Movie production costs show rare dip, but advertising expenses increase

Tuesday, March 9, 1999 | 4:41 a.m.

Although modest, the 1.4 percent drop in production costs for major studio films in 1998 was welcome news to an industry struggling with out-of-control spending. Expenses have hurt studio bottom lines even as the business enjoys record box office grosses and attendance.

"It's a slight, slight, slight dip, but at least it's somewhat down," said Jack Valenti, president of the Motion Picture Association of America, which released the data at the annual ShoWest convention for movie theater operators. "I'll take that any day."

Average production costs have declined just three times since records were first kept in 1972: in 1988, 1991 and, now, 1998.

Some of the cost decrease was attributed to the fact that "Titanic," the most expensive movie ever produced at more than $200 million, was included in the 1997 report. But Valenti noted that 1998 included a number of big-budget films including "Armageddon" and "Godzilla."

These lower costs, however, were offset by a 13 percent jump in the expenses that go into making the movie prints shown in theaters and the marketing of films. Nearly all that increase was due to higher ad rates in television and newspapers, with print costs stable, Valenti said.

Combining all these expenses, it cost an average of $78 million to produce and market a film last year, up from $75.7 million in 1997.

The MPAA study was based on movies released last year by the seven members of the association, who include such major studios as Disney and Warner Bros. but not the increasingly successful smaller studios such as Miramax and New Line. It also doesn't include DreamWorks, which is not an MPAA member.

As for the industry overall, the MPAA study confirmed earlier reports that the American box office leaped 9.2 percent last year to $6.95 billion, which Valenti called "the biggest box office in the history of our business."

His characterization related only to the raw dollar total, which was not adjusted for inflation. The box office increase, however, far outpaced ticket price hikes; the average movie ticket rose from $4.59 in 1997 to $4.70 last year.

In all, the study clearly showed that going to the movies is gaining in popularity in the United States, despite a number of other entertainment alternatives from computer games to the Internet. Admissions rose 6.7 percent last year to 1.48 billion admissions, well ahead of population gains.

As seen in past studies, movie admissions are powered by a bloc of frequent moviegoers. The 28 percent of audience members who were frequent attendees - watching at least one movie a month - made up 83 percent of the overall American box office last year, according an MPAA survey.

Considering the glut of teen movies, it came as no surprise the study found the biggest segment of movie-goers were young people, with those ages 12 to 24 making up 37.4 percent of admissions.

But that was followed closely by audience members over 40, who made up 35.3 percent of admissions.

Indeed, the fastest-growing audience segment was the over-40 crowd, the survey found.

A separate study, released Tuesday by ACNielsen EDI, also found a youthful slant to the audience and the power of repeat movie-goers.

This study also revealed that despite a theater building boom, rural Americans still have twice as much difficulty finding a film they want to see near their homes compared with urban residents.