Wednesday, July 19, 2006

Not so Monster Expectations?, or How To Read a Box Office Opening

A few days ago I mentioned the successful Monster House sneaks on Saturday. I just saw another piece on those sneaks, along with this quote from Rory Bruer, Sony's president of distribution: "I think we'll open in the mid-$20 million range, hopefully." Hopefully?!? Now, I don't want to tell the man his business, but either Sony is expecting a huge disappointment, or they're trying to set expectations very low. . . Why do I say that? Wouldn't a $25 million dollar opening potentially be okay, given the strength of the competition (POTC 2 and a new M. Night Shyamalan movie)? Well, no, it wouldn't. But, you ask, what if the movie opens at $25 mill and has "legs?" In this case it still likely won't be enough. Given how much MH clearly cost, and that the buzz on the movie is good, Sony has to be expecting a hit (and I think it will be). But, in today's movie world, any film opening wide to $25 million is headed for a total domestic gross of $75-108 million. And for a big-budget, major release (especially a CG-animated one with Bobby Z. producing), that would be a turkey. I'm going to get into some box office economics that for some reason fascinates me. Maybe it's because I worked on some of those turkeys early in my career, and I know what it's like to show up at the studio on a Monday, having had "my" film underperform on it's opening weekend, and been in too many water-cooler conversations that start out, "Yeah, it sucks that the opening weekend was low, but maybe when word of mouth starts to spread, it'll pick up and turn into a hit." Unfortunately, that almost never happens, and as I've watched the way the box office has behaved in recent years, it's become clear that there's a mathematical precision to what one can expect after the opening weekend. Two simple formulas define a range: Total Domestic Gross = Opening Weekend x 3 (for a movie with no legs) TDG = OW x 4.3 (for a movie with great legs) Most films will fall neatly within the range of those two extremes. Exceptions over the last 10 years are unusual. Animated films tend to be on the high side of that range, so take an opening weekend and multiply it by, say, 3.8, and you'll likely be near the final tally. A multiplier closer to 3 is disappointing; a multiplier around 4 or better means the public dug the film. Films with multipliers much above 4.3 are either superstar performers or surprise breakout hits (or both). So, with all due respect to Mr. Bruer, I suspect Sony is really looking for an opening closer to $40 million (unless they think they can repeat the pattern of Polar Express two years ago -- but then, Monster House isn't a feel-good holiday release that will be free of serious competition after it opens). Just for fun, here are the opening week multipliers of most CG features: Polar Express -- 7.4 Toy Story -- 6.6 Shrek -- 6.3 Jimmy Neutron -- 5.8 Antz -- 5.3 A Bugs Life -- 4.9 Finding Nemo -- 4.3 Toy Story 2 -- 4.3 Madagascar-- 4.1 Shrek 2 -- 4.1 Monster's Inc. -- 4.1 Hoodwinked -- 4.1 Over the Hedge -- 4.0 Cars -- 4.0 The Wild -- 3.9 Ice Age -- 3.8 The Incredibles -- 3.7 Robots -- 3.6 Dinosaur -- 3.6 Shark Tale -- 3.4 Chicken Little -- 3.4 Valiant -- 3.3 Ice Age 2 -- 2.9 Final Fantasy -- 2.8 Doogal -- 2.1 Crunch the numbers for live action films in the last few years and the pattern is even clearer. Try it, it's fun! Use it impress your friends with your predictive powers at those Monday-morning water-cooler chats.


Mark Mayerson said...

This is great, Kevin. Now, do you have a formula for figuring out overseas box office based on domestic gross? And how about a formula for DVD sales based on domestic gross?

Anonymous said...

Very smart question Mark.
This is a really interesting and helpful stat, Kevin. Thanks for the posting.

Kevin Koch said...

Thanks, guys. Foreign box office is both very simple and much more variable. In recent times the foreign box office has tended to roughly equal the domestic, or to be a little higher (about 55-45, foreign to domestic) . But that only holds if you average LOTS of films together.

Big American hits tend to do disproportionally well overseas, especially if they have big name stars. Meanwhile, films with less stature tend to get limited release and marketing overseas, and perform poorly in foreign markets.

Also, the foreign distribution system seems to be getting more efficient, so the foreign share of the total gross seems to be creeping up.

Regarding DVDs, here's some data I saw from a major animation studio that had had considerable success. For their average film, the worldwide theatrical grosses accounted for about 25% of the total revenue stream (and was split about 50-50 domestic-foreign). Another 25% of the revenue was from merchandising, pay-TV, and ancillary stuff. A full 50% was from DVD/video sales.

So, basically, you could take (on average) the domestic gross and multipy it by 4 to get the DVD/video revenues, or by 8 to get the total revenues.

Now, all that is GROSS revenue. The studio's actual profit margin on any of that is info we're never going to know. You can make guesses (the studios get back about 55% of the box office grosses, and the profit margin on DVDs is huge), but it's hard to go beyond that.

Steve Hulett said...

My friend Bob Birchard -- who used to be in film distribution -- says that the domestic split between film studios and theatre chains is somewhere between 55-60% for the studios, and 40-45% for the theatres.

He says this varies from film to film. Sometimes studios collect 100% of gross in the first week and pay the theatres their "nut" for operating costs and a 10% guaranteed profit. Sometimes the first week cut is lower than that.

The weighted average, according to the estimable Mr. Birchard, comes out to the percentages up top (which is what Kevin found in the Regal Cinemas Prospectus.)

Anonymous said...

Looks like Bruer was right. ;-)

Kevin Koch said...

I guess that's why he's prez of distribution, and I'm not! Of course, if I were in charge I would have made Monster House an October release . . .

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