Last year, the six major studios—Disney, Fox, Warner Bros., Paramount, Universal, Sony, and their subsidiaries—had total revenues of $7.4 billion from world box-office sales, $20.9 billion from world video sales, and $17.7 billion from world television licensing. Revenues, however, are what companies record, not what they earn. And, in the case of Hollywood, the revenues from movies, DVDs, and TV yield very different earnings.
Once upon a time—before the TV and VCR—studios earned virtually all their profits from a single source: the theater's box office. Nowadays, in the new Hollywood, the world box office is a money loser: In 2004, the studios lost an estimated $2.22 billion on the $7.4 billion they took in from the box office. (Click here to see a table of this data.) This sad reality is not a result of the high cost of making movies, inefficiencies, or of any sort of studio accounting legerdemain. The simple fact is that the studios pay more to alert potential audiences via advertising and to get movie prints into theaters than they get back from those who buy tickets.
Consider, for example, Warner Bros.' movie The Negotiator, with Samuel L. Jackson and Kevin Spacey. It was efficiently produced for $43.5 million, scored a world box office of $88 million, and appeared to be a modest success. In fact, Warner Bros. collected only $36.74 million from its theatrical release after it had paid check-conversion and other collection costs, the theaters had taken their cut, and the MPA had deducted its fee. Meanwhile, to corral that audience, Warner Bros.' advertising bill was $40.28 million, and its bill for prints, trailers, dubbing, customs, and shipping was another $12.32 million. So, after the movie finished its theater run, without even considering the cost of making the movie, Warner Bros. had lost $13 million. Why? For every dollar Warner Bros. got back from the box office, it shelled out about $1.40 in expenses, which was about average, if not slightly above par, for studio movies. |