Is Hollywood Making Too Many Movies?

In a city that seems to brim with bravado and thrive on Schwarzenegger-sized deals, this week in Hollywood has been flush with uncharacteristic introspection and uncertainty.

The soul-searching is prompted in part by the announcement that Walt Disney Company will cut film production in half next year.

Disney's pullback raises a question that causes consternation from the back lots at Paramount to the Main Street cineplex: Is Hollywood making too many movies?

The decision also comes at a time when some say the entertainment industry is at a major crossroads. Domestic profits are shrinking, salaries are swelling, and the market is splintering.

"I have never seen this industry so on edge, so uptight on so many fronts," says John Krier, director of Exhibitor Relations, a leading industry-tracking firm. "The stakes have gotten so high that the future of a company or an individual can be made or broken in a weekend."

If a film doesn't pull in an audience in the first week or two, movie houses are quick to pull it and there is no lack of replacements. Nearly 10 films a week will be released on average this year, according to the Motion Picture Association of America. But only 1 in 10 will make a significant profit. In some cases, the competition has become so fierce that more and more expensive films are dying after just two or three days for lack of audience. While ticket sales are up 1 to 2 percent, profit margins for domestic moviemakers are falling 14 to 15 percent a year.

Reacting partially to a series of box-office flops - "Celtic Pride," "Eddie," "Two Much," and "Last Dance," - Disney says it will reduce output from between 35 and 40 films a year to about 20. "The audience is appropriately telling us there are too many films," says Disney chairman Joe Roth.

Disney reported a 35 percent loss in movie profits in '95, according to the Hollywood Reporter.

The cost of making and marketing a movie is now, on average, a whopping $52 million. Analysts say Disney's move is intended to cut losses on smaller pictures and concentrate on big-star vehicles like "The Rock," which is projected to make $250 million worldwide.

While some argue Disney's backpedaling should cause no concern, others say the fallout could be significant."The Disney decision signals a significant new redirection for one of the giants of Hollywood entertainment," says Douglas Gomery, who teaches the economics of cinema at the University of Maryland in College Park. "For moviegoers, the decision may mean better movies but more of the same. For production people, cinematographers, screenwriters, the news is very bad indeed."

Noting that Disney purchased ABC Television last year and is in a new phase of production for new network shows, Mr. Gomery says: "The question will be how many other studios will now follow [Disney's] lead?"

All studios are having to reconsider where to invest for the future. Movies are now only one vehicle in a growing fleet of entertainment products.

"Audience attention is now more fragmented than ever with a plethora of entertainment choices that never existed before," says Brian Stonehill, a professor of media literacy at Pomona College in Claremont, Calif. He notes the advent of new home-delivery systems from satellite and cable to the Internet and CD-ROM. Executives are trying to divine the future of movies, TV, and computers all at once.

"The truth is, for all the investment in market research, nobody really knows whether people are going to surf the Web or get pay-per-view movies," adds Mr. Stonehill. "The result is an industry in a state of digital paranoia."

Adding to the current unease is the new best-selling book "Hit and Run: How Jon Peters and Peter Guber Took Sony for a Ride in Hollywood," which chronicles the saga of two inexperienced American producers who were hired to run one of Hollywood's biggest studios, Columbia, after its purchase by Sony. By throwing too much money at stars and directors without proper oversight, the duo helped inflate the costs of key Hollywood talent for other studios, the book says. They also caused one of the biggest losses, more than $4 billion in five years, in Japanese and Hollywood history.

"Every boneheaded, ill-conceived, poorly executed film project for half a decade is being laid bare for all to see," says one director. Noting that one theme of the book is how sheer greed dictated profits over art, creativity, story line, and message, he says: "By exposing the whos and the whys, this book could be a watershed for how things are and are not done here in the future."

Despite a strong opening weekend, many analysts say that if Jim Carrey's "Cable Guy" flops it might also be a watershed. Competing studios have been incensed that the $20 million price tag for Carrey has caused a ripple effect as other top stars have begun demanding stratospheric salaries as well. Los Angeles Times' showbiz columnist Claudia Eller wrote that a flop might help reverse the trend.