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Big Budget Bombs Mean Hollywood Movies Need a New Business Model, Says Variety’s Peter Bart

The bigger is better mantra that's been driving Hollywood studios in recent years is no longer working. Many of the summer blockbusters costing $100 million or more have failed at the box office including “The Lone Ranger” and “White House Down.”

And this past weekend "Lee Daniel’s The Butler,” about a White House butler who served eight U.S. Presidents, led at the box office on its opening weekend, taking in about $25 million, or roughly what it cost to produce.

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“The studio business has to change its basic business model,” says Peter Bart, editor-at large for Variety, and a former Hollywood producer. “The more traditional dramas and comedies that cost between $20 million and $40 million are still an important part of the business. Equally important, there has to be a little more discipline on the big tentpole pictures.”

Bart tells The Daily Ticker that the those big tentpole pictures—so-called because sequels and superhero movies are expected to hold up the studio financially—not only cost $100 million plus to make but another $100 million or more to promote, which means they must earn more than $200 million just to yield a profit.

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“Today a picture like World War Z will have an international marketing and print budget of about $150 million… [and] costs about $220 to make... and Viacom (VIAB) is happy that it grossed about $500 million worldwide. [But] after all those costs only about $200 million comes back to the studio.”

Given those economics why does Hollywood continue to make so many blockbusters?

Because it’s no longer focused on the U.S. market but rather on foreign markets.

“The main market for Hollywood today is the overseas audience,” says Bart. “ Hollywood is more focused on the reactions in Brazil and China and Russia than they are frankly about what the reaction is in Hollywood.” Given that those audiences don’t speak much English, the emphasis, says Bart is “on making bigger and spectacular effects pictures.”

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And sometimes that works, with big-budget blockbusters making big bucks in the U.S. and overseas. According to Box Office Mojo “Iron Man 3" grossed $408 million in the U.S. and $805 million overseas, and "Fast & Furious 6" (talk about sequels) grossed $238 million in the U.S and another $547 million overseas.

Many of these blockbusters are aimed at young audiences which “have a lot of other things to do than go to the movies,” says Bart, while the “most faithful” moviegoers are those 45 and older. That audience may be more “satisfied by what they see on cable television than what they see in the theaters,” says Bart.

And then there’s “Breaking Bad,” AMC’s critical hit that’s ending this season. The show has such a loyal following that the Lincoln Center Film Society recently hosted marathon viewings of its first five seasons in the theater before the final season began a week ago.

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