THB #506: How To Value A Movie (2024), Pt 1
It used to be pretty easy to broadly figure out whether a movie was profitable. You just had to know a few numbers.
Production Budget
Marketing (Or Prints & Advertising, as it used to be), for all windows
Percentage participants (gross or net or by formula)
Residuals and bonuses in post-theatrical
Studio overhead… a real budget line, but a bit of a con in terms of real costs
vs
55% of domestic box office revenue
45% of international box office revenue (except China)
25% of China box office revenue (when applicable)
80% of physical media gross
Pay-One deal
Ongoing pay-tv, broadcast, cable revenue windows
Occasionally, a movie would have enough merchandising revenue to make a noticeable dent in the overall revenue line. Disney, sometimes others, would have an added value in the exploitation of the intellectual property at theme parks or in other circumstances.
And there were variations in these numbers… for instance, deals for theatrical in which the distributor, anticipating a big opening, demanded a higher percentage of the gross in early weekends, then going back to what had become the norm. (The practice of starting at 90/10 pro-distributor and working to 20/80 pro-exhibitor by the end of a long run was mostly flattened out to fixed rates in the 90s, as studios sought to frontload grosses more and more to get to the Home Entertainment market revenues more quickly. Disney returned to being especially demanding during the hot run for Marvel/Lucasfilm/Pixar)
Of course, even in this broad formula, the only number that was fully public was the domestic box office and in the last 20 years or so, mostly, the worldwide box office. Those of us who have played with the numbers for decades generally estimated much of the rest, using some inside information, but also relying on broad industry expectations.
Changes would come and go, like the evolution of the VHS as an almost-exclusively rental model to start to a mixed (rental/sell-thru) model in the late 80s to a completely sell-thru model with DVDs to Netflix’s subscription model. In the early 2000s, DVD reached its revenue apex, dominating the overall revenue outlook for a movie, then falling steadily from about 2006 on.
When Netflix introduced Streaming in 2007, it was addition revenue for the studios, who were happy to squeeze another 8 figures a year out of their content libraries. By 2010, the “norm” became a series of $100 million a year deals for companies pushing out 10 -15 new movies a year. It took only a couple years before Netflix saw the demand from studios for overall licensing deals explode to $300 million a year and more. Netflix realized that this was not going to serve their company well. That’s when they started growing their own.
Since then, with the launching of Streamers from all the of Legacy majors, except Sony Pictures (which ironically had Crackle before anyone else was playing in that pond), we have entered the era of Self-Dealing. What used to be the norm - making movies, exploiting them yourself through a series of windows before licensing them to others and getting paid cash money - suddenly became known as “arms dealing.”
(Note: It was only 50 years ago when theatrical release was pretty much the only window. Occasional TV deals, not very high paying… eventually exploding into $20 million for E.T. to go on TV, sponsored by Sears. First run could go a full year, second run was a strong business, and international was marginal.)
So… moving along to now… fewer “movies” than ever are playing theatrically, but those that do can still be measured by their box office as the first window.
Physical media is a shadow of its former self.
And Streamers pay for films that have had a theatrical window and others that have not. But those amounts, however private, do exist.
The giant question mark is how to measure the value of a movie to a Streaming service that is either licensing the movie (or tv show, but sticking to movies here) or funding the movie itself. With every Streamer self-dealing, often without any direct revenue stream at all, how are these films valued?
(Under The Fold: Squid Game, The Mother, Netflix & Universal Animation, Apple’s Oscar movies)
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