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Valenti Calls 2001 The Greatest Box Office Year in Film History

6 Mar, 2002 By: Brian Fuson

LAS VEGAS — While nearly all indicators regarding the state of the theatrical film business in the United States were pointing up last year, the most dramatic development was a marked drop in the price of making movies.

Negative costs on studio films dropped a steep 13 percent — the biggest fall in more than two decades.

On the income side, theatrical box office in the United States crossed the $8 billion mark for the first time, rising to a record $8.41 billion in 2001 — an increase of almost 10 percent from the previous year's $7.66 billion. The rise in box office receipts continues the longest expansion in movie business history as revenue increased for the 10th straight year.

"2001 was the greatest box office year in film history," MPAA president and CEO Jack Valenti said in his annual state-of-the-industry address Tuesday at ShoWest 2002 in Las Vegas. "A record 20 films released in 2001 soared to more than $100 million each in box office, with a record five films reaching the rarefied air of $200 million," he added.

But before giving his mostly upbeat assessment of the industry, Valenti began on a more somber note, making mention of the terrorist attacks of Sept. 11, calling it, "a day that will live in perfidy." Valenti noted that in the aftermath of the attacks, "like a swiftly running river in full unstoppable force, the nation came together in a circle of unity that fired and fueled the emotional capillaries of this country. We assembled our courage and renewed our fidelity to the American basic belief in human liberty."

Valenti noted that in the aftermath of the attacks there were some who thought that theaters would be empty, and that Americans would shun the moviegoing experience. "But that did not happen," Valenti said. "What did happen was a confirmation that Americans, even in a time that tries their souls, will not be cabined and confined in their homes." Valenti also gave praise to the entertainment industry's swift and positive response to the White House's request for help in the war effort.

In addition to the rising tide of box office receipts, Valenti noted that admissions hit 1.49 billion in 2001, an increase of almost 5 percent from 2000's 1.42 billion. "It was the largest ticket buying total since 1959," Valenti said. The admission count for 2001 tops the 1.48 billion racked up in 1998, which had stood as the largest ticket unit tally since 1959.

The results from 2001 hold out promise for the years ahead because the rise in box office and admissions was realized with fewer theaters and screens in operation than in both of the two years prior. The official figures released by Valenti on box office and admissions confirm exclusive projections given by The Hollywood Reporter (HR 1/2).

In the high-cost, high-stakes business of making movies, the drop in negative costs was a most welcome respite for an industry that has seen costs skyrocket in the past decade, from $26.8 million in 1990 to $54.8 million in 2000.

Valenti noted that the average negative cost for an MPAA member company film in 2001 was $47.7 million — a drop of 13 percent, or $7.1 million.

Valenti attributed the decline to studio fiscal restraint. "The studios are exercising fiscal discipline like they have never done before," he said.

In years past, Valenti has bemoaned rising negative costs. In 1997, for example, when negative costs skyrocketed a record 34 percent from the previous year, he referred to the increased cost as "a great shaggy beast prowling the movie forest, a fiscal Godzilla slouching toward our future." The negative cost in 2001 is lower than the $53.4 million reported in 1997, but higher than 1996's $39.8 million.

Before 2001, the biggest year-to-year decline on record was 10 percent, and that was in 1988. In the past 22 years, there have been only five years when negative costs have declined from the previous year, three of which were single-digit percentage decreases.

Multiplying the average savings of $7.1 million per film by the average number of films released by MPAA member companies equates to a production cost decrease of roughly $1.3 billion in 2001.

But it wasn't all good news: The decrease in negative costs was offset by the nearly 14 percent rise in costs for prints and advertising. Valenti noted that the average cost for P&A for a major studio in 2001 was $31 million — the third largest increase since 1991.

The cost for prints and advertising has been steadily on the rise for most of the past two decades. Since 1980, only two years have seen a decrease in P&A costs, and in each of those years — 1985 and 1999 -- the decline was a relatively low 3 percent.

Valenti noted that altogether, the combined average cost to make and market a major studio film in 2001 was $78.7 million -- a decrease of 4 percent, or $3.4 million, from 2000. "This is a most welcome piece of fiscal arithmetic," Valenti said.

With the continued increase in P&A costs, marketing vaulted to a 39 percent share of the total cost to make and market a film — the highest ratio of P&A to negative costs in more than 12 years. That's an increase of 6 percent from 2000, when P&A costs made up 33 percent of the combined total. During the past 12 years, the ratio of P&A to negative costs have fluctuated from 29 percent-33 percent.

Valenti was upbeat about the number of people going to the movies. "On a per capita basis, each American sees 5.3 films a year — the highest per-capita attendance in the world," he said. But Valenti took it a step further, saying that "if you exclude from the per-capita population those who are not 'moviegoers' (going to at least one movie a year), the per capita viewing rises to 8.6 films per year, which I can tell you is a most healthy number."

"Frequent" moviegoers, or the ones who see at least 12 films a year, continue to be the group that drives the box office, accounting for 82 percent of all admissions in 2001, up from 80 percent in 2000. The MPAA chief also noted that 27 percent of all moviegoers were in that category and that 60 percent were either "frequent" or "occasional" (seeing two to 11 films a year) moviegoers.

Valenti touched on a demographic nuance as well. The highest percentage of frequent movie fans is between the ages of 12 and 24, but the second largest group is in the over-40 bracket. "These are the baby boomers who have never lost the 'movie urge,' " Valenti said. Men are slightly heavier moviegoers as 60 percent are in the frequent or occasional category, compared with 56 percent of women.

During the past several years, the MPAA chief has noted how well the theatrical movie experience has held up in the face of new entertainment technology. This year he noted a welcome trend: "The more people watch movies on DVD and VCRs, the more they go to a movie theater." Nearly half of those who watch DVDs and almost 40 percent who watch videos are either frequent or occasional moviegoers. "People who love movies are eager to watch them in different environments," he said.

According to the MPAA's latest statistics, the heaviest moviegoing segment in the United States is the Hispanic population, with a per-capita viewing of 9.9 films per year, which represents 15 percent of all admissions. The black population sees 7.6 films per year and comprises 11 percent, while all others view 8.1 films per year, making up 68 percent of total admissions.

Remarking on the MPAA and the National Association of Theatre Owners' ratings system, Valenti said it continues "to be a landscape marked by vision and success, which markedly benefits parents." Of parents with children under 13 years, 78 percent found the 33-year-old system "very useful" to "fairly useful" in helping guide their children's moviegoing. "It plainly says that parents like and trust what we are offering them," Valenti said.

With the tumult raised two years ago by the Federal Trade Commission regarding film ratings and marketing to children, the MPAA, as well as movie theaters and newspapers, started including "reasons for the rating" and what ratings mean. Since that time, Valenti noted that the MPAA Web site Filmratings.com is drawing 180,000 visitors a month.

Valenti credited theater owners and the leadership of NATO president John Fithian with doing a superior job of enforcing the ratings. "The movie theater is the only business establishment in America that voluntarily turns away revenue at the box office in order to fulfill the obligation that we as an industry have made to parents," he said.

In closing, Valenti revisited his theme regarding the events of Sept. 11. "I pray that 2002 bears witness to a lifting of hearts and hopes in this free and loving land. We can do no less because there is a word that sums up the American experience, a word that at all costs must be preserved, protected and defended. May God grant that word never die. That word is freedom."

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