2 posts tagged money
2 posts tagged money
Edward Jay Epstein, entertainment industry expert and author of The Hollywood Economist 2.0: The Hidden Financial Reality Behind the Movies (one of the best books on the business of film) explains the realities of the weekly box office “horse race.” Who’s No. 1 doesn’t necessarily align with who’s making money, and here’s why:
Even the numbers themselves are misleading. The reported “grosses” are not those of the studios but the projected sales of tickets at the movie houses in the U.S. and Canada (which is counted by Hollywood as part of the U.S.). Whatever the amount actually is, movie houses remit about 50 percent to the movie distributor, which then deducts, off the top, its out-of-pocket of costs, which includes advertising, prints, insurance, local taxes, and other logistical expenses.
For an average big-studio movie, these costs now amount to about $40 million. So, just to stay in the black, a movie needs $74 million in ticket sales. … Most Hollywood movies nowadays actually lose money at the American box office and make it from ancillary markets.
Meanwhile, the outcome of the box-office race has little importance to theater owners, because each of the major multiplex chains books all of the studios’ wide-release movies. Their only concern is the total number of people who show up and how much popcorn, candy, and soda they buy, since that’s where their real profit comes from. In numerical terms, the movie-going audience has been shrinking since 1948.
The studios focus on the cumulative revenue their movies take in over many platforms, including both domestic and foreign movie houses, DVD stores, pay-TV output deals, and TV licensing. Even though its ancillary benchmarks can be higher when a movie is No. 1 at the box office, the film can fare very badly in its cumulative results.
Edward Jay Epstein, industry expert and author of The Hollywood Economist 2.0: The Hidden Financial Reality Behind the Movies (one of the best books on the business of film) says that despite what you read, studios are making money. Here’s how:
The ways that Hollywood loses money are the meat of news reporting on Hollywood. The headlines screamed in early 2012: “Movie Attendance Falls to 16-year Low,” reflecting a secular decline at the box-office that has gone on since 1949; “Hollywood in Turmoil as DVD Sales Drop,” reporting on what had been, earlier this decade, the cash cows of the big studios; and “John Carter a Financial Disaster For Disney,” a $200 million fiasco which led the resignation of the studio chief.
What goes largely unreported is that the studios have found other ways to make money. Despite all the bad press, most of the major studios are making record profits. Even Disney, the John Carter loss not withstanding, will make more money this year than it ever has before.
Here are five ways that the big studios are now greatly enhancing their profits:
1. Licensing to new media
Since 2010, there has been an explosive growth in license fees for studio-owned recent/still-airing TV series and older series. The big studios have tens of thousands of TV episodes, movies, and animated shorts in their libraries. Warner Bros, for example, has over 30,000. Non-exclusivity is gone for the ones most in demand as their competition heats up between Amazon, Hulu, and Netflix. Each are buying exclusive rights to compete which each other. As a top Warner Bros. executive recently wrote me, “license fees that were chump change two years ago are now mind-boggling. Since studios do not pay for advertising or prints on licensed material, almost all the revenues, except for residuals, go directly to the bottom line. As a result, the surging license fees have more than compensated for the decline in DVDs.