Hollywood's record year: two studios surpass $1 billion in U.S. box office.

For the first time ever, two Hollywood studios have broken the coveted $1 billion mark in domestic box-office receipts, fueling Hollywood's biggest financial payday for a single year - nearly $7 billion.

The billion-dollar studios are Walt Disney Co. and Paramount Pictures, finishing in first and second place, respectively, for the year. Through Dec. 27. Disney pulled in $1.06 billion, for a 16.2 percent U.S. market share, marking the fourth time in the past five years that the Burbank-based company has led the pack.

Paramount's $1.03 billion in domestic box office, through Dec. 27, gives it a 15.8 percent market share.

How Studios Fared in '98

Disney and Paramount dominated Hollywood last year, while MGM and
Universal were the industry laggards.

                              Domestic             Market
Studio                      Box Office(*)          Share

Disney                          $1,055              16.2%
Paramount                        1,027              15.8
Warner Bros.                       717              11.0
20th Century Fox                   715              11.0
Sony Pictures                      710              11.0
New Line Cinema                    535               8.0
DreamWorks                         450               6.8
Miramax                            370               5.7
Universal Pictures                 349               5.4
MGM                                182               2.8

* In millions, for 1998 through Dec. 27

Source: AC NielsenEDI Inc.

So how did Hollywood achieve its record-setting year? Primarily by doing what it does best - producing big, sprawling movies.

The largest single contributor was "Titanic," the mammoth Fox-Paramount production that opened Dec. 18, 1997, but generated $440 million in 1998, more than two-thirds of its total U.S. revenues.

Several other big-budget films contributed significantly, as well.

"There was much better box-office depth," said Dan Marks, senior vice president of A.C. NielsenEDI Inc., which charts box-office returns. "We had some good commercial films."

Among them was Disney's "Armageddon" (the highest-grossing 1998 release, with $201.6 million in domestic box office through Dec. 27) and "Enemy of the State." Major contributors to Paramount's success were "The Truman Show," which pulled in $125.6 million, and "Deep Impact," which brought in $140.4 million for the studio.

Making the record year even more impressive, Marks said, was that Hollywood had 12 fewer "wide-release" films in 1998 than in 1997. A wide-release film is one that appears in more than 1,500 theaters.

"It shows how healthy the business is if there are less films but the box office is still higher," he said.

Ironically, fewer wide-release films may have actually helped boost the overall box office by avoiding a cluttered market in which one big-budget film opens against another.

Not all of Hollywood's big-budget movies were hits, however, as evidenced by Sony Pictures Entertainment's much-hyped "Godzilla," which never lived up to its domestic potential.

"There was a great balance of films in 1998," said Robert Bucksbaum, president of Reel Source Inc., a company that analyzes box-office returns. "There were many great comedies each quarter. You had 'The Wedding Singer' in the first quarter, 'There's Something About Mary' in the second quarter, 'Rush' and 'Waterboy' in the third and now 'Patch Adams.'"

Another factor contributing to Hollywood's record year has been the explosion in multiplexes that have largely displaced department stores as the anchor tenant of choice for mall developers.

While Hollywood as a whole clearly had reason to be pleased with its domestic results, No. 1-ranked Disney might be particularly pleased, considering its slow start. For the first four months of the year, Disney had only $90 million at the domestic box office. But the studio gained momentum, coming on strong with its fourth-quarter releases.

Best Per-Film Performances

Average U.S. box-office gross receipts per film, for 1998 releases.

                          Films released             Average
Studio                        in '98            per-film gross(*)

DreamWorks                       5                     $90.0
Paramount Pictures              14                      73.2
Warner Bros.                    13                      55.4
Disney                          21                      50.9
New Line                        12                      44.4

* Through Dec. 27.

Source: A.C. NielsenEDI Inc.

Hollywood's other billion-dollar studio, Paramount, was not expected to catch Disney, despite another week of box-office figures remaining to be tallied. Disney's holiday releases - "Enemy of the State" and "A Civil Action" - still draw significant audiences, while Paramount's "The Rugrats Movie" and "Star Trek: Insurrection" have slowed.

While the strong performances of Disney and Paramount - major studios with long track records - may not be surprising, smaller studios also fared well. DreamWorks SKG, for example, pulled in $450 million for 1998, more than four times its $100 million box-office take for 1997. The big jump was due to an increased slate of films and the success of director Steven Spielberg's "Saving Private Ryan," which earned $191 million, and "Antz," which took in $88 million.

Another corner was New Line Cinema, once the sickly stepbrother to Warner Bros. It generated $535 million, up from $375.million in 1997.

The year also saw several predictions dispelled, most notably the one that big-budget Hollywood films would be replaced by more intimate independent films. The box-office returns of such films are miniscule compared to Hollywood blockbusters - the real engines for box-office success.

Even so, low-budget films enjoyed commercial success in 1998; Fox Searchlight's $3.5 million "Waking Ned Devine" already has broken even after just a month in limited release.

The breadth of successful films in 1998 rivals that of 1997, but not on all fronts. "There were 16 films in 1997 that earned more than $100 million," Marks said. "We've had 12 so far in 1998, and we still have to play out what happens for the rest of the year."

Heading into the final week, four films had a chance to cross the $100 million mark: Sony's "The Mask of Zorro" ($93.7 million), DreamWorks' "Antz" ($88.0 million), Disney's "Enemy of the State" ($87.5 million) and Paramount's "The Rugrats Movie" ($82.0 million).

The record-setting domestic box office is seen as welcome news in that it came in a year fraught with overseas challenges. Hollywood suffered a considerable slowdown in financially troubled Asia. Those troubles are expected to persist through 1999 and are clearly a source of concern for Hollywood. Overseas markets generate as much as 50 percent of global box-office receipts.

Bucksbaum anticipated that 1999 would be another banner year. He pointed to several films that should be major hits. They include the "Star Wars" prequel for Fox, Paramount's "Mission Impossible 2" with Tom Cruise, and Warner Bros.' "The Green Mile" with Tom Hanks.