The Bubble Has Burst and the Pendulum is Swinging

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Anonymous's picture

I don't think Blockbusters are going away, but the formula might shift. With auteur directors being given more money we might see a nice blending of style and flash. We'll see what 2015 brings.

Aaron Weiss's picture

#1 I too don't think that blockbusters are going away either, I just think the reliance on crafting them through formula will diminish over time. Like usual, they will evolve and devolve.

Anonymous's picture

"As an example, John Carter was made on a budget of $250 million, but grossed roughly $78 million domestically and over $200 million in foreign markets for a total of $282 million worldwide. When you consider the marketing costs, which are never included in the budget, the film did not exactly make its money back, and Disney’s Studio division recorded a $84 million dollar loss during that quarter."

This is a bit confusing. Box office revenue is not equivalent of production costs as this revenue is shared with theaters (around 50% in the US and at various percentages internationally). And you have mentioned marketing costs et al. Then again, with Hollywood's creative accounting practices (paying itself a fee to make a movie and including that as a budget expense, charging interest on "loans" for the money used in the production, etc) its not like these announced budgets can be taken too seriously either. Didn't the studios attempt to add the costs of all the failed Superman movies before "Superman Returns" into the SR budget (as if that was somehow a true costs of making SR).

Aaron Weiss's picture

That 50% figure isn't accurate at all. Distributors typically have a either a 90/10 or 100/nut agreement for the first week or two.

And depending on how the holding companies that owned the Superman screen rights were set up, there is a financial legitimacy to adding developmental expenses to the final bill. It's all about reducing taxation and preventing net profit sharing from triggering.

Anonymous's picture

Studios have a much higher share early in the release of a film (and the exact ratio will very per film/studio) but then it quickly shifts and after several weeks the ratio will have the theater keeping most of the revenue. Movies generally make 30-40% of their totals on opening weekend. Most industry analysts will state that while it varies per picture/studio and the ratio changes during the release . . . in the END it generally ends up a 50/50 split with the theaters. Movies with longer legs benefit the theater, films that are front loaded benefit the studios but it all averages out. Additionally, foreign films do not have anywhere near that level of profit sharing. Recently China has made the headlines when they fought against paying US Studios their full 25% of revenue yet you seem to mix domestic and foreign totals without any qualifier.

And to the more important point, studios DO NOT recoup their budget in their box office proceeds. Only a handful of films make enough for that. Studios try to maximize their profits with films and it can take a full 3 and a half years before this process is finished. For the first 6 months the only movie revenue is theater ticket sales. Most films will be lucky to make up their P&A (Prints and Advertising) costs with this revenue. Ticket sales are only somewhere in the range of 20-30% of a movie's total revenue.

30-50% of a movie's revenue will be DVD rental, DVD sales and Pay-per-view. The last big portion will be the television licensing fees which is almost pure profit producing revenue due to the major studios incestuous relationships with networks these days.

In addition some franchises like Star Trek, Kung Fu Panda, The Avengers, etc, can make additional revenue from merchandising and other licensing agreements than your typical Hollywood movie.

And to be clear, I am NOT talking about the creative accounting done by the movie studios to create their official budgets where movies like Forrest Gump, The Lord of the Rings Trilogy, Return of the Jedi, Harry Potter, etc, have never made a profit. That's just an example of the big Hollywood Studios avoiding the need to share revenue with actors, writers, directors, etc, while avoiding taxes. Obviously the key players are making money hand over fist. That kind of BS accounting, however, is a discussion in itself.

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