Harry Potter $s
Michael Fleming – still the only person at Deadline bylining major studio stories… Nikki’s been doing only press releases, minis, cable, and theme parks for almost a month now – ran a page from a financial distribution report from Harry Potter & The Order of The Phoenix, dated to September 30, 2009.
He asked around and got pretty normal responses.
One thing that struck me is that he makes it all sound like accounting trickery – “Phony Baloney Net Profit Accounting” – when it is really simple.
WB paid themselves a 22.5% distribution fee on the film.
WB paid itself interest on the “loan” to make the movie… some of which likely paid the much bigger line of credit for the studio at a much lower interest rate.
WB paid itself a 10% override on marketing.
That’s $211.8 million, $57.6 million, and $13.1 million.
That’s $300 million into the studio coffers on incoming revenues of $612 million. A pretty good haul.
The only thing missing is a massive charge for using the studio… because they shoot in England…. where part of the payment for the studio space probably kicks back to WB somehow.
The only thing, of those three, that is really “unfair” by normal standards is the distribution fee, which at market rates for a movie like this would be max 9%… and the studio paid itself 2.5x that amount. A “fair” distribution fee would be about $85 million. The studio took $211m.
But that’s not an accounting trick… that’s getting away with doing business. There is nothing particularly clever or underhanded… it’s just extreme. And, as Michael Fleming points out, as the sole investor in the film, how they split out the revenues is really up to them.
The one piece of this puzzle that puzzles me is the lack of any gross participants. That means that JK Rowling’s deal is done in some other way. That could explain the one other massive line of $316 million for “production and/or advance,” including $7.8 million under that heading between September 2008 and September 2009. Is she getting an “advance” as a budget line? The 9/08-9/09 year’s “advance” is almost exactly 20% of the total defined gross for that period, so that kinda makes sense. But just guessing, really.
Anyway, always interesting to digest this stuff… even if I lean towards using it as background instead of publishing private documents that are not of any direct news value.
First!
A friend of mine made a movie that got picked up by a major several years ago. Not only is it still “in the red,” but he once received a statement billing the production nearly 100K for prints for “international territories”–even though the studio only had rights for North America!
dpoland wrote: at market rates for a movie like this would be max 9%… and the studio paid itself 2.5x that amount. A “fair” distribution fee would be about $85 million. The studio took $211m.
But that’s not an accounting trick… that’s getting away with doing business.