Box-Office Payola?

Chris Anderson, the editor-in-chief of Wired magazine, has a long-running website called The Long Tail. Now he has just published his book of the same name, and it’s doing great. (Congrats; I haven’t read it yet, but it sounds good.) What caught my eye on his website was this fascinating note (end of the post) from an anonymous writer regarding movie box-office figures, how and why they may be inflated, and why they often fall so dramatically after one or two weeks. Here’s what the anonymous source had to say:

I happened to be riding to work with an exec from one of the major studios this morning, and he mentioned that the studios are increasingly making deals with theaters to inflate opening numbers. In particular, they will give the theaters very high revenue share for the first X days of the movie (he mentioned 100% for the first 3 days), incentivizing the theater to maximize the number of screens the movie’s shown on, inflating opening numbers.

The particular example of Superman and Pirates were actually the ones he brought up — that Superman’s decline was partially due to the theaters’ incentive period running out.

I have no idea how true or prevalent this is, but something you might want to look into. This would be done for movies which the studio considers potential “hits”, increasing discrepancy between them and normal movies.

To me, 100% of the take even for three days sounds ludicrous, but I could certainly imagine the promise of inflating the real figures by 25% for an additional 5 or 10% of the short-term take. I’ve always assumed the reported box-office figures were pretty much made up, anyway. But, as widely as these figures are reported these days, essentially serving as the best marketing a movie could hope for, I would think there’s plenty of value in paying to drive up those first-week numbers as high as possible. It’s hard to imagine anyone in Hollywood objecting, really: studios and producers all want to look more successful than they are, and actors and directors get to negotiate their next deal based on inflated figures.

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  1. Trent says:

    That doesn’t make a bit of sense. It is the studio that pays the marketing cost, not the theater owner. Why would paying the theater owner more in any way increase opening weekend sales?

    Historically the ratio has been the other way around. Theaters get less of a take the opening week (while the studios recoup marketing costs, and because the higher traffic makes up for the lower share) and increasingly higher percentages with each passing week. This is why theater owners loved Titanic – long legs that kept people coming back in the later weeks when the theaters got a bigger share.

    If this is going on it would seem not only unusual but unusually stupid on the part of studio management…. so now that I think about it, they may be doing it after all.

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  2. Trent says:

    That doesn’t make a bit of sense. It is the studio that pays the marketing cost, not the theater owner. Why would paying the theater owner more in any way increase opening weekend sales?

    Historically the ratio has been the other way around. Theaters get less of a take the opening week (while the studios recoup marketing costs, and because the higher traffic makes up for the lower share) and increasingly higher percentages with each passing week. This is why theater owners loved Titanic – long legs that kept people coming back in the later weeks when the theaters got a bigger share.

    If this is going on it would seem not only unusual but unusually stupid on the part of studio management…. so now that I think about it, they may be doing it after all.

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  3. Mango says:

    I’m trying to work that out as well, Trent. The theory that incentivising the theatres to show it on more screen inflates ticket sales sounds a bit hokey. More screens does not necessarily translate to more viewers; once everyone who wants to see the movie has a seat, there is zero value to anyone from adding more seats.

    The 100% thing is also a tip-off that the ‘anonymous source’ might be a fraud; the studio’s aren’t giving up tens of millions in revenue to get a marginal boost in box-office figures.

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  4. Mango says:

    I’m trying to work that out as well, Trent. The theory that incentivising the theatres to show it on more screen inflates ticket sales sounds a bit hokey. More screens does not necessarily translate to more viewers; once everyone who wants to see the movie has a seat, there is zero value to anyone from adding more seats.

    The 100% thing is also a tip-off that the ‘anonymous source’ might be a fraud; the studio’s aren’t giving up tens of millions in revenue to get a marginal boost in box-office figures.

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  5. Dusty says:

    Maximizing the number of screens opening weekend could help immunize the studio against poor word of mouth and reap the greatest benefits from the marketing, buzz and publicity push that tends to drop off once the film actually opens, as everybody moves on to the next product. 100% seems dubious, though, as some of these films will make a relatively large part of their domestic gross opening weekend, although that total is becoming an increasingly smaller part of the revenue stream and perhaps it pays off down the line in terms of ancillary and foreign markets to have a film acquire that air of success, even if you take a big hit upfront. It’s hard to imagine you’d spend $50 million on advertising and then another $50-130ish million to hit the #1 spot target.

    From Mango: “More screens does not necessarily translate to more viewers; once everyone who wants to see the movie has a seat, there is zero value to anyone from adding more seats.”

    Of course, but no one really knows what number of seats are required before it opens. Ideally, you’d want to have just enough screens and showtimes so that anyone who wants to go would be able to and that the theaters would be at or near capacity. If you underestimate, you run the risk that people will go see another option at the time and venue they want to attend rather than wait for the next available showtime.

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  6. Dusty says:

    Maximizing the number of screens opening weekend could help immunize the studio against poor word of mouth and reap the greatest benefits from the marketing, buzz and publicity push that tends to drop off once the film actually opens, as everybody moves on to the next product. 100% seems dubious, though, as some of these films will make a relatively large part of their domestic gross opening weekend, although that total is becoming an increasingly smaller part of the revenue stream and perhaps it pays off down the line in terms of ancillary and foreign markets to have a film acquire that air of success, even if you take a big hit upfront. It’s hard to imagine you’d spend $50 million on advertising and then another $50-130ish million to hit the #1 spot target.

    From Mango: “More screens does not necessarily translate to more viewers; once everyone who wants to see the movie has a seat, there is zero value to anyone from adding more seats.”

    Of course, but no one really knows what number of seats are required before it opens. Ideally, you’d want to have just enough screens and showtimes so that anyone who wants to go would be able to and that the theaters would be at or near capacity. If you underestimate, you run the risk that people will go see another option at the time and venue they want to attend rather than wait for the next available showtime.

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  7. theberle says:

    Why do we measure movie populartity by box office revenue rather than people in the seats?

    I think we should do the same for sporting events: report the revenue the owners are pulling in rather than the number of tickets sold/given away.

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  8. theberle says:

    Why do we measure movie populartity by box office revenue rather than people in the seats?

    I think we should do the same for sporting events: report the revenue the owners are pulling in rather than the number of tickets sold/given away.

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