Blockbuster hits give Disney market-share Oscar; but a string of bombs plays havoc with Warner Bros.

Blockbuster hits give Disney market-share Oscar

But a string of bombs plays havoc with Warner Bros.

Hollywood's year-end performance figures were released last week and The Walt Disney Studios captured top honors while Warner Bros. fared the worst.

Among the eight big studios in Los Angeles County, Disney captured Hollywood's market-share crown for the first time in its 65-year history largely on the strength of three blockbuster films -- "Who Framed Roger Rabbit," "Three Men And A Baby" and "Good Morning Vietnam." These three films alone brought Burbank-based Disney $381 million in box-office receipts during 1988.

"Disney has proven itself to be a tremendously aggressive and successful company in every area of the industry, with the possible exception of television," said Alex Ben Block, editor in chief of Show Biz News, a bi-monthly business newsletter on the entertainment industry. "But even in television they are starting to beef up," he said.

Meanwhile Warner Bros., also based in Burbank, flopped terribly in 1988.

Despite releasing more than twice the number of films as Disney during the year, it still managed to capture 8.2 percent less market share.

Warner's box-office bombs last year included "Caddy Shack II," "Hot To Trot" and "Arthur 2 On The Rocks."

Hollywood observers have speculated for months that Mark Canton, Warner Bros. president of film production, may be on his way out if the current string of losers is not halted.

"It was just an embarrassingly bad year for them," Block said. "But it is the kind of company that has the assets, the distribution system and the people to make a comeback."

Warner's fourth-place finish in 1988 is a further deterioration of last year's performance, when it placed third after having ranked either first or second from 1983 to 1986.

"Warner spent a lot of time in 1988 trying to figure out how to make the Lorimar deal work," said Jeffrey Logsdon, entertainment analyst at the Los Angeles investment banking firm Crowell, Weedon & Co. "That had to have taken away from their ability to focus on putting out quality pictures."

Warner Communications Inc., the New York-based parent of Warner Bros., spent much of last year attempting to acquire Culver City-based movie and television producer Lorimar-Telepictures Corp. The $1.2 billion takeover deal was finally consummated last week.

Most industry observers are confident that Warner will bounce back at the box office in 1989. However, it will likely be just as prolific. In addition to its own ambitious slate of films scheduled for release this year, Warner expects to release at least nine films from its newly acquired Lorimar studio in 1989.

Warner did much better in the domestic videocassette market last year, where it had the highest gross sales among the top eight studios. The $360 million figure, however, was only a 13 percent improvement over its 1987 performance. Much more dramatic gains in the videocassette market were made last year by Universal Pictures and, once again, Disney.

These two studios posted percentage gains for video sales of 173 percent and 67 percent, respectively.

Universal's success was due almost exclusively to the popularity of its Oct. 27 video release of "E.T.: The Extra-Terrestrial." By pricing "E.T." at $24.95 rather than at the usual $89.95 charged for most A-title videos, Universal was able to sell a record-smashing 15 million-plus units of the Steven Spielberg classic. Prior to last year, the most-purchased video had been Disney's "Lady And The Tramp," with 3.2 million units sold.

Disney also smashed its own "Lady And The Tramp" record in 1988 by selling 7.2 million units of "Cinderella," which was released Oct. 4.

While Disney's 1988 performance was undoubtedly impressive, many analysts expressed doubts that it could maintain the market share gains of 1988.

"The highest probability of any occurance in 1989 is that Disney's market share will go down," said Andrew Wallach, entertainment analyst at the investment banking firm Drexel Burnham Lambert Inc. "They'll be the victim of their own success. But their share of the market will still be respectable."

Disney's ability to maintain its newly won market share will likely be aided in 1989, however, by the company's new studio, Hollywood Pictures. The studio is scheduled to begin operations Feb. 1 and is expected to double Disney's current film output.

If Disney does lose market share in 1989, as Wallach predicted, it might want to consult Paramount Pictures Corp. That studio is now experiencing the same fate that Wallach is predicting for Disney in 1989.

Paramount captured a 19.7 percent market share in 1987 with such box-office hits as "Fatal Attraction" and "Beverly Hills Cop II," but was unable to maintain that lofty perch in 1988. It dropped back to second place, with a 15.2 percent share of the market.

"Most studios would consider (a 15.2 percent market share) as a huge success," said Show Biz News editor Block. "They had a solid year, but not a flashy year like 1987."

Paramount's "solid year" was the result of a string of modestly successful films like "Coming To America," "Crocodile Dundee II" and "Naked Gun."

While Paramount's head of film production, Ned Tanen, resigned from his official post in late 1988, he plans to continue working at Paramount as a private consultant. One Hollywood securities analyst said the change is largely cosmetic and will not likely have significant impact on Paramount in 1989.

Columbia Pictures and Tri-Star Pictures, Burbank-based subsidiaries of Columbia Pictures Entertainment Inc., both continued to lose market share in 1988. Tri-Star lost another 0.4 percent of its market share in 1988, after dropping 0.9 percent in 1987. Columbia lost 1.0 percent in 1988, after having lost a whopping 5.0 percent in 1987.

A Columbia spokesman, who wished to remain unnamed, attributed the back-to-back slumps to David Puttnam and last year's five-month-long writers' strike.

British producer David Puttnam, who headed Columbia until he was replaced last fall by Dawn Steel, insisted on making lower-budget "art films" geared toward international audiences.

These films, which have more limited commercial appeal, are still being released, the spokesman said. By scorning traditional Hollywood fare (flashy, big-budget films) and by alienating big-name stars, Puttnam reportedly undermined Columbia's broad commercial appeal. Steel is still in the process of returning that commercial appeal to the studio, he said.

"Steel is a consummate Hollywood insider, a relationship-builder and a believer in mainstream Hollywood talent," he said. "Puttnam, on the other hand, is a self-avowed reformer and, in some senses, an outsider."

Columbia's first production under Steel's leadership, "Karate Kid III," is due for release in June. That film will be followed by another sequel with vast commercial potential, "Ghostbusters II." The original "Ghostbusters," Columbia's biggest money-maker of all time, had box-office receipts of more than $220 million.

Despite its tumultuous year, MGM/UA Communications Co., snared the biggest market share gain of all the studios last year. Its 10.3 percent market share in 1988 was 6.1 percent gain from the previous year.

Some of this can be accounted for by MGM/UA's release of 21 films in 1988 compared to only 14 films in 1987.

Amid massive layoffs, top-level resignations and the virtual shutting down of its United Artists Pictures unit, MGM/UA still managed to score some big successes in 1988. Most noteworthy were "Willow," "A Fish Called Wanda" and additional revenues from its 1987 hit "Moonstruck."

However, most industry observers said MGM/UA's 1988 success will be short-lived because it is due to films produced by executives who have since resigned.

"MGM/UA appears to be a company that has been allowed to dissipate," said Block. "It does not have that many managers left -- just salesmen who are trying to sell the company."

Kirk Kerkorian, MGM/UA's controlling shareholder, hired a trio of investment bankers from Merrill Lynch Capital Markets last fall. The threesome was put in charge of MGM/UA after several failed attempts by Kerkorian to sell the studio. Continuing rumors surrounding the studio's pending sale triggered a mass exodus of top-level executives.

"MGM/UA could be an instant turnaround story in 1989 if the right party buys it," Block said. "But until that happens, I have nothing but pessimism for the company."