The year in profits
By Marcy Magiera -- Video Business, 1/19/2007
To quote a former publisher of Video Business (who remains beloved despite his ability to squeeze a buck as hard as any man in publishing)—“It ain’t how much you make, it’s how much you keep.”
Our quarterly tallies of consumer spending on purchases and rentals of home entertainment, such as the year-end 2006 report, are one measure of how much the studios make. And, if the amount of input we receive from studios about their positions on the charts is any evidence, how much you make remains important in Hollywood.
How much you keep has definitely grown in importance in recent years, however, and the titles that make the most are not always the ones that keep the most.
Kagan Research last week released its Kagan Profitability Index, which estimates that the No. 1 DVD title of the year, Buena Vista’s Pirates of the Caribbean: Dead Man’s Chest was the second-most profitable film released in 2006, with a revenue-to-cost ratio of 3.93 on revenue of $1.67 billion and costs of $424 million, including production costs in the range of $200 million.
The most profitable film of the year was Fox’s Ice Age: The Meltdown, according to Kagan, with an index of 4.11 on revenue of $1.05 billion and costs of $256 million.
Generally, films need to reach a ratio of 1.4 to 1.75 to break even, according to Kagan. The research concern counts revenue from theatrical and initial video and TV releases, but not merchandising. Its tracked costs include production, theatrical prints and advertising and video replication, but not distribution fees, overhead, interest, profit participations or residuals.
Rounding out Kagan’s most profitable five were Sony’s The Da Vinci Code, Fox’s Borat and scrappy Lionsgate’s Saw III, with Buena Vista’s Cars, DreamWorks/Paramount’s Over the Hedge and Warner’s Happy Feet also falling in the Top 10.
Just another insight on the year’s top titles—one that is not always so apparent.
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There used to be a time not so long ago that consumer media outlets reviewed theatrical releases with a passion, but pretty much left the video reviews to the trade. With the huge growth of DVD, however, seemingly every media outlet is reviewing not only the extra features on new releases, but catalog collections and DVD premiere movies as well.
In our continuing quest to provide unique and useful information to home entertainment retailers, we’ve refreshed our Tipsheet DVD reviews with a new emphasis on our retail readership.
In the “Shelf Talk” portion of each review, you will find merchandising information ranging from marketing support to tie-ins and the performance of comparable titles.
We hope you’ll also find the new design easier to navigate.
