Changes are going on inside the motion picture industry which are tending to take it out of the class of hazardous speculation and transforming it into a more secure investment field. The biggest stabilizer in the industry is the fact that 95%, or some $2,137,500 invested in the business is controlled by a dozen established companies.
Producers are not abruptly saving money, but they are not throwing it around in the dark as was done in the past. They spend lavishly, but for larger returns. Some firms gauge public taste for a 100% success as precisely as a successful magazine editor knows a sure ringer short story.
Hit-and-miss producers are falling by the wayside. The successful producers have the probabilities and even the purely artistic side of their business diagrammed and weighed as elaborately as an insurance company.
The financial comptrollers of several of the largest firms let Dow, Jones & Co. in behind the scenes showing how they make their budget. The most doubtful factor in the business would seem to be the future success of a film. The returns from new pictures do not come in for three years.
Two companies interviewed were Famous Players-Lasky, whose 1923 report shows inventory $15,383,482 in negatives, rights to plays, and total assets of $47,943,454; and the First National with 26 franchise holders with motion picture theatres worth $150,000,000.
Lasky Charts Everything
Famous Players-Lasky stands out conspicuously in the field for scientific management. Their financial comptroller was formerly cashier of the National Bank of Commerce. He has several young New York University statisticians associated with him. Dozens of charts and statistical curves were shown analyzing past business and determining cycles in that to come. In tabular form they show costs, and past and future returns of all their films. Out of the last 164 films, but nine failed to pay expenses, some by but a small margin. Four of these were films with Fatty Arbuckle. Another was a film with an English cast produced abroad to show the English that no attempt was being made to crowd out their home talent. The American public found the star too cold and rejected the picture. Two of the remaining were below the dead line by only a small margin.
Studying Mountains
An interesting chart was what seemed to be a parallel range of mountains showing in different colors returns from each picture over the range of its life. The chart demonstrated that, irrespective of the picture, the span of its life and the high and low points of returns on it follow much the same cycle. The film barometer shows that film rentals ordinarily bring in returns over 3 1/2 years. In three months 50% of the cash returns come in. The residual value of the film from long experience is marked down 88% in a year and 100% in two years.
Before a picture leaves the studio the producer usually can tell whether it will be a success or a partial one. In the first few weeks of its run in New York total earnings can be gauged with surprising accuracy. It is only the rare degree of failure or success, like the Covered Wagon, which cannot be foreseen. This picture has already paid costs of production, brought in gross receipts of some $9,000,000 and is expected to make $3,000,000 clear profits. A picture should bring in three times its costs of production. Distribution takes an added 20-25% of cost.
Every phase of motion-picture production has been charted. There are charts showing returns from each film in terms of the starts in it, those showing earnings of pictures by producers, by total costs, by amount of publicity, by sections of the country and in foreign returns.
Comptrollers of Famous Players, of First National and several others declare that they now make rigid budgets, and more important still keep to them. When a scenario is completed, items of costs are not left to the fertile fantasy of the producer and to chance as in the past, but are fought over item by item with the business department. When a producer threatens to overdraw, a business conference is held to determine on cutting certain scenes or, if some improvement has been made, of providing for a new appropriation. Famous Players boast that in their 60 pictures under way this year they are still well on the sunny side of their budget- an achievement unique in movie history.
Stars Market Value
The outsider looking into motion picture production costs is startled by the enormous sums spent on stars and on staging. Stars will continue to get salaries running as high as $10,000 a week and more producers say because the public demand them and are willing to pay for them. The presence of this or that star is at once reflected at the box office. With two stars in one film their box office returns were double what they would have been for either one of them alone. It is the public and not the producer, therefore, which in last analysis pays the star.
The last few years the public has demanded grandiose palatial sets,
vast caravans, armies, and mobs of thousands. Producers admit that this
has been overdone and turn with relief from the super-film to the more
intimate one. It is not overlooked, however, that the world wide success
is still linked with colossal presentation such as the Covered Wagon,
the Ten Commandments and the Thief of Bagdad.
"Movie Producers Gauge Public," The Wall Street Journal, April 5, 1924, page 3.
© 1997, David Pierce, on editing and revisions (if any)
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