Oscar Economics 101
Lions Gate opens the books on 'Crash,' allowing a rare look at the high price of academy campaigns.
LA Times February 12, 2006
Thanks to Lions Gate Entertainment Corp.***and federal laws requiring companies to disclose meaningful developments to investors, we can all get a "Crash" course in Oscar economics.
Last week, the parent of film distributor Lions Gate publicly disclosed to Wall Street that its profits will be crimped in 2006. One reason: the company is spending "an additional $2 million" to promote director Paul Haggis' "Crash" during the stretch run of the best picture race, which ends March 5 with the Academy Awards.
The operative word here is "additional." That's because it's double what the company had already spent to promote the movie for various awards. All told, Lions Gate is expected to spend $4 million to campaign for a film that only cost $6.5 million to make.
What's interesting about last week's Lions Gate disclosure is that it may be the only time anyone has had to publicly own up to how much cash is being thrown around to buy Oscar votes.
Hollywood studios are usually loathe to talk about what they spend on campaigns. It's all about art, or so the line goes, even though the rest of us know it's about money and ego.
Truth be told, "Crash" is still probably one of the cheapest campaigns out there.
Estimates on some Oscar efforts (think Harvey Weinstein) have been as high as $15 million to $20 million over the years. The big guns don't have to mention those expenditures because they are immaterial to the bottom line at giant media companies — a Sony or a Paramount couldn't even buy their execs a new Gulfstream V for that price.
Of course, no one ever admits to spending that much anyway. That's why every story reporting numbers in that range will inevitably include an anonymous denial from a source everybody knows works for the studio.
Lions Gate is a small independent company where $2 million actually means something — 3 cents a share on earnings. By comparison, at Warner Bros. parent Time Warner Inc., 3 cents a share is somewhere north of $130 million.
According to Lions Gate Theatrical Films President Tom Ortenberg, the company decided to pony up some money for a campaign last June after "Crash" was well received by critics when it opened in May.
By early January, Lions Gate had spent $2 million on trade ads and other promotions. To date, the studio's most audacious move was sending out 130,000 DVDs to members of the Screen Actors Guild.
It looked more expensive that it was. Ortenberg said it only cost $220,000 — 60 cents each for the discs, which were wrapped in cellophane, plus mailing costs. "Crash" received SAG's best movie ensemble award, and now has probably been seen by virtually every voting member of the Academy of Motion Picture Arts and Sciences.
Just before Oscar nominations closed, Lions Gate earmarked another $500,000. After "Crash" scored six Oscar nominations — best picture, best director, best original screenplay, best song, best editing and best supporting actor for Matt Dillon — yet another $1.5 million was budgeted.
On a conference call with analysts Friday, Chief Executive Jon Feltheimer called spending the extra $2 million a "prudent investment."
Here's why: Feltheimer estimates an Oscar win could provide a windfall of as much as $10 million, because Lions Gate would would sell more DVDs, and get more money when "Crash" is shown on TV. Then there's the intangible benefit of sending a message to filmmakers you want to do business with that you will go to bat for good films.
Still, one analyst asked "why do you think that's efficient spending?"
Maybe it's me, but it seems a little unfair to hold someone's feet to the fire over $2 million to promote an Oscar contender.
It's less than 25% of what Walt Disney Chief Executive Bob Iger took home last year. And I've yet to hear an analyst slip in a question during a Disney conference call about whether the company's executive paychecks are "efficient spending."
Lions Gate won't talk specifics about where that money is going, but it's known the strategy involves spending it largely in Los Angeles to "win" the city. Think of it as the Oscar equivalent of Ohio in the 2004 presidential election.
The studio then hopes New York votes that don't go to "Crash" will be split among "Brokeback Mountain," "Good Night, and Good Luck," "Capote" and "Munich."
Part of the logic for focusing on L.A. is that it has a higher proportion of actors, who like ensemble films because they underscore how valuable actors are to filmmakers. "Crash" also features such popular actors as Don Cheadle, who doubled as a producer, and director Haggis, who has earned a lot of goodwill here over the years working in television.
And, at a time when runaway film production is a sensitive issue, it probably doesn't hurt that "Crash" is about Los Angeles and was shot here, whereas leading rival "Brokeback Mountain" was shot in Canada.
It's entirely possible that "Crash" gets steamrolled by the other films, which were released by divisions of gigantic media companies that could easily outspend Lions Gate in any Oscar arms race.
Still, there's no "Crash" and burn here for Lions Gate. By gaining the financial and cachet rewards a nomination brings, the company has already won.
More like walkaway production… In recent years, Hollywood's Oscar nominees have mirrored the trend toward runaway production of films to cheaper shooting locales such as Canada. At the 2003 ceremony, only one film was shot in Hollywood — Hollywood, Fla.
This year, Los Angeles did better, although it tied with Canada for the number of best picture contenders. "Brokeback Mountain" and "Capote" were shot in the Great North, while Los Angeles was home to "Crash" and "Good Night, and Good Luck."
The fifth film, Steven Spielberg's "Munich," was shot almost entirely in Europe.
Turning a deaf ear to the Grammys Much is being made of last Wednesday's ratings slaughter of the Grammys, which honor music's top performers, by "American Idol," which showcases some pretty mediocre amateurs.
This year's Grammy telecast, highlighted by Sly Stone's bleached Mohawk, averaged 17 million viewers, the lowest since 1987, when Bruce Hornsby was the best new artist. If it's any comfort, the Grammys did edge "Lost" during the second of the show's three-plus hours, a sequence highlighted by Sly Stone's bleached Mohawk.
It's yet more proof that viewers know what Kudos Inc. doesn't seem to get — the traditional awards show format is a bore. Given a decent alternative, viewers will hit the remote.
***Note: Lions Gate is a Canadian distributor and producer founded by American director Robert Altman and named after Vancouver's Lions Gate Bridge. Altman will be receiving a special Oscar on March 5th. His last film was made in the UK, "Gosford Park".
