I think having a discussion on the efficacy of box office vs. total revenue is fair. In fact, this is an argument that Ike Perlmutter made. Perlmutter was frustrated that Team Disney has an obsession with looking at the success of films in terms of box office rather than holistically. So, Bob Iger and Disney's executive leadership team actually seems to judge the success films more like
@TP2000. Perlmutter views things more like you.
Ok, I’ll mostly park this other to say I need a source on this other than a white paper from a disgruntled ex employees and a failed corporate raider.
The trouble with your thesis is they don’t seem to judge it like TP. They seem to call Elemental and Mermaid a success. He doesn’t.
But if you want something not from a terrible year when they (Disney) were motivated to lie - how about Encanto. That seems to constantly get top billing over the more forgotten Doctor Strange. Or how about Tangled, which actually highlights how fixating on the production cost as the true and only arbiter of cost can miss the point.
I think both provide useful data. Pre-Covid Disney could reasonably expect to make money on their theatrical runs. That means that any TV/VOD revenue was simply extra money to enjoy. Moreover, theatrical performance is a good indicator of the performance of TV/VOD revenue (obviously not perfect, as sometimes films blow up in the secondary market as you well know). But your point that Hollywood doesn't stop tabulating a film's success when the last theater drops
the film is well taken. A lot of money is made through other forms of distribution.
But all of this is rather separate from the argument on estimating the breakeven point for a film to earn money on its theatrical run.
@TP2000 is making a narrow argument that the breakeven point for Apes 9 is around $460 Million USD in earnings on its theatrical release based on his method of calculation. You argued that the 2.5x rule is more appropriate based on Disney's accounting, but there is too much interference from other revenue streams to use Disney's accounting as a useful benchmark for inferring the cost of a film.
I’m not inferring cost, actually. I’m inferring a rule of thumb that can accurately call whether a film makes a studio money or not, at the end of the day. One we can backtest accurately against financial reports and trades breakdowns. One that is holding up a lot better to scrutiny.
Knowing a films true costs can only be backtested as an estimate when you know how much the film made. That’s because in some cases, the production costs can be a smaller and smaller portion of the entire costs. That’s true in hugely successful movies or the weird oddity that is the Comcast animated films. I only bring up this segment in particular, because I think this forum is pretty interested in comparing those two more accurately.
Why do costs fluctuate? Profit sharing, marketing spend. Other factors, but as a movie is more successful, the studio releases more waves of marketing, both for the theatrical window and the back end.
As a result there’s no day one rule of thumb. Conveniently I can roughly determine the point of equilibrium.
If you want to know the true full costs versus only the partial revenue (of the theatrical window), that number actually seems to be 4X for Disney films and most of the industry.
So if no other source of revenue ever existed, Apes would need 640 million in box office to break even (kind of simplifying for a 50-50 Domestic:International split). That’s sort of asinine, because some of that cost is because there’s profit participation… because there is profit… because there is back end money.
Deadpool 3 would be 1 billion. Inside out 2 700 million.
Testing the Illumination and Dreamworks profile, that number seems to be 6X. Both because the rest of the costs are poorly implied by the upfront production budget. Secondly because the profit participation starts somewhat earlier. It’s a weird measuring stick, but that’s what it is if you guys really want to use that.
So you’d be looking at 450million for Trolls and Migration. 600 for Mario and Despicable me films.
I think that’s a terrible way of looking at and reporting the data, but it is more accurate.
I also see some indication that Disney doesn't expense the entire production cost of a film at the time of the film's release. They expense it over the life of the asset, so you don't actually see the total cost of the film hit the financial statements at the time of release. They have internal models for expensing the costs, but we aren't privy to them. So, it's not extremely useful to try to deduce the production costs of individual films or even groups of films from the financial statements.
This is why I included Q2, very purposefully. It was actually a unique time to see how Disney amortizes the films in the back end under the hood. They seem to match the back end tail correctly as that’s a bit more reliable for them with streaming and licensing. So while we should have a terrible Q2 that is back ended by terrible amortization from all their end of year flops, the company only reports -18million. Which I honestly think a small chunk of was due to the Pixar films.
Whereas you can clearly see how the films production budgets are put mostly on the books upfront. It’s why the quarterly loses spike around Indy, Wish, Marvels etc quite predictably. And why those movies are called out in their subsequent quarters. It is more accurate than you allude to and I will still say my calculation is over-calling it, despite me including 5 quarters of loses for that reason. So it seems to be backed in for the droughts of a couple more million of loses not realized.
TP’s numbers are completely missing the mark and again do not align with Deadline figures, which you are also sidling to try and ignore my two actual data sources. I’m still waiting on the missing 650+ million in loses.
Moreover, Disney has a responsibility to use their money well. Some of these films might be making a profit, but they have to weigh the benefit of spending money on a particular film next to spending it on other investments. Right now, Disney could invest their shareholder's money into an S&P 500 index fund and they would make a better RoI. That's humiliating.
100 percent. I’m trying to just get more accurate data reports. I did not in actuality change a single conclusion in reality. The big losers still lost money. The Studio division still lost money. Isn’t it more helpful to know accurately how much instead of a fake estimate?
It's that, and I just don't want to do that much math six months after a movie flops at the box office to see if it could claw back a few million via corporate accounting. That doesn't sound like much fun during my afternoon patio time.
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