Disney (and others) at the Box Office - Current State of Affairs

[TP2000]

FYI - I’m not actually trying to eliminate the formula. I’m trying to help him refine it.

How about this... The First Omen was the first new movie in theaters from any Disney studio in 2024. It has now left theaters this week, and it's box office performance is noted below. I come up with a $20 Million loss for 20th Century Studios from the rather weak box office performance for The First Omen.

What does your math equation come up with as a profit or loss for The First Omen? Here's mine again...

The First Omen: Production $30, Marketing $15, Domestic $12, Overseas $13 = $20 Million Loss

The First Omen (2024) - Box Office and Financial Information

Financial analysis of The First Omen (2024) including production budget, domestic and international box office gross, DVD and Blu-ray sales reports.

www.the-numbers.com

 

[BrianLo]

But for the sake of this thread and all of us non-experts here, it's easier and more interesting to just stick to Box Office.

I’m not asking you to change that. I’m asking you to utilize the more accepted industry 2.5 rule of thumb. That one that actually calls loses better.

Or use the 4x/6X multiplier if you just want to know what the theatrical break even would be in a ‘headline grabbing’ take.

 

[BrianLo]

How about this... The First Omen was the first new movie in theaters from any Disney studio in 2024. It has now left theaters this week, and it's box office performance is noted below. I come up with a $25 Million loss for 20th Century Studios from the rather weak box office performance for The First Omen.

What does your math equation come up with as a profit or loss for The First Omen? Here's mine again...

The First Omen: Production $30, Marketing $15, Domestic $12, Overseas $13 = $25 Million Loss
View attachment 786818

The First Omen (2024) - Box Office and Financial Information

Financial analysis of The First Omen (2024) including production budget, domestic and international box office gross, DVD and Blu-ray sales reports.

www.the-numbers.com

12.5 million Loss

The easiest way to figure that out for you is just drop half of the marketing from your budget.

Or 1.25X production minus the Domestic and International totals (12+13) - (30x1.25)=


Note - it’s not an accurate measure of marketing, we’d have to back test down the road.

 

[Disney Analyst]

 

[WoundedDreamer]

As a result there’s no day one rule of thumb.

This seems to be the core of you argument. And I don't think anyone is contesting that we lack the information to make an entirely concrete estimate. Marketing spend might be more or less. Production budget might be more or less. The domestic to international ratio might be more or less. This will fluctuate film to film. There's no concrete rule. But we can use models to get us closer to the truth than we otherwise would be. And @TP2000's model (that he didn't even invent, but got from others following this market) is not absurd or invalid. Individuals have said "we know its inaccurate," when in fact there is reasonable evidence that it's a useful tool. There might be outliers like Elemental that do not fit within the model, but that does not mean we throw the model out completely as useless or invalid.

I completely respect your argument that looking at revenue sources holistically is the superior approach. But @TP2000 is having a narrower conversation on box office vs. production costs. You can argue with him on the wisdom of that, but it's certainly not uncommon amongst those who follow the film industry (both in professional Hollywood and amongst novice enthusiasts).

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.

Disney has an internal model for the “Ultimate Revenue” of each theatrical film that they create. Suppose they expect a film to make $700 million in “Ultimate Revenue” over the life of the asset. If Disney spent $150 Million on the film, that $150 million would be amortized in line with the projected revenue of the asset.

You’re correct that this is not a straight line. The costs will be skewed towards the beginning of the run. But that’s not the complete picture. The projected “Ultimate Revenue” and the associated amortizing of a film’s production cost takes up to ten years:

“For film productions, Ultimate Revenues include revenues from all sources, which may include imputed license fees for content that is used on our DTC streaming services, that will be earned within ten years from the date of the initial release for theatrical films.“ (See Page 96 Disney’s 2023 Annual Report).

This means that Disney is still amortizing the production costs of films like Avengers Endgame or Star Wars: The Rise of Refuse. Why then were losses particularly dramatic with the release of the 2023 films? Because of the following:

“Ultimate Revenues are reassessed each reporting period and the impact of any changes on amortization of production cost is accounted for as if the change occurred at the beginning of the current fiscal year. If our estimate of Ultimate Revenues decreases, amortization of costs may be accelerated or result in an impairment. Conversely, if our estimate of Ultimate Revenues increases, cost amortization may be slowed.” (See Page 63).

Disney also explains that they reassess their models of “Ultimate Revenues” after the theatrical release (See Page 63). When a film tanks at the box office, Disney is forced to front load more of the cost of the film in their earnings for that quarter in line with the lower expected revenue. However, this does not mean that the entire cost is amortized in that first quarter. The 2023 loser films you mentioned (Indy, Wish, Marvels, etc.) likely have hundreds of millions more to amortized. Disney will be slowly paying down Indy 5 and Wish until the early 2030s. Unless they determined that those films were not going to make any “Ultimate Revenue” over the next decade, which they have not indicated. That’s where @TP2000’s missing hundreds of millions went.

All of this can be summed up by saying that using quarterly financials to determine the total cost of a film (or group of films) is pretty much futile. It gives us an idea, but hundreds of millions more will be hidden in the next 40 quarterly reports.

Noteworthy Edit: "The original version of this post said "[costs] will be hidden in the next 40 annual reports." That was a mistake. I replaced quarterly with annual. Apologies for any confusion that this might of caused. I have amended the post for clarity and accuracy. The costs of a film are amortized over ten years.

 

[_caleb]

Interesting discussion about the "rule of thumb" for determining box office break-even/profitability, but I don't think any of the conventional thinking, metrics, or rules apply reliably across the industry anymore.

In other, completely related news, did anyone stream the Fall Guy yesterday, just 17 days after its box office release?

 

[WoundedDreamer]

This film is going to be huge. Wolverine is going to bring in the fans.

 

[DKampy]

Interesting discussion about the "rule of thumb" for determining box office break-even/profitability, but I don't think any of the conventional thinking, metrics, or rules apply reliably across the industry anymore.

In other, completely related news, did anyone stream the Fall Guy yesterday, just 17 days after its box office release?

This exactly…when most films can be streamed at $20 a rental while still in theaters… I can only assume many people watch films this way as every studio continues with this revenue venture…it has thrown a wrench into any models or rule of thumb at determining profits

 

[Disney Irish]

This seems to be the core of you argument. And I don't think anyone is contesting that we lack the information to make an entirely concrete estimate. Marketing spend might be more or less. Production budget might be more or less. The domestic to international ratio might be more or less. This will fluctuate film to film. There's no concrete rule. But we can use models to get us closer to the truth than we otherwise would be. And @TP2000's model (that he didn't even invent, but got from others following this market) is not absurd or invalid. Individuals have said "we know its inaccurate," when in fact there is reasonable evidence that it's a useful tool. There might be outliers like Elemental that do not fit within the model, but that does not mean we throw the model out completely as useless or invalid.

Except when said model is shown to be inaccurate time and time again, and acknowledged by everyone as such, you throw out the model and use a different one or update it to be more accurate. That is what @BrianLo is suggesting here, use a different model to do the box office calculations which on average is more accurate than the previous model.

And its not even like using 2.5x is some outlandish model, that has always been the traditional way of calculating box office, ie the rule of thumb model. It was only when some posters started getting into the weeds of domestic/international cuts that this new model that TP uses came into being. But as has been discussed numerous times, and you even acknowledge, those cuts change from studio to studio and even movie to movie, and in some cases theater to theater. Which is why to average everything out better and not have to account for the different cuts, 2.5x is the tried and true rule of thumb model that should be used.

 

[TalkingHead]

Disney Pixar’s ‘Inside Out 2’ Poised To Be Highest Opening Of 2024 YTD With $80M-$85M – Box Office Early Look

Disney/Pixar's Inside Out 2 came on tracking this AM and sources are telling us it's bound to be the highest opening at the domestic box office year-to-date, inching out Dune Part Two ($82.5M) and Godzilla X Kong: The New Empire ($80M) with a 3-day between $80M-$85M.

deadline.com

 

[WoundedDreamer]

Disney Pixar’s ‘Inside Out 2’ Poised To Be Highest Opening Of 2024 YTD With $80M-$85M – Box Office Early Look

Disney/Pixar's Inside Out 2 came on tracking this AM and sources are telling us it's bound to be the highest opening at the domestic box office year-to-date, inching out Dune Part Two ($82.5M) and Godzilla X Kong: The New Empire ($80M) with a 3-day between $80M-$85M.

deadline.com

The original had ~$119 million inflation adjusted domestic opening gross. So, the new film's opening is expected to be ~70% of the original. Pretty weak for a Pixar sequel film, but sets it up to easily surpass Elemental. This is legitimately good news. This gives Pixar time to conduct their restructuring and turnaround with less pressure.

I'm going to be very curious about international performance. The original was great domestically, but really performed impressively in Western Europe and Latin America. Will there be a repeat? Hopefully! And China could also be a positive market for growth.

 

[Tony the Tigger]

Disney Pixar’s ‘Inside Out 2’ Poised To Be Highest Opening Of 2024 YTD With $80M-$85M – Box Office Early Look

Disney/Pixar's Inside Out 2 came on tracking this AM and sources are telling us it's bound to be the highest opening at the domestic box office year-to-date, inching out Dune Part Two ($82.5M) and Godzilla X Kong: The New Empire ($80M) with a 3-day between $80M-$85M.

deadline.com

I have to say, I had no interest in the original. Years after it came out, I forced myself to watch it, and I was bored to death and turned it off probably within 20-30 minutes.

The previews have been more interesting than the last time around, IMO. I’m still not going to see it, but I can see why it appeals to some. (I saw the trailer when I went to see Apes.)

Comparing to pre-covid & pre-anti-Disney politics days is kind of pointless. While I disagree with those who say movies will never be what they were, there is definitely at least a temporary lull across the board.

 

[TP2000]

There's no concrete rule. But we can use models to get us closer to the truth than we otherwise would be. And @TP2000's model (that he didn't even invent, but got from others following this market) is not absurd or invalid. Individuals have said "we know its inaccurate," when in fact there is reasonable evidence that it's a useful tool.

Thank you for getting it.

The 2023 loser films you mentioned (Indy, Wish, Marvels, etc.) likely have hundreds of millions more to amortized. Disney will be slowly paying down Indy 5 and Wish until the early 2030s. Unless they determined that those films were not going to make any “Ultimate Revenue” over the next decade, which they have not indicated. That’s where @TP2000 's missing hundreds of millions went.

Again, thank you. It's a shame we all can't lose track of hundreds of millions in a single Fiscal year like Burbank can.

All of this can be summed up by saying that using quarterly financials to determine the total cost of a film (or group of films) is pretty much futile. It gives us an idea, but hundreds of millions more will be hidden in the next 40 annual reports.

I don't have that much time left, unfortunately. So I'll just stick with the 2 or 3 month theatrical runs on Disney's mega-budget movies to see how they do at the.... wait for it... Box Office!

 

[Disney Analyst]

I have to say, I had no interest in the original. Years after it came out, I forced myself to watch it, and I was bored to death and turned it off probably within 20-30 minutes.

The previews have been more interesting than the last time around, IMO. I’m still not going to see it, but I can see why it appeals to some. (I saw the trailer when I went to see Apes.)

Comparing to pre-covid & pre-anti-Disney politics days is kind of pointless. While I disagree with those who say movies will never be what they were, there is definitely at least a temporary lull across the board.

I am shocked - only because I think it's such a lovely film and can't fathom someone finding it boring

 

[BrianLo]

Individuals have said "we know its inaccurate," when in fact there is reasonable evidence that it's a useful tool. There might be outliers like Elemental that do not fit within the model, but that does not mean we throw the model out completely as useless or invalid.

Perfect, so let's tweak it to something slightly more accurate!

The 2023 loser films you mentioned (Indy, Wish, Marvels, etc.) likely have hundreds of millions more to amortized. Disney will be slowly paying down Indy 5 and Wish until the early 2030s. Unless they determined that those films were not going to make any “Ultimate Revenue” over the next decade, which they have not indicated. That’s where @TP2000’s missing hundreds of millions went.

Correct, so by your own understanding, the "Ultimate revenues" are accounted for. TP is and has misinterpreted this like there is another 600 million of loses yet to be reported, but really it's all reasonably accounted for. They know a very clear trajectory of all these films post-theatrical lifecycles at this juncture. The net results are a neutral amortization over a decade. The actual loses were front-loaded.

Anyways, I'll just re-iterate the figures also continue to not match the trades either. There's still an over-accounted for 600 million, because the calculations are in fact inaccurate and non-holistic. As you say.

It's really quite simple to fix, fortunately. We've got a ton of data now thanks to all their recent failures.

 

[erasure fan1]

Isn’t it more helpful to know accurately how much instead of a fake estimate?

But it's all fake estimates, that's the problem. And if there's no reported budget, that's when it's a more inaccurate estimate.

I’m not asking you to change that. I’m asking you to utilize the more accepted industry 2.5 rule of thumb. That one that actually calls loses better.

I'm a bit confused. The 2.5x rule of thumb is what has been used. Let's use the first omen like @TP2000 said. 2.5x the 30mil budget would be 75mil. That would be 24mil shy of profit. Every estimate I've given was that same formula. The problem I've seen is the ones who leave out a marketing budget. We saw that a lot with elemental and mermaid.

 

[Disney Irish]

But it's all fake estimates, that's the problem. And if there's no reported budget, that's when it's a more inaccurate estimate.

If its all fake estimates, and everyone agrees, then what's the point of posting any of it and talking about Disney's box office based on the same fake estimates then other than to air out some silly grievance against Disney?

 

[BrianLo]

I'm a bit confused. The 2.5x rule of thumb is what has been used. Let's use the first omen like @TP2000 said. 2.5x the 30mil budget would be 75mil. That would be 24mil shy of profit. Every estimate I've given was that same formula. The problem I've seen is the ones who leave out a marketing budget. We saw that a lot with elemental and mermaid.

It doesn't involve grossing down the box office figures. It's actually much simpler than you all think it is.

It's an estimate of how much the film made or loss on the Studio end, not an estimate of costs or revenues. Essentially it's always been a simple checkmark of what a film needs to clear in the box office to balance itself out. The 2.5 rule is really most applicable to a conversation of break even. A quick mental tally that if a film makes more than 2.5x the production cost in the box office, yes the film has broken even for the studio.

So if a film costs 30 million to make, it breaks even with a 75 million box office (NOT a 90 million box office as being mis-reported).

For the First Omens current 20 Million Domestic Take and 33 International Take

1) ((Production budget*2.5) - Box Office)/2=
- 30 x 2.5 = 75
- 75 - Box Office (53.6) = 21.4
- 21.4 / 2 = 10.7 Million in net Studio Loss


What we are left with for Revenues
1) The Production Budget was 30 million
2) The Marketing Budget we *think* was 15 million**
3) The Residuals are unknown
4) The Interest is unknown
5) The Participation should be zero since there is no profit

**This would be typical for a Disney movie that broke even, though marketing budgets are reduced if a film fails out of the gate or potentially doubled+ when they are extremely successful. The whole point is the marketing budget and additional costs are not fixed, the only anchor we have is the Production budget.

What we are left with for Costs
1) The film made 12 million at the Domestic Box Office
2) The film made 13.44 million at the International Box Office
3) The film has made some unknown post theatrical revenue - Usually about double the unknown additive costs

Similarly, the revenue are not really fixed, the only anchor we have is the Box office.

So the film cost perhaps 50 million dollars and made 39.3 (from post office and post theatrical) and will have lost 10.7 million for the studio. Or it cost 75 million and made 64.3 million, but lost 10.7 million for the studio.

It doesn't really matter, at least you have three accurate numbers to vacillate over. A production Cost, a Box Office and a better prediction on if the Studio made money.




I think where everyone is running afoul is that they are pretending like they accurately know the marketing costs - and we really don't. It's not that a 2.5X rule ignores that, it just comes out in the wash - it's baked into the presumption.

 

[Tony the Tigger]

If its all fake estimates, and everyone agrees, then what's the point of posting any of it and talking about Disney's box office based on the same fake estimates then other than to air out some silly grievance against Disney?

 

[erasure fan1]

If its all fake estimates, and everyone agrees, then what's the point of posting any of it and talking about Disney's box office based on the same fake estimates then other than to air out some silly grievance against Disney?

The point is, it will always be off. No one can say their way is more accurate than someone else. If you know the estimated budget, and we know the domestic and foreign box-office, it's not that hard to figure out when something underperforms. So what's the point of talking about any of this? The problem I see is, too many are so invested in Disney that they can't see the problems. If we were talking about Disney killing it at the box office, you or anyone else trying to defend Disneys performance wouldn't be saying a word. There wouldn't be any issues, just a bunch of, yea Disneys doing great.