Harry Potter Inc: Warner Bros' $21B Empire

Final Harry Potter Already Wrecking Foreign/Domestic Records

EXCLUSIVE: With history’s most successful movie franchise coming to an end with the Friday release of Harry Potter And The Deathly Hallows Part 2, it’s a good time to ask: How much loot was conjured up en masse? And the answer is startling. You can find about $21 billion by adding up gross sales the series has generated since 1998 from films, videos, video games, licensed merchandise, and books. (See detailed breakdown below.) Time Warner has already seen an estimated $1 billion in profit from the films and its work as custodian of a global entertainment brand. The tally should continue to grow, probably by a lot, with the release tomorrow of Warner Bros’ Harry Potter And The Deathly Hallows – Part 2 — although Hollywood accounting has a way of making profits vanish. (Here‘s how the black magic worked for Harry Potter And The Order Of The Phoenix in a studio accounting statement obtained by Deadline’s Mike Fleming. Though the film grossed $938.2 million worldwide, the document conveys that the film is still $167+ million in the red)

Things have turned out so well that it’s easy to forget what a huge risk Warner seemed to be taking more than a decade ago when it bought the Potter rights. The studio didn’t know how the series would end. And J.K. Rowling, who wrote the series, was a wild card. Many wondered whether U.S. audiences would warm to the all-British movie cast that Rowling required.  “The casting of the kids was the biggest place where it could have gone wrong,” Warner Bros Pictures Group President Jeff Robinov tells me. Some Warner executives also chafed at Rowling’s demands that there be no Potter-related fast food offerings and that Warner show restraint in product licensing. “I can only say now to all the parents out there, if the action figures are horrible, just tell the kids that I said don’t buy them. Sorry, Warners,” Rowling told a 60 Minutes interview.

Virtually everybody agrees now that Rowling was right to keep the franchise faithful to her vision. And Warner was right to embrace that vision down to small details in licensed merchandise. “We had a guideline that was perhaps frustrating to our colleagues in Consumer Products but has held well for us as a company which was to look to create artifacts, not souvenirs,” DC Entertainment President Diane Nelson tells me. She oversaw the Potter franchise from the beginning. Marketing plans also adapted as fans became older and the Potter saga grew darker. “We held on to fans as they aged in a way that’s never been seen before,” Nelson says to me.

Here’s how all of the Potter business decisions have turned out so far:

Movies. The first seven films accounted for nearly $6.4 billion in ticket sales, with 68% of the total coming from overseas, according to Box Office Mojo. The only other franchise that comes close is James Bond: Its 23 films beat Potter if ticket prices are adjusted for inflation.

Home Video. Consumers have spent nearly $3.9 billion globally — with 44% of that coming from the U.S. — to buy 302 million videos of the first six Potter films, Warner says. IHS Screen Digest says that Warner probably collected about $1.5 billion just from domestic video sales, which would more than cover the studio’s estimated $1.4 billion production budget for all eight films.

TV rights. Add $1 billion to the tally, with about half coming from the U.S. Although Disney passed on the film rights to Rowling’s novels, ABC saw the light and bought most of the domestic broadcast and cable rights. Overseas broadcast partners include UK’s Sky, France’s TF1, Italy’s Mediaset, Australia’s Nine Network, Canada’s CBC, and Mexico’s Channel 5.

Video Games. Fans have spent about $1.5 billion buying 42 million Potter-related games.

Licensed merchandise. This may be the biggest annuity: Consumers have already spent more than $7 billion globally on Potter-related games, clothing, trading cards, candies and other goods – and continue to shell out an estimated $1 billion a year. The big question is whether spending will diminish now that the movie series has ended. Warner hopes to keep the business fresh by creating what it calls immersive environments.  “The film franchise is coming to an end, but the brand isn’t,” says Nelson. She says that the company will be “big supporters” of Rowling’s new Pottermore Web site. The studio plans to turn London’s Leavesden studio, where the Potter films were shot, into a tourist attraction. It has also been encouraged by the response to “The Wizarding World Of Harry Potter” at Universal’s Islands of Adventure in Orlando. The theme park attraction opened last year, the result of a 10 year licensing deal NBCUniversal signed with Warner. More than that 7 million people have ridden the “Harry Potter and the Forbidden Journey” ride, and the park reports that its attendance in the first quarter was up 68% vs the same period last year. Visitors to the destination’s Hog’s Head pub have bought more than 2 million Butterbeers.

Books. Readers have snapped up 450 million Potter books in 68 languages. Publishing company Scholastic says it has had 150 million books in print in the U.S. and has collected nearly $1.2 billion in revenue from the series from 1999 through 2010.