Friday, 18 January 2008

Hollywood Babble On & On... #29: We have a question.

Forlourned said...

D, I'm not too sure about how being pre-sold in europe is a bad thing. It's earned over $240+ million (est) there.
The concept of "pre-sold" eludes me. Could you explain it briefly?
It depends on what kind of a 'pre-sale' deal your film has.

Okay, here's how it goes.

Let's say that you're making a film and you can distribute it in the USA by yourself. You have a big star in your cast, but you need up front cash to make the movie.

You go to foreign distributors and say:

"Hey, I have a movie with a big star, lots of boobs and explosions. Will you give me $X,000,000.00 for the rights to distribute the film in your country and you get to keep anywhere between 60%-100% of the box office take in your territory."

They give you the money and keep whatever the movie makes in their territory according to your contract.

You then release the film domestically, and keep 100% of the distributor's share of the box-office take depending on the amount of up-front cash and how much box-office potential the film has.

Independent producers use pre-sales a lot, especially for films with good domestic box-office appeal. It helps raise production funding and can keep a thinly capitalized company afloat until the film starts earning money.

Now most big studios don't pre-sell, preferring to distribute internationally through their foreign subsidiaries.

New Line, though a Time Warner company, has its own domestic distribution system, and no international distribution.

Normally it has a deal with foreign distributors to release their films in exchange for around 40% of the gross. But, according to reports, cost overruns in the making of Compass coupled with internal cash flow troubles compelled New Line to drop that plan, sell the rights for up front cash, and rely just about entirely on domestic distribution for the film to make a profit.

Compass tanked in the USA, and of that $240+ million in foreign box-office New Line might see only a few million, and that isn't enough for a film that cost over $250 million to make and market.

For a film to be considered profitable, it has to earn at least 200% of its production budget. To learn why, click here.

I hope that answers your question.

1 comment:

  1. Forlourned19/1/08 7:47 am

    Good lord! To pull so much money in and have not but pittance back for it is a tragedy! Akin to a person who had the winning numbers, told somebody else without buying it, and getting 5 bucks from the winner as a casual aside. Poor analogy yes, but the only off hand I could imagine at the now. Is this Newlines "Heaven's Gate"? Seriously, two bombs in a row! What's the tipping point to bankruptcy for a studio I wonder.

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