How To Estimate Real Profit And Losses On Marvel & DC Films? Black Adam Analysed!

Welcome to #7 of Leeds 1888.

Hello to my new readers!

If you've been reading my content for awhile, you know I'm a big fan of what’s happening in the media & entertainment space.

Skimming the surface of 3 ideas each week, I write about-

• Weekly box office chart of best movies worldwide

• Weekly news in the media & entertainment space, and

• A deep dive into an interesting story

In the story for this week, we will see how a movie makes revenue by analysing the Dwayne Johnson starrer Black Adam. I will also bust the claim as to why the movie is not a FLOP as claimed by certain “experts”.

Before diving in, a small request-

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Let’s get started-

What occurred in media and entertainment this week?

1. RRR song Naatu Naatu wins a Golden Globe- SS Rajamouli’s Telugu-language epic action drama RRR has created history. The song Naatu Naatu has won Best Original Song at the 80th Golden Globe Awards - a first for any Asian song. Music director MM Keeravaani, lyricist Chandrabose and singers Rahul Sipligunj and Kaala Bhairava are over the moon. The fact that Naatu Naatu trumped music stalwarts like Taylor Swift, Alexandre Desplat, Lady Gaga and Rihanna who were also among the nominations is making the hearts of Indians swell with pride.

2. 95th Academy Awards: 'Kantara' receives two Oscar qualifications- The Academy of Motion Picture Arts and Sciences announced the list of 301 films eligible for the 95th Academy Awards. From Rishab Shetty's directorial 'Kantara' to Alia Bhatt starrer 'Gangubai Kathiawadi', S. S. Rajamouli's 'RRR', 'The Kashmir Files' and several other Indian films have secured spots in the reminder list of films eligible for Oscars 2023. The celebrated Kannada film 'Kantara' has received two Oscar qualifications.

3. Disney Star appoints Ajit Varghese as network ad sales head- Ajit Varghese will be responsible for overall advertising revenues of Disney Star’s television and digital businesses and for driving growth through transformative sales and channel strategies, creating alliances and business development. Ajit joins Disney Star from ShareChat and Moj where he was Chief Commercial Officer, responsible for driving monetization, leading marketing efforts and content partnerships.

4. IMAX to speed up India plans after blockbuster year- Global entertainment tech company IMAX Corporation will be speeding up its market expansion plans in India after witnessing healthy growth in box office collections in 2022, a top company executive said. IMAX Corporation CEO Richard Gelfond, who is on his fourth trip to India, said that the time is ripe to up its investments in the Indian market as 2022 was the best year for the company after 2019.

5. Avatar 2 set for OTT release- After mega success in theatres worldwide, the movie fans are eagerly waiting for its release on online streaming apps. As per reports, like its first instalment, Avatar: The Way of Water or Avatar 2 will be released on Disney Plus Hotstar soon. However, there has been no official announcement about the release dates, but going by the earlier trends, the blockbuster is expected to be released in February.

Worldwide Collection of Best Movies

And in the story of the week, we will now discuss the trending news of this year in media & entertainment-

How To Estimate Real Profit And Losses On Marvel & DC Films? Black Adam Analysed!

We recently saw a wave of news saying Black Adam has been a box-office hit.

While other news had it that Black Adam was a box office flop.

And they are losing $100M dollars.

Why are some people saying some movies are making money while others are saying they are not?

Many media sources claimed that Black Adam made huge losses.

While a popular entertainment industry news site, Deadline, reported that the film is looking to net between $52M-$72M.

As audiences, WHO SHOULD WE BELIEVE???

Today, I am going to break down the revenue of the film Black Adam and let you know which side I am on with FACTS.

Let’s see how Black Adam did at the box office-

With a 6.4 IMDB rating, the film was shot with a production cost of $195M. Adding to it, the Promotion and Advertising spend has been between $80M-$100M.

With a global gross of approx $390M, the Dwayne Johnson DC/New Line film is looking to net between $52M-$72M.

These numbers do not include the extra source of cash from Black Adam merchandise.

The movie needs to earn around $600 million globally to break even as per experts.

But even these numbers are good enough for Black Adam to be a franchise starter (given that the first Captain America made $370M WW) as Johnson pointed out on his social media.

Experts had predicted that the film wouldn't likely be able to cross $400 million. As a result, Black Adam could lose between $50 million and $100 million during its theatrical run.

However, there is something missing in the EXPERT OPINION.

Let's dive deep into the numbers and understand how the film made revenue -

A film has different categories of revenue.

Revenue is the money you get when you make a product. When Warner Brothers is making a movie, they want to sell as much as possible.

They also make predictions about the revenue- which ranges from high-end to low-end.

No doubt, Black Adam is in the lower range of what they were hoping the movie would do.

The movie grossed $392M worldwide.

But, can we conclude that it is a BIG FLOP?

Well, that's a harsh and inappropriate statement to make. And I will explain why.

But let's consider for a moment that Black Adam is a loss-making product.

Because how could they make a profit, especially if they spent approx $200M making the movie and another $100M dollars promoting the movie???

Added to that, the distributors also need to get a certain percentage of money too. In the USA, it is 50 per cent while internationally it is 60 per cent to distribute the film.

There is something missing.

Looking at the Profit and Loss statement of the movie here, we can reach certain conclusions-

The movie revenue comes from various sources-

1. Revenue from Rentals-

It's considered rentals when the movie makes revenue from the theatrical release. Or in other words, what's the gross revenue?

In the case of Black Adam, the revenue is $83M domestically while International rentals earned $101M.

It is to be noted that these figures don't have China. China has sidelined several U.S. blockbuster titles in the wake of Covid and other political factors.

So in total, the Theatrical revenue was $184M approx.

2. Home entertainment and TV Revenue-

This includes a series of sub-revenue streams like:

• Revenue from Domestic Home entertainment and streaming- It has got everything to do with D2C sales, digital downloads sales and a streaming licensing fee.

In the case of Warner Brothers, they have their own streaming service, HBO Max.

So, they are paying for the licence themselves.

Is this weird?

NO.

Paramount also does the same thing when they put Maverick on their streaming service, Paramount +.

They write a cheque to themselves.

Other sub-revenue streams include revenues from-

• International Home Entertainment

• Domestic free TV is like a cable that is being paid for with ads or on broadcast networks. Eg- Disney has its own broadcast network ABC.

• Domestic pay TV which is like HBO, there is a licensing revenue here;

• International TV with its licences.

Coming to the expenses side of it, the film has incurred the following costs-

1.  Production cost is estimated to be $195M.

And

2. The global promotion and advertising costs for all of their distribution channels, including the theatricals, home entertainment and for promoting everything to generate the $390M revenue are $100M.

The additional costs incurred are:

• The participation costs that include shared profits with the producers and the big stars of the movie. They get paid an amount when the movie breaks a certain number- let's say a $100M domestic target would be considered a big milestone.

• Residual costs that are paid overtime usually after the movie has been shown a number of times to all kinds of participants, not just the big stars. And

• Global Home Entertainment Costs because it's not free to sell and deliver your content to these home entertainment markets.

These additional costs are estimated to be $43 million.

So, doing basic maths, against a total cost of $338M and with a total revenue of $390 M, the movie stands for a net profit of $52-70 million.

Experts were of the opinion that the film needed to earn around $600 million worldwide to break even. However, sources at Warner Bros. disputed those numbers, saying the movie will break even at $400 million.

Dwayne Johnson added fuel to the entire controversy by announcing that the movie was on track for a profit and compared Black Adam's numbers to the first Captain America movie starring Chris Evans.

But even with these numbers,

Is the film a disappointment for Warner Bros???

It should be. And it is.

And that is why the film isn't part of the new DC film universe's "first chapter."

Johnson hasn’t been shy about wanting a sequel to Black Adam. But the box office number did not tell the same story. He announced the same on his social media as well.

What do I think of the entire controversy?

Black Adam doesn't have the momentum of a Marvel movie. It’s not a Marvel film and we should not expect it to play like one.

If you have seen Thor: Love and Thunder, it has an IMDB rating of 6.3. Its box office collection was $760M. The movie was UNwatchable, to be honest.

But it's about the in-built Marvel brand which is an asset that Disney has.

And it’s not just “Black Adam” that’s struggled greatly to earn back its budget in pandemic times. Disney’s Pixar’s “Lightyear,” director David O. Russell’s star-studded period piece “Amsterdam” and Lionsgate’s disaster thriller “Moonfall” were other big-budget properties that failed to turn a profit in theatres. Even Strange World, a movie that faced a $100 million-plus loss, still is getting $ 90 million in ancillary revenues on an “unwatchable” movie.

Coming back to Black Adam,

When the film was commissioned, the break even was believed to be $450 million, but that figure has dropped given the particularities of the new home entertainment landscape.

The theatrical performance is just one element of the overall profitability profile of the movie.

The film has already over-performed projections for its home video release.

Any film's "ancillary revenue," that is, money a movie makes outside of theatres, is now more profitable thanks to films having generally shorter periods of time in theatres. Thanks to pandemic era concessions, films hit home entertainment platforms in 33 days rather than 75 days.

With these ancillary revenues added, Black Adam will turn a profit. Movies tend to turn a profit only after revenue from home video, streaming, rentals, and consumer products are factored in.

Then there is the HBO Max release that will help expand the film's profile and bring it to more viewers in more places. Just because a company that makes films also owns their own distribution platform doesn't mean the money they earn is not real money.

Black Adams definitely could have been a bigger hit, playing somewhere in the $500M category. Because this was an actual good DC superhero movie starring one of the biggest names in cinema today with a cameo by Superman, the favourite superhero of all time.

But to call it an outright DISASTER would be an overstatement. We could say the movie underperformed.

Future of Black Adam?

The actor: Johnson - let audiences know that future opportunities of Black Adam are possible through DC's multiverse and any appearances would either be standalone such as Joker and The Batman, or an event movie like Spider-Man: No Way Home.

What do you think upset the DC fans?

That's all for today!

And if you've got a moment, I’d love to hear what you thought of this edition of the newsletter.

I read each of your replies.

Vipul.