IBS

Sony Pictures

FOR connoisseurs of derivative film-making, the next few months will be a joy. Between early May and mid-August Hollywood will unveil sequels to “Spider-Man”, “Shrek”, “Harry Potter”, “Rush Hour”, “The Bourne Identity”, “Pirates of the Caribbean”, “Fantastic Four”, “Ocean's Eleven”, “Die Hard” and “Bruce Almighty”. Admittedly, not all of this summer's big-budget films are based on other films. “The Simpsons” and “Transformers” are based on television programmes.

It is safe to predict that none of these films will be artistically adventurous. Reviewers will dislike them, as they have disliked crowd-pleasing films since 1914, when a critic bemoaned “the terrible sense of rush and hurry and flying about” in contemporary cinema. But none of this concerns the people who produce such films. They know that blockbusters draw punters to cinemas and DVD racks more reliably than any other kind of film.

Since 1975, when “Jaws” chewed up the competition, Hollywood has increasingly relied on summer and Christmas blockbusters to tide it through leaner months. The summer season, which used to begin in June, has crept forward to early May. Production and marketing budgets have mushroomed. “Spider-Man 3” is said to have cost more than $300m, or half as much again as “Titanic”, the price of which terrified Fox executives in 1997. If few are so alarmed these days, it is because the economics of blockbusters have changed.

To see how, compare the performance of two films, both released in late May. “Indiana Jones and the Last Crusade”, which appeared in 1989, and “X-Men: the Last Stand”, released last year, appealed to the same broad audience of children, teenagers and indulgent parents. Each was the third instalment of a three-part series. They were both successful, earning almost exactly the same in real terms during their first two months in American cinemas.

But their lives at the box office were dramatically different (see chart). “Last Crusade” had a healthy opening weekend and a slow decline. “X-Men”, by contrast, came and went in a flash. It earned $123m in just four days, more than in the remaining four months of its run.

Both films are typical of their time. The first modern blockbusters, such as “Jaws” and “Star Wars”, were released on a few screens and grew slowly (ticket sales for “Star Wars” peaked in the 11th week). Over the years the hillock of box-office revenues became a downward slope, then a cliff face. Given this year's crowded schedule, the drop-offs will be vertiginous.

One reason is growing capacity. The number of cinema screens in America rose from 29,700 in 1996 to 39,700 last year. Because the supply of seats is greater than the potential weekend audience for almost any film, marketing campaigns aim to lure customers en masse before the next big film appears. These days blockbusters form an orderly queue, rarely competing on the same weekend.

Another reason is the growing importance of the small screen. American cinema-goers account for no more than a quarter of a film's total revenues. Foreign audiences supply another quarter, with the remaining half coming from television, product licensing and—the biggest single contributor by far—sales of DVDs. Last year a silver disc appeared, on average, just four months and eight days after the same film opened in cinemas, according to the National Association of Theatre Owners—five weeks sooner than in 2002.

Oddly, this has made the opening weekend's box-office sales more important. As Jim Gianopulos, the co-chairman of Fox, puts it, the theatrical release of a film now represents the launch of a product that will be consumed in a variety of forms. The first few days' tally is not just a reliable predictor of later DVD and television sales; it is, in effect, an advertisement for them. Lest anybody fail to notice, studios place advertisements in newspapers and trade magazines pointing out how well their films are doing.

The clearest sign that big-budget sequels are dependable is that the studios risk their own money on them. Hedge funds are encouraged to invest in most films, but not big franchises such as “Harry Potter” or “Pirates of the Caribbean”. And blockbusters have other advantages. Cinemas are so desperate for them that they can often be persuaded to show less promising fare as well. Trailers that run before big movies reach huge audiences. A hit also gives studios licence to swagger.

A few clouds have begun to drift over the summer skies, however. One problem is that DVD sales, which boosted profits for a decade, are slowing. Between 1997 and 2002 sales of DVDs in America grew by 50% or more each year, according to the Digital Entertainment Group. But they were flat in America last year and revenues fell in Britain and Germany. New formats such as Blu-ray, HD-DVD and online downloads have not enticed many buyers.

Another headache is that the studios' partners are driving harder bargains. Having worked out that DVDs are profitable, stars are demanding—although not always getting—a larger share of “back-end” sales. Cinemas, which used to be paid using complex formulae that entitled them to a greater share of box-office receipts the longer a film stayed open (an arrangement that suited the studios just fine, given the short lives of many films), are now more likely to receive a fixed share of the total sum. Consolidation in recent years has made them tougher.

The biggest problem, though, is the growing sums being wagered each weekend. Blockbusters have always been global products, but the threat of piracy and the rapid spread of opinion on the internet, which can quickly inform cinema-goers around the world if a film is a turkey, means they are now likely to be released almost simultaneously everywhere. “Spider-Man 3”, for example, will open in China, France, Germany and Japan on May 1st, then migrate to America and Britain three days later. Stars, who can be in only one place at once, cannot provide much publicity, and marketing campaigns have to get it right first time. The potential for catastrophic error has never been greater. If this summer's big gambles fail, expect a lot of hand-wringing and a retreat—though probably only a temporary one—from the blockbuster model.