Forbes article comparing Star Wars trilogies' profitability

[ahalpert]

https://www.forbes.com/sites/scottm...isney-jj-abrams-profits-fox-george-lucas/amp/

It always kind of grosses me out to analyze budget/gross ratios, etc. But it's interesting to see how successful the latest trilogy was in historical terms, but how singularly successful the original trilogy was, and particularly A New Hope.

 

[DLD]

The multipliers/profit percentage don't matter as much in films. Total profit does. And the article doesn't count the tertiary income either.

A side note, the early Star Wars financials are outliers. It's the "was shootin' at some food and up through the ground come a bubblin' crude" effect. You can't plan for it.

 

[ahalpert]

You can't plan for it but you can make a damn fine and imaginative story.

Why don't multipliers matter? They matter for investors who will put their money wherever the highest rate of return is...

 

[DLD]

... Why don't multipliers matter? They matter for investors who will put their money wherever the highest rate of return is...

And the highest rate of return is in tentpoles. Which is why you're seeing tons of them.

And there's a reason why the majors don't make a lot of $20M-$40M films. The related expenses for marketing and distribution eat up most of the profit. Up until mid-1970's, most movies were released in major markets first, and then slowly spread across the US. In doing so, they could take profits from the early screens and pay for the advertising in the subsequent locales. "Jaws" changed all that. Now, with the film studios, it's blockbuster or nothing.

And Mel knew this 35 years ago.

 

[combatentropy]

And there's a reason why the majors don't make a lot of $20M-$40M films.

I do miss the $20-40 million films, but I guess they've all gone to TV and streaming.

The related expenses for marketing and distribution eat up most of the profit.

Can someone break this down?

First, let's take "distribution." Does that mean sending copies to the theaters? I can understand why it was expensive when it was shipping two hours of 35mm film to every theater. But in the age of digital, why is it even a blip on the expense sheet?

As for "marketing," I can understand that costing a bit: posters, TV spots, etc. But still, why does it have to be tens of millions of dollars, especially if your movie is not a tentpole?

 

[DLD]

The "inexpensive" comedies and horror flicks are still being made. Most of what used to be dramas are kind of merged into the TV series. My hunch is that they will reappear on the various streaming services to some extent. However, something like "Kramer vs. Kramer", "Alice doesn't live here anymore" or "Ordinary People" may simply be left without audiences. Even as TV shows.

As to the accounting breakdown of feature releases, one would have to be a studio head to know where every dollar comes from and goes go. Global marketing costs - mostly advertising and promotion - varies from ~ $50M on the low end to $150M on the high. But, if it's done by a studio own division, then it's not really an arm's length transaction.

And neither is the allocation of the overhead. Prior to the 1970's, accounting in Hollywood was based on the same principle as general accounting. (GAP) Then, a CFO at Colombia Pictures (working under Dave Begelman, IRRC) figured out that, had the company written off the overhead against the profitable projects, they would not have to pay out the promised sharing. At that time, top stars were on "net profits", with superstars like Jimmy Stewart getting as much as 50% of the real net. But, by allocating overhead to films with highest revenues, the net profit disappeared and top stars got zilch. That, naturally, led to a bunch of law suits (Art Buchwald vs. Paramount, James Garner vs. MCA/Universal, etc.). The market mode for the star pay compensation then quickly adjusted from net to gross, which led to gigantic paydays for the blockbusters, as superstars like Tom Cruise were able to negotiate as much as 15% off the top. Over the last 20 or so years, the payment arrangements have gotten even more complicated - percentage/amount upfront/guaranteed, percentage after the break even, percentage off merchandising, video/streaming sales, etc.

Mind you, this is simply how it's done in the entertainment industry. In "Everything one need to know about the music business", a powerful music industry attorney Don Passman (who also happens to be related to a friend of mine, though they are not that close) wrote that a rock group with one million CD's/records sold will probably be in debt to the record company. The book is in its 9th print and is a worthwhile read on how business is conducted in this town.

 

[ahalpert]

DLD - you sound like you switched from arguing that total profit matters to arguing that multipliers matter.

That being said, I think it's sadly true that you can make a more CONSISTENT and RELIABLE return from a mediocre studio-algorithm-and-focus-group-driven tentpole than from risky small movies. You'll never hit a multiplier of 50x from your budget, but you're much less likely to take a loss (which is what they're desperately trying to avoid).

Combatentropy - the key point that DLD is making is that it costs AT LEAST $50 million to market ANY movie. I don't know why. I think it's because they have to saturation bomb every ad market simultaneously to turn the film premiere into an event because it has a very short window in which to reap profits and the perception of excitement is key. So, that economic picture is bad for movies that cost $20 million to make. It costs way more to market them and it's harder to turn them into an event.

I think a good example is Cloverfield Paradox. Supposedly it was made for $40 million and then the studio decided it wasn't worth it to market it and put it in theaters. Then Netflix picked it up for $50 million and spent (I assume) $10 million on a superbowl ad for it and premiered the movie after the superbowl. If it had been a good movie, that would have been a great play.

Paranormal Activity was a huge success by circumventing traditional marketing and getting the movie out without all that expense.

Will streamers save the $20-40 million budget movie? Maybe. A lot of the marquee movies they're shooting are more like $60-150 million (Irishman, 6 Underground). There must be a number of lower-budget movies... they spend a huge amount attracting stars though (Adam Sandlers just signed a 2nd $250-million 4-movie deal with them). They also can't continue their current debt-fueled streak of producing original content in a bid to create their own vault of content no one can pull from their library.

My issue with Netflix stuff is somehow it still manages to feel cheap. When Harry Met Sally shot with a budget (adjusted for inflation) of $40 million but I feel like it had that Hollywood feel while a lot of Netflix stuff feels like TV somehow. Anyone else agree?

 

[Run&Gun]

There are a few outliers(like The Witcher) that feel like “TV”, but Netflix and Amazon and HBO, etc. are mostly killing it, in my book. We’ve had this discussion before, but there is very little actually released in the theater that I want to see. The real entertainment is at home on TV. The production value for so many of the shows and movies on the streamers, cable nets and even OTA nets is through the roof.

I think some of that “feel” may be psychological, because you KNOW that it was in-fact a “Hollywood” theatrical movie vs. something you KNOW wasn’t a theatrical release. I think you could take a large majority of what is being produced for streaming and cable and release it in the theater and if you did it first, no one would be the wiser.

Now, I’m not trying to say the WHMS doesn’t have that look/feel, but that other things NOT having that feel may be because you know it wasn’t a theatrical release. Also, styles are different, now, so you have to take that in to account. I’ve seen modern theatrical releases that felt rushed and not quite as polished as movies from the past.

 

[puredrifting]

There are a few outliers(like The Witcher) that feel like “TV”, but Netflix and Amazon and HBO, etc. are mostly killing it, in my book. We’ve had this discussion before, but there is very little actually released in the theater that I want to see. The real entertainment is at home on TV. The production value for so many of the shows and movies on the streamers, cable nets and even OTA nets is through the roof.

I think some of that “feel” may be psychological, because you KNOW that it was in-fact a “Hollywood” theatrical movie vs. something you KNOW wasn’t a theatrical release. I think you could take a large majority of what is being produced for streaming and cable and release it in the theater and if you did it first, no one would be the wiser.

Now, I’m not trying to say the WHMS doesn’t have that look/feel, but that other things NOT having that feel may be because you know it wasn’t a theatrical release. Also, styles are different, now, so you have to take that in to account. I’ve seen modern theatrical releases that felt rushed and not quite as polished as movies from the past.

Along those lines, did you watch, "The Goldfinch" yet? Not sure if I liked the script and some of the plot holes but the production values and atmosphere were VERY high end, felt like a Hollywood feature. Interesting aesthetic choices.

 

[DLD]

DLD - you sound like you switched from arguing that total profit matters to arguing that multipliers matter....

I don't see that. Let's say you have a $200M movie (including global marketing) that grosses $600M in theaters. The ancillary revenues are then connected to that number. That is what brings in the total revenues to the multiples of a number you often see in papers.

https://en.wikipedia.org/wiki/Ancillary_market

And some more "Star Wars" accounting.

- https://www.youtube.com/watch?time_continue=3&v=fmNaMz4Zkj0&feature=emb_logo

PS. Having worked in retail a while back, a typical department manager wants total profits, not marginal.

 

[DLD]

General articles of how feature films make (or lose) money.

https://www.investopedia.com/articles/investing/093015/how-exactly-do-movies-make-money.asp

https://www.hollywoodreporter.com/news/what-is-profitable-movie-ever-1269879

https://stephenfollows.com/how-movies-make-money-hollywood-blockbusters/

 

[combatentropy]

My issue with Netflix stuff is somehow it still manages to feel cheap. When Harry Met Sally shot with a budget (adjusted for inflation) of $40 million but I feel like it had that Hollywood feel while a lot of Netflix stuff feels like TV somehow. Anyone else agree?

Now that is an interesting discussion topic! But my reasons may be different than your reasons.

Cinematography.
It just so happens that the late 1980s is for me the zenith of cinematography. This belongs in its own thread. But briefly, I prefer everything about it: the lighting style, the diffusion filters, the contrast and highlight roll-off of the film stocks, even the amount of grain (not too much, not too little). I prefer it over the 1970s. Then the film stocks seem less sensitive, so they had to use harder light. The color of those stocks also seems less nuanced. But I also prefer it over the 1990s, when the lighting fad was toward less filtration. The 1980s used just the right amount of diffusion, whether as a glass filter over the lens or, even better, haze in the air. Don't get me wrong, I don't mean the extreme diffusion in the music videos and low-budget movies of the early 80s. My favorite cinematography is more reliably found in the high-end 35mm TV commercials of the late 80s for major brands like Pepsi and UPS. I think some of them were shot by Adrian Lyne. When Harry Met Sally has very nice cinematography, by Barry Sonnenfeld, that is also a good specimen of the era.

The cinematography of today, even by Roger Deakins on an Arri Alexa, does not look like late-twentieth-century 35mm film. It doesn't look like 1980s video either. It has its own look. You are free to like it, but I would characterize it as overgraded and still retaining some of that telltale video harshness. Its colors are more vivid while the luminance of the mids still has a bit lower contrast (a major contributor for me to a fake or plastic look). And most of the time the highlights still clip too quick. You really need to roll them off long and slow to match the film look. Whether they are even trying to match film is another thread, and I'm pretty sure most of them aren't. But the point is, it doesn't match film.

Writing.
It's a bit unfair to compare When Harry Met Sally to (random Netflix original) because (random Netflix original) likely has a script of medium quality, but When Harry Met Sally was written by Nora Ephron.

Casting.
I know Billy Crystal and Meg Ryan, and I know that they are movie stars. I don't know most of the actors in the latest Netflix original. This is, of course, unfair and subjective to me. But if we're trying to determine the reasons behind such a vague sentiment as it "feels like TV somehow," then it must be taken into account. A movie with major stars feels like Hollywood. A movie with unknowns feels low budget.

Memory.
I know that When Harry Met Sally was in the theater, and I know that (latest Netflix original) was never in the theater. Therefore that memory colors my perception.

How about you?

 

[DLD]

"When Harry met Sally ... " had a lot of Billy Crystal ad libs - some were actually proven bits from his standup routine, such as the "man's dance floor overbite" - with additional uncredited contribution by Rob Reiner and Andrew Scheinman.