Warner Bros., Disney and Universal Pictures are the leaders in the marketplace for 2013, driven by powerful box office numbers from franchise tentpoles and animated titles. Warner Bros. had a huge market share jump over all others with $5.035B (projected domestic of $1.895B and $3.140B internationally) to take home the market share prize title. It is now the only studio that exceeded $1B for 13 years running; they have consistently ranked No. 1 or No. 2 for nine out of the last ten years. The studio had eight films that grossed over $100M, six of them in a row came from the summer season (The Great Gatsby, The Hangover Part III, Pacific Rim [$310 worldwide], Man Of Steel [$377M], The Conjuring and We’re The Millers). In addition, Gravity (which opened in October to $260M in the U.S. and grossed $408M worldwide) and The Hobbit: Desolation Of Smaug have been feeding their box office with a vengeance; in its third week, Smaug has grossed $450M worldwide with China and Japan yet to bow. “A lot of us have been working together over for a long while and it’s truly a team effort,” noted distribution president Dan Fellman. “All divisions work extremely well with each other.” No. 2 this year is Disney. Iron Man 3 (Marvel), Monsters University (with Pixar), Oz The Great And Powerful, and Frozen pumped up Disney (Frozen becoming the top animated opener “of all time”; and Despicable Me 2 and Fast And Furious 6 helped push Universal to $3.7B total market share. No. 3. Sony announced that it crossed the $3 billion worldwide mark and three weeks ago (it fell to fourth place this year — hey, it happens). Three weeks ago, Disney announced that it broke the $4 billion mark at the global box office for the first time in its history on the very day that Frozen opened (updated numbers as of January 1 are actually higher at $4.7B). Universal, whose pictures are still playing including the write-off extravaganza 47 Ronin, has a final domestic market share of $3.7B ($1.42B domestically and internationally $2.258B). Lionsgate stepped over Paramount this year thanks, in great part, to The Hunger Games: Catching Fire which is about ready to cross the $800M market globally and should cross the $400M mark today or tomorrow domestically. Iron Man 3 grossed $1.215B globally to be the No. 1 film of 2013 ($409M domestic) and boosted Disney into being 11% ahead of 2012 for $1.719B domestic and $3B. internationally. Five of Disney’s films grossed over $200M. Record breaking again.
That’s great, right? But what are adjusted grosses after inflation for all these films in the marketplace? What are the negative costs, the marketing and distribution costs, and if you deduct those numbers, which pictures are really the winners and which are the losers? Why aren’t those things tracked on a regular basis, given that these are public companies? The big proclamations make juicy headlines for the company’s shareholders to ooh and ahh over but there is something more important for shareholders than headlines — corporate responsibility through profitability, and everyone knows this.
Despicable Me 2 made $367.8M ($921M worldwide), Fast And Furious 6 grossed $238.6M domestically for Universal which also had several “breakout hits” including the horror film Mama, Identity Thief, The Purge, Two Guns and The Best Man Holiday. Despicable Me 2 was the highest-grossing animated film of the year. It has yet to bow in China (January 10), the world’s second largest market, so expect more record announcements. For the first time, Universal Pictures International crossed the $2 billion mark $2.25B, it said; domestic is $1.42B.
Clearly, box office take is huge on some of these films. But it’s all gobblygook unless studios come clean not only on negative costs but also what it took to market and distribute these films (and splits with exhibitors). And it’s just not in the U.S. — all over the world in each territory, there are costs to bring those pictures to market. Those costs are then put against the revenues of these properties, dealt with by accountants who are the ones inside their offices that really see it all. Then there are other streams of revenue — pay TV, DVD, etc. — but marketing/distribution costs are deducted. So how profitable are they, really?
How about a new category for the record books on an ongoing basis that starts like this: Here are not necessarily the highest box office films of the year, but the most profitable films of the year. Yes, it made $100M at the domestic box office, but its negative cost was $100M and marketing and distribution costs were $60M to $80M plus we had a 60/40 split with the exhibitors plus it cost $45M to market and distribute overseas, so it really made only $XX. Remember, every lavish premiere and party is part of marketing costs, too, junket costs, flights for stars, hotel accommodations, TV spots, trailers, the list is seemingly boundless and endless. Any product brought to market includes development, production, marketing, and distribution costs. Every cost means you need that more in ticket sales, etc.
Universal’s 47 Ronin, for example, is a movie whose budget ran out of control. The studio says it had a negative cost of $175M, others say higher. Of course it’s higher! Marketing and distribution costs must be added not only in the U.S. but to bring it to market in every territory. One former movie executive I spoke with at a major studio (not Universal) told me how he watched numerous party costs, food costs — $1 million here and $2 million there — added onto the picture’s bottom lines and was appalled to see how arbitrary this kind of thing was to do on a regular basis. Now 47 Ronin has taken in a total (so far) of only $56.5M worldwide through Dec. 31. More territories will be added, but it doesn’t matter. And people wondered why someone lost their job.
Even perceived box office successes can lose money. The studios’ quarterly reports, despite these firework headlines, often show that the film units lost money. Years ago, I had the luxury of time to check budgets and box office returns for each studio — back then, producer Robert Simonds had the best studio track record for profitability based on his penchant for moderately budgeted comedies (yes, the producer who started out making Problem Child and went onto to produce numerous Adam Sandler comedies). At that time, the biggest write-off at Universal was a total surprise. It was the animated Balto from Steven Spielberg. Why? Because the studio tacked on as many costs it could to the picture to ease the overall cost of its animation unit. I’m told Disney did that in recent years with the animated film Tangled which, in turn, can only benefit those animated films that come after it … like the box office phenom Frozen which doesn’t have to cover those start-up CG costs.
Wouldn’t it be nice to see an itemization, a copy of the trial balances and/or a general ledger for each picture and then talk about records using profitability as a measure for success? Anybody game for that? How about a most profitable list — that starts with The Conjuring from New Line which the label said cost $19.5M negative and worldwide gross was $317M with no financial partners on the picture. Or maybe Jackass: Bad Grandpa which Paramount said cost around $16M (negative) and made a whopping $101.3M to date. Okay, so with that one maybe $18M to market (to bring it to $34M) and then a 50/50 split with exhibs so $50.5M so maybe took in actually $16.5M? Or what? Yes, I’m just throwing out numbers. And this is a title that does good numbers in home entertainment. So, you see where, I’m headed. What were the marketing and distribution costs for every aspect of its runs, including home entertainment? Wouldn’t Jackass: Bad Grandpa or The Conjuring be one of the most profitable movies around, maybe even No. 1 this year?