Business Update with Mark Lacter

Disney's prequel to "The Wizard of Oz" is a bright spot at winter box office

KPCC's business analyst Mark Lacter says it's been a tough winter for the box office.

Susanne Whatley: Hollywood movie studios may have struggled in recent months, but Disney’s prequel to "The Wizard of Oz” did very well in its opening weekend.  Business analyst Mark Lacter, will we be seeing more from the Land of Oz?

Mark Lacter: It’s a good bet, Susanne – certainly that’s what the Disney folks are hoping for in coming out with “Oz the Great and Powerful.”  It drew more than $80 million in domestic ticket sales over the weekend, which looks pretty good in what’s otherwise been a dismal year.  But, the real question is whether this will lead to a studio franchise – just as Disney has done with “Pirates of the Caribbean” and “Toy Story.”  Movie franchises are a big part of Hollywood’s business model these days – they figure that audiences who liked the first film will want to see a second and third installment.  They also provide additional revenue streams, whether it’s theme park attractions or merchandising.  Even before the “Oz” movie was released, Disney executives were considering a sequel, although nothing has been finalized.

Whatley: But not every film is destined to be a franchise…

Lacter: That’s right – and not every film is even destined to make money.  You saw a good example of that the weekend before with the opening of “Jack and the Giant Slayer,” which was released by Warner Bros. and is a riff on the “Jack and the Beanstalk” fairy tale – except that it brought in just $28 million.  They’re starting to compare it with last year’s Disney bomb, “John Carter.”  Not great.

Whatley: They’re both based on classics and they’re both big-budget films.  Why does one make it and the other not make it?

Lacter: …The next thing you’re going to ask is why the stock market goes up or down.  If only we knew.  But, there are a few things the Oz movie has going for it, starting with the general view that’s it’s a somewhat better movie.  Also, Disney put together a very effective marketing campaign, there’s been a big presence on social media, and – maybe most important – moviegoers are crossing many demographic groups since everyone has seen the “Wizard of Oz” multiple times.  And, it’s not only Disney tapping into this popularity: Warner Bros., which actually owns the rights to the “Wizard of Oz” movie from 1939, is planning an Oz cable TV show and a re-release in 3D of the original.  That’s part of the studio business model: milking success right down to the last drop.

Whatley: Sounds like there’s good news on the Hollywood job front.

Lacter: That’s right.  When the Labor Department released its employment report last week, one area singled out was the movie and television business, which added 20,000 jobs in a single month.  That’s a lot of new jobs in an industry that isn’t especially large nationally.  Now, Hollywood is a highly cyclical business and employment levels tend to bounce around from month to month.  Still, as of last month, there were more payroll jobs in the movie and television industries than at virtually any point in history.

Whatley: I would imagine a lot of those jobs are in L.A…

Lacter: They are – about a third of all payroll jobs are here, and that doesn’t include freelance contracts, which make up a large portion of industry employment.  What these figures won’t show is the number of jobs that have been lost to other states – even other countries – that provide attractive tax incentive packages for filmmakers.  Certainly there have been losses over the years, which is one reason an incentive program has been established in the state of California.

Whatley: What areas are especially vulnerable?

Lacter: Well, the special effects business is having a real tough time – most recently, El Segundo-based Rhythm & Hues (which had a big hand in the film “Life of Pi”) was forced to file for bankruptcy protection, although a South Korean company has recently made a bid.  Obviously, none of this reflects the popularity of special effects – just the economics involved.  But, that doesn’t mean much to the hundreds of people who have lost their jobs.

Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.


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