It used to be common to see ads that heralded a $100m gross but now that figure seems rather puny. Still, it's not that common to see a double truck for a picture that's done $500m. Certainly when you toss in ancillary revenues from cable, merchandising, soundtracks, and DVD sales and rentals, there have to be instances where someone can cite billion-dollar bragging rights. Could the reason for the recent silence be modesty' Certainly it could not possibly be restraint.
Of course, we all know that big numbers do not necessarily have a direct correlation to, nor do they even equate to, returns on the positive side of the ledger.
A couple of decades back, just for fun, I began an annual report based on profitability on the basis of a cost-to-return ratio. The first outing placed the re-issue of Bambi at the top of that chart. It was a bit of a cheat because the production cost was nil and the print and marketing expenses quite negligible.
A few years later The Wedding Banquet topped the chart and while such conspicuous grossers as Jurassic Park, The Fugitive and Cliffhanger figured in the top 20, they had to share space with the likes of The Piano, Menace II Society and The Crying Game.
The ratio chart was ultimately abandoned in the late 1990s because the deals became too complex and information crucial to its compilation became scarce or suspect. But the recent spate of mega box-office performers prompted its recollection and the question of how to gauge the comparative success of everything from Pirates and Harry Potter to D-War (Korea's most expensive movie) and La Vie En Rose.
Now it should be understood that all scenarios are speculative but let's imagine that one of the major summer hits had a negative cost of $175m and an additional $75m was spent on P&A. For argument's sake, a $250m investment would have to be recouped and to date that film has grossed approximately $900m at the worldwide box office.
What's become more complex in recent years is that the majors often have investment partners or have struck advertising deals or sponsorships.
Nonetheless, costs are costs regardless of the pecking order for repayment. The studios split revenues with theatre owners - the rule of thumb is 50-50. But there are also 'make goods' and settlements, so if our film had 45% collections, something in the order of $405m would come streaming back and on the surface there would be $155m in profits.
However, it doesn't work so simply. The studios take what they call a distribution fee off the top that ranges from 30%-35%, so knock off another $53m. Then there are the gross profit participants who can account for (on a high-profile film with top talent) perhaps 40% or, in this scenario, an additional $42m. And because the producers aren't banks, there will be another $30m tacked on for interest charges.
With any luck the books will show a loss but even if theatrical revenues somehow show a $10m or $15m profit, that's less than a 10% return on investment.
The inexperienced profit participant is likely thinking that the big bucks will kick in once the film is released on DVD. However, read the fine print. Only 25% of those revenues show up as royalty fees, the lion's share is gobbled up for marketing and handling fees.
Virtually no film shows a profit on the books and the list of losers includes Rain Man, Forrest Gump and The English Patient. It brings to mind the exchange in the boxing expose The Harder They Fall, when the fighter's agent is given a breakdown that shows his winner is owed $0. When he protests, he is told: "Don't argue with (accountant) Louie, he knows where every penny goes."
- Feedback: firstname.lastname@example.org.