• Home
• Media
• News Article

Are the days of million dollar fees for actors really over?

By Kathleen Brooks, director of research, Forex.com
So says Brad Pitt, and he should know. He argued that the "economics" of big studios these days just don't support actors' earning a huge chunk of the profits in the way they have done for years. Considering Pitt made approximately USD 25 million last year, according to Forbes magazine, his latest musing suggests he knows he could be in for a major pay cut in the coming years.

The star who should watch out is Tom Cruise; he earned USD 75 million last year according to the same Forbes list, yet his most recent movie to hit theatres has been one of the biggest flops of the year - I refer to the star-studded "Rock of Ages". Like other industries, when profits and wages start to fall, it suggests that the power is draining from that location - Hollywood may not be the epicentre of the silver screen for much longer.

The cinema and film industry has been profoundly impacted by the internet-fuelled demise of the traditional media business model. DVD sales globally have tumbled more than 25% since 2006; added to that, digital downloads of films, which some in the market expected to be as popular as DVDs, have suffered from a couple of things: One, Apple getting in on the act first and beating the studios at their own game; and two, a surge in the number of competitors in the digital movie space, which compresses margins.

The box office hasn't been immune either. Box office takings in the US have been particularly slow this summer, and studios banking on the popularity of 3D movies have been fairly disappointed. While some blockbusters in 3D have performed extremely well at the box office, they tend not to do that well afterwards, as most people still don't have 3D television screens to watch the movies at home.

But perhaps the biggest problem for the movie industry is the cost of going to the cinema, especially in developed markets. It has become an expensive night out with some tickets costing in the range of GBP 15 in the UK, approximately three times what it cost 15-20 years ago, which is keeping audience growth depressed.

In this environment it's hard to see actors in the run-of-the-mill romantic comedies fair well. Jennifer Aniston is another actor in Hollywood who has had her share of movie flops. If she is not careful she could disappear from our screens forever and she hasn't even won an Oscar yet.

So while actors nervously study the box office takings to see if their fortunes may pick up, what does the current economic situation say about the future of cinema? Like other services and products the movie business needs to look to the East. India already has its own Bollywood; the Middle East could be the biggest opportunity for the studios in the coming years. The Middle East is a huge market for cinema; in fact its problem is that there is not enough capacity to fulfil demand. There are expected to be 12 million cinema admissions this year compared with two million 10 years ago. In response to this surge in demand some of the world's largest cinema chains are hoping to expand the number of cinemas across the Middle East in the coming years.

But, as the Middle East audience gets more important for the Hollywood studios the impact on actors, as well as writers, directors etc. may be profound. If the importance of the Middle Eastern audience grows, then so too will its influence over the cinema industry in the years to come. This means that audiences may want to see reflections of their own lives on the silver screen, not just American lives. It could also provide a big opportunity for the Middle East to develop a bigger film industry on home soil.

Brad Pitt seems to have a realistic attitude, but it's hard to think that the rest of Hollywood shares similar values, especially as we are often bombarded by scenes of their self-obsession on a daily basis in the popular press. However, the tide is turning and the future of cinema may not lie in Hollywood for much longer.

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that FOREX.com is not rendering investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. FOREX.com is regulated by the Commodity Futures Trading Commission (CFTC) in the US, by the Financial Services Authority (FSA) in the UK, the Australian Securities and Investment Commission (ASIC) in Australia, and the Financial Services Agency (FSA) in Japan.

© Forex.com 2012

---

© Copyright Zawya. All Rights Reserved.

---