I was listening to WGBH public radio 2 weeks ago and was fascinated by the discussion about the Hollywood Accounting.
Transformers: Age of Extinction
On June 27th, “Transformers: Age of Extinction” which opened in China at the same time as in USA, shown a record-breaking box office worldwide. It scored $100 million at the opening weekend, marks the biggest domestic debut of the year. Up until Jul 30 2014, the movie has worldwide gross revenue of $968 million, $238 million from USA and $301 million in China alone. China is an integral part the success, bigger than USA. (Link to BoxOffice Statistics)
Keep in mind that in some soccer-frenzied countries (Europe and Latin-American), this movie did not open until the World Cup finished. Per hollywoodreporter.com, it has earned $30.1M in Mexico and $22.2M in Brazil in last two weeks. And it still has more several weeks to go. BoxOffice.com projects it to reach $1 billion in its global theatrical run.
Among all the US films shown in China, this Transformers 4 movie becomes the top-grossing movie in history at the Chinese box office, bigger than the last hit – Aviator in 2009. Well, many things have changed since 2009. There are more 3D megahit and massive movie theaters in China now. Also, this movie was co-produced by Paramount, China Movie Channel, and Jiaflix Enterprises. 30-40% of the backdrop and scenes were shot in Hong Kong and China.
International Box Office is growing faster for all films
In 2013, average movie ticket price in China is around US$7.00 per adult while it is $8.33 per adult in USA (source). The total box office in 2013 for China is $3.6 billion while USA & Canada has $10.9 billion.
source: MPAA.org 2013 Statistics
How much revenue returns to Paramount’s pocket?
The gross budget for the movie is $285 million. At $1B projection, Transformers 4 earns 250% return. An officially designated China co-production may have meant 40% back for Paramount. But Transformers 4 failed to receive this co-production designation, so the revenue sharing number drops to 25%. Compare that to what Paramount makes in the U.S., which is generally around half of the domestic (USA) gross. (source). Therefore Paramount still earns double the money from USA than in China.
MVP of Movie Celebrities
Forbes’ writer Dorothy Pomerantz wrote many interesting pieces about which Hollywood actors are most overpaid and biggest bang for the buck last Dec 2013. I won’t go into detail here but it’s entertaining indeed to know the facts on Hollywood accounting.
2013 Most Overpaid Actors – link: Adam Sandler (film makes an average return $3.4 for every dollar paid to Sandler), Katherine Heigl ($3.5), Reese Witherspoon ($3.9)
2012 Best Actors For the Buck – link.
One key takeaway is that USA alone produces approximately 485 movies (you CANNOT finish it by watching daily in 365 days). 50% of Hollywood films have small budget (<$30M) BUT they are still making profits. Their total gross revenues look insignificant – usually only around $50M or less each.
Value Investing Fund (VIF) 