The New York Times got a nice scoop today… that Reliance will move forward with funding for DreamWorks, in smaller numbers, but moving forward.

Great.

Six graphs of actual facts. Excellent. And then they get into a mess, trying to do analysis of the initial push by the company, now a large production house, without much more than the easy, oft-repeated reasons/excuses/misinformation.

1. “DreamWorks has had to rein in its ambitions partly because of broader weakness in the movie industry.”

Huh?

I know that the NYT has continued to sell the slump that they stepped into by an obsessed and incorrect Sharon Waxman in 2005. That’s 7 years ago. I know that the NYT is infallible, but you got it wrong. Give up the spin.

The questions around DreamWorks’ funding are about the first seven films the Reliance-funded version of the company (DW 3.0), not about the same steady decrease in ticket sales we have seen for over a decade or the pulled-from-ass shot that European box office is “troubled.”

The same “weakness” that NYT is somehow blaming for the financial failure of Dinner for Schmucks, I Am Number Four, and Fright Night, and especially, Cowboys & Aliens is the same (earlier in the alleged erosion, actually) “weakness” that saw DW hits with The Help, Real Steel, and War Horse.

2. “If they’re having a rough go, what does that mean for the rest of the industry?”

It means nothing. Only people who really don’t get this industry see it on some mass continuum, where everything is connected. This is just not the reality. Movies are sold individually, especially in the theatrical marketplace. Trends do come and go. But the box office is as strong or as weak as the interest in the crop of movies released every week, month, quarter, and year.

Journalists have convinced themselves that, say, dividing the Hunger Games gross against whatever the Q1 ticket prices average that is announced by NATO, tells you almost exactly how many people saw the film. But it, obviously, does not. It does not take the percentage of tickets sold at discounts into account. Or the films in the market that quarter getting a 3D bump. Or whether the film had a higher or lower concentration of tickets sold in bigger or smaller cities. Etc, etc, etc. Can you probably be comfortable that you are within 20% by that form of estimation. Yeah. Probably. But while, as of this week, Hunger Games has grossed 50% more than The Lorax domestically, the number of tickets sold is surely a lot closer than that (though continuing to spread), as more Children’s Tickets are obviously sold for The Lorax.

Meanwhile, as a journalist, you don’t get to write off The Hunger Games, for instance, when you are trying to sell the lie that people aren’t going to the movies anymore. (As in, “Attendance in North America has perked up in recent months (largely because of Lionsgate’s huge hit The Hunger Games.”)

Firstly, again, attendance is a jackass way of measuring success in the industry. Reliance didn’t look at the Tickets Sold stat to decide they weren’t thrilled with how DW was doing. They looked at dollars and cents… which is ALL that counts. No one outside of exhibition makes money, loses money, gets a bonus or a raise or fired for Tickets Sold.

So looking at the money, the box office was up 16.7% this year through Feb, before Hunger Games ever showed up. THG spiked that up to 23.7% through March.

Think is, unlike the NYT and others, I don’t go around selling this as a renaissance for theatrical, any more than I accept the lie about slumps. Theatrical will continue to lose eyeballs as we continue to see an increase in competition for eyeballs for the very same product via new or improved delivery systems. Absolutely. But to paraphrase Charles Foster Kane, if exhibition loses 2% a year in tickets sold for the next 50 years, they will still be there for another 50 after that.

Everyone struggles. Lots of people with weak track records get The Big Hit. Happens. This business is a business of gambling. DreamWorks had a better year in 2011 than a number of studios have had in recent years… but no one is taking about closing those studios’ doors? Why? Infrastructure keeps the ship from sinking fast. Four years of famine and you’re in real trouble. One, and it’s par for the course.

3. I don’t know why the Paper of Record can’t do the math that clearly suggests that DreamWorks’ kick-off year was a tale of two Dreamworks… but that shouldn’t keep others from doing it.

Here is some incredibly simplified math. DW 3.0’s first four films cost at least $360 million to make and $225m to market and distribute. Therefore, they earned $546m in theatrical gross and $300m in rentals (money returned to the distributor) against an investment of $580m.

DW 3.0’s next three films costs about $200m to make and $150m to market and distribute. The return was $676m in gross and $370m in rentals.

In other words, these three films were just about profitable in theatrical alone (largely because of the low-cost, big return The Help), while the first group of four films were at least $280m in the hole, seeking to dig out with post-theatrical revenues.

4. History Helps

When Paramount took on DreamWorks in 2006, they released seven DW films… and only Dreamgirls was a hit. Over The Hedge was a modest grosser by DW standards and Flushed Away was one of their few outright flops.

In 2007, there were nine Par/DW releases, including hits Norbit, Blades of Glory, Disturbia, Transformers, and DW Animation’s Shrek The Third.

But the thing to really look at is the developing relationship with DreamWorks Animation and the existence of a franchise like Transformers (which started before Par acquired DreamWorks). Transformers is the only piece of DW product that grossed over $120m domestic, aside from animation (which is, literally, a separate company). It’s very hard to build a film studio with mostly singles and doubles, the occasional triple, and no home runs.

For a growing company that intends to be in the “studio movie” business, $650m, which is what DreamWorks 3.0 launched with – not the $1b that was widely promoted – deep enough pockets to cover more than 2 years are needed. The billion was about right. $625m means the potential for trouble. And that is what happened at DW last spring and summer. They got out of the blocks slowly and even though they had a big, fat, cheap-to-make hit and a couple solid doubles, it’s not enough to get things straight.

And history reminds that DreamWorks 1.0 got into some of the same trouble. The Peacemaker, Amistad, Mouse Hunt, Paulie, and Small Soldiers all came before the first real hit for the company, Saving Private Ryan. But they still weren’t out of the woods… even with American Beauty and then Gladiator… too many singles or strike-outs. And at the same time, DW was trying to do television at just the time there was a show runner bubble. So hundreds of millions were lost there. When Shrek became The Franchise, it was already too late to get back to even. And eventually, even with great successes along the way, the Paramount deal saved the company from the fire.

Point is, the pockets were deep enough to get to Saving Private Ryan and Gladiator and Shrek. Things are tighter now than they were then.

5. “Over the years, small, independently financed companies — some with their own distribution mechanisms, others, like DreamWorks, without — have generated hits, only to disappear or be merged into larger corporations.”

Yes. A touch of sanity.

But again… why the generalizations? There is no comparison of Miramax becoming part of Disney, where the annual operating budget grew by 500% from the original agreement (which was for more than Miramax had been spending as an indie) and Summit merging with Lionsgate (note to NYT copy editors… it’s been one word for over 5 years already), where Summit comes with a massive cash cow but almost no other success and no ambition as continuing an independent operation or Spyglass, which merged with MGM with the explicit intent to distribute through multiple distributors.

Now, I know most of what I wrote off the top of my head and spend maybe 20 minutes floating around Box Office Mojo grabbing hard numbers. Cieply has been around longer than me. Barnes is apparently a very nice guy who knows little about this business. But the difference between smug, lazy, inaccurate coverage of the industry from The Paper of Record and a real story is about 2 hours of reporting, max. Stelter can do it, day in and day out. Why can’t the guys on the movie beat? Seriously.

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