thing. This year they released the doc Enron: The Smartest Guys in the Room in theaters and on Cuban's HDNet on the same day, which infuriated theater owners who claimed Cuban and Wagner were cutting into their business -- and yet it still made more than $4 million at the box office. And in late January, director Steven Soderbergh will simultaneously release his movie Bubble theatrically, on HDNet, and on DVD.

Cuban and Wagner aren't just shortening the release window between movies and DVDs -- they're jumping through it. But they can do this because they're a small company. The studios are lumbering, bungling beasts. It's easy to turn a speedboat on a dime; it's impossible when you're steering the Titanic.

"Paramount's biggest DVD last year was Chappelle's Show, which they established on Comedy Central," Epstein says. "One of Warner Bros.' biggest DVDs was The Sopranos, established on HBO. And Harry Potter was established as a book first. In the future, the theater will be less and less important, and [studios are] just trying to keep them alive. Everyone understands it's an inefficient system, but if they kill the theaters, they will kill themselves. If you try to open Syriana or King Kong on HBO or as a network special, like a Super Bowl, and all the publicity was concentrated on it that way, you may make more money. But they don't know."

Epstein laughs, then adds with dramatic understatement: "You know what? They're scared."

But not broke. Not by a long shot.

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