Middle-earth warming up studio profits this winter



Deadline.com published a report today sharing information from research company SNL Kagan. Kagan’s financial model indicates The Hobbit: An Unexpected Journey is going to make a tidy profit. Read the story by executive editor David Leiberman below:

Warner Bros’ latest visit to Middle Earth should generate $1.26B in revenues from all major sources — 3.59 times its expected costs — putting it on track to become the most profitable movie released in December, SNL Kagan says today. The research company builds a financial model for films by using early box office results to estimate likely revenues from theaters, home video, and free and pay TV deals against probable costs. To account for many variables it can’t ascertain (including distribution fees, interest, profit participation, and residuals), Kagan figures a movie will be profitable if expected revenues are 1.75 times higher than estimated costs. Those with a lower ratio but that are still higher than 1.40 times are in a gray area.

Films below that level are deemed likely money losers. By that standard three other December films will end up in the black: Universal’s Les Miserables ($396.7M in expected revenues/2.37 times costs), Weinstein Company’s Django Unchained ($473.2M/2.18X) and Columbia Picture’s Zero Dark Thirty ($230.7M/2.10X). Those falling short include: Paramount’s Jack Reacher ($253.8M/1.38X), Universal’s This Is 40 ($159.5M/1.14X), Fox’s Parental Guidance ($163.3M/1.12X), Disney’s Monsters, Inc 3D ($75.0M/0.77X), Paramount’s The Guilt Trip ($89.1M/0.57X), and FilmDistrict’s Playing For Keeps ($37.7M/0.28X).

That made December a pretty good month for studios: The 10 top releases are expected to average revenues that are 1.84 times higher than costs, exceeding 1.67X from 10 films in December 2011, and 1.40X from 12 films in the month in 2010. It’s behind 2009, though, when 13 films had an average profitability ratio of 1.99.

Now, I know this involves financial projections, and anticipated revenues, and so forth, but I really do think those who predicted TH would be a flop should start eating their words.  And these figures are not factoring in monies made through the sale of licensed Hobbit merchandise, either.

And last time I checked, I made a solid contribution to those coffers . . . *cough*

About fedoralady

I'm an LA native--Lower Alabama, that is. My husband of more than 30 years and I live here on a portion of my family's former farm with two gorgeous calicos and a handsome GSD mix. My background is art education, and over the years I've been a teacher, department store photographer, sales associate and a journalist. My husband, his business partner and I have Pecan Ridge Productions, a video production company, for which I shoot & edit video and stills and manage marketing. I also still write part-time for the local paper. I love movies, music, art, photography and books, and my tastes in all of them are eclectic.

2 responses »

  1. I suspect that some pundits are going to be supping on a steady diet of crow. We knew TH would succeed, even if it meant we would go to as many screenings as physically feasible.

    • I just hate when gloom and doom is forecast before the film can hardly get out of the gate. And yes, loyal fans of RA and fellow cast members and Tolkien fans certainly pulled together to make it happen around the world.

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