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Production Budget Thread

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Thread where we can chat about production budgets for current and upcoming movies.

 

Best sources for budgets are the trade papers VARIETY and THE HOLLYWOOD REPORTER, plus the L.A. Times and BOM and IMDB and SBD (complete access).

 

 

As an aside, Aaron Sorkin appeared on the The Rewatchables podcast and he had an interesting tidbit on production budgets (30 min mark). I'm paraphrasing...

 

There is no net with respect to whatever percent of the net you're promised. Studios will often charge to your movie development funds spent on movies they didn't make. Not to mention marketing/prints. A Few Good Men cost $41m to make, made over $500m (including rentals) but hasn't shown a profit. 

 

He recounts how Bill Goldman, writer for (the profitable) All the Presidents Men, told a story about how each year after the film's release, Warner Bros writes him a letter stating how the movie hasn't realized a profit. The 14th year, he gets a very small check, the 15th year, the movie somehow goes back into the red! 

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Feel we had a thread for this already:

 

 

I would add to those:

http://film.ca.gov/wp-content/uploads/CA-Tax-Credit-Progress-Report-FINAL-DRAFT-11-2-18.pdf

15 minutes ago, lilmac said:

There is no net with respect to whatever percent of the net you're promised

I imagine that why that practice has long been completely stopped (outside book adaptation type of deal where it seem still common to get f... on the book you sales before your first successful adaptation).

Edited by Barnack
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3 hours ago, lilmac said:

Thread where we can chat about production budgets for current and upcoming movies.

 

Best sources for budgets are the trade papers VARIETY and THE HOLLYWOOD REPORTER, plus the L.A. Times and BOM and IMDB and SBD (complete access).

 

 

As an aside, Aaron Sorkin appeared on the The Rewatchables podcast and he had an interesting tidbit on production budgets (30 min mark). I'm paraphrasing...

 

There is no net with respect to whatever percent of the net you're promised. Studios will often charge to your movie development funds spent on movies they didn't make. Not to mention marketing/prints. A Few Good Men cost $41m to make, made over $500m (including rentals) but hasn't shown a profit. 

 

He recounts how Bill Goldman, writer for (the profitable) All the Presidents Men, told a story about how each year after the film's release, Warner Bros writes him a letter stating how the movie hasn't realized a profit. The 14th year, he gets a very small check, the 15th year, the movie somehow goes back into the red! 

Someone once said that the film industry uses accounting methods that in any other business would land a lot of people in Jail for fraud.

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People overestimate how much contract in other industry are respected a big entity that deal with a small for who it is the main clients will often not respect terms, suing is complicated, costly and would mean loosing your main/virtually only client. Donald Trump type of story with contractor isn't really that special.

 

In that movie industry type of story (when it is involve someone first success) it is really often an adult signing a very bad contract that made it perfectly legal for studios to charge and overhead that include that type of spending, obviously net profit would have removed P&A, call only 20% of the home videos sales in the revenues line, etc...

 

For example the story can read Warner Brother claimed that the 1989 Batman and the sequels didn't made any profit despite grossing over 2 billions in revenues.

 

The reality isn't that at all, they are not claiming the movie didn't made any profit, they are claiming that the 13% of what was defined in a contract formula turned out to end up being $0 and a judge did agree for it to be the case:

http://marshallinside.usc.edu/mweinstein/teaching/fbe552/552open/notes/BATFILM decision.pdf

 

When it is a mentality stable and adults, not coerced in any way to sign a contract like that, it is hard to call it fraud and to change it or void it after the fact.

 

Is it fraud too:

During the trial, plaintiffs claimed that eight elements of the Warner Agreement's "Net Profits" definition were unconscionable:

 

(1) the 10% advertising overhead charge;

(2) Warner Bros.' retention of any economic value of United States tax credits created by the payment of taxes in the foreign territories where Batman was distributed;

(3) application of the 15% production overhead charge on participation payments to third parties;

(4) application of the 15% production overhead charge on the $100,000 deferment;

(5) all of the interest charges;

(6) the costs charged by Pinewood Studios in England for holding sets and stages after completion of photography;

(7) application of the 15% production overhead charge to the costs incurred at the Pinewood Studio lot; and

(8) the inclusion in "gross receipts" of only 20% of the revenue from videocassettes, less a distribution fee. (These items, and the dollar amounts associated with them, are listed on Exhibit B9.)

 

If all of this was written clearly in the contract people that are producers and worked in the industry for a while and on a studio side and knew well about those tricks signed that contract ? Not sure the studio lie about anything at any point.

 

Many other player made a lot of money on this movie (apparently Jack made 50 million to 90m or so with it), they didn't accepted to have an overhead on other people bonus.

 

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For an other example, when Lee sued Marvel over Hollywood accounting for the Spider-Man movie, it was really not a case of Marvel saying Spider-Man didn't made any profit or fraud.

 

Stan Lee contract said:

[Lee] shall be paid a participation equal to 10% of the profits derived during [his] life by Marvel (including subsidiaries and affiliates) from the profits of any live action or animation television or movie (including ancillary rights) productions utilizing Marvel Characters. This participation is not to be derived from the fee charged by Marvel for the licensing of the product or of the characters for merchandise or otherwise....

 

The contract seem to contradict itself in the same paragraph, a would imagine a giant part of the Marvel revenues came from licensing the character (to Sony, video game maker, toy maker) and make it sound like if licensing revenues are out of Lee deal but at the same time the sentiment of the first sentence seem to be a very clear simply getting 10% of all profits if they are due to Marvel characters.

 

How does the I would imagine highly paid accounting/legal team of Stan Lee sign a contract with such ambiguous wording, and it is not some many page later sneaked affair in what looked a boring part of it, it is directly in what look like the most relevant paragraph of the contract and the whole point of it.

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I’m sure there was a tweet from the director of Source Code recently. His film was a box office hit but apparently the studio told him it hadn’t made any profit til this year (11 years later). 

 

Also, didn’t WB claim one of the Harry Potter movies lost money, with their accounting “methods”? 😂

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11 hours ago, Barnack said:

 

 

I imagine that why that practice has long been completely stopped (outside book adaptation type of deal where it seem still common to get f... on the book you sales before your first successful adaptation).

Has it stopped?

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9 hours ago, Avatree said:

Has it stopped?

 

It does feel like it at least I do not remember any recent example of it on the movie side, stuff like a claimed verbal understanding not being holded up with Fury Road/Hobbit with Weinstein/Do Peter Jackson point include the licensing of the movie imagery on the books do feel quite different than that 13% point meaning $0 on a 2 billion grossing Batman trilogy.

 

The streaming era will have brought I would imagine a new vague of tension:

https://www.hollywoodreporter.com/thr-esq/fox-rocked-by-179-million-bones-ruling-lying-cheating-reprehensible-studio-fraud-1190346

 

It would be my guess everything time a new source of revenues come up, some people get really more rich than the other side for a while, would it be merchandising (Lucas deal), TV, VHS, than DVD and for a while someone take advantage of the situation until it become well known and adjust itself. Every time a case go to court in a big splash like that I doubt entertainment lawyer in the future sign contract with those close and the trick is burn for the studio after that.

 

Lot of participation bonus now are quite clear with the people being able to calculate it with a simple spreadsheet entering number from box office mojo, like you will not walk out of something like this easily:

 

bo bonuses:

$250k @ DBO $70MM or WWBO $140MM

$375k @ DBO $80MM or WWBO $160MM

$375k @ DBO $90MM or WWBO $180MM

$500k @ DBO $100MM or WWBO $200MM

$500k @ DBO $110MM or WWBO $220MM

$500k @ DBO $120MM or WWBO $240MM

$500k @ DBO $130MM or WWBO $260MM

+
paid ads + 500k perqs

 

Has for point system when reading the contract, they do sound like the result of decade of entity not trusting studio at all, for example the revenues are not accounted by the studio usually anymore but by a third part cam company like this one:

http://zannonimedia.com/collection-account-film-productions/

 

A firm that both the studio and other entity will agree on, Sony was for example using them: https://www.fintagehouse.com/business-groups/filmandtv/collection-account-management/ 

 

CAM-Dia-2.png

 

 

in their contract, those firm can make the residual payment, profit participation themselves, I do not think people would trust any opaque by the studios accounting anymore after all those stories. And the contract go quite in detail in how all is calculated, but then again people that go played in the past probably thought the same.

 

Those who are far from the executed actual movie contract too, say you wrote a book and sold the right to a firm that is selling them to production house that are selling it / distributing it via a studio that end up being a movie 12 year's after, apparently them if they had point rarely see anything after all those steps that need to roll back without any issues.

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11 minutes ago, Ryan Reynolds said:

Do films with massive product placement deals like Transformers films lower the reported budget in anyway?

 

Usually partner will determine in advance tax credit, international pre-sales, product placement and so on is dealed and usually it is diminishing the movie budget and helping the formula to reduce the break even point to have the bonus kick in faster (because they could be put in a revenues column instead of reducing the cost column arguably).

 

You can read about how it was handled by sony:

https://wikileaks.org/sony/emails/emailid/87112

 

Michael: Regarding product placement/integration fees for products to appear in Bond films (whether Sony pays or a 3p [e.g., on the last film Omega paid 1m and Heineken paid 3m]), the agreement is clear that such fees serve to reduce the budget of the picture. As a result, whatever we pay costs us only ½ that amount extra since we get the benefit of the budget reduction and we are 50/50 on costs with MGM.

 

(2) If the anticipated use of a Consumer Product is a featured use for which MGM and Danjaq intend to seek a cash product placement or product integration fee or other promotional support (a “Bond Product Integration”), then the procedures set forth below shall apply to each such Bond Product Integration, and, if SPE exercises its option to have the Sony Consumer Product used for such Bond Product Integration, SPE shall pay fair market value consideration (including by means of cash payment and/or promotional support) for such Bond Product Integration based on the nature and extent of the use of such Sony Consumer Product in such Bond Product Integration, in accordance with the terms set forth in sub-paragraph (c) below (and such consideration shall be applied as otherwise described in this Agreement (e.g., cash payments will be applied as a Budget Reduction, etc.)). 

 

But has you see with a beer deal on what was maybe the biggest placement product franchise of them all, the amount actually paid in money isn't necessarily that massive, 1M, 3M, 5M for smartphone

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This is a good article that is tangentially related this thread, and very much related to the board's interests generally:

https://thehustle.co/why-is-movie-theater-popcorn-so-outrageously-expensive/?curator=MediaREDEF

 

Quote

 

When a theater wants to show a film, it must agree to pay the distributor a percentage of all ticket sales. This percentage is higher during the first few weeks of a film and decreases over time, but generally averages out to ~70%.

In 2018, Cinemark sold $1.8B in tickets at a cost of $1B (distributor fees). By contrast, concessions brought in $1.1B at a cost of just $181m — an 84% profit margin.

 

 

The cinemark ratio (1/1.8) is 55.5% which matches the detailed Harry Potter revenue sheet from that court case that said the movie lost a zillion dollars.  Doesn't match the 70% quoted before.

 

Also of interest:

Quote

Less than 10% of the US population goes to the movies, compared to 65% in 1930. And those who do go are attending less: In 2018, the average moviegoer paid for only 3.5 tickets, down from 4.9 tickets in 2002.

As a result, the National Association of Theater Owners says the number of cinemas in the US has fallen from 7,477 to 5,869 (-22%) in the past 20 years.

 

(not sure if there's a better thread for this)

Edited by MattW
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8 hours ago, MattW said:

This is a good article that is tangentially related this thread, and very much related to the board's interests generally:

https://thehustle.co/why-is-movie-theater-popcorn-so-outrageously-expensive/?curator=MediaREDEF

 

I am not sure if it was ever true is 70% figure but like you said that is false and have been for a very long time, even in the old days annually it averaged out close to 50%.

 

Not only is theater rétention rate is own figure he use show much more than 30% going to the theater but the company he use put together their advertissing cost and what they pay distributor on the same line, the actual amount going to distributor is lower than that.

 

Also ticket sales - film rental  = 828m

Concessions sales - concessions cost = 872m

 

It is not like ticket sales are a loss lead for Food they are often the biggest revenues for theater chain (tend to be close), even thought the margin is much higher on one.

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Good discourse here. I love it.

 

The hyperscale streaming companies are eliminating a lot of the ambiguity and complexity by writing checks for stars upfront and that being that. Not sure if there are ANY ‘revenue’ sharing deals, like for the producers. 

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On 9/4/2019 at 2:35 PM, Barnack said:

 

It does feel like it at least I do not remember any recent example of it on the movie side, stuff like a claimed verbal understanding not being holded up with Fury Road/Hobbit with Weinstein/Do Peter Jackson point include the licensing of the movie imagery on the books do feel quite different than that 13% point meaning $0 on a 2 billion grossing Batman trilogy.

 

The streaming era will have brought I would imagine a new vague of tension:

https://www.hollywoodreporter.com/thr-esq/fox-rocked-by-179-million-bones-ruling-lying-cheating-reprehensible-studio-fraud-1190346

 

It would be my guess everything time a new source of revenues come up, some people get really more rich than the other side for a while, would it be merchandising (Lucas deal), TV, VHS, than DVD and for a while someone take advantage of the situation until it become well known and adjust itself. Every time a case go to court in a big splash like that I doubt entertainment lawyer in the future sign contract with those close and the trick is burn for the studio after that.

 

Lot of participation bonus now are quite clear with the people being able to calculate it with a simple spreadsheet entering number from box office mojo, like you will not walk out of something like this easily:

 

bo bonuses:

$250k @ DBO $70MM or WWBO $140MM

$375k @ DBO $80MM or WWBO $160MM

$375k @ DBO $90MM or WWBO $180MM

$500k @ DBO $100MM or WWBO $200MM

$500k @ DBO $110MM or WWBO $220MM

$500k @ DBO $120MM or WWBO $240MM

$500k @ DBO $130MM or WWBO $260MM

+
paid ads + 500k perqs

 

Has for point system when reading the contract, they do sound like the result of decade of entity not trusting studio at all, for example the revenues are not accounted by the studio usually anymore but by a third part cam company like this one:

http://zannonimedia.com/collection-account-film-productions/

 

A firm that both the studio and other entity will agree on, Sony was for example using them: https://www.fintagehouse.com/business-groups/filmandtv/collection-account-management/ 

 

CAM-Dia-2.png

 

 

in their contract, those firm can make the residual payment, profit participation themselves, I do not think people would trust any opaque by the studios accounting anymore after all those stories. And the contract go quite in detail in how all is calculated, but then again people that go played in the past probably thought the same.

 

Those who are far from the executed actual movie contract too, say you wrote a book and sold the right to a firm that is selling them to production house that are selling it / distributing it via a studio that end up being a movie 12 year's after, apparently them if they had point rarely see anything after all those steps that need to roll back without any issues.

 Are you sure that the practice has stopped? As the OP mentioned studios have been known to add development costs of other projects to your budget. How do you account for all the known and unknown tricks and loopholes they could pull... To me it comes down to having good lawyers reviewing your deal. You make a good point that it’s common knowledge that studio accounting can be suspect. Both sides know both sides are aware. 

Edited by lilmac
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I know this is a PRODUCTION budget thread but I'd like to talk about P&A right quick.

Do you think studios are opting for shorter ad campaigns to lower costs?

One example I noticed was WB/NewLine putting out the teaser for IT 2 a fair bit later than the original. IT 2's teaser came out in May while the first film put one out in March 2017.

A bit of evidence I found was Solo's proposed Ad spend. According to Deadline's Blockbuster Tournament (the flop side) it said that Disney only spent $110m. While back in 2016 they spent $160m marketing Rogue One (source also Deadline).

As most of you know, Solo's ad campaign was significantly shorter than RO or any recent SW film (they didn't release a trailer until Feb. which is about 3 months before it came out).

Thoughts? 

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9 minutes ago, LOGAN'sLuckyRun said:

I know this is a PRODUCTION budget thread but I'd like to talk about P&A right quick.

Do you think studios are opting for shorter ad campaigns to lower costs?

One example I noticed was WB/NewLine putting out the teaser for IT 2 a fair bit later than the original. IT 2's teaser came out in May while the first film put one out in March 2017.

A bit of evidence I found was Solo's proposed Ad spend. According to Deadline's Blockbuster Tournament (the flop side) it said that Disney only spent $110m. While back in 2016 they spent $160m marketing Rogue One (source also Deadline).

As most of you know, Solo's ad campaign was significantly shorter than RO or any recent SW film (they didn't release a trailer until Feb. which is about 3 months before it came out).

Thoughts? 

I think 100M+ is still a pretty solid P&A budget for a wide release movie that's releasing both stateside & internationally. iirc most blockbusters spend 100M-150M on advertising.

 

an example I've seen of Disney lowering their marketing budget if they knew they had a dud was after a wrinkle in time flopped (which they spent 125M marketing it, for some reason) they knew that nutcracker would flop even harder (and it did) so they only spent 77M advertising for that. (according to deadline)

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19 hours ago, LOGAN'sLuckyRun said:

Do you think studios are opting for shorter ad campaigns to lower costs?

 

Has media platform multiply I doubt that it would be the case, it is quite more gray when spent marketing start for a movie on the Internet nowaday versus television-radio, how one even know if what is seen is paid for promo or natural content sometime.

 

But at the end of the day:

http://investors.lionsgate.com/~/media/Files/L/LionsGate-IR/annual-reports/2019-annual-report.pdf

 

Liongates P&A exploded since 2017 versus before.

 

Universal studio marketing spending also raise a lot in 2018 versus the last 2 year's:

 

https://www.cmcsa.com/static-files/54b28afa-2286-46bc-bca0-e35c9a4be739

 

Filmed Entertainment Segment Results of Operations

Advertising, marketing and promotion 1,783 1,559 1,600

 

I feel the most solid evidence are actual studio annual report over what pundits-deadline, what we perceive, etc...

 

It can feel like marketing is down but almost 100% of the online revenues come from marketing expense of big company and movie studio are probably quite over represented here :

annual-revenue-of-facebook.jpg

googles-annual-global-revenue.jpg

 

twitters-annual-revenue-by-channel.jpg

 

 

 

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