BOX OFFICE ROUNDUP: Global Dollars To Hollywood’s Rescue?

The first few weeks of summer have proven pretty revealing for Hollywood’s current and future business model.

There have been a few high profile tent pole releases that have received lukewarm to outright disastrous responses by North American moviegoers, but have been rescued or even embraced by international audiences. The question now facing Hollywood is does it either try to make its product more appealing to domestic audiences or does it embrace this shifting paradigm and cater more to international markets, continuing the overseas gravy train (where they get a smaller slice of the box office pie), possibly alienating homegrown audiences in the process?

Transformers: The Last Knight ‘s schizophrenic opening is just another example of this evolution. While Paramount is throwing out a whole lot of hyperbole about their new film’s domestic performance, the simple truth is the Transformers may have worn out their welcome in North America. Last Knight easily had the lowest domestic opening in the franchise’s history.

Its first full weekend saw it garner 44.6 million here at home and 68.5 million since it’s Wednesday release. But compare that to 2011’s Dark of the Moon, which was the only other Transformers movie to open on a Wednesday. Moon made 162.6 million in its first five days, while every other movie has grossed more than 69 million in it’s opening weekend alone. If you go all the way back to 2007, the first Transformers (and the last one many people actually liked) grossed just over 70 million in it’s first three days, meaning Last Knight couldn’t best it despite having ten years of inflation on its side.

Compared to its estimated 217 million dollar production budget, it looks like this may be the first actual bomb the Transformers franchise drops. Especially when you consider that after promotion and advertising, Paramount’s investment is probably in the 300 million dollar range.

Except . . .

While North American audiences gave Optimus Prime and company the cold shoulder, the international market (particularly China) ate it up, handing it 196 million additional dollars in those first five days, meaning that by the time all was said and done Monday morning, everyone’s favourite Robots in Disguise had 265 million under their Cybertronian belts. The franchise has been trending in this direction the last few titles (Age of Extinction enjoyed a total worldwide gross of 1.1 billion, but only 245 million of that came from North American shores), but this is the most profound step in this new direction.

This isn’t the first time this year we’ve seen evidence of this new reality. While Fate of the Furious’ domestic gross of 225 million was nothing to sneeze at, it fell well short of its 250 million dollar budget. But it became the first movie in history to gross a billion dollars internationally, giving it a current tally of 1.24 billion.

Kong: Skull Island made 168 million here at home, which, while great, didn’t come close to covering its 185 million price tag. But toss in the 398 million it made abroad and Warner Bros.’ bean counters were all smiles. If you think North Americans gave the new Transformers the cold shoulder, they gave Captain Jack Sparrow’s new adventure an equally cool reception as the latest Pirates of the Caribbean movie, which cost 230 million to produce (yes, it cost more than Transformers) has managed only 161 million in North America so far. But Captain Jack and the latest batch of sea faring zombies have collected over 519 million in foreign markets to this point, meaning its closing on 700 million worldwide.

Last February’s The Great Wall, which managed a mere 45 million domestically, brought in an extra 286 million internationally. The only reason Alien: Covenant, which has been an unmitigated disaster here at home, may break even is because of a generous foreign reception. Last year’s Warcraft, which bombed in North America, made nearly 400 million abroad (nearly all off of it in China). Strong overseas performance helped take the sting out of low North American interest and bloated production budgets.

Some movies can survive on their domestic box office alone. Disney’s live Beauty and the Beast has made over 500 million domestically, more than enough to cover it’s costs. The Star Wars films, some of Marvel and Pixar’s higher earners, Wonder Woman (made for 149 million, DC’s Amazon just passed the 300 million dollar mark and is on pace to become the DCEU’s highest domestic earner) and last year’s Deadpool could all turn small profits based on their North American business alone. But the movies that can survive strictly on domestic dollars are now in the minority and Hollywood has become addicted to foreign dollars.

A stronger presence for international markets can only help Hollywood’s current conversation on diversity and white washing, and Paramount was quick to announce that Transformers is a global brand, tailored just as much for international business as domestic. But there’s a potential problem for Hollywood if it continues to lean harder on foreign dollars.

To say Hollywood’s revenue sharing formula is complex is a Grand Canyon sized understatement. But one truth is that studios keep a larger portion of domestic receipts than foreign, where they may only see 30-40% of foreign box office. There have even been rumours that some Chinese distributors have never paid their share at all. So while that particular pie may be getting bigger, the size of Hollywood’s slice remains a sliver.

And foreign markets are more vulnerable and sensitive to political upheaval. Whether its Lebanon recently banning Wonder Woman because of Gal Gadot’s Israeli heritage or China making thinly veiled threats against American studios in response to Donald Trump’s anti-China hyperbole during last fall’s Presidential election, there’s a lot more than can complicate a movie’s financial performance overseas.

So now the question facing Hollywood is, do you try to understand why so many movies have been snubbed by North America and try to address those shortcomings? Or do you go all in and cater to the Middle Kingdom and the rest of the world? If Hollywood decides on the latter, it also has to wonder what happens if the same indifference and malaise that’s sinking their movies domestically sets in overseas. Because if that happens, it will be left with nothing but dead birds and no more stones.

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