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Why Legend of Tarzan with $194M in Gross and a $180M Budget is NOT Yet Profitable (sorry, be patient!)

Legend of Tarzan (Movie), Legend of Tarzan Box Office

Legend of Tarzan continues to confound naysayers and do better than the “experts” expect — so there is a great deal for fans of the project and fans of Edgar Rice Burroughs and his legacy to be happy about.  Buas LOT’s global total went past $180M, (the presumed production budget), excited cries of “It’s profitable!” started showing up in the ERB groups on Facebook and elsewhere. This is understandable because there is nothing more confusing than movie profitability.  But …. be patient — we’re not there yet. I will try to explain it.  If you are the impatient type, then all you really need to take away from this is that a film needs to achieve global box office of somewhere in the range of 2x to 2.5x of its production budget  for it to be “on track” for profitability.  Thus LOT needs to get to $360M to $450M global box office before we can start talking profitability — and even then, there are caveats.   So hold yer zebras . . . . we’ve got a ways to go before we can declare victory.

Anyway those who have the stomach for it — here is a longer discussion about movie profitability.

The Old “2x Budget = Profitable Movie” Really Means, and Doesn’t Mean

Anyone who pays much attention to box office reporting has probably heard that if a film performs at global gross of 2x or 2.5x of its production budget, it’s profitable.  You’ll notice, however, that when I mentioned this in the first para, I said “on track for profitability”.  I’ll explain the difference.  “Profitable” would mean that as soon as it has earned 2x or 2.5x at the box office, it’s already “in the black” and that’s not true, and that’s not what this formula means. What the formula means is that if a film earns that much at the global box office, then it is “on track” for eventually achieving profitability after all of the revenue streams have come in — meaning theatrical (most of which comes in during the first year), blu-ray/dvd/digital home (most of which comes in later in the first year into the second year), premium cable (year two), regular cable, broadcast, ancillary, etc, etc.   A film earns income over at least 10 years (which is the amortization schedule used for films–similar to a car being depreciated over 7 years) and it is not until sometime well into that period that a film will actually be “in the black.”  But …. experts have come to believe or realize that if a film achieves global box office of 2 (some films) or 2.5x (other films), then it will probably eventually be profitable when all is said and done and all income streams have been realized.

How Box Office Dollars Are Shared

Domestically in the US, box office receipts during the opening weekend are heavily favored to go to the studio — 80 or even 90% of those box office dollars go to the studio.  But as the run continues, the scale swings to the exhibitor (theater), so that eventually, toward the end of the run, it’s 80% to the exhibitor.  Traditionally a figure of 50% going to the studio is what is used when doing a general assessment of what the studio is getting from a theatrical release in the US.

Abroad, the percentage is less. 40% is what is usually used for estimating the studio share in most countries, except for China, where it is 25%.

So let’s take LOT and say that it does $400M this way:

$130M in the US @ 50% = $65M Net
$60M in China @ 25% = $15M Net
$210M in Rest of the World @ 40% = $84M Net
$400 M Gross = $164M Net

So that’s almost the $180M of the budget, so it’s almost there?


Marketing and Promotion — or “Prints and Advertising” — “P&A”

The production spend only gets the film “in the can” and ready for release — it then has to be marketed, promoted, and technically distributed.  The cost of this goes on top of the production budget and for a huge blockbuster release — $100M is the figure that usually gets used in making an assessment, or even as high in some cases higher still.   For John Carter, Disney definitely spent $100M.  For Tarzan — no one knows for sure, but it looks like WB was more frugal.  Their TV spend, according to RelishMix which tracks such things, was $24M as of opening weekend, and that’s usuall 80% of the spend for all marketing and promotion.  That would put it at maybe $40M in the US, plus foreign — so maybe 70 or $75M.  Maybe.  But it’s also possible that after all the foreign promotion is considered, maybe it will reach $100M.  But let’s be optimistic and call it $75M.

So now — that would  mean:

$180M — Production Investment (Budget)
$  75M — Marketing Investment (Budget)
$255M — Total Investment (Total Budget)

Note that I’m calling it Production Investment — it’s not really right to call it “budget” because budget is what you set out to make the movie for, not necessarily what it actually comes in as.

So what we would be looking at, then, would be:

$400M Box Office Gross
$164M Box Office Net
$255M Investment
-91M Yet to Be Recouped After Theatrical

That $91M would be what is expected from DVD, Premium Cable, Regular Cable, Broadcast — and remember, there is always gross and net.

But Wait …. It’s Worse Than That

Ahh, you think it’s pretty simple, right?  $400M gross, $164M net, $255M invest — means $91 to recoup.

But we forgot something.

You see, WB Studios Distribution is different from WB Studios, the producer.  (Or in this case, WB Studios/Village Roadshow, who coproduced.)

Oh yeah.

So remember that $164M Net?

Well, let’s lop 20% off of that.  This would go to WB Studios Distribution.

So that $164M is really $131.2M, which is all that the producer (WB Studios/Village Roadshow) would make on the $400M gross.  And that, then, would be the starting point for the additional recoupment from DVD/Blu Ray, etc.

But Wait …. It’s Even Worse Than That

  • What about any “Gross Participation” by anyone involved in the film? Oh yeah, that would have to come out.  Who might have such a deal in LOT? Fortunately, almost no one. Maybe Jerry Weintraub’s estate.
  • Accrued financing charges?  Oh yeah, while the money is out, whoever provided cash is charging interest on that, so the investment continues to grow by the amount of the interest.  So $180M could become $190M, or $195M depending on how long it takes for the money to come in and trickle back down to the WB/Roadshow, the producers.

What About Rebates?

LOT was shot in the UK where it should have been able to avail of a rebate that is 25% on the first L20M and 20% thereafter. This is not on all expenses — but would be on most, since the film qualifies as a UK production by all the various criteria including creative participation (many UK citizens), location filmed (all UK except for some second unit in Gabon) and story content (UK).  Plus they availed of a Quebec tax rebate as well.  So it could be that the $180M is gross production investment before rebates — and thus the $180M could be $150M.  Or it could be that $180M is net of rebates — thus $220M minus $40K rebates equals $180M.

Oh, there’s more . . .

Here’s a good one.  If a sequel is approved, the investment of the first film will get reduced by as much as 10%?  Huh?  Yeah, that’ exactly what happened with Avatar, which was, as I recall, around $270M before they approved a sequel, then ended up at $229M.  This is because, if there is a franchise, the one-time development costs that will be to the benefit of the whole franchise, not just the first film, will get spread across the franchise.  Avatar got a bigger bump from this than most, because there were new technologies that had to be developed that were part of the production cost — and which resulted in a bigger amortization than might be the case with LOT if it gets a sequel. But still, some of those production costs would be removed and then spread over the franchise.

Bottom Line

It is because of all the foregoing, that the shorthand 2x to 2.5x budget is used to gauge whether or not a film is profitable. Actual profitability is very hard to calculate and takes time — and of course, with Hollywood accounting, sometimes even the most successful films are never declared to be “in profit.”

Have I forgotten anything?

Well, merchandising, spinoffs, etc . . . Oh yes, also “residual library value” — that’s the asset value of a film after the 10 year income stream is finished.  With less successful films this may not be much — but look back 10 years to the films that did well in 2006, and wonder what you would have to pay to buy those films now, assuming they were for sale:

Pirates of the Carribbean: Dead Man’s Chest
Davinci Code
Casino Royale
Ice Age: The Meltdown

I’ve got a headache now so I’ll stop.  If people out there think of more stuff I should have included, just put it in the comments.  I need a tylenol.



  • Sorry, some of your figures are off. The initial take by the cinemas are in fact higher than you calculate. It is in fact, generally 50/50 split. I work in distribution & know the facts. Sorry, Tarzsn is indeed on its way to bring a box office flop. Sorry.

    • Well, if you work in distribution and your only correction is that my 80% to exhibitors for opening weekend should be 90%, I guess we don’t have that much to quibble about. Oh yeah, you’re calling it a flop. I’m not. Okay, that’s fine.

    • Michael writes a detailed article on why LOT isn’t yet, and might not be, profitable. But you quibble with one set of figures, those for the initial percentage that theaters get, which you admit to being ‘generally’ 50/50. And with this one difference of percentage claim that LOT is going to be a BO flop. As already pointed out, money comes from places other than just BO and it may indeed end up losing money for WB.
      But since your focus is on the initial percentage, and your extrapolation from that to make your claim, I just can’t help getting a little bit of eau de troll from you.

  • Enjoyed this article, thanks. Complicated set of numbers but this helps me understand some aspects of profitability for movie industry. My first thoughts after reading this, glad I don’t dabble in investing in this industry. Second is that LOT is doing SO much better than so many other movies yet people seem to want to perpetuate the idea that it is failing. The losses on other recent big budget films are huge. IF LOT ends up a loss, and it may be break even actually or better, it is far more successful than many many others. Not sure why so many seem to refuse to acknowledge their doomsaying was wrong. Just human nature maybe, not wanting to admit they were wrong? Anyway, thanks for the thoughtful article, very interesting lesson in film economics.

  • Wow….that was something, Michael. I really appreciate the lesson and can see just how complicated it all is based on what you shared. It truly is mind-boggling. 🙂

    I’m glad to see that LoT is doing so much better than predicted and I take a good deal of solace from that. I guess whether or not it’s profitable remains to be seen, but I’m happy for what we have so far. 🙂

  • Posted elsewhere, but adding here since China is specifically mentioned. (No clue the currency – assuming USD)

    No idea how legit this is (from Box Office Theory), but figured I’d share.


    Tarzan midnights 1.3M

    Tuesday presales
    Tarzan 2.55M

    Tuesday est
    Tarzan 45m/46.6m
    Cold War – 14.5M/609m
    When Larry Met Mary – 13.4m/142m
    Big Fish – 13.2m/491m
    Never Gone -5.1m/320m
    Turtles – 1.65M/389M

    Wednesday est
    Tarzan 35.8m/82.8m
    Cold War – 12.8M/621m
    When Larry Met Mary – 11m/153m
    Big Fish – 11.4m/502.5m
    Never Gone -5.1m/326m
    Turtles – 1.4M/389.5M
    Skiptrace 3M midnights

    Looks like a 25% drop for Tarzan today. Maybe a bit more.
    look for 33-34mill and a 80 mill total in 2 days

    (later post by fmpro)
    Evening were strong and around 36 mill should be the number for Tarzan. That only a 20% drop from OD..
    That must be pretty good

    • Lindie — that’s a great report. If that’s true, I think we’re almost ready to pop the champagne. Is there a link? And thanks for catching that…..

      • Hey Michael,
        I had some problems posting, so I sent the link to you in an email. We’ll see if this goes through…I’ve tried several times with the other post.

        • Interesting…I tried to repost, but it didn’t go through. Maybe it doesn’t like the link. Anyway, it should be in your mail inbox. 🙂

          • I found it and I’ve posted. The guy reports China Box Office every day; he has done 17,000 posts and has an extremely high reliability rating on Box Office Theory. I couldn’t sit on it — Thanks Lindie…You win the Intelligence Commendation Medal for fantastic reporting. Thanks!

    • Yikes folks. I’ve got egg all over my face and am cleaning it off as fast as I can. Figures are in Yuan, not dollars. Duh.

  • The budget still intrigues me. We have no source for the number that was first put on IMBD, but no really reliable source for the HR number either.
    With the new Ghostbusters the budget figures do seem more reliable, but the HR had an article this week how one scene, that ended up being part of the closing credits, cost over a million, which Sony denies:
    It’s interesting how some studios are upfront about how much the movie they’ve just greenlit is supposed to cost: Lionsgate and Gods of Egypt, and others you’re left making some educated, and not so educated, guesses.

  • I agree with you BC, we are making guesses on profitability based on a suspect budget number. If you were to figure the original IMDB budget number was correct, maybe that was $120 million minus about $30 million in rebates? So net budget cost of $90? And HR did the standard X2 to figure production cost of $180, then the current ww gross of over $200 million would have everyone cheering. Warner Bros. didn’t promote this like a $180 million film IMO. It was interesting to see the Relish Mix info above. Going backward, if you figure marketing and promo at very approximate $75 to $100 million max, following the usual X 2 would indicate appropriate marketing costs for a film budget of the same, right? There is something just “off” in these numbers.

    • I agree that the promotion didn’t quite match up with a $180M film . . . .but that figure has been out there for quite awhile and no one from WB or the production has challenged it either directly or even indirectly through a leak or blind item. Because it’s been a very damaging part of the equation — making it possible for the flop trolls and their real-media cousins to declare that the movie was a bad bet to begin with, and is a flop or at least semi-flop even though it’s performed pretty well. So why is there no effort to refute it? I just wonder about that.

      One thing was clear, though — the reference in THR was to $180M production budget …. it did not include marketing, and it was presented as the real production budget which, given the level of sophistication of Kim Masters who wrote it, should have been net of rebates. I’m not sure it really was that — but it was presented that way.

      Here’s something to be optimistic about, though. Check out Pacific Rim. Budget of 190m, US Domestic 101M, Global Box Office 411M, and there is a Pacific Rim 2. Wasn’t easy, different studio for the sequel — but they got one.

      • WB not refuting the 180 did lead to the belief that it is an accurate figure. And after all, Sony very quickly disputed the figures that reporter for the Ghosbusters dance scene. There was an interesting throwaway line in another WB related HR article this spring “WB doesn’t usually respond to rumors” (I wish I’d bookmarked it, because now I can’t find it).
        WB only responded to the assertion that they were worried about Yates’ double duty on LOT and FB, and that’s something that Yates addressed during on of the promo interviews. But what if that’s the only question they were asked directly about?
        As for Kim Master’s level of sophistication in writing the article, she’s an award winning HW business writer, she’s very good at the weasel wording. Because it wasn’t just about that 180 figure.
        So we’ll still be wondering what’s the final production figure, and the final marketing figure.

        As for comparing LOT to Pacific Rim, they finally got one, but PR is probably easier to do because it’s relying more on the story than the leads. In LOT’s case if they decide they can go for a sequel they’ll need to do it quickly, considering that Alex turns 40 next month and the turn around time from approval to shooting to release will need to be shortened.

        • I spent (or wasted? Lol) a couple hours scouring various articles trying to find hard numbers on the budget question. What I found were many instances of “mushy” numbers, i.e. “Allegedly
          ” or “estimated”. I finally found the actual HR article which gave that $180 million budget number but that was attributed to “a source” with no identity or hard numbers to back this up. Most interesting were the comments on the article, with several directly challenging that $180 million number. One offered specific numbers, saying the movie’s budget had been reduced to $90 to $120 million before it was green lit. Yes, it would be nice if Warner Bros. would just release a factual budget number but honestly, I kind of understand why they don’t. It isn’t anyone else’s business really. We are curious cause it’s hard to tell if the film is going to be financially successful enough to give us hope for a sequel. But that doesn’t really serve as a “need to know”. Also, the comments seemed to indicate the reporter for this article has a strong bias against Warner Bros. meaning she was looking for the most potentially damaging info she could find to set the film up to fail. She apparently favors Disney. Elsewhere online, I found a couple of other interesting nuggets. IndieWire seemed less hostile to LOT than some others. They used the $180 million budget number but added only $120 million more for marketing and dist. costs, coming up with a combined total cost of $300 million (so lower than the standard X 2 which would be $360 million break even), although they then said it would need to total $400 million worldwide to be profitable. In a later article, giving an honest nod to LOT’s unexpected box office strength, they say it “looks like it could reach $140 million domestic, double that foreign (where it is rolling out slowly, now at $90 million)…” So double $140 would be $280 million overseas, plus the $140 million domestic number, for a total of $420 million eventually?? I personally feel the $140 million domestic number may be too optimistic so I redid the calculation based on domestic $120 million instead, getting $240 million foreign plus the $120 mill. Domestic for total ww gross of $360 million. Again, the budget number haunts us. If the HR number is right, this $360 million ww gross is about break even. If the commenters numbers are more accurate, and the budget was more like $120 million, this would indicate profitability.

          • Sandy, many thanks — I’m glad to find someone else willing to spend (waste?) some time on this kind of research. I think you just ended up being budget researcher in chief….Now for some comments on your comments.

            First — can you send me the indiewire link where they talk about $400M needed to be profitable? I’ve not seen that one but someone else mentioned it. I would like to lasso it for the files.

            Re domestic final …. I have done some very detailed projections lately and I am 95% confident it will reach $130M and 95% confident it probably will not reach $140M. In other words — it will land between $130M and $140M.

            Of more concern is the foreign. John Carter did $211M foreign, and LOT is lagging behind LOT in almost all territories. I was hoping LOT would surge ahead in China, but that’s not happening. Based on same-territory comparisons, it seems like LOT is running at least 20% behind JC in foreign. It may have better legs . . . but the bottom line is that we really need ever drop of domestic we can get. The softness in foreign is troubling.

            That gets back to the budget …. yes — the sequence was, it was originally supposedly budgeted at $120M and WB shut down the prep and told them to go figure out how to make it for $90M. That’s pretty much confirmed, both through the articles, and because this was also told to ERB Inc. Then some time went by, and it got greenlit again. The assumption at the time was that they had gotten the budget down to 90m. But that was never reported — and meanwhile, new cast members had been locked, etc. So …. did they really get the budget down? Or did they upgrade the cast to the point that WB greenlit anyway? Keep in mind that at this point, Jerry Weintraub had been chasing the project like a white whale for twelve years and was a forceful advocate. Plus by this point Yates was fully on board and firing on all cylinders to get it greenlit.

            The thing is . . . film budgeting for an old pro like Weintraub would normally be pretty easy — for live action film-making. You can easily break down the costs, isolate where you are spending money, and figure out how to fix it. But with CGI it’s a lot more amorphous. It’s just multiples of hours spent by an army of CGI artists and it’s hard to know how many hours it will take to get something done to a level that it works. The CGI is kind of a wildcard — meaning, even without going over-budget or over schedule in the live action shoot, the CGI budget could have floated the overall budget up from an approved $120M to something a lot higher. Maybe. We just don’t know.

          • I think this is the correct IW link, I remember linking to it the first weekend.

            I think if it really went way over budget it was probably the CGI. I also think I read in one of the recent articles that they converted it to 3D, which can be expensive. I though I had read when they started filming they were filming it in 3D, but apparently not.
            Deadline has it bringing in 6 million this weekend, for a total of just over 114 domestic.

  • Glad to see BC provided the link for you. It was interesting to go through the older articles and especially the comments. I got the impression that several factors hurt LOT. First, the trade publications seemed to go out of their way to sow the seeds of negative news. Warner didn’t seem very effective in countering any of it, nor did they manage a very effective marketing push for it. Sounded like there was a serious shake up in top execs at Warner, maybe those who had green lit it left and their successors would not have had an interest in seeing the project succeed, making their predecessors look good. Second, the real driving passion behind it seems to have been Jerry W whose death deprived it of its most enthusiastic voice. So LOT was, appropriately?, kind of an orphan. Third, the source material is “old” and that alone makes it an easy target nowadays for younger critics and online blogs to attack, making it kind of “in” to bash it. Accusations of inherent racism, however unfounded, made it harder to praise. Last, The foreign numbers aren’t as good as for other types of CGI heavy films which have a more video game feel to them, and I am not sure how many other countries have the tradition of Tarzan as a cultural hero to enjoy the feeling of seeing an old friend reborn. Long story short, LOT suffered from an unfortunate mix of unhelpful circumstances and has performed amazingly well given the headwinds it faced, maybe mostly because it was a terrifically entertaining movie.

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