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April 21, 2008
Burying The Lead
Claudia Eller ran a story in the LA Times today about how risky the deal for Indiana Jones 4 is for Spielberg/Lucas/Ford.
Ha ha ha.
She buried the lead down on Paragragh 17... and it's a doozy!
After the first $400 million in gross revenue, the S/L/F team get 87.5% of the revenue.
87.5 OMFGing percent!!!!
How about a little math?
Let's look at the last Indiana Jones movie... 19 years ago... which should be about half the gross of this year's film. The film did $474m worldwide. Taking 87.5% of rentals (at a conservative 55%), the S/L/F group is already into a payday of about $36 million.
Now… let’s assume that DVD and other ancillary revenue is being paid out based on net, not gross sales. If a $474 million movie were release in this era (like, say, 300 last year), you’re looking at least $200 million in net returns from on-theatrical. That’s another $175 million for S/L/F.
So… based on the last Indiana Jones movie, S/L/F would make $211 million.
Feeling risky yet?
Now… let’s look at the realistic numbers for this film. The last Indy film was 60/40 international, as this one should be. So let’s say that this one makes $300 million domestic and $450 million international. By Claudia’s numbers, that means that on theatrical alone, S/L/F are looking at $168 million in pocket.
Look at ancillaries of at least (least!) $300 million net, putting another $262 million in their pockets…
That’s $430 million.
The only profit participants who have ever made that kind of money are Lucas, who paid for the second set of Star Wars movies himself, and maybemaybemaybe Jim Cameron, whose Titanic grossed $1.8 billion worldwide, creating an economy of scale unlike any other film.
What’s the math for Paramount?
They spend about $300 million between production and P&A on the film. On the first $400 million, they earn a $50 million distribution fee, which combine with the rentals to get them somewhere near breakeven.
After that, they get 12.5% on everything. So using the same math as I just did, Paramount makes a profit of about $82 million. That’s a 25% return on the investment… on one of the biggest cash cows in movie history.
Now… I want to smack Brad Grey for making this horrible deal. But I can’t. Because there is no way there would be an Indy 4 without Paramount being willing to suck it up big time and to try to put the best face on it.
But let’s not bullshit ourselves. This is a NO RISK deal for Spielberg, Lucas, and Ford… or for Paramount. And it is a crap deal for Paramount, which will not, as with M:I 3, look at a loss while their star dances away with scores of millions, but which will have this huge success without much to show for it if anyone on Wall Street actually pays a little attention.
On top of that, a movie that they could have made a bigger profit on, Iron Man, has been funded by Marvel, according to reports. So there won’t be big profits there either.
The studio will only get their 10% distribution fee on Kung Fu Panda.
And they will share in whatever happens on DreamWorks' Tropic Thunder.
So even though I expect Paramount to compete for the top slot in distribution this summer, there is very little upside for the company financially.
And that, my friends, is a risky quest.
Posted by poland at April 21, 2008 03:04 PM
Comments
I hear they also have a similar deal in place for the Ben Stein documentary. I can hear the cha-ching already...
Posted by: a1amoeba ![[TypeKey Profile Page]](http://www.mcnblogs.com/thehotblog/nav-commenters.gif)
at April 21, 2008 03:50 PM
Funny indeed. Paramount looks, on paper, to blow away the other distributors with their summer market share, but when all is said and done, Viacom's fourth quarter studio earnings will be soft.
That said, don't forget to include consumer goods and other ancillaries in this equation.
Posted by: Wrecktum at April 21, 2008 04:14 PM
Here's another big detail missing from this article where Eller discusses "The Holiday."
"The 2006 romantic comedy, which cost more than $100 million to produce, grossed only $63 million at the U.S. box office and had weak DVD sales."
The Holiday did over 200 million worldwide after its 63 million in the US.
Posted by: 4nkate at April 21, 2008 05:17 PM
That's the thing, less profit-but less risk. Didn't we go into a big discussion on Heaven's Gate and UA about a week ago?
Posted by: doug r at April 21, 2008 06:34 PM
Just think: if Sony continued the year with their 1st quarter mix of doubles such as "21" and "Vantage Point" and Screen Gems low budget genre pics, could conceivably end up with a bigger contribution to their bottom line than Paramount with these tentpoles.
Posted by: samguy at April 25, 2008 11:26 AM
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