Warner Bros’ latest visit to Middle Earth should generate $1.26B in revenues from all major sources — 3.59 times its expected costs — putting it on track to become the most profitable movie released in December, SNL Kagan says today. The research company builds a financial model for films by using early box office results to estimate likely revenues from theaters, home video, and free and pay TV deals against probable costs. To account for many variables it can’t ascertain (including distribution fees, interest, profit participation, and residuals), Kagan figures a movie will be profitable if expected revenues are 1.75 times higher than estimated costs. Those with a lower ratio but that are still higher than 1.40 times are in a gray area. Films below that are deemed likely money losers. By that standard three other December films will end up in the black: Universal’s Les Miserables ($396.7M in expected revenues/2.37 times costs), Weinstein Company’s Django Unchained ($473.2M/2.18X) and Columbia Picture’s Zero Dark Thirty ($230.7M/2.10X). Those falling short include: Paramount’s Jack Reacher ($253.8M/1.38X), Universal’s This Is 40 ($159.5M/1.14X), Fox’s Parental Guidance ($163.3M/1.12X), Disney’s Monsters, Inc 3D ($75.0M/0.77X), Paramount’s The Guilt Trip ($89.1M/0.57X), and FilmDistrict’s Playing For Keeps ($37.7M/0.28X). Read More »
Cable and satellite companies have a well-deserved reputation for being terrible marketers. (How many other industries would describe consumer products with terms such as “DOCSIS 3.0″ and “EBIF-Enabled”?) Still, I thought the industry would do better with TV Everywhere. Execs sure talk enough about how quickly they need to offer subscribers cable shows streamed to their mobile devices. That’s why I was surprised to see this factoid today from SNL Kagan: The research firm says that in September, 3.1M unique users streamed TV Everywhere programming at AT&T, Cox, Comcast (Xfinity), Verizon, Cablevision (Optimum), Time Warner Cable, and Dish Network. That comes to just 5.1% of the roughly 60M customers who could have accessed TV Everywhere videos at those companies. The data suggest “relatively weak TV Everywhere awareness among cable, DBS and telco video subs, most likely due to the lack of any serious marketing campaigns to promote the product,” analyst Tony Lenoir says. It also means the services have a long way to go to catch up to other streaming video providers. For example, Hulu had 21.3M unique users in September, while Netflix had 16.2M.
Only four of last month’s 12 major movie releases are clearly destined to be profitable according to the latest monthly tally from SNL Kagan. The research firm says that DreamWorks Animation’s Madagascar 3: Europe’s Most Wanted should lead the pack with projected total revenues (at $783.3M) coming in 2.31 times higher than total costs (of $339.4M). Kagan forecasts each film’s revenues from all sources, except for merchandise and second-cycle TV sales. It compares that to all the expenses it can identify, except for things like distribution fees, interest, profit participations and residuals. Since Kagan can’t account for everything, it figures a film is clearly profitable if estimated revenues are at least 1.75 times estimated costs. Films with an expected revenues-to-costs ratio of at least 1.40 are considered to be in a gray areas while those below 1.40 are deemed likely unprofitable. By that standard, Warner Bros’ Magic Mike came in second at 2.23 ($252.6M revenues to $113.5M costs), followed by Universal’s Ted at 2.20 ($439.4M to $199.4M), and Disney/Pixar’s Brave at 2.11 ($788.9M to $374.1M). Those on the bubble are Lionsgate’s Tyler Perry’s Madea’s Witness Protection at 1.57 ($91.2M to $58.3M), Fox’s Prometheus at 1.54 ($450.7M to $292.0M), and Universal’s Snow White And The Huntsman at 1.52 ($531.4M to $349.7M). Read More »
The mostly dreary new analysis from SNL Kagan reflects the continuing decline last year in domestic home video sales and rentals — and helps to explain why studios are so determined to expand overseas. The research firm says that the average film only recouped 46% of the release costs (negative costs plus domestic prints and advertising) from domestic box office sales and home video transactions. That’s down from 48% in 2010. Paramount’s 14 films delivered the best performance. Kagan figures the studio collected $895.5M from theaters and $242.9M in cash flow from video transactions, equal to 73% of its $1.55B in release costs. True Grit helped with domestic returns covering 134% of its $90.9M in release costs. The Weinstein Co followed with 11 films that generated $102.2M from theaters and $49.0M from home video, 70% of its $215.1M in release costs. Its top title was The King’s Speech, with a 216% return on $50.2M in release costs. Among other studios, Warner Bros also beat the industry average with a 67% return followed by DreamWorks Animation (61%) and Disney (58%). Low budget films dominate the top performing films. They include IFC Films’ Cave Of Forgotten Dreams (941% on $455,000 in release costs), Warner Bros’ Hubble 3D (754% on $2.8M), Fox Searchlight’s Another Earth (429% on $488,000), Producers Distribution’s Senna (258% on $557,000), and Rogue Pictures’ Catfish (258% on $1.6M). Top major releases included Universal’s Bridesmaids (243% on $73.9M) and Disney’s The … Read More »
It was a close contest but sci-fi/fantasy films came in second in the research firm’s analysis of different films’ financial performance in the decade from 2002 through 2011. Since analysts can’t tell how much studios spend for things like negatives, marketing, and DVD reproduction, SNL Kagan figures a film is clearly profitable if the revenues it can estimate from all sources are at least 75% higher than the costs it can calculate. Those with margins of at least 40% are considered to be on the bubble (profitability usually depends on specific deals the studios have with theaters) while movies below 40% probably lost money. By that measure, the decade’s 1,444 films were on the bubble with average worldwide revenues per film of $216.6M and costs of $133.3M, resulting in a 63% margin. The best investments overall were animated films that had a budget of between $90M and $100M: The five films in that category had a 292% margin. The worst performers were two westerns with a budget of $50M or less; costs ran 80% ahead of revenues. Read More »
The per-household subscription fees ESPN charges cable systems amounts to “a tax on every American household,” Liberty Media Corp. CEO Greg Maffei said Monday at an investor conference sponsored by UBS AG in New York City. ESPN charges are the highest of any cable channel, according to SNL Kagan, which estimates those per-subscriber fees have jumped 42% since 2006 to $4.69. By comparison average cable channel fees were up 24% for that period to 26 cents a month. The problem isn’t just ESPN, Maffei said later, because regional networks such as Fox Sports also contribute to the overall escalation of fees networks pay to carry events. NFL, for example, is negotiating contracts that could raise broadcast networks’ fees by 60% to about $3.2 billion a year, the Wall Street Journal noted. Some executives think it might be better to position expensive sports channels such as ESPN on a separate tier that would allow uninterested subscribers to opt out and lower their bills. Otherwise, rising sports rights fees could lead many consumers to drop services. MTV Networks and Nickelodeon owner Viacom Inc.’s CEO Philippe Dauman also singled out ESPN as a significant factor in higher costs because it is “double the cost of all our networks combined.” Even though they still resist the idea of a la carte packaging, media exec are beginning to see the merits of selling smaller, cheaper programming bundles as … Read More »
DreamWorks and Disney’s The Help and Fox’s Rise of the Planet of the Apes are the only two August releases that can be sure of making a profit, although New Line’s Final Destination 5 could make it over the line, according to the latest monthly estimate from SNL Kagan. The financial analysis firm makes its projections based on a ratio that compares a film’s estimated revenue from all sources to the costs that Kagan can calculate — which don’t include distribution fees, overhead, interest, profit participation, and residuals. A movie with expected revenue 1.75 times higher than the known costs is projected to be a winner, while those with a ratio of at least 1.4 are on the bubble. The Help easily succeeds with a 3.09 ratio vs. Apes’ 2.49. Final Destination just barely makes the gray area with 1.43. But other major releases fall short including Focus Features’ The Debt (1.18), Sony’s Colombiana (1.06), and Dimension’s Spy Kids: All the Time in the World (0.97). The biggest disappointments by Kagan’s calculations are Disney’s Fright Night (0.44), Fox’s Glee The 3D Concert Movie (0.44), Lionsgate’s Conan the Barbarian (0.48), Universal’s The Change-Up (0.67), and FilmDistrict’s Don’t Be Afraid of the Dark (0.71). Overall, last month’s 14 releases had an average ratio of 1.24, slightly below the 1.25 for 12 films released in August 2010 and 1.45 for the 14 films in August 2009.
Some bad news today for the cable and satellite companies that have been pooh-poohing the possibility that millions of subscribers will cut the pay TV cord. Researchers at SNL Kagan — one of the most cable-friendly forecasting firms — say they expect 12.1 million homes in 2015 will receive TV shows and movies from Internet services such as Netflix instead of a traditional pay TV provider. That would represent 10% of all households and would be up dramatically from 2.5 million cord cutting homes at the end of 2010 and 4.5 million expected at the end of this year. Although cable and satellite companies still may add pay TV subscribers, SNL Kagan says that “the pace is not expected to keep up with occupied household formation.” About 86% of all homes subscribed to pay TV in 2009 and that dropped to 84.9% last year.
Looks like May wasn’t so bad for movie studios after all. Five of the month’s eight major theatrical releases tracked by SNL Kagan are poised to be profitable. Averaged together, each of the films will generate $464.7 million from theaters, home video, and TV sales. That’s 2.13 times the films’ estimated average cost of $217.7 million — making this the most lucrative May since 2007 when revenues on average were 2.4 times higher than expenses. Since the cost tallies don’t include distribution fees, interest, profit participation and residuals, Kagan figures a film will be profitable if revenues are 1.75 times higher than the estimated expenses.
Disney’s Pirates of the Caribbean: On Stranger Tides sailed to the head of the profitability armada. Kagan figures the studio ultimately will see $1.2 billion in revenue, 2.88 times its estimated $421.9 million cost. Warner Bros’ Hangover Part II follows with expected revenues of $611.4 million vs costs of $213.8 million. The winners list also includes Universal’s Bridesmaids ($311.0 million over $139.6 million in expenses), Paramount’s Thor ($660.7 million over $301.5 million) and DreamWorks Animation’s Kung Fu Panda 2 ($652.3 million over $301.8 million).
Expected losers are TriStar’s Jumping The Broom ($63.4 million vs costs of $66.9 million), Warner Bros’ Something Borrowed ($94.2 million over $135.9 million), and Screen Gems’ Priest ($108.7 million over $160.6 million).
Don’t be fooled by the headlines this summer that likely will focus on how strong movie ticket sales look compared to last year. Researchers at SNL Kagan predict that domestic box office for the period from late April to the end of August will be up 1.7% to about $4.2 billion. Not bad – especially considering that this year’s figure counts 42 releases vs. 45 last year — right? Not so fast. When Kagan looks at all sources of income including international sales, home video, and TV, it estimates that this year’s crop will generate $4.45 billion in profits on $12.3 billion in revenues. That’s down slightly from last year’s $4.49 billion in profit on revenues of nearly $13 billion. The forecast follows Kagan’s estimate that only 2 out of 16 releases in April clearly will be profitable: Fox’s Rio and Universal’s Fast Five. Three others could be profitable for distributors, depending on the terms of their deals with exhibitors: Universal’s Hop, FilmDistrict’s Insidious, and Summit Entertainment’s Source Code.
While the studios sort through their finances, theater chains will enjoy any uptick in summer sales. Box office revenues in the first quarter for the four biggest publicly traded chains – Carmike, Cinemark, Reading International, and Regal – dropped 17.2% vs the same period last year to about $803 million. Their concession sales were down 12.6% to about $337 million, although sales per customer rose 3.2% to $2.97.