The Hollywood Economist (17 page)

This report reflects the financial status of the 1997 movie
Midnight in the Garden of Good and Evil
eighty-seven months after its release, a span long enough to reflect TV licensing and other back-end revenue. Based on the hugely successful novel by John Berendt, it was directed by Oscar winning director Clint Eastwood, and starred Jude Law, Kevin Spacey, and John Cusack.

1. “Defined Gross” is a term of art in Hollywood accounting used to avoid any confusion or litigation over what is meant by “Gross.” In the case of everything but video, it is the total revenues that are received from all sources. In the case of video (which includes both VHS and DVD), it is a royalty, which, in this case, is 20 percent of wholesale sales.
   

2. “Fee” refers to the fee taken by the distributors, Warner Bros. Pictures and Warner Home Video,
   both of which are wholly-owned subsidiaries of Time Warner, which financed the movie.
   

3. The advertising and publicity expense of $33.8 million and the print cost of $3.4 million include foreign as well as domestic costs.
   

4. “Residual Payments” include the fixed amount deducted from television licensing for pension plans. This applies to every film made with union labor (which is virtually every studio-made movie in the world).
   

5. “The Defined Proceeds,” in this case a deficit, is $85.5 million. This includes interest of $22.7 million, which is a notional charge (though studios do pay interest on their lines of credit).
   

6. “Negative cost” refers to investment in the film itself. It includes above-the-line expenses, such as the money paid for the book, script, producer, director, and principal actors, and the below-the-line costs, which include daily shooting, editing, and post-production.
   

7. “Total Domestic Theatrical,” which includes Canada, is $10.3 million. Since the theater box
   office is $25.5 million, the studio gets only about 40 percent of the box office. This is probably due to the release deal in which theaters reduced the distributor’s share after the first two weeks as the price of extending its run. It is also interesting to note that the off-the-top expenses of $32.7 million are more than three times more than the studio’s share of the domestic box office (even though it ranked fourth the week it opened).
   

8. In addition, a $3 million distribution fee was deducted. Warner Bros. could charge a 30 percent fee because it financed the film.
   

9. The film also lost money on its foreign theatrical distribution, with the expenses of $6 million almost twice the gross. In addition, there is a distribution fee of $1.23 million.
   

10. The richest profit is the nearly $10 million from US pay-TV. This is a result of an output deal that Warner Bros has with HBO, another Time Warner subsidiary. Note that unlike theatrical release, there are only $308,000 in expenses.
    

11. Foreign pay-TV of $9.6 million is also the result of Warner Bros. output deals.
    

12. The domestic video gross of $4.7 million is the 20 percent royalty received from wholesale sales of $23.5 million by Warner Home Video. Warner Home Video retains the balance of $18.8 million to pay the costs of manufacturing and selling the videos, which is probably less than $3 million.
    

13. The film’s total revenues of $52 million were approximately five times the domestic box office. If the domestic and foreign video had been fully accounted for rather than on a royalty basis, the total revenues would have been over $70 million, or seven times the domestic box office.