Small Wonders

By RICHARD BEHAR

The hottest thing traipsing through Hollywood last week was not another $1 million, half-written movie script, or Julia Roberts, or even Warner Bros.' squad of shiny dark Jaguars. Instead it was a supposedly top-secret 28-page memo from Jeffrey Katzenberg, chief of Walt Disney Studios, to a small group of his colleagues. In the memo, which leaked out and instantly set fax machines buzzing all over town, Katzenberg called on the studio to avoid high- priced stars whenever possible, shun the "blockbuster mentality that has gripped our industry" and return to Disney's roots as a budget-minded filmmaker.

Disney isn't alone. Rival moguls at Warner and Paramount Pictures have begun preaching their own cost-containment messages. The reasons are as simple as a friendly ghost, an ingenuous hooker and an eight-year-old hero. The three top- grossing films of 1990 -- Ghost, Pretty Woman and Home Alone -- cost a relative pittance to produce and were driven by syrupy, uplifting stories rather than star power. These films succeeded beyond all hopes in a year when studios shelled out $30 million to $60 million to make films with big-name stars and fancy productions. Many of these budget busters (among them: Another 48 Hrs., The Bonfire of the Vanities, Days of Thunder and Rocky V ) fell short of expectations or flopped outright.

Sales of movie tickets in the U.S. fell 7% last year, to an estimated 1 billion. Rising ticket prices helped keep revenues at $5 billion, the same as the previous year's, but some experts calculate that the profitability of Hollywood's studios plunged by $150 million. Moreover, runaway costs have begun to turn even some box-office hits into money losers. "I've been watching the industry destroy its profitability for more than a year," says Harold Vogel, who follows the industry for Merrill Lynch. "The cost cutting, if it really happens, is a welcome move in the direction of sanity."

Many studios are rethinking their approach to stars and scripts. For one, audiences are growing older and may be interested, at least for now, in affecting, down-to-earth movies with characters who have more than one dimension. Big names are no longer a guarantee of a film's success, a development that prompts studio executives to gripe privately that certain stars are overdue for a deep discount, most notably Robert Redford, Paul Newman, Sean Connery, Bill Murray, Warren Beatty, Richard Dreyfuss and Nick Nolte. Each commands $3 million to $7 million a movie, but they are simply not attracting enough theatergoers to justify those salaries.

Some studios, like Warner, will now avoid "overpackaged" films that are chock-full of stars. Case in point: Warner's The Bonfire of the Vanities, the $35 million fiasco starring Tom Hanks, Bruce Willis and Melanie Griffith. Other studios, notably Universal Pictures, are stressing "back-end" deals, in which such stars as Arnold Schwarzenegger (Kindergarten Cop) and Tom Cruise (Born on the Fourth of July) receive a cut of ticket sales as opposed to a hefty up-front salary. "If we don't control costs, we won't have much of an industry left," warns Thomas Pollock, head of Universal, whose $40 million- plus Havana died on impact last year despite Redford's starring role. At 20th Century Fox, executives are trying to keep 1991 film budgets below the industry average of $27 million. "We haven't started telling people to walk to the airport," says Fox president Strauss Zelnick, "but we're trying to produce high-quality entertainment at responsible costs."

Disney was No. 1 in market share last year, but the studio's profits hit a three-year low. Katzenberg's prescription: smaller budgets and fewer films like Dick Tracy, last summer's comic-book extravaganza starring Beatty and Madonna that cost an estimated $100 million to make and market. While the movie has grossed nearly $200 million in theaters worldwide, Katzenberg complains that it has "static" characters who fail to evolve, and he suspects that it was not worth the expense or the 10 years of development effort. "Thanks to the dictates of the blockbuster mentality," he writes, "the shelf life of many movies has come to be somewhat shorter than ((that of)) a supermarket tomato."

Paramount ranked second to Disney in box-office share but was the first to take the budget-pruning pledge after suffering several embarrassing stiffs. Godfather III, which cost at least $55 million, started strong but sagged after several weeks. All told, Paramount has had to lower the estimated asset values of five of the 15 films it released in 1990. Since the summer, Paramount has trimmed its staff, shaken up the studio's production staff and halved the number of films in development (to 125). For this year, Paramount still plans big-budget films with stars, but the company intends to make more movies (20) without increasing its production budget from last year's $420 million.

Warner Bros.' earnings hit an estimated record $370 million in 1990. But the studio's box-office rank slipped from No. 1 in 1989 to No. 3 last year, when Warner had only three modest hits out of 22 released films: Goodfellas, Presumed Innocent and Hard to Kill. This year The Last Boy Scout will be the only Warner film to have a budget of more than $30 million. "We're not giving * up working with stars, as long as we can match the right star with the right material," says Warner chairman Robert Daly. "We want to resist the trap of overpackaging movies."

Some studios aren't bothering to jump on the new cost-cutting bandwagon. Columbia Pictures is now shooting Hook, a $50 million-plus Stephen Spielberg extravaganza starring Dustin Hoffman, Robin Williams and Julia Roberts. The film's top talent will get a lavish 40% of the gross revenues. To earn a nickel for the studio, Hook will have to become one of the year's highest- grossing films. But the new management team at Columbia, led by Batman producers Jon Peters and Peter Guber, is clearly confident. The company bought two French-made Falcon jets last year, even before the duo made their first movie.