Hollywood Babble On & On #120: Quo Vadis Paramount?

Yesterday I wrote about how Paramount's report that they are the first studio to hit the billion dollar revenue mark this year and how it my not be as grand as they make it out to be.

Don't get me wrong, a billion dollars in revenue is a wonderful thing, I'd love to rake that in. But in Hollywood, there's a certain amount of illusion involved.

Now I explained all this before in one of my first posts, but that was a long time ago, and for those who are too lazy to click the link I'll explain it again.

Now everyone hears about the big numbers in ticket sales raked in by the blockbuster movies and you hear a lot about "gross revenues" and how big name movie stars land big "gross point" deals, yet you don't hear anyone discussing the net profit in anything outside of litigation. That is because no one gets a net profit, because in Hollywood a net profit is akin to the Loch Ness Monster with fewer reported sightings, and absolutely no photographic evidence.

So I guess I should start explaining and stop using mixed up mythical metaphors.

You buy a ticket to see a movie and it costs X amount of dollars. Those $X is gross revenue earned by that movie, but that's not the end of the story, it's only the beginning.

A piece of the $X is kept by the exhibitors, to cover the overhead costs of actually showing the movie and is called the "house nut." What's left of that $X is called the "rental" and goes to the distributor.

Then the rental goes on to cover the studio's overhead costs of distributing and marketing the film, and then whatever is left is then divvied up between the producers, gross-profit-point players, and other investors. What's left is called the "net profit," but since it's never seen, it's not really worth talking about.

Now while this all sounds straightforward, it's actually darker and more arcane than the devious machinations of some secret society that does all communications in pig-latin. The money path is not a straight line, it's more like a maze designed to confound and confuse all who dare to understand it.

So now you can understand why Paramount's $1 billion isn't as hot as it sounds.

And with DreamWorks moving on as soon as it's legally possible, Paramount will be without not only its top content producer, but its biggest hit-maker.

So what is the venerable and still formidable Paramount to do?

Well there are some strategies they can use:

1. SIMPLIFY: Any corporate mission statment should eliminate all of those meaningless buzzwords like "synergy" and "maximization." The mission statement should simply be: MAKE MOVIES THAT MAKE MONEY.

2. REDUCE OVERHEAD: Basically trim un-needed executive fat, every major media company has it. Look into new technology to reduce the costs of marketing and distribution and look into new markets, and what products you might produce for those markets.

3. REMOVE THE SCREW FACTOR: Independent producers and investors will find any studio that isn't going to financially sodomize them much more appealing than the others. Remember that while everyone else scrambles for a piece of a shrinking pie, you can use smart business sense to make a whole new, and potentially bigger pie for yourself.

4. FOSTER NEW TALENT: I know this sounds like a gamble, but it's still better than handing over a $100 million dollar film to a guy who did a music video that aired on MTV, and only got that job because he met the lead singer in rehab. Use the internet to reach out to find new filmmakers that are interested in giving the audience what it wants. Not what appeals to the Axis of Ego. So you can pretty much forget Sundance as a source, especially now that Paris Hilton hangs out there.

5. SENSIBLY MANAGE FRANCHISES: Don't let a single star dominate a good franchise. You can do Mission: Impossible without Tom Cruise and it would probably be cheaper too. When you do want an actor to come back for a sequel, use the non-screwing policy to woo them with real profit participation in exchange for a lower fee. Long term financial security can be a selling point if you pitch it correctly.

6. WOO A COMIC BOOK COMPANY: Comic book franchise films are big business. So, you could try for the now self-financing Marvel to sign on with Paramount full time as their distributor, or you can do what Universal did with Dark Horse, and forge a formal alliance to produce their books into films. You could try the various comic-studios at Image Comics, or try buying up properties left by companies wrecked during the big comic market crash of the mid-90s.

7. CONTROL PRODUCTION COSTS: A company can do very well without having every film be a blockbuster if each film doesn't have to be a blockbuster to be profitable. New technology doesn't just mean selling movies to be downloaded onto an iPod. It can also reduce the costs of making the movies themselves. Filmmakers used to use their imaginations to get around tricky and expensive problems, and they made better and more satisfying films because of it. I'm not saying you should be stingy, but you should promote imagination over expense.

And that should get the proverbial ball rolling.