Talking small, spending big

Here's an early warning to those pundits who even now are pondering their weighty year-end analyses of Hollywood's malaise. Be wary: There's a substantial gap between what the studios are saying and what they are doing.

The mantra of the moment is that things look bad for the studios, that costs are out of control and serious recessionary cutbacks are at hand. The problem with all this is that while the talk is bearish, studios' actions are bullish. Indeed, according to my anecdotal survey, there will be more movies made next year, not less, and Hollywood will be lavishing more money on star salaries and marketing rather than instituting the cutbacks that everyone likes to talk about.

All of which may lead you to ask, Where does illusion end and reality begin? That, folks, is what Hollywood is all about. We are seeing the illusion of austerity crashing up against the reality of free-spending optimism.

A quick look around town illustrates my point: Sony has had its troubles in Hollywood, but last week Nobuyuki Idei held a rare press conference to introduce his new management team and unveil ambitious new plans. His message: We're gearing up, not retreating.

MGM/UA, too, has a new team, a new owner and its own blueprint for growth. Despite industry skepticism, Polygram next year plans to establish its own distribution system, and expand its output deals with Interscope and other suppliers. New Line has had its setbacks this year, but Time Warner Turner will shortly sell its majority ownership, and the existing aggressive management plans to enhance and expand its motion picture output from 12 to 18. Ambitious plans also are under way at DreamWorks and Orion.

Why, then, all the talk of cutbacks? Sure, Disney's Joe Roth declared he's reducing the number of releases, but what he's really doing is making fewer but bigger pictures and spending $40 million and more to market them. Established regimes at Fox, Paramount, Warners and Universal are plunging ahead with ambitious programs as well.

To be sure, the emphasis on "event" pictures and the skepticism about mid-range projects is causing nervousness throughout the industry, as well it should. Similarly, while the studios have held the $20 million barrier on star salaries through 1996, the mania for star vehicles will surely lift the bar by the middle of 1997. Hollywood is well-aware that, as costs keep rising, its moviemakers become akin to circus acrobats, performing without a net.

The publicity generated by high-profile failures, however, seems to be obscuring certain underlying realities. The 1996 mishaps at New Line are a case in point. Its three megahits of 1995-96, "The Mask," "Seven" and "Dumb and Dumber," generated a quarter of a billion dollars in profitability. Expanding steadily into more expensive fare, its 1996 offerings, such as "The Island of Dr.Moreau" and "The Long Kiss Goodnight" provided an instant reality check.

Far from retreating, however, New Line intends to produce and distribute a bigger, better-balanced program of movies in 1997, including a few traditional niche pictures. Three years into its Ted Turner era of ownership, New Line started actively campaigning for a post-merger sale, arguing that it doesn't make economic sense for New Line and Warners to operate under the same corporate umbrella.

Does all this mean that Hollywood's continued optimism will automatically bring increased profitability? Not necessarily. I was a kid starting out in Hollywood back in 1970-71 when the town experienced its last serious recession. I witnessed the unthinkable: Star salaries actually came down. Budgets actually were tightened. Some companies actually stopped making movies.

Could it happen again? There's one huge difference between 1970 and 1996. The production entities at that time, by and large, were single-product companies they made movies and, in one or two cases, were also starting to turn out TV shows. Now, of course, the studios are owned by multinational corporations with assets into the billions. When a studio told a star in 1971, "I can't afford to pay you a million dollars," the star believed it. When Rupert Murdoch's or Michael Eisner's executives make a similar declaration, the response is obviously rather skeptical.

The economic realities of the multinationals have changed the face of Hollywood in the seven years since Sony, Matsushita and Murdoch made their dramatic invasions. They also have introduced one gravity-defying law: What goes up will not necessarily come down. And that's definitely the sort of precept Hollywood feels at home with.

When Hollywood was in its youth, its studios were called Dream Factories. The big dream lives on.