Thursday, December 29, 2005

Where the Money Comes From

What if I were to ask you what brings in the most revenue for a film? The average person may think that the theatrical release is the biggest moneymaker. However, you guys are in the film industry and know that DVDs and the home video release is the biggest moneymaker. Right? Wrong! The biggest moneymaker for a film is TV licensing. ...continued...

The first time I looked through the numbers, it was somewhat of a surprise to me too. After all, it isn’t something the studios openly share with the public and we have been told for years that home video is the money buffet. Studio accountants like to merge box office, home video, and TV licensing into a single number for their Wall Street reports. They purposefully blur things so that it is hard to get a firm grip on where the money comes from. There are several reasons for this, but is probably left for another story. Lucky for us, the real internal figures are confidentially furnished to the Motion Picture Association and if you know the secret MPA handshake, you can follow the money trail.

Last year, the six major studios had total revenues of $7 billion from world box office sales, $21 billion from world video sales, and $18 billion from world television sales. Even a 3rd grader can tell you 21 is more than 18. However, these numbers are slightly misleading because they reflect gross revenue. Simply put, there is more costs associated with box office and DVD sales than television licensing. However, you can see how easy it is to think that home video brings in the most cash.

During a theatrical release, there is a lot of money spent on P&A (prints and advertising). A rough estimate is that studios spend at least half of the production budget for marketing. If Chicken Little cost $80 million to make, they have probably spent at least $40 million to market it. However, a lot of times that marketing cost is much higher and can sometimes approach the cost of the production itself. When you price in prints and the cost of shipping them to theatres, it can add another $15-$20 million for a major release. You can start to see that P&A can easily match or exceed the actual production costs for a movie. When an $80 million dollar movie makes $200 million in the box office, the studio is still losing money by the time theatres take their cut of ticket sales and pay off those P&A costs.

When a film is ready for home video sales, it hopefully has broken even or gotten close to that in its theatrical release. Home video is the point where the studio see the money tip in their favor. Wholesale DVD prices have dropped to $5 in some cases. Even though the profit margins have decreased and sales have leveled off, it still is a huge income source and can bring in excellent revenue. However, marketing costs and advertising are still high and offset a good portion of those returns. Until Iger gets his way and eliminates the delay in release windows, these costs will continue to be significant.

The real moneymaker is in television licensing. What makes it so profitable is that unlike home video, the licensee pays for the cost of marketing and advertising. The studio no longer has to pay for these things. It is pure profit outside of a couple of minor costs. Roughly $4 billion in revenue comes from the major networks, another $4 billion from pay-per-view, and close to $10 billion from cable networks. With this flow of cash and practically no expenses, TV licensing easily out gains both theatrical and home video sales.

The whole purpose of theatrical release is to get as close to break-even as possible. Home video sales should send you into profit. By the time you get through television licensing, you should be sitting on a pile of cash if you have played your cards right.

Mix Up

My first exclusive content on was posted last week. That exclusive content wasn't really so exclusive. Seems that I misunderstood the agreement we had going and I just needed to delay the post here. Sorry for the mix up. Speaking of that website, if you are interested, I just put up a new piece a few minutes ago. Give it a read....not continued...

Thursday, December 22, 2005

Merry Christmas

Merry Christmas to everyone! I'm not going to give into political correctness and wish you Happy Holidays. Sorry, but it is Merry Christmas from me. I'm so sick of everyone tip toeing around afraid to offend others. If you don't celebrate Christmas, good for you. You can still accept a Merry Christmas without getting your panties in a twist.

Now for the Christmas animation wrapup. ...continued...

I wrote my first "exclusive" content for CGCHAR and posted it this morning. You can't see it here, but you can see it there! Hop over to and you will find it. The story actually has to do with "The Business of Animation". Imagine that!

Hoodwinked will be opening nationwide in a couple of weeks. It has received a mild reception from those that I talked to that went to the premiere in LA. There really is no reason to bash the movie, we all know its short comings. Lets see how it performs when its wide release happens. Many eyes are watching carefully.

Pixar and Disney still haven't announced anything. So much for Jobs psychic abilities (he said an announcement would be made by year end).

A recent headline announced that animated films are the most lucrative of releases between 2000 and 2004. This really shouldn't be a surprise. The amount of animated films heading to the theaters in 2006 should be proof enough.

Rumor has it, a CG Chicken Little tv series is in the works.

The following items are still on my Christmas list. I have been informed by my wife that I will not be receiving either of these! The nerve!!

* Palm Lifedrive, Treo, or T5 handheld.
* A decent video camera (I recently dropped our last one).

Thursday, December 15, 2005

DreamWorks Animation, Paramount, and Pixar

DreamWorks Animation recently got a distribution deal with Paramount that must of made Steve Jobs lick his chops. As we all know, Jobs and Iger are trying to see if there can be a continued relationship between their two companies. Although it is an over simplification to say that Pixar just wants Disney to market and distribute for a low percentage fee, that is a very big part of it. ...continued...

Many (including myself) have been saying that Pixar is asking for too much and they need to back down. However, now that DWA struck this deal with Paramount to distribute for an 8% fee has got to give Jobs a case of the happies. Eight percent really is a bargain. And on top of that, Paramount basically gave $75 million cash to DWA for the right to distribute those pictures. Additionally, DWA will get the chance to promote their movies as well as collaborate on new television programming on the huge TV empire that Paramount's parent company (Viacom) owns. Nickelodeon, MTV, Nick at Nite, VH1, BET, TV Land, and Comedy Central.

In a nutshell. DreamWorks scored!

This makes me question why Paramount did what they did. The must have talked with Pixar on a similar deal. They had to be choice #1. That obviously didn't pan out, which leads me to believe one of two things. Either Pixar and Disney have worked things out and will be back in saddle soon or Pixar was demanding way too much from Paramount. For the last several months, rumors abound that Jobs animation company was asking for too much from everyone and potential suitors were leaving the table. This brings me back to what I've been saying for months.

Pixar needs take a step back if they want Disney to sign the papers.

Joining Forces

This blog and CGCHAR ( have formed a mini alliance. For a few months we are going to try out an exchange. I will supply them with articles for their front page news stories and in return, CGCHAR will provide traffic to this website. Relax, this will in no way affect what is being posted on this blog. ...continued...

The founder of CGCHAR and I have exchanged emails in the past and during a recent back and forth, we decided to try this out. I'm always happy to get more readers to my rants and this could be a good way. Rick the CGCHAR guy tells me that the forums have been around since 1996, but in the last few months there has been more of a push to offer industry news on the front webpage. Not that anything I say should be considered "news", but I'm happy to give this a shot and the occasional commentary might be a good fit for that site.