Hollywood’s global strategy: Made in America, but not for Americans

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Nearly every year-end story about the film business was punctuated with the same depressing statistic — U.S. attendance at the movies had fallen to its lowest level in 16 years. Maybe that’s because Hollywood, which for so long served as an icon for all things American, isn’t making most of its movies with Americans first in mind anymore.

Whenever I talk to top studio executives these days they are invariably jet-lagged, having just returned from a trip to some far-flung country where they’ve either been setting up a new distribution entity, visiting a film set or negotiating a co-production deal. Moviegoing may be lagging in the U.S., but it’s enjoying explosive growth in markets such as Russia, China, Brazil and South Korea. Just look at the numbers: Three of the four top-grossing films of 2011 — “Harry Potter and the Deathly Hallows — Part 2,” “Pirates of the Caribbean: On Stranger Tides” and “Kung Fu Panda 2” — did more than 70% of their business overseas.

This focus on foreign markets is clearly changing the way studios assemble their feature film slates. Nowhere is this more evident than at Paramount Pictures, Hollywood’s market-share leader in 2011 with 19.2% of the overall business. In 2007, when the studio also had the largest share of the market, Paramount did roughly the same amount of business in the U.S. as it did overseas — $1.5 billion domestic versus $1.6 billion international. In 2011, the studio’s films grossed $1.9 billion in the U.S. But they made a whopping $3.2 billion overseas.

Under Brad Grey’s leadership, Paramount is now focused on making two radically different kinds of films — behemoths that appeal to audiences everywhere and low-budget ones that appeal to a specific niche of American moviegoers. Nine of the 10 movies the studio bankrolled in 2011 cost at least $125 million — or $25 million or less. The studio has a hit this week with “The Devil Inside,” a horror film released through Paramount’s micro-budget Insurge label. Made for $1 million and marketed without any prime-time TV advertising, it was the weekend’s No. 1 release, taking in $33.7 million.

“There’s been a definite recalibration of the movie business,” Grey says. “With that in mind, our strategy has been to focus on big franchises or films that use the power of our Viacom-branded networks, which can bring in revenues from a variety of aftermarkets for years to come. And at the same time, we’re making small movies that allow us to use innovative social media and viral marketing techniques to go after specific targeted audiences.” The expensive films, “Mission: Impossible — Ghost Protocol,” “Transformers: Dark of the Moon” and “The Adventures of Tintin,” all were aimed at international audiences. In fact, the Steven Spielberg-directed “Tintin,” a co-production with Sony Pictures, was so globally oriented — the film is already on track to make nearly $300 million overseas — that it would’ve been a hit if it had never been released in the U.S. (The film opened in Europe two months before debuting stateside.) With “Ghost Protocol,” the movie’s story line is constructed in such a way that its action unfolds in a string of international locations, notably Russia, India and the United Arab Emirates (where the studio held the film’s premiere, in Dubai).

Paramount’s other 2011 titles were lower-budget films that had little chance of playing well overseas: “Young Adult” was aimed at urban hipsters, “Justin Bieber: Never Say Never” was targeted at preteen girls, and “Paranormal Activity 3,” like “Devil Inside,” was for horror fans.

Paramount’s one midrange film was the J.J. Abrams-directed “Super 8,” which cost $50 million. In years past, a splashy special-effects movie by one of the studio’s leading filmmakers would’ve carried a far higher price tag. But realizing that the film’s distinctly American subject matter (and lack of name talent) would have far less international appeal, the studio persuaded Abrams to make the film in West Virginia, where there were generous tax credits. The studio says Abrams also took no up-front fee for the picture.

This is no doubt great news for Paramount’s bottom line, as well as for other media conglomerates that are moving in a similar globally oriented direction. But what will happen to the kind of movies we’ve traditionally viewed as distinctly American — “Mystic River,” “Milk,” “The Descendants” — movies that explore, define or simply poke fun at our American character?

We still see American-oriented dramas at Oscar time, since the lure of a best picture statuette can still hypnotize the most pragmatic studio executive into ignoring their bottom-line instincts. But this year’s leading best picture contender, “The Artist,” is an international production, written, directed and produced by French film talent. If American filmmakers want to play the Oscar game, with rare exceptions they’ll either be financed by wealthy outsiders — Kathryn Bigelow’s upcoming film about the hunt for Osama bin Laden is backed by Megan Ellison, daughter of Oracle Chief Executive Larry Ellison — or they’ll be produced for peanuts, as with Alexander Payne’s next film, “Nebraska,” a black-and-white road picture that Paramount is spending $10 million to make.

In the past, our great American novels would provide regular fodder for the studio machinery. But their subjects are now too specifically American, not to mention too dramatically complicated, for studios to launch into the global jet stream. Three of the best recent novels — “The Corrections,” “A Visit From the Goon Squad” and “The Art of Fielding” — are in various stages of development, not at a film studio but at HBO.

You could argue that being associated with distinctly American subject matter can actually slow a film’s acceptance across the globe. Surely it’s not a coincidence that of the 15 top-grossing films in 2011, the movie that did the lowest percentage of overseas business was “Captain America: The First Avenger,” even though it was set largely overseas, as were “Harry Potter,” “Rio,” “Cars 2,” “Pirates,” “The Hangover Part II,” and “Fast Five.”

What the U.S. still brings to the table is the spunk and brainpower of American entrepreneurialism. Hollywood has a creative ecosystem that is virtually impossible to duplicate anywhere else. China, for example, has a domestic market easily big enough to make its own films. But according to Sony co-chairman Michael Lynton, the country still lacks key creative resources — starting with a thriving community of screenwriters — that are essential ingredients in making films.

“Our movies may no longer espouse American values, but they carry a ‘Made in America’ stamp that guarantees a commercial and technical quality level that’s unmatched anywhere else,” Lynton says. “When you’re overseas, you often find yourself negotiating deals with someone’s sister or brother-in-law who may or may not have any actual film experience. In the U.S., we have an entire system of institutions, from film schools to union guilds to talent agencies, designed to provide quality entertainment.”

So while something is lost, something else is gained. Our commercial movies may have less to say about specific American values, but they are still magnets for great talent, making their mark around the globe through their vibrant style and technical prowess. Filmmakers come from all different cultures: Peter Jackson, Ang Lee, Guillermo del Toro, Chris Nolan, Timur Bekmambetov, Neill Blomkamp. But all have found ways to make very American movies.

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— Patrick Goldstein