NEW YORK --- Rising international demand, new technologies and a renewed effort to control costs are all helping the movie business stay in strong shape despite ever-increasing costs, entertainment industry execs told an industry conference Tuesday.
In a message clearly aimed at Wall Streeters downbeat on Hollywood, Time Warner chairman and CEO Gerald Levin told Variety/Schroder Wertheim's annual Big Picture media conference that while "costs are high, so is demand ... just consider that in 1996, movie attendance approached a level it hadn't been at since 1959."
A similar upbeat tone emerged from a panel of Hollywood studio execs, who agreed that efforts are finally being made to control costs and that technology like the digital videodisc offered the prospect of new revenues.
David Londoner, managing director at Schroder Wertheim, underlined the industry's more cheerful prospects with a forecast that movie industry profits would rise as much as 5% in 1997 after declining 5% in 1996. Londoner also told the conference that last year's earnings decline was much smaller than the drop of one-third he had expected this time last year.
But it was the Time Warner execs appearing at the conference who appeared to go out of their way to talk up Hollywood's prospects. In his keynote address, Levin said, "The hunger for movies has become almost a part of human nature.... It's as if people can't get enough."
Speaking to reporters after his speech, Levin said the "fundamentals of the business, I think, are really good.... People have lost sight of the expanding marketplace."
"People are just focusing on the domestic theatrical marketplace and the cost of releasing films," Levin said, noting that these critics ignore the ability of the studios to sell films to foreign markets, domestic broadcast and cable networks, video-on-demand and new formats like the digital videodisc.
Warner Bros. chairman and co-chief operating officer Terry Semel, a movie industry panelist, took up the same point in his session's discussion, arguing that the digital videodisc puts Hollywood "at the crossroads that could be the most exciting time in our collective careers," Semel said.
And fellow panelist, MGM chairman Frank Mancuso, said that "we see signs now that we are moving in the right direction" to control costs, although he cautioned, "It's early to predict complete victory."
In his speech, Levin also noted that the entertainment industry was more focused nowadays on rationalizing after a period of consolidation.
"To everything there is a season ... a time to acquire and a time to de-leverage," Levin said, highlighting a trend that has been evident among all the entertainment majors, with the exception of Rupert Murdoch's News Corp. Levin repeated his previously disclosed intentions to reduce Time Warner's investment in cable systems (see story, page 14).
"We are determined to ensure our competitive position while generating substantial free cash flow for reducing debt and eventually buying back stock," Levin said, adding that while content had been king, now "cash is king."
Also during the conference, broadcast execs debated how the major networks would deal with the introduction of digital television (see story, page 12) and touched on a wide range of topics from NFL rights to the new content ratings system.
On escalating sports rights, CBS Television and Cable Group prexy Peter Lund said, "You need some sense of balance" between expensive loss leaders like the NFL and profitable, smaller-scale sports so that bidding on marquee properties makes economic sense.
NBC president and CEO Robert Wright defended the three-month-old program ratings system, saying, "We can't possibly satisfy all the viewpoints out there," but none of the networks has received complaints from viewers like those they've received from politicos.
"We're not dealing with an audience that's terribly confused; this is a make-believe issue that there are people wandering the streets who are unable to watch our shows," Wright said.
A panel of international TV execs also focused on changes rippling across the European TV landscape, particularly the introduction of digital television. But the group, like their American counterparts, are divided over how the new digital channels will be used.
The international execs also stressed the importance of local programming. Canal Plus chairman Pierre Lescure said pan-European services need to be perceived as local to succeed.
Len Fertig, CEO of Central European Media Enterprises, said the Eastern European markets his company services "demands diversity and localism" and described how locally produced gameshows rate better than everything except a Hollywood blockbuster.
In the same vein, Tom Rogers, president of NBC Cable and Business Development, said pan-European advertising was not turning into a pot of gold, adding that pan-European channels are being forced to customize to serve local tastes and attract local advertising.
After welcoming remarks by Variety VP and publisher Gerry Byrne and Schroder Wertheim head of investment banking Mack Rossoff, Tuesday's conference was launched by a presentation on Internet programming from Pete Higgins, Group VP for Microsoft Corp.'s Interactive Media Group. Higgins painted a bright picture of the future of entertainment business on the Internet, though he said much of the industry's potential is yet unrealized.
While Higgins stressed the rapid growth of the industry, with 12 million to 14 million U.S. households now holding Web accounts, he conceded that the medium is not yet a "major part of what people do." But he claimed the Web will move toward becoming a mainstream device once imminent technological improvements make the process of connecting to and using the Internet faster and more consumer-friendly.
He also predicted that entertainment would soon play a greater role on the Internet. "The classic forms of entertainment have in many ways been underachieved on the Web, but I think that's changing," Higgins said.
Of course, few companies make any money on the Internet as Higgins conceded. "I'm going to gloss right over the top of how we're going to make money on this."
(Gary Levin, Monica Roman and Carol Diuguid contribued to this report)
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