Thursday, November 14, 2013

Studio Analysis Part One: The Marvels & Dreams of Paramount’s Past

paramount gate high res
While its executive hierarchy has hardly changed over the past few years, the fortunes of Paramount Studios at the box office have been a roller coaster. As with each of the previous studio analyses, we begin with an examination of the four years leading up to this one. We’ll be discussing Paramount’s recent ups and downs before moving on to discussing the studio’s current state of affairs and speculating about the studio’s days ahead.

One of the things that made Paramount so successful over the last few years was its distribution arrangement with Marvel Entertainment. Through that partnership, Paramount earned a big chunk of market share, thanks to the exploits of Iron Man, Thor and Captain America. A similar relationship with DreamWorks Animation helped as well. It should be noted that both deals were purely fee-for-service distribution and marketing arrangements. On the other hand, the company’s deal with DreamWorks—which was responsible for the first three Transformers movies—let Paramount post hefty grosses without actually putting up big year-end profits or releasing a large slate of movies.

On the contrary, the studio has consistently been in the middle of the pack in terms of the number of releases. It hasn’t been afraid to overspend on a project if needed, but it’s also noted for not putting all its eggs into any single franchise basket. Whereas there were once several franchises in the studio fold, Paramount has found its franchise properties dwindling. To fully understand what happened, we need to examine the last four years and how the studio’s movies fared.
Films Released and Market Share
It’s been the best of times, it’s been the worst of times. A steady rise in market share and box office grosses culminated in the studio’s greatest year: 2011. But the euphoria fizzled out as grosses dropped by more than 50 percent the following year. In 2009 and 2010, Paramount was the second highest grossing studio in town, with 13.9 percent of the market share and $1.48 billion at the box office the first year and 16.2 percent and $1.71 billion the following. Each year, the studio had 13 releases, made up of a solid mix of budget-busting blockbusters and leaner, artier fare, with plenty of pulp and fluff in the middle.

Paramount 2009 2012 ComparisonThe first year, the monster performer was the second Transformers movie, Revenge of the Fallen, while the second Iron Man film took care of business in 2010. Both movies cost $200 million, both made more than $300 million domestically (Fallen roared past $400 million) and $600 million worldwide (with Fallen beating the $800 million mark). Now, Iron Man 2 was a Marvel movie but the Transformers film belonged to Paramount, and a big hit like that helps a studio go a long way toward profitability, especially after you mix in a winner like the J.J. Abrams-directed Star Trek reboot. If we’ve learned anything over the last couple of months, it’s that franchises are a good thing and crucial to a company’s bottom line.

Of course, when a bunch of franchises all hit the same year, that means a lot of green coming your way, and that’s what happened in 2011. An extra couple of releases (15 total) helped a bit, but a third Transformers movie, a fourth Mission: Impossible, a Kung Fu Panda sequel, two more Marvel movies (Thor and Captain America: The First Avenger), and the Shrek spinoff Puss in Boots carried the day. But here’s the wrinkle: Four of those five movies were from Marvel and DreamWorks Animation, which meant a chunk of the numbers were merely superficial. And, in another twist, a bunch of big movies coming together in one year is both good and bad. Good because it means a bumper crop of profits that year, but bad because it sets up the following year for a fall.

And that’s exactly what happened. Part of the problem, of course, is that Marvel defected to Disney and DreamWorks Animation went over to Fox. That not only removed two enormous contributors to Paramount’s market share and overall grosses, it also left a few holes in the studio’s release schedule. To add insult to injury, a couple of attempts at creating brand new franchises fell flat.

What’s especially interesting about 2012 is that it wasn’t defined by a single, all-consuming flop but rather by a series of disappointments that added up to a lousy year. When you’re only releasing 12 movies in a given year, and one of your biggest hits is the 15th anniversary re-issue of Titanic retrofitted for 3D, popping the champagne is not in the cards at year’s end.
What Went Right

Paramount 2009 2010 v2In its first three years? A lot. Aside from the Transformers series, which has been a license to print money since it first appeared in 2007, the studio had any number of reliable properties. Interestingly, aside from the two Transformers movies released in this time frame, no other franchise made more than a single appearance. Setting aside the DreamWorks entries (one Kung Fu Panda, one Madagascar and one Shrek film, as well as a spinoff, plus the first installment of How to Train Your Dragon), there was one Mission: Impossible and one Jackass (in 3D!) as well as the first installments in others, including Star TrekG.I. Joe and Tintin (shared with Sony).

The one exception to this, of course, was Paranormal Activity, the most profitable franchise in movie history. Consider this: The first one cost just $15,000, cleared $100 million domestically and almost $200 million worldwide. Each succeeding year gave us another installment in the franchise. The second cost $3 million, did $84 million domestic and $177 million worldwide. Numbers three and four each cost $5 million and combined to make more than $150 million domestically and almost $350 million worldwide. So, four movies, whose combined cost add up to a shade over $13 million, grossed more than $700 million worldwide. Not a bad ROI. Generally speaking, victories like that don’t come around very often—but when they do, they pay for a lot of other stuff.

What else pays off? Reinvigorating older properties. Take, for instance, Tom Cruise’s pet project. While the studio saw the end of the first Transformers trilogy, Brad Bird joined Cruise to breathe new life into the M:I franchise, yielding the best worldwide gross in the series.

What the mega-hits often overshadow is the important of successful medium- and lower budget projects to a studio’s overall performance. In fact, Paramount’s recent successes owe much to how well its mid- and low-budget projects fared. The grosses of Shutter IslandTrue GritNo Strings AttachedJackass 3DSuper 8Up in the AirThe FighterFlight and I Love You, Man, to name a few; the concert films, Justin Bieber: Never Say Never and Kate Perry: Part of Me; and of horror projects (aside from the Paranormal Activity flicks) like The Devil Inside all far surpassed their cost and helped make Paramount one of the most successful places in town. As we have said repeatedly during the course of this exercise, a bunch of big hits covers any number of losses.

Paramount 2011 2012Two perfect examples came from 2010 and 2011. In 2010, the studio put out 13 films, 10 of which were in the top 50 grossing films of the year. The next year, of the 15 films released, 12 made it. That is an astonishing percentage in any given year, much less two, back to back. For a comparison, only four of the 12 films released last year made it.

Mixed in with the monster hits and the smaller ones were tricky calls like Rango, the studio’s attempt to jumpstart its own animation department. While the $135 million production didn’t quite recoup its cost domestically (racking up $123 million), it did close to $250 million worldwide and snagged the Academy Award for Best Animated Feature. The Last Airbender was considered a failure at the domestic box office, but the $150 million film brought in more than $300 million worldwide. Two other animated projects, Megamind and Rise of the Guardians, both cost in excess of $130 million to make and, while both cleared $100 million in domestic grosses, it was their worldwide success—both made more than $300 million—that earned them places at the winners’ table. But none of these films have a sequel in development, and what’s more, the latter two were both DWA entries, not Paramount, so it’s not as though the studio has any choice in the matter.
What Went Wrong

Looking at the two-year period of 2010 and 2011, not much went wrong. There were, however, a few slips in 2009, and the studio took on more water during the above-mentioned awful year: 2012.

A couple of films that had lofty 2009 awards season aspirations—The Lovely Bones and The Soloist—were met with great indifference by moviegoers despite the impressive talent involved. Eddie Murphy’s unfortunate downward career spiral showed no sign of abating as Imagine That, which cost $55 million, returned less than half that once all the grosses were counted. Three years later, it happened again, as A Thousand Words tanked, costing $40 million and recouping half that much.

There were a couple of noble failures like Martin Scorsese’s Hugo, an alarmingly expensive movie that did not capture the audience the studio hoped it would, and Jason Reitman’s Young Adult, which only cost $12 million but couldn’t find an audience. Still, considering both were released in 2011, in the midst of that year’s enormous successes, the damage was minimal.

The year after, though, was a whole other beast. Aside from A Thousand Words, the Seth Rogen-Barbra Streisand comedy The Guilt Trip was another clunker. And while there were no other major fires to put out, the disappointments of a couple of much-hyped films made the year seem that much worse. One of them was Tom Cruise’s attempt to jumpstart a new franchise for himself, Jack Reacher, adapted from the popular series of bestsellers. The film made its money back and did some nice foreign business in the face of a powerful lobby of fans who thought that the short-of-stature Cruise was not fit to play the towering Reacher depicted in the books. In the end, the numbers weren’t enough to get a sequel greenlit. Another flop was Sacha Baron Cohen’s The Dictator, which didn’t come close to putting up the numbers of the first Borat and then BrĂ¼no, possibly because audiences had grown tired of his act and possibly because it wasn’t something people wanted to see.

Either way, the combination was one more gut-punch for a studio coming off the best year in its history, only to see it all turn to ashes a few months later.

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