Hollywood clears a tough year: Film takings are up despite bloodletting and cost-cutting, reports Phil Reeves

HOLLYWOOD has just completed one of its best years at the box office despite a sluggish economy, fired up by sequel hits such as Home Alone 2 and Batman Returns.

According to initial estimates, cinema-goers bought dollars 4.9bn ( pounds 3.25bn) worth of tickets in the US and Canada last year - a statistic widely used as a yardstick for assessing Hollywood's annual performance. This constitutes Hollywood's third-best figure and is a rise of nearly 4 per cent on the previous year's box office grosses, although it fails to match the dollars 5.03bn record in 1989.

Industry experts are being sparing with their congratulations, warning that the film industry still has many problems to overcome. They also point out that the surprisingly healthy figures are also partly explained by a small rise in ticket costs. 'It was an OK year, although it wasn't setting off any bells, whistles or fireworks,' said Harold Vogel, film industry analyst at Merrill Lynch & Co in New York. 'It was modestly better than last year - that's about all you can say.'

But 'OK' is a far better end-of- term report than was expected at the beginning of a year that started dismally. Recent months have been turbulent in Hollywood, punctuated by upheavals in the senior ranks of several big studios, a severe bloodletting within the talent agencies and a continuing battle against rising production costs. Nor has the economy helped. 'Where the rest of the economy is declining, at least this industry is stable,' said Lisbeth Barron, another leading Wall Street analyst.

Perhaps the most significant departure from executive ranks was that of Joe Roth, chairman of Twentieth Century Fox, who, tired of being a wage- slave, defected from Rupert Murdoch's News Corp empire in favour of a lucrative production deal at Walt Disney Studios. As he put into production Fox's record- breaking blockbuster Home Alone, and its highly profitable sequel, his absence is a blow for Mr Murdoch, who is still exploring the mysterious science of running a studio. Staff at Paramount are also regrouping after Sherry Lansing took over the chairmanship from Brandon Tartikoff.

Nor did a big shake-up in the talent agencies contribute anything to the industry's stability. Triad Artists merged with the powerful William Morris agency, while another rival, InterTalent, disbanded. The loss of the two agencies resulted in dozens of job cuts, but was more significant because it caused a sense of disruption that filtered through Tinsel Town.

Then there was the war on costs. This was signalled nearly two years ago when Jeffrey Katzenberg, the chairman of Disney's studio, penned a now-famed memo announcing to the rest of Hollywood that, in effect, the feeding frenzy was over. After almost tripling in the 1980s, production costs have levelled off at an average of about dollars 27m per film. Disney still manages to make movies for several million less, partly by avoiding hiring superstars on highly expensive 'vanity deals'.

There is speculation that Sony and Matsushita Electrical, the Japanese owners of Sony Pictures Entertainment and MCA/Universal, have finally decided that their Hollywood honeymoon is over. There are dire mutterings that the Japanese, who have so far shown an unusual tolerance for big-budget films, will soon begin to pressure their studio executives for larger profit margins.

For all this, some of the industry's more spectacular excesses still thrive, particularly when it comes to superstars. According to reliable reports in Los Angeles, Arnold Schwarzenegger received dollars 15m for Terminator 2: Judgment Day. Jack Nicholson netted dollars 500,000 per day for his supporting role in A Few Good Men, while the star, Tom Cruise, walked away with a mere dollars 12.5m.

But perhaps the most graphic account of gravy- travel comes from a Warner Bros lunch party at which the chairman, Robert Daly, allegedly distributed the keys to seven dollars 40,000 Range Rovers to the principal talent in Lethal Weapon 3. In comparison with the film's dollars 295m global takings, buying a handful of flashy cars does not amount to much. But, for many observers, the gift is a symptom of a deeper malaise - an addiction to grandiose spending that has been outdated by economic conditions.

Not that Warner Bros had a bad year. With Batman Returns (latest gross: dollars 163m) and Lethal Weapon 3 (dollars 145m), Mr Daly and his colleagues will be reflecting on a relatively good performance - although its two top hits are, significantly, both sequels. But Disney, for so long the runt of the Hollywood majors, is emerging as the most profitable studio. Its position is secured by a combination of superb animation and cheap but successful movies such as Sister Act, a low- budget affair that has made dollars 140m at the box office.

The studio is currently raking in millions for Aladdin (dollars 115m to date), which has become its fastest film to hit the dollars 100m mark - in just 38 days.

According to a source quoted by the Los Angeles Business Journal, Disney's earnings in the first fiscal quarter, ending 31 December, should top dollars 200m - dollars 33m ahead of last year and more than double 1990's figure.

While Michael Eisner, the head of Disney, and Mr Katzenberg are no doubt heartily toasting 1992, there will be a more thoughtful mood in Mr Murdoch's operations room. His first shot at Hollywood has proved to be decidedly inconsistent. Twentieth Century Fox has had some successes, notably Home Alone 2: Lost in New York (gross to date, dollars 146m), but also White Men Can't Jump and The Last of the Mohicans.

But the year ended with a couple of clangers: the much-awaited Hoffa, starring Jack Nicholson, is doing badly, and the children's film Toys, with Robin Williams, has gone down like a runny jelly at a toddlers' party. Mr Murdoch, movie mogul, will now be aware of the first law of Hollywood: some you win, some you don't. What he must now figure out is - why?

(Photograph omitted)