Chapter 98: Step Up Movie Revenue
[Chapter 98: Step Up Movie Revenue]
Back in Los Angeles, Linton first went to Universal Studios to discuss the next phase of the film's distribution plan with Levitt and Robert. When they saw Linton return, Levitt warmly embraced him and happily said, "Our great director and hero is back."
...
As of August 30, Step Up's North American box office had reached $109.51 million. It was already the fourth week, and the daily box office had inevitably dipped significantly, but over the weekend from the 28th to the 30th, the daily box office still exceeded $2 million each day, with weekdays expected to not drop below $1 million.
Of course, the number of theaters showing the film had sharply decreased. Now it was only screening in about 800 theaters with 1300 screens. As time passed, the screen count was expected to decline further.
Universal anticipated the theatrical run would end in two months with a total North American box office around $125 million. This was a remarkable achievement that would definitely rank in the top 10 box office hits of 1992.
Halle, Tyra, and their team were still promoting the movie in cities with higher African American populations. They had expanded their reach to mid-sized cities, and the effect was very good, though they planned to wrap up this week.
Overseas, thanks to Linton and Naomi's promotional efforts, Naomi, having more free time and with this being her breakout hit, pushed promotional events very hard. She toured seven cities in the UK, and just recently moved on to Australia to cover seven cities there for in-depth promotion.
Linton felt a bit ashamed hearing this. Compared to Naomi's intense schedule, his own promotional efforts seemed too light. But thinking about the good results he personally had from promotion, he relaxed.
The overseas box office growth was evident, especially impressive in Japan and France, followed by Germany and the UK. Last week, another 20+ countries began screening the movie.
By August 30, the overseas box office had totaled $92.35 million; Japan $15.24 million, France $11.21 million, Germany $11.54 million, and the UK $9.75 million. Universal estimated the total overseas gross would not fall below $200 million.
However, this would take a long time since each country had different film protection policies, leading to staggered release dates -- some countries might not screen the movie until two to three months later or even half a year.
Merchandising for Step Up, including T-shirts and baseball caps in North America, had surpassed $50 million in sales. Inventory was mostly sold out now, with final sales expected around $55 million.
...
"How much profit did the merch make?" Linton asked.
"Our profit margin was set at 40%. There might be some markdowns on leftover stock, but total profit won't go below $20 million," Levitt replied.
"After deducting distribution fees?"
"Of course. That $20 million is net profit for both our companies combined."
Linton was stunned. The merch profits were incredibly high -- a real goldmine.
Noticing Linton's surprise, Levitt added, "Don't think every film's merch has profits this high. Our merch sold so well mainly because the movie was a breakout hit and your image in the film is extremely popular -- good looks, cool dancing -- that really drew in the young crowd. For most movies, if merch profits reach 50% of the film's investment, that's considered very good. Some films with poor box office don't even sell their merch and end up losing money."
"Yeah, all profits stem from the box office," Linton nodded knowingly.
"Linton, you're amazing -- your first film cracked $100 million in North America, making you a top director already, and we all made big money from it."
"So, how much can I expect to make from this movie? Levitt, can you estimate?"
"Sure. First, the North American market breaks down into four parts. One: box office revenue sharing. Based on our calculations, the North American total box office should be around $125 million. According to the tiered revenue-sharing agreement between Universal and theaters -- where the studio's share decreases over time -- the percentages drop from 70% in the first week to 65% in the second, 60% in the third, then to 45% in the fourth week, decreasing 5% each week until the eighth week at 25%. Given current performance, the final studio cut should be about 55%, roughly $68.75 million. After deducting Universal's distribution fee of $31.25 million, the producers' share would be $37.5 million.
Second is TV rights. Given Step Up's box office, the 7-year TV rights deal should be worth about $10 million. After the 7 years, licensing fees are renegotiated. Universal takes $2 million, leaving $8 million to the producers.
Third, home video rental and sales rights. Based on box office performance, the 7-year deal includes a base transfer fee around $10 million plus a 30% rental and sale revenue share, with renegotiations after 7 years. Universal's base transfer cut is $2 million, leaving $8 million for the producers. Rental and sales revenue is usually settled quarterly and split equally between us.
Fourth is movie merchandise -- so far only T-shirts and baseball hats -- already discussed with profits over $20 million, split evenly to about $10 million each. Other merchandise income depends on the film's long-term influence. If possible, Universal Studios might develop special zones or commercial partnerships.
That covers North American market income. You can expect around $63.5 million in one-time revenue -- not including subsequent home video revenue shares, which won't be small.
You also have soundtrack sales. Daniel said it's selling very well, so that income should be significant too."
"The soundtrack sales are good, but most of the profit goes to Universal Records."
"Ha ha, that's a different division from us, but it's all under Universal nonetheless."
"When will our studio receive these funds?"
"Typically, within a week after the film's run ends, we complete the TV rights and video rental/sales deals. A week after the film's end, theaters settle their box office shares with Universal. Then we settle with you producers. This process varies -- sometimes quick, sometimes very slow.
But don't worry; you're family at our company, so we'll settle with you as fast as possible."
"How fast exactly?"
"After the film's run is over, you can have your accountants and lawyers come verify the accounts. Once confirmed -- at most three days -- I'll complete payment and transfer the funds."
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