I was reading a Merrill Lynch study on equity funding of movies. And it finally occurred to me how Warner Bros could claim profitabilityfor Superman Returns without getting sued by Time-Warnerstockholders.
Superman Returns grosses $392 million worldwide. That’s
roughly $210 million in rentals. WB takes roughly $130 million in worldwide
P&A and another $55 million in distribution off the top. That leaves $25
million for distribution toward participations and production.Ancillaries on
this movie look to be (generously) about $175 million net. That’s $200 million.
WB takes half of that, $100 million… plus roughly $55 million in distribution
fees… equals $155 million. Why, that would be a $5 million profit! And if you
accept WB’s acknowledged cost on the picture of $210 million, you’d be looking
at… taa dah!!!... a $50 million profit, as they claimed in the NY
Of course, you have to overlook the $60 million in failed development costs… also acknowledged by WB. And the $30 million or $40 million in additional production costs that are generally acknowledged inside the non-publicity side of the studio as real. And my figure of $130 for worldwide publicity is generous, especially considering the long push to crack $200 million domestic (it happened last week) and the big money spent on weeks two and three and four of the domestic run. And any participants who might have gotten paid (did Bryan Singer have gross points?) are not offered here. But studios are good at hiding costs when they so wish, just as they are good at hiding profits when they so wish.
Interesting. When you look at a film like that and add back things like distribution fees you can really enhance the look of the film's bottomline. But how much of that money does the studio actually ever really see?
Best of all, by this accounting method, Legendary Pictures took an
only-in-for-$105- million hit of $5 million and an it’s-really-$150-million hit
of $50 million.
In looking towards a second Singer Superman, there is the
obvious advantage of not carrying the load of failed development costs. And
keeping Singer to a $150 million budget is possible. But Variety’s
story on the idea of this sequel says that a financing partner is key for WB
to movie forward. Why, if the first film was allegedly profitable?
Yeah, I've been asking the same thing. If the film would've been profitable whether or not WB split the $200 million in revenue ($25M from theaters plus $175M in ancillaries) with those distribution fees added back, why DOES the financing partner matter???
Well, as you see, WB gets to triple dip, while an equity partner has only one
shot at breaking even or profiting. Recovered marketing costs also pay for
permanent WB staff on the picture. Distribution returns are mostly profit. So if
Superman Returns Again did 20% less at the box office ($400 million is nothing
to sneeze at), the dollar flow looks like...
Production cost: $150 million
Total net: $310 million (on $315 million worldwide gross)
WB P&A - $120 million
WB Distribution – $40 million
WB Production - $75 million
Partner Production - $75 million
In other words, a breakeven movie, with $40 million in profit for WB, using this year’s SR calculation. And nothing for a partner. (Again, this is without profit participation.)
Yeah, I know that's enough to make your head spin, and there's even more figures on the blog page that details other scenarios for a sequel, but the point is pretty clear how you can make it look a lot better than it actually was.
The betting is that Superman Returns gets more love on DVD than it did in
theaters and that it is stronger going into another film, plus the idea that
Singer makes the movie that people really wanted to see the last time.
That said, Batman Returns was down 10% from Batman and Spider-Man II was off 7% from
Realistically, what will make the “deal with Singer” into an actual movie? It could be DVD revenues. Everyone involved will be waiting to see how SR sells on DVD. The margin for financial safety on another film in the series is that thin. And of course, this all becomes moot if the next film soars. And so it goes…
So like we said last week, even though Singer is "signed" to some form of a contract to do a sequel, just how and in what form that materializes will be dependent on what happens in the home video market and just what kind of profit margin goes on the books after that.