LOS ANGELES — Never mind their quality, an economic study released Tuesday concludes that R-rated movies are just bad business for Hollywood studios.
In a study that questions the industry's basic business model, economics professor Arthur De Vany's equations and economic modeling show that the combination of a big budget, top stars and a R rating may be the worst investment a Hollywood studio can make.
In fact, the study concludes that not only are R-rated films less than half as likely as PG releases to gross $25 million domestically, but that G, PG and PG-13 movies all generate better revenues and profits than R-rated films while keeping costs down.
Yet, according to De Vany's study, more than half of the films released in the past decade were rated R, less than 3 percent were rated G and the remainder were split about evenly between PG and PG-13 movies.
"A studio executive seeking to trim the downside risk and increase the upside possibilities could do so by shifting production dollars out of R-rated movies into G, PG and even PG-13 movies," wrote De Vany, an economics professor at the University of California, Irvine.
Those who know something about film revenues, like box-office tracking guru Paul Dergarabedian, said the study has merit because the numbers for R-rated movies don't add up.
"If we do look over the past five years, let's say, at the top 30 (grossing) films, there's just a handful of R-rated films," said Dergarabedian, president of Exhibitor Relations Co. "Certainly, there is some validity to that study."
Ironically, the study was released after "Scary Movie," which is rated R, earned $42.5 million in its opening weekend, the biggest opening ever for a R-rated film. It cost only $19 million to make, ensuring that it will be one of the exceptions to De Vany's rule.
In an interview, De Vany cited actor Jim Carrey's career as proof that R-rated movies have a harder time making a profit. While Carrey has enjoyed considerable box-office success with his PG-13 rated comedies such as "The Truman Show" and "Ace Ventura," his new R-rated offering, "Me, Myself & Irene," is having a disappointing summer.
Burbank-based entertainment industry analyst Art Rockwell said that while it's clear that an R rating reduces a potential audience, "there's an awful lot of successful R-rated films."
And Dergarabedian noted that some of Hollywood's classic titles — like "The Godfather," and the "Exorcist" — and recent hits like the Oscar-winning "American Beauty" were all rated R.
De Vany undertook the study to test a theory advanced by syndicated film reviewer Michael Medved, who criticizes R-rated films not only because they have foul language, sexual content and graphic violence, but because Hollywood is losing money by making so many of them.
Using a complex economic model honed by earlier studies De Vany authored on more traditional industries, he concluded that R-rated movies are just a bad business decision.
"I think the studios are running around trying to apply formulas that are based on wrong kinds of statistical thinking to a business that's very different from that," De Vany said.