WARCRAFT from Legendary Pictures and Universal Pictures (6/10/16)

[fantastic_four]

China is different because they're still not a capitalistic society and still officially Communist. The government manages the film market and limits how many foreign films are allowed to be shown in the country. Many of the ones they do allow don't even get a cut of the box office, they get a flat fee. When China allows revenue sharing at all, the max they allow is 25%.

 

This article details some of the restrictions the Chinese government places on foreign films:

 

http://www.latimes.com/entertainment/envelope/cotown/la-et-1230-ct-china-box-office-20151230-story.html

 

Now THAT is a really good article about the Chinese movie market.

 

But I wouldn't assume what China is allowing for studios is the model for everyone. That's the leap that has been made by some because they see one paper mention 25% studio share for all international markets.

 

It's not...the Chinese and North Korean markets are unique in all the world since China is semi-Communist with heavy government control over markets and North Korea is crazy-Communist with absolute control over markets and near-absolute isolation from the rest of the world. I see no evidence that the journalists talking about box office even know what the details of the deal with China are to even comment on this. Since Legendary is now a Chinese-owned company, it's possible the deal was unique.

[fantastic_four]

1/3 is the traditional overseas take.

 

Several reputable sources have pointed out over the last four years that China is an exception and U.S. studios make only 25% of the gross receipts there, less than in any other country.

 

Also, for more specifics on Warcraft's estimated $15 million loss, see here:

 

http://www.hollywoodreporter.com/news/box-office-analysis-warcraft-avoids-910268?utm_source=Sailthru&utm_medium=email&utm_campaign=THR%20Box%20Office_2016-07-13%2006:00:00_awashington&utm_term=hollywoodreporter_boxoffice

 

It notes that other analysts have put the overall loss at $30-40 million, but those don't take into account the record $24 million paid just for digital rights to the film in China, as well as the $20 million paid for ongoing merchandising rights in China.

 

Why are they writing this article about losses while it's still in theaters without even attempting to factor in the remaining income? Relative to the overall revenue, $15 million to $40 million is only 3% to 9% of the revenue to date, and it could still make that amount by the time it's totally out of theaters--not to mention the income from streaming, networks, discs, etc. If someone thought this movie was going to bring in far more than half a billion, they were delusional. At its height the game had a bit over 10 million subscribers, and that was worldwide with only 3 to 4 million being in America and another 3 to 4 million in China. If every person who ever played the game bought a ticket that might be 20 million people, and that's only around $200 million. But plenty of the people who had ever played gave up on it within a few months and probably had little interest in a film. Thinking they'd draw a huge number of people who hadn't consistently played the game is bizarrely optimistic.

 

then why did they spend $275MM making and marketing the movie?

 

Because they did their forecasting well. I trust the accuracy of Legendary and Activision's forecasts on the Chinese market far more than these sketchy autopsies by reporters.

[Gatsby77]

"Sketchy autopsies by reporters" or no, the conventional wisdom -- well-known amongst most major movie critics & pundits -- remains correct:

 

U.S. studios typically pocket 50% of the box office from domestic releases

 

(and this is on a sliding scale -- usually ~60% of the first two weeks, 30-40% thereafter, although Disney played hardball with Episode 7, demanding as high as 70% for the first two weeks. Overall it still averages out to 50%)

 

33% for foreign releases

 

25% for Chinese ones

 

(my source: a few business school case studies on movie economics circa two years ago.)

 

Separately, even among movie critics, it's the specific job of Scott Mendelson at Forbes to know the economics cold -- that's Forbes' schtick -- the publication doesn't actually care about film reviews, only relative box office vs. production costs -- and they often have access to non-public information, such as marketing and promotion budgets as well.

 

That's a key and non-trivial difference between a reviewer at say, The LA Times or The New Yorker vs. one say, at Forbes or The Wall Street Journal.

[Bosco685]

"Sketchy autopsies by reporters" or no, the conventional wisdom -- well-known amongst most major movie critics & pundits -- remains correct:

 

U.S. studios typically pocket 50% of the box office from domestic releases

 

(and this is on a sliding scale -- usually ~60% of the first two weeks, 30-40% thereafter, although Disney played hardball with Episode 7, demanding as high as 70% for the first two weeks. Overall it still averages out to 50%)

 

33% for foreign releases

 

25% for Chinese ones

 

(my source: a few business school case studies on movie economics circa two years ago.)

 

Separately, even among movie critics, it's the specific job of Scott Mendelson at Forbes to know the economics cold -- that's Forbes' schtick -- the publication doesn't actually care about film reviews, only relative box office vs. production costs -- and they often have access to non-public information, such as marketing and promotion budgets as well.

 

 

That's a key and non-trivial difference between a reviewer at say, The LA Times or The New Yorker vs. one say, at Forbes or The Wall Street Journal.

 

I appreciate you want to share details, and point to sources as solid references. But how would a movie critic have access to studio financial records and overseas distribution agreements?

 

I can't see studios turning over the balance sheets and marketing agreements so they can get a positive review from a critic. It would be too risky that same information would start to reveal things they fight never to have in the public eye so easily.

[paperheart]

"Sketchy autopsies by reporters" or no, the conventional wisdom -- well-known amongst most major movie critics & pundits -- remains correct:

 

U.S. studios typically pocket 50% of the box office from domestic releases

 

(and this is on a sliding scale -- usually ~60% of the first two weeks, 30-40% thereafter, although Disney played hardball with Episode 7, demanding as high as 70% for the first two weeks. Overall it still averages out to 50%)

 

33% for foreign releases

 

25% for Chinese ones

 

(my source: a few business school case studies on movie economics circa two years ago.)

 

Separately, even among movie critics, it's the specific job of Scott Mendelson at Forbes to know the economics cold -- that's Forbes' schtick -- the publication doesn't actually care about film reviews, only relative box office vs. production costs -- and they often have access to non-public information, such as marketing and promotion budgets as well.

 

That's a key and non-trivial difference between a reviewer at say, The LA Times or The New Yorker vs. one say, at Forbes or The Wall Street Journal.

 

are you saying that Forbes reporters have actual sources that may make their articles/analysis more accurate than the average internet poster who knows nothing? I thought they just winged this stuff.

[fantastic_four]

25% for Chinese ones

 

(my source: a few business school case studies on movie economics circa two years ago.)

 

Separately, even among movie critics, it's the specific job of Scott Mendelson at Forbes to know the economics cold -- that's Forbes' schtick -- the publication doesn't actually care about film reviews, only relative box office vs. production costs -- and they often have access to non-public information, such as marketing and promotion budgets as well.

 

That's a key and non-trivial difference between a reviewer at say, The LA Times or The New Yorker vs. one say, at Forbes or The Wall Street Journal.

 

How would he have any idea whether Legendary's Chinese parent company was charged a 25% rate, some rate below 25% as often happens during negotiations with the Chinese government, the flat rate that half of foreign imports get, or a custom rate since they're a Chinese company and may have been able to get the government to call it a Chinese film since Legendary Pictures pays taxes in China? If he does have a inside source, he should have either cited it or made a non-specific reference to having that source.

[Gatsby77]

how would a movie critic have access to studio financial records and overseas distribution agreements?

 

I can't see studios turning over the balance sheets and marketing agreements so they can get a positive review from a critic. It would be too risky that same information would start to reveal things they fight never to have in the public eye so easily.

 

Are you being serious here?

 

Maybe I just live in a bubble because I work in public relations and deal with reporters every day.

 

Financial reporters get access to studio financial records by interviewing sources, doing research, etc. -- the same as any other reporter. Sometimes they can cite them as on the record; sometimes not.

 

Again, these aren't fanboys from AintItCoolNews or even The Phildelphia Inquirer who just watch a movie & give their opinion; these are film critics from financial publications whose job it is to talk to insiders and market analysts & report information material to the studio's stock price.

 

See the Hollywood Reporter article again:

 

- It quotes Eric Handler, analyst for MKM Partners and Jeff Bock, analyst for Exhibitor Relations Co.

 

- It also attributes opinions given by anonymous "insiders" and "other film executives" -- which goes to your point that studios try very hard to keep this information private.

 

- Tellingly, it reinforces the 25% box office take, noting that for a sequel "Legendary would get more back from the box office in China, around 43 percent, compared to 25 percent, since it would be deemed a co-production now that Legendary is owned by Wanda."

 

- Finally, the article notes that Universal, which put up 25% of the financing compared to Legendary's 43% "should be okay" because it gets a "10% distribution fee off the top" -- this specificity of figures indicates the reporter either saw the contract, or talked with insiders who did.

 

In other words, the reporter did her job.

 

 

[Bosco685]

Are you being serious here?

 

Maybe I just live in a bubble because I work in public relations and deal with reporters every day.

 

 

Financial reporters get access to studio financial records by interviewing sources, doing research, etc. -- the same as any other reporter. Sometimes they can cite them as on the record; sometimes not.

 

Again, these aren't fanboys from AintItCoolNews or even The Phildelphia Inquirer who just watch a movie & give their opinion; these are film critics from financial publications whose job it is to talk to insiders and market analysts & report information material to the studio's stock price.

 

See the Hollywood Reporter article again:

 

- It quotes Eric Handler, analyst for MKM Partners and Jeff Bock, analyst for Exhibitor Relations Co.

 

- It also attributes opinions given by anonymous "insiders" and "other film executives" -- which goes to your point that studios try very hard to keep this information private.

 

- Tellingly, it reinforces the 25% box office take, noting that for a sequel "Legendary would get more back from the box office in China, around 43 percent, compared to 25 percent, since it would be deemed a co-production now that Legendary is owned by Wanda."

 

- Finally, the article notes that Universal, which put up 25% of the financing compared to Legendary's 43% "should be okay" because it gets a "10% distribution fee off the top" -- this specificity of figures indicates the reporter either saw the contract, or talked with insiders who did.

 

In other words, the reporter did her job.

 

I guess you do if you need to take this to the negative when asked about your assumptions.

 

As has been pointed out before, there are Hollywood economic practices that lead to secrecy about much of their individual film financials. So not everything is in their public documents, even though they are publicly traded companies as investments.

 

Otherwise, how could things like this occur?

 

How Hollywood Accounting Can Make a $450 Million Movie 'Unprofitable'

 

Hollywood Accounting: How A $19 Million Movie Makes $150 Million... And Still Isn't Profitable

 

NPR: We See Angelina's Bottom Line

 

This system is partly a historical accident. But, Epstein says, all the accounting tricks can also help protect the egos of Hollywood's finest: They allow actors to say they're landing huge contracts to make movies, even when the actors may never see most of that money.

 

And yes, these were also researched by very reliable and thorough reporters. Go figure!

[Bosco685]

Warcraft Sequel Might Not Release in US Theaters

 

Thrillist caught up with director Duncan Jones and talked with him concerning the film:

 

“I’m equally proud and furious about Warcraft. I love it. I spent so much time on it. I put all my heart into trying to make it work. Parts of it, I think, work but it also drives me crazy that I wasn’t able to push through everything that I knew needed to happen in order to make the film I knew it could be.”

 

"If there were an opportunity for us to make another film in the Warcraft universe I really feel like we did the hard work in the first movie as far as setting the table. I would love to capitalize on three-and-a-half years of hard work and be able to have some fun in that world now that I’ve done the hard work. [so] who knows? Maybe I’m just being a masochist.”

[Bosco685]