A Blog by Jonathan Low


Aug 16, 2013

Tentpole Torpor: When a Big Budget Strategy Targets the Wrong Audience

The tentpole in question is a metaphor.  It refers to the strategy Hollywood studios employ to generate revenue and profit from big budget epics that usually feature lots of extra-terrestrials, spectacular explosions and a superstar or two.

These movies, often sequels - or designed to stimulate same - have budgets of at least $100 million. And they are targeted at teens, more often boys than girls, because teens will go back to see a movie they like several times.

The problem, now emerging, is one of strategy. Loyalty is one of the most prized assets a business can create. Loyal customers tend to come back repeatedly which makes them a less expense audience to market  and a more profitable consumer base as a result of the lower costs. They also frequently display a proclivity to be 'upsold' to more expensive products and they love accessories like $25 t-shirts. So all of this would appear to validate the Hollywood approach: give repeat and relatively undiscerning customers whatever they want.

Recently, however, this formula has not been working. It could be that the industry's herd mentality (3-D sells?! I'll  make one of those, too...) has created a real surfeit of the same-old, same-old. Or, as the following article explains, it could be that by pursuing this strategy, Hollywood has decided to invest its future in its least committed, most easily distracted, least loyal consumers. Teens are  notoriously flighty in the best of circumstances. That is not a criticism but an observation. It is a reflection of where they are in their development as humans: they want to experiment, they want to fit in, they want to have it all. So when a powerful new medium like the internet starts to offer them the fare they want without the hassle and expense of going to the cineplex, they are game.

It is possible that this year's experience is a one-off: an anomaly not ever to be repeated. But the experts doubt it. Deepening one's exposure to an inherently disloyal audience by investing ever greater sums in hopes of surpassing past excesses is not just unwise, it's the definition of bad business. JL

Peter Bart reports in the Wall Street Journal:

Movie audiences across the U.S. seem to be suffering from tentpole torpor. A tentpole, in Hollywood lexicon, is a movie that costs at least $100 million—often a sequel or a superhero epic. This summer, these pricey films, designed to foster franchises and theme-park rides, instead have prompted yawns at the box office.
Moviegoers were not lining up to see the likes of "White House Down," which cost $150 million to make and has made only $72 million domestically, or "The Lone Ranger," which Disney admits could represent a $190 million loss.
Ask for an explanation from CEOs like Viacom's Philippe Dauman and you get a quick response: Oversupply. There are simply too many mega-movies competing for too few dates. Jeffrey Katzenberg of DreamWorks Animation also chimed in last week, claiming that there is also a surplus of animated movies—"Despicable Me 2," "The Smurfs 2" and "Monsters University" among them. "We've seen more animation this summer by about 100% than we've ever seen before," he said in a call to discuss his studio's earnings. "We hit a perfect storm here."But there's another school of thought. Many critics and filmmakers argue that the issue isn't oversaturation but a more fundamental problem: The stories simply aren't good enough and the budgets are out of control. That's why, they say, film attendance is stagnant and profits are shrinking.
That's also why Wall Street activists like Daniel S. Loeb of Third Point are sending up warning flags. Mr. Loeb, who holds a 7% stake in Sony, argues that the decline in studio revenues reflects "a complete lack of accountability" on the part of studios. Sony rejects Mr. Loeb's contentions and his proposal for restructuring Sony by spinning off the company's entertainment assets. In addition to "White House Down," this summer Sony also released "After Earth," another big-budget failure, and will open a $140 million science-fiction epic starring Matt Damon, "Elysium," on Friday.
The losses have been daunting to the major studios whose strategy is built around the premise that bigger is better. It's also disappointing to moviegoers, who show strong signs of superhero fatigue. Yes, Hollywood has had some recent winners, like "Man of Steel" and "World War Z," but soaring budgets and marketing costs slashed profit margins even for the movies that performed well at the box office.
One big problem is that every studio seems to be making the same movie—a trend in recent years that is only picking up steam. Studio chiefs have abandoned adult drama and cut back on comedy to go after action pictures aimed at teenagers. Since "The Avengers"—the first and second—worked, why not replicate the trend with flicks like "Iron Man 3" and "Fast and Furious 6."
Then there's cost. During my limited time in Hollywood, I witnessed a bizarre escalation of production costs. In 1977, I produced a movie called "Fun With Dick and Jane," starring Jane Fonda and George Segal. It cost $5 million. Seven years ago, a remake with the same title and plot starring Jim Carrey cost $120 million—and tanked. (I was listed as an executive producer, but had nothing to do with the movie.)
As a young production executive at Paramount, I worked on "The Great Gatsby," starring Robert Redford, in 1974. It cost $8 million. The remake this summer, starring Leonardo DiCaprio, came in somewhere north of $120 million. "The Godfather" cost $7 million in 1972; today it might cost $170 million. Even if adjusted for inflation, those numbers are staggering.
To be sure, films today feature cutting-edge special effects, and the salary demands from stars have escalated, but the reality is this: Filmmaking still revolves around actors speaking their lines in front of a camera, usually on a sound stage. It's basically the same setup as in the time of movie pioneers like D.W. Griffith. But these days, everybody takes a lot more time and is paid a lot more money.
Problems relating to production costs are exacerbated by the basic business model. Hollywood refuses to accept that the teen audience it's trying to win over is actually its least loyal segment. Kids have too many other things to do than line up to see comic books come to life. The far more loyal 45-plus audience is essentially ignored all summer. Of the few offbeat low-budget entries that were released this summer, several—"This Is the End," "The Way, Way Back" and "Now You See Me"—enjoyed substantial success.
Faced with these realities, Hollywood should be coming to the conclusion that the poles are no longer holding up the tent. Maybe the answer is simple: Give moviegoers something better.


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