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[dvd-discuss] Re: Hollywood accounting practices
- To: dvd-discuss(at)cyber.law.harvard.edu
- Subject: [dvd-discuss] Re: Hollywood accounting practices
- From: Michael Sims <jellicle(at)inch.com>
- Date: Thu, 6 Jun 2002 10:04:52 -0400
- In-reply-to: <200206060500.g56500A08929@eon.law.harvard.edu>
- References: <200206060500.g56500A08929@eon.law.harvard.edu>
- Reply-to: dvd-discuss(at)cyber.law.harvard.edu
- Sender: owner-dvd-discuss(at)cyber.law.harvard.edu
> 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
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
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.