[dvd-discuss] Re: Hollywood accounting practices

[Michael Sims <jellicle(at)inch.com>]

mickey wrote:

> I said that wrong, didn't I? The claim is that only 2 of 10 recover
> costs.. .

There are any number of factors.  First you "recover costs in theatrical 
exhibition" doesn't mean much.  Many films are made for video release - 
some never even hit the theaters.  The breakdown might be something like 
this:

For every ten films:

1 of 10 films bombs and only makes back a fraction of its costs, say 50% 
or 75%.  Note that even a "bomb" is still a loss of maybe 25% of the 
principal over a period of three years or so: better than most US stocks 
have done recently.

2 of 10 films are made for video: don't recover costs in theaters, do 
recover costs in video.

5 of 10 films hit the theaters, don't make back costs.  For instance, the 
movie may have cost $100 million to make, and only made back $99.99 
million in the theaters.  These films become profitable as soon as they 
hit video.

2 of 10 films hit the theaters, make back costs in the theaters and then 
become super-profitable in video.

Valenti's statement that "8 of 10 don't make back costs in the theaters" 
is neglecting that video is now the major part of their business - 
theatrical releases are secondary.  Films are produced based on the 
overall calculation that they will be profitable over the next five years 
counting revenue from all sources: theaters, pay-per-view, rentals, video 
purchases, cable television, broadcast television, product promotional 
tie-ins, etc.  And the vast majority of them are.


-- 
Michael Sims