Box office reporting focuses heavily on ticket sales and revenue numbers. So it’s no secret that (according to latest Box Office Mojo numbers) The Hobbit: The Desolation of Smaug has pulled in just over $944 million in ticket sales.
Profit figures, on the other hand, tend to be more opaque and mysterious.
However, movie website Deadline | Hollywood has crunched some numbers with a number of “experts” as part of its effort to unearth the most valuable blockbuster of 2013. By its calculation, the second film in Peter Jackson’s Hobbit sequence has (thus far) made a profit of $134.1 million.
Just how did they do it?
The Hobbit: Desolation of Smaug profit breakdown. Source: Deadline | Hollywood.
Explaining the earnings
Disregard the calculations for The Hunger Games: Catching Fire in the second column — it’s part of the head-to-head thing that Deadline is conducting.
The first thing to realise (and it took me a little bit of research to work it out) is that that enormous $944 million global box office is split a number of different ways. Nominally at least (Hollywood accounting practises are notoriously dubious), distributors and theatres are taking a goodly chunk of that gross.
Well, according to Deadline’s figures, USA domestic distributors and theatres are taking just under half the domestic box office, while Warner Bros. sees a mere 42.9% of the foreign take and as little as 23.4% of the Chinese gross. The remainder — named Theatrical Rental — is Warner Bros. income. Thus, of that $944.2 million, only $420.3 will make its way to Warner Bros. coffers.
That’s why, according to Deadline, even with other revenues (telly and etc.) factored in, Warner Bros.’ gross revenue from The Desolation of Smaug will hit only (only!) $795.6 million.
Accounting for the expenses
Deadline puts Desolation of Smaug’s production cost at $260 million. I’m not entirely certain how they arrived at that, I’ve seen figures as low as $225 million, and others as high as $295 million (the latter admittedly including printing and advertising costs).
Yet Deadline lists printing and advertising (domestic and international) costs as an additional $155 million.
It’s a puzzle, but this article on io9 gives some insights.
According to Contrino, the Print & Advertising (P&A) costs of a movie can be incredibly high — for a small $20 million film, the promotional budget can be higher than the production budget. That’s because those films are often romantic comedies or kids’ movies, which are cheap to make but still need a lot of promotion. For a film which cost between $35 and $75 million to make, the P&A budget will most likely be at least half the production budget. And the numbers only go up with bigger films. “If the studio spends a lot on the budget, they’re going to want to protect that investment by advertising it heavily,” says Contrino.
If Deadline is correct, the amount invested on marketing The Desolation of Smaug’s around the world clocked in at more than half its estimated production budget.
Rights payments presumably include royalties to the late Saul Zaentz’s Middle-earth Enterprises as well as to Tolkien Estate, while Participations refers to payments to actors, writers and directors as a percentage of either gross or net profit. And overheads seems to be calculated at a straight 15% of the production budget.
According to Deadline, all these factors mean that the total cost of making, marketing and putting The Desolation of Smaug on screen add up to a sizeable $661.4 million.
Return on investment
Which brings us to the bottom line — a profit of $134.1 million. As Deadline calculates, that’s a cash return on cash invested of 20% (134m/661m x 100). It’s a return on investment that as best I can tell compares favourably against other forms of investment — the 10-year (to December 31, 2013) performance of the the S&P 500 is an average annual total return of 7.40%. US bonds, as gauged by the Barclays Aggregate U.S. Bond Index, average 4.55% annually over the same period.
The numbers for The Hunger Games: Catching Fire (an ROI of an unbelievable 200%) illustrate even more starkly (in big, fat $$$ signs) the reason studios relentlessly chase blockbuster success.
Of course, the flipside is the greater risk involved. Stocks and bonds, generally, offer a safer investment. For every profitable film, there’s a long list of grand commercial failures that see studios losing tens of millions of dollars. And that’s the hard calculus under all that creative accounting.
Note: This is mostly an attempt to puzzle out the numbers. I am not an expert (in this area at least). If there’s anything I’ve missed, or seems out of whack, leave a note in the comments or drop me a note at demosthenes at the onering dot net.
Posted in Headlines, Hobbit Movie, Peter Jackson, Studios, The Hobbit, The Hobbit: The Desolation of Smaug, Warner Bros.
For Tolkien fans, 2013 was the year of anticipating the dragon, as fans worldwide grew ever more enthusiastic between the final shot of the billion-dollar “The Hobbit: An Unexpected Journey” and the opening of “The Hobbit: The Desolation of Smaug” in December. The staff of TheOneRing.net has been privileged to participate in many related events, by fans and for fans, and this ‘year of the dragon’ was more exciting than anyone expected! Take a walk down memory lane with us and peruse chapter 2013 of the “fan book of Westmarch” below:
Tolkien Forever “Toast To Tolkien.”
Fans in Los Angeles met at the Cat & Fiddle pub to share a drink and stories of all things Tolkien. The Tolkien Toast is a tradition started by the Tolkien Society to celebrate professor Tolkiens birthday on January 3rd. On that day, fans around the world lift a glass to “The Professor” at 9:00 p.m. local time wherever they may be.
Billy & Dom live fan chat – Merry & Pip reunion special
Our weekly webcast TORn Tuesdays had an exciting January as host Clifford “Quickbeam” Broadway snagged an exclusive “reunion” chat with Billy Boyd and Dominic Monahan. Dom discussed the launch of his new series on BBC America: Wild Things with Dominic Monaghan, and Billy filled us in on the new album, new album, Blue Sky Paradise, released by his band Beecake.
Dylan Sprouse on TORn Tuesday
Another great TORn Tuesday in January included an interview with guest Dylan Sprouse, star of the hit Disney Channel series “The Suite Life of Zack & Cody.” A Nickelodeon Kid’s Choice Award-winner and T.V. star, Dylan chatted about his own, personal love of Tolkien and how generational love of J.R.R. Tolkien is handed down to kids , inspiring them to great things! We hear you, Dylan!
Sylvester McCoy live fan chat
TORn Tuesdays spent a full hour with Sylvester McCoy and he even played the spoons! Of course, he also touched on his role as Radagast, the wizard, in The Hobbit movies. Have a look (or another look) at this great interview.
Kiran Shah live fan chat a week later! (Archive not available)
In early February actor and stunt man Kiran Shah joined us for an exclusive live chat on . Kiran shared his experiences as a scale scale double for all 5 Hobbits (Frodo, Sam, Merry, Pippin, Bilbo) in the LOTR Trilogy and his return to Middle-earth in The Hobbit movies.
Unexpected Art Show – Los Angeles
To kick off TORn’s Oscar Party weekend, TORn held ‘An Unexpected Art Show’ at Lot 613, a blank-canvas special events space in the Historic Arts District of downtown Los Angeles. The show was a unique celebration of artwork from over 30 artists around the world inspired by J.R.R. Tolkien’s Middle-earth. Attending in person, and exhibiting their art, were Tim Kirk, who illustrated the 1975 Tolkien Calendar — the first by an illustrator other than Professor Tolkien, and Jerry VanderStelt, an artist producing licensed reproductions for The Hobbit and The Lord of the Rings films. Additional artists include Donato Giancola, Stephen Hickman, and Jay Johnstone.
One Expected Party w/ Dom & Billy and Beecake
Once again, TORn returned to the American Legion in Hollywooed to host the party of all parties on the night of the Academy Awards. Attendees were treated to a live broadcast of the Academy Awards, a photo booth, fabulous food an drink, an amazing auction of LOTR and Hobbit collectibles and the company of Tolkien fans and friends from around the world. Sponsored by Houghton Mifflin, Air New Zealand., Sideshow Toys, The Tolkien Shop, The Noble Collection and Empire Magazine. World-class entertainment at the party included music ensemble Dorian Mirth, Celtic band Emerald Rose, Sir Ian McKellen impersonator Hunter Davis and a grand finale by Billy Boyd’s band, Beecake. Needless to say, a fabulous time was had by all!
AUJ released on DVD
We knew the Extended Edition was coming but fans still bought AUJ on DVD… because we just couldn’t wait to invite Bilbo, Gandalf and the dwarves into our homes!
DVD press junket (Andy Serkis, Richard Armitage, James Nesbitt and Martin Freeman)
While we were all waiting for the release of the AUJ DVD, TORn staffers were able to get exclusive interviews with Andy Serkis, Richard Armitage, James Nesbitt and Martin Freeman. In these great interviews, the four talented actors shared their experiences preparing for their roles and filming The Hobbit movies If you listened to them before, they’re well worth another listen. If not, what are you waiting for?!
WonderCon – Anaheim – Panel
On March 31st, at the 2013 Wondercon convention, staffers Garfeimao, Josh and Clifford “Quickbeam” Broadway presented a panel
titled: “TheOneRing.net’s Unauthorized Sneak Peek: The Hobbit: The Desolation of Smaug.” Upwards of 600 people attended as our staff showed excerpts from the WB DOS sneak peak gave their insights to the latest Hobbit news and rumors. Feedback from the attendees was mega-positive.
Tolkien Reading Day
On the 25th of March, the same day of the destruction of the Ring of Power in The Return of the King, fans gather worldwide to celebrate the works of J.R.R. Tolkien and read favorite passages to each other. Tolkien Reading Day was started by the Tolkien Society and celebrated its 10th anniversary this year. TORn coverage here and here.
MTV Movie Awards hosted a fan-voting contest for “BEST HERO” and when we first discovered it, Kirsten Stewart, of Twilight and Snow White fame, was so far ahead of Bilbo it seemed hopeless. Beginning in last place, #VoteBilbo captured the hearts of twitter users around the world and, one by one, Bilbo overtook The Hulk, Batman, Catwoman and Ironman and finally led a heated battle with Snow White herself. An alliance was formed with LOTRProject to track voting in real time and while the battle was epic, and Bilbo came out ahead, the biggest reward was the many new friendships forged over twitter.
C2E2 – Chicago – Panel
TORn staffers were crowd-pleasers once again at the Chicago Comic and Entertainment Expo (C2E2) in late April. Staffers entmaiden and Corvar offered a presentation and discussion of all things Hobbit and were a big hit!
Adam Brown live fan chat
TORn Tuesday did it again with an exclusive interview with actor Adam Brown who plays dward Ori in The Hobbit movies.
The Fall of Arthur published – New Tolkien book
A rare and exciting thin happened in April of 2013: a previously unpublished work of J.R.R. Tolkien was released: The Fall of Arthur. Like too many of his works, the narrative poem, edited by his son Christopher, was never finished. Still, as it is, it covers much of the Arthurian legend including Arthur’s expedition overseas into distant heathen lands, Guinevere’s flight from Camelot, the sea battle on Arthur’s return to Britain, Mordred and the tormented Lancelot.
Phoenix Comic Con – Panel
Hitting the con circuit again, staffer Garfeimao brought ‘The Desolation of Smaug: Sneak Peek’ panel to Phoenix.
Trailer 2 released
#Hobbitception Elves reaction video
All the Happy Hobbits, Fili and Kili, set out to do was quickly record their reactions to the 2nd trailer for “The Hobbit: The Desolation of Smaug.” So, still in their pajamas, they set up their camera and started recording their sheer, geeky delight over what they saw. Little did they know that their little recording would be picked up by mainstream news outlets like Entertainment Weekly and Stuff.co.nz. The production and actors also got a kick out of their enthusiasm. From Stuff: “Jackson saw the video and posted it to his Facebook page saying it was “pretty cute”. He then filmed Hobbit cast members Orlando Bloom, Evangeline Lilly, and Lee Pace watching their reaction, saying “here’s what I guess you’d call a sequel to that fan video”. More than 20,000 people liked his video of the video, with many applauding Jackson for satisfying The Hobbit’s avid fans. Way to go, Hobbits!
Emporium of Goods launched
Fans worldwide submitted t-shirt designs for TheOneRing.net Emporium, and we had a tough time keeping up with demand!
SDCC – San Diego – Panel & Booth
San Diego Comic Con was just as epic as TheOneRing.net shared booth space with the fine folks at WETA Workshop and Badali Jewelry. Cosplay was out in full force, impression the likes of Evangeline Lilly, Manu Bennett, and Richard Taylor.
#ThankYouPJ fan video project
The final day of filming on The Hobbit trilogy inspired fans worldwide to say “Thank You Peter Jackson” for creating films we love.
Tauriel “It IS out Fight!” poster
Evangeline Lilly supported our efforts for a 5 Army Solution with an amazing poster designed by Badali Jewelry artist David Powell.
Road To DragonCon
New adventurers Doug, Ryan and Katalena joined the 3rd annual Road To DragonCon, meeting Tolkien fans across the country.
The blurriest pic to ever fire up Tolkien fandom.
S.H.I.R.E Project (Sharing The Hobbit to Improve REading) is a new charitable effort started by TheOneRing.net to provide needy schools with copies of Tolkien’s literature. The inaugural drive exceeded all our expectations so look forward to more book-giving efforts in the future.
Dragon Con – Atlanta – Four days of programming, celeb panels, a booth and an Epic 80′s Dance Party
DragonCon 2013 was yet again, the most Tolkien-centric event in the nation with four days of wall-to-wall programming from the track “Tolkien’s Middle-earth.” With TORn staffers MrCere, deej, greendragon, and Thorongil running the track, running the fan table to sell shirts and to see folks face-to-face and hosting big stars, this year’s edition also drew new attendees from Twitter and social media. The presence of stars was bigger than ever with Sylvester McCoy, Graham McTavish, William Kircher and Manu Bennett delighting fans at multiple panels. In fact, the two dwarf actors appeared on a large-room panel every single day of the convention. But one of the highlights of the week was the first annual Middle-earth Dance Party that created a big stir at a convention with endless entertainment possibilities.
Dragon Con video dance night highlights
Dragon Con ‘Tolkien’s Middle-earth’ track highlights
Baggins Birthday Bash – Los Angeles
TORn’s LA staffers hosted their 11th annual Baggins Birthday Bash in Griffith Park where close to 150 fans ate like Hobbits, drank like Dwarves and generally celebrated Bilbo and Frodo’s September 22 birthdays.
Exclusive set visit reports published
Our exclusive set-visit reports and photos from a lengthy stay with much more to come in 2014
NYCC – New York – Panel & Booth
TheOneRing.net was once again the only Hobbit content at the New York Comic Con and we’re always proud to represent Tolkien fandom! Our booth (complete with a ‘ring’ of dwarves mounted on the top), staffed by Calisuri, deej, Earl, greendragon, ImladrisRose, Justin, and Thorongil drew many folks eager for some Middle-earth goodies, and we were able to satisfy their craving with our own t-shirts and buttons, as well as Weta collectibles.
Sean Astin live fan chat
Sean Astin recalled his time on LOTR and updated us on his life and his projects since.
November brought the long-expected “The Hobbit: The Desolation of Smaug” fan event hosted by Anderson Cooper in New York. The event was held live in major cities around the world and also online. Per Anderson: “this global fan event is for fans around the world to ask questions of their favorite Hobbit actors and also to see some never before seen footage from the upcoming film. Go here for the video and a full transcript of this exciting event!
AUJ DVD Extended Edition Bluray release
The release of the extended edition of “The Hobbit: An Unexpected Journey” in Blu Ray format had fans around the world scratching their heads in confusion: “So, what version is available where and what is included on how many discs?” TORn to the rescue! Our staff put together this comprehensive, easy-to-follow guide to help fans zero in on exactly what they wanted.
TORN Book Club – Show launch
November brought about the debut of a new weekly live streaming video chat show for Tolkien Fundamentalists and all book lovers. Sundays 3pm PT at http://theonering.net/live
Premiere – Hollywood – pinch seen ’round the Tumblrs
Although Berlin got the bigger premiere, fans watching Hollywood were most delighted to see a fun moment between Benedict Cumberbatch and Martin Freeman. Only TheOneRing.net cameras caught this, inspiring legions of tumblr gifs and validating shippers worldwide.
Plane unveiling – LAX
As part of The Hobbit: The Desolation of Smaug’s premiere festivities, Air New Zealand graciously invited TheOneRing.net to the red carpet reveal of their new Smaug plane! Joining the Happy Hobbits at the event were TORn staffers Quickbeam & Sarumann, who shared a brief moment with director Peter Jackson and actors Aidan Turner (Kili) and Dean O’Gorman (Fili). Check out the pics and video here!
Press Junket – Beverly Hills
Check out our exclusive “Playlist of Desolation.”
William Kircher live fan chat
Bifur himself stops by and gives the scoop on our favorite Dwarf with an axe in his head.
FORTH EORLINGAS INTO 2014!
“Tolkien Fandom is the most generous, thoughtful and kind fandom I’ve ever seen.”
- Doug Brochu
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