As Studios Rush to Cash In on DVD Boom reports, Americans spend more on DVDs than they spend at the box office:
Between January and mid-March this year, Americans spent $1.78 billion at the box office. But in the same period they spent $4.8 billion — more than $3 billion more — to buy and rent DVD’s and videocassettes.
Thus, studios spend as much marketing DVDs as theatrical releases:
Studios now spend comparable amounts of money on DVD and theatrical marketing campaigns. Disney spent an estimated $50 million marketing the “Finding Nemo” DVD last year, said officials at Pixar, which made the film. It was money well spent. The DVD took in $431 million domestically, about $100 million more than the domestic box office.
Rarely does a movie recoup its costs at the box office — the theatrical run is now an ad for the DVD:
The average movie now costs $64 million to make and another $39 million to market, according to the Motion Picture Association of America.“In the last five years maybe 6 pictures out of 1,000 recouped their cost in the theatrical marketplace,” said Nick Counter, president of the studio alliance. “Today the hits have to make up for all the losses.”
For bigger-budget movies the DVD revenue has become critical. Nowadays, “basically the movies are commercials for the DVD’s,” observed John Lesher, an agent for the Endeavor talent agency who represents leading directors like Walter Salles, Paul Thomas Anderson and David O. Russell. Movies with budgets over $100 million now commonly just break even at the box office.
The financial rules have changed — and Office Space shows how:
The old Hollywood model of needing to recoup three times the production cost at the box office to make a profit is long gone. But many are asking: What is the new model?The answer to that may lie with a little-known movie called “Office Space” (1999). The satire by Mike Judge, co-creator of the animated television series “King of the Hill,” cost 20th Century Fox about $10 million to make, and took in just $10 million at the box office. But on DVD the movie has become a hit, with the studio so far selling 2.5 million units, well over $40 million worth.
There are other examples of surprising windfalls. The Lion’s Gate comedy “Van Wilder” was renamed “National Lampoon’s Van Wilder” and has unexpectedly become a hit on DVD, where it sits alphabetically next to other National Lampoon movies.
A moderate hit like the DreamWorks comedy “Old School” starring Will Ferrell took in $73 million at the box office, but made an astounding $143.5 million on DVD.
(Hat tip to Marginal Revolution.)