Movies: Child's Play, Too

In the '90s, Hollywood won't make movies for the whole family but will do more children's films.

1993 will be remembered as the year that dinosaurs ruled the cinema box office. Steven Spielberg's raptors have generated more than $700 million in global ticket sales, and Jurassic Park seems well on its way to becoming the first movie to gross $1 billion.

Meanwhile, dinosaurs of another type—aging leading men—did their part to give Hollywood what is expected to be its biggest year ever at the box office. Robert Redford proved with Indecent Proposal that he can still excite women, provided he wears a tuxedo throughout the film. Clint Eastwood and Harrison Ford went through their paces in action-adventure films and were rewarded with big hits. Even Sylvester Stallone had a comeback with Cliffhanger, though most people agree that the real reason this film did so well was director Renny Harlin.

But take a second look at those films. We have one tale of glamorous adultery. We also have several R-rated thrillers (we should also include The Firm in this category). And finally, we have Jurassic Park; sure, it was PG-rated, but even Spielberg admitted that it wasn't something that young or very impressionable children should see. Where are the family hits?

After all, 1993 was supposed to be the year of the family film. Hollywood gave us dozens of films carefully designed to appeal to everyone from six to 60. But of these, only two, Free Willy and Rookie of the Year, were even moderate hits. Theaters were littered with failed family movies: Sidekicks, Cop and a Half, Into the West…I could go on. Even Arnold Schwarzenegger's much-hyped attempt to be kinder and gentler, The Last Action Hero, flopped.

Contrary to the assertions of critics such as Michael Medved, there doesn't seem to be a huge market for family films waiting to be served by Hollywood. But then, Medved never really understood why Hollywood during the 1970s and '80s kept producing the sexy and violent films that earned his ire. So he may be at a loss to explain why in the '90s Hollywood won't make films for the whole family but will produce more children's films, even though the typical box-office take for these films may not be that impressive.

First of all, a little history. The expansion of television in post-World War II America had a disastrous impact on the cinema. Average weekly movie attendance fell from 90 million in 1948 to about 19 million in 1991.

But the decline wasn't across the board. The people who reduced their movie attendance or stopped going entirely were disproportionately more likely to be older people, children, or female. As a result, the single biggest bloc of moviegoers was made up of males aged 12 to 25. This segment was also the group most likely to give any particular film the sort of repeat business that creates a hit.

Movies began to cater to this crowd. Films became more violent and sexier. Exploitation films, once a small niche of the movie business, became the mainstream.

This tendency was reinforced by the increasing importance of foreign markets. As Asians and Europeans became wealthier, their demand for entertainment grew. Hollywood stepped in to fill this need, but it found that American comedy didn't always translate and that dramas about middle-class American families left foreign audiences baffled. But breasts and guns were universally understood and appreciated. Globally, Clint Eastwood, Arnold Schwarzenegger, and Sylvester Stallone became the biggest box-office draws. About half of Jurassic Park's $700-million gross has come from foreign markets, and it hasn't even opened yet in some key countries. Today foreign box office makes up almost half of the total theater revenue of the major studios. That's up from less than a third in 1970.

But just as market forces drove movies to become sexier and more violent in the 1970s and '80s, these forces now dictate that movies—some movies, anyway—will have a more wholesome appeal. With total annual U.S. theater attendance stuck at about the billion-admission mark for the last 20 years, Hollywood has been forced to develop ancillary markets for its products. In the 1970s and '80s, these ancillary markets were foreign nations. But with these markets maturing, Hollywood is looking for other ways to profit from its products. Chief among them are licensing and sell-through videotapes.

Star Wars proved that a movie popular with children can generate as much in licensing royalty revenues as it does in box office returns. But it was Batman that demonstrated just how lucrative licensing can be. In addition to licensing dozens of different products bearing the Bat logo, Warner Bros. developed deals with McDonald's and other corporations that allowed a powerful cross-promotion of the different products. The result was a major hit, not only at the box office but in every other venue. The movie grossed more than $400 million, but some industry analysts estimate that it made even more money for the studio in sales of licensed goods.

Batman the movie also furthered the rejuvenation of Batman the comic book, which is also owned by Time-Warner, and it spawned a live-action show in the company's Six Flags amusement parks. In addition, the success of the film inspired Warner Bros. to create a new Batman cartoon series, which has been quite successful.

Indeed, Batman demonstrates how market forces can temper artistic judgments. The film was basically a dark tale aimed at young adults. But because of licensing concerns, the darker elements were kept in check to prevent it from getting an R rating. If children couldn't see the film, they wouldn't want the Batgoods.

The amusement-park tie-in that contributed to Batman's profits was, of course, pioneered by Walt Disney Co. back in the 1950s. Today, Disney's theme parks provide more than half of the company's total revenue. And the other major studios have either expanded their own theme parks (such as MCA's Universal Studios tours) or bought theme parks of their own (such as Time-Warner's recent acquisition of the Six Flags chain). In each case the companies are planning to increase their output of animated features to generate rides for the parks.

They've also taken another line-extension lesson from Disney. In the late '80s, Disney developed the concept of sell-through home video. Previously, studios had thought that the only people interested in owning videos were rental stores and a handful of cinephiles. But Disney knew that its products were the sort that children would want to watch again and again, and if the videos were priced right, parents would buy them for children. So Disney dropped prices on its features from the $80 range to about $30 and watched its home-video division skyrocket to $1 billion in annual sales.

Those sales, in turn, pumped up even more profits for products licensing Disney animated characters and, just as important, became the driving force for new rides and attractions at the company's theme parks.

If a film has enough appeal to children, it can be an even bigger hit in the video market than at the theater. Last year, for example, the shaggy dog story Beethoven was a moderate success at the box office, earning about $40 million. But according to some estimates it had an even bigger gross in the video market, becoming one of the year's top-selling videos. What this all boils down to is that a children's movie (as opposed to a film with an appeal to the entire family) can be lucrative even when the box-office take isn't that great.

The growth of these new ancillary markets means we can expect continued pressure to tone down sex and violence in films with merchandise spinoff potential (such as Jurassic Park) to get a kid-friendly PG or PG-13 rating. That was the thinking behind Arnold Schwarzenegger's The Last Action Hero. Unfortunately, the large numbers of Schwarzenegger action figures left in toy company warehouses show what can happen when one of these movies isn't a hit.

And there's a new incentive to produce films with the sort of preverbal physical humor that very young children appreciate. Every studio is looking for the next Home Alone or even the next Beethoven. This was undoubtedly the driving force behind Dennis the Menace.

But there is still little incentive to produce movies geared toward the entire family. Sure, a studio might get lucky and turn out a Free Willy. On the other hand, given that about two out of three films fail at the box office, it's more likely to get a movie like The Secret Garden or Searching for Bobby Fischer, great films that are much appreciated by the relative handful of people who see them but that don't make money at the box office and don't have any real ancillary markets to earn additional dollars in.

These films may still get made, but not out of simple profit motives. Warner agreed to finance The Man Without a Face for Mel Gibson because he wanted to take a break from action films and direct a feature and Warner wanted to do a favor for one of its biggest stars. Similarly, Paramount made Searching for Bobby Fischer as a favor to producer Scott Rudin (who made The Firm and The Addams Family for them).

Does this mean that movies as a whole will be less violent or less sexy? No. There's still a huge market for adult films. Indeed, all of this year's biggest films featured themes or scenes of sex or violence that many would say render them unfit for younger viewers. But it does mean that the mix of films will change. In the future, not all films will cater to 16-year-olds. Some will cater to 6-year-olds.

Contributing Editor Charles Oliver writes for Investor's Business Daily.