PATHWAY TO PROFITABILITY -- The Studio View

At ShowBuzzDaily we look at the movie year in three parts: the soft Winter/Spring year-part from January through April, the strong Summer season from May-August, and the slow-starting but soon sizzling Fall/ Holiday season from September through December.  With the Summer season over, it is a good time to take stock of the year so far. 

The chart below summarizes the distribution of all wide-releases films in 2011 (between January and August) according to Worldwide box office revenue.  As we saw last week, the film business is heavily weighted toward strikeouts with a few homeruns and triples.  The ten films in the top two categories in the table are guaranteed huge profits, while the 40 films in the bottom two categories are sure to burn through a lot of cash.


                 Distribution of 2011 Films (through Sep 4)

                        #      (average - millions $)      Ovrseas
                      Films Worldwide  Domestic  Overseas  Multiple
Mega-hit ($750M+)        3    $1157      $325      $833     2.6
         ($400M-$749M)   7     $536      $183      $352     1.9
         ($200M-$399M)  11     $263      $129      $134     1.0
         ($100M-$199M)  15     $148       $83       $64     0.8
         ($75M-$99M)    15      $88       $41       $48     1.2
         ($35M-$74M)    18      $50       $38       $12     0.3
Bomb     ($0-$34M)      22      $21       $17        $4     0.2

A note on reading the chart above.  A total of 15 films this year have grossed between $75 and $99 million worldwide this year.  The average film in this group has averaged $88 million worldwide, with $41 million domestic and $48 million overseas.  (The numbers do not always add up because of rounding error.)  The 1.2 Overseas Multiple indicates films in this category do slightly better outside North America than in it.  In contrast, the 18 films in the $35-74 million group do about the same as $75-99 million films domestically but have virtually no overseas revenue (a 0.2 Overseas Multiple). 

Of course, the chart above looks at Hollywood as a whole, and does not take into account the fierce competition between the six major studios.  The chart below does just that by counting the number of films in each worldwide revenue category for each studio's slate so far in 2011.  Read on to see how each studio stacks up.  


                 Distribution of 2011 Films by Studio

                             DIS   FOX   PAR   SON   UNI   WB
Mega-hit ($750M+)             1     0     1     0     0     1 
         ($400M-$749M)        1     1     2     1     1     1
         ($200M-$399M)        0     2     3     4     1     1
         ($100M-$199M)        3     2     1     1     3     3
         ($75M-$99M)          0     1     1     2     2     5
         ($35M-$74M)          1     1     0     4     4     2
Bomb     ($0-$34M)            4     2     0     2     1     0

DISNEY -- The Mouse House has become a punching bag and a target for industry gossip of late.  At least one of the six majors has to be under-performing, struggling operation.  Kind of like how NBC is treated in the press, with "perennially fourth-place" always preceding the network's name.  As you can see, Disney has the highest number of films in the bottom ("Bomb") category.  Although it has three films in the $100s of millions worldwide, these films are just barely profitable or not profitable at all if the production budgets approach $100 million.  Most important, although Pirates of the Caribbean: On Stranger Tides made it into the top category and Cars 2 landed in the strong second category, there are NO Disney titles in the $200-399 million range, a category that separates winners from losers during the year.

FOX -- 20th Century Fox had a fairly stable year so far, with an even distribution of films.  No mega-hits, but three films in the next two categories and limited number (three) in the bottom two categories.  

PARAMOUNT -- The Melrose studio has the best distribution of the six majors so far this year, thanks to some strong output from DreamWorks.  A mega-hit in the latest Transformers, as well as Kung Fu Panda and Thor in the second category.  What's most interesting for Paramount this year is the utter lack of bombs in the bottom two categories.  Zero.  But we still have a third of the year to go for things to even out.  But still, regardless of where the films came from or what the complicated co-financing deals were, this is a pretty good performance.

SONY -- The Culver City studio has released the most films so far this year (14 versus a low of 8 for Paramount), and it has the most sitting in the bottom two categories.  If there is a silver lining, more Sony clunkers broke $35 million than fell below that level, but that's a pretty lame compliment.  Although Sony managed to place four films in the $200-399 million tier, it only has one (The Smurfs) in the upper two categories (and it just barely makes it).  A disappointing but not disastrous showing.

UNIVERSAL -- Then there's Universal.  Not suffering quite the amount of abuse as Disney in the trades and gossip mill, its 2011 slate is heavily weighted toward the bottom end of the chart.  Only two Universal films (Fast Five and Bridesmaids) occupy the top THREE categories.  The rest of the slate is packed in the lower- to lower-middle categories.  With Comcast pulling the plug on many expensive projects, it will be interesting to see if a singles or doubles approach can really change its profile.  One doesn't want to spend money wildly on every project, but sometimes an expensive swing-for-the fences project or two will actually result in more homeruns to finance the inevitable mistakes.

WARNER BROTHERS -- Other than the final Harry Potter (and that is one BIG exception to make, I grant you), a rather quiet year so far for Warners.  Avoiding bombs very well, most of the slate, however, lands in that region where it is tough to make a profit.  But, of yeah, it had Harry Potter, and that covers up a lot of mediocrity. 

Of course, a movie's production budget has an incredible impact on profitability.  After all, profits (such as the are counted by creative Hollywood accounting rules) are based on a film by film basis and not arbitrary category averages.  For example, two films in the third category ($200-399 million worldwide) are near each other on the worldwide revenue ranking but worlds apart in terms of profit.  Bridesmaids is sitting at $281 million worldwide ($168 million domestic and $113 overseas), while Captain America: The First Avenger is at $339 million worldwide ($175 million domestic and $165 overseas).  The two films have similar domestic grosses but the international advantage clearly goes to Captain America.  However, which film is more profitable?  Bridesmaids was reportedly made for under $50 million, while Captain America was produced for at least $150 million and probably closer to $200 million.  Both films probably had between $75 and $100 million in worldwide marketing costs.  Nonetheless, Bridesmaids has the clear profit advantage, given its comedy genre and lack of special effects.  

We will look closer at film by film profitability in coming weeks (using close but not precise estimates of production budgets), but think of our studio scorecard as a 30,000 foot overview of the Hollywood landscape.