Looking at the Box Office

What should we be making?

I hope everyone is having a nice Summer.

I’m getting tired of old IPs (and their attendant controversies). Are we spending too much mental energy on all these IPs from the 30s to the 70s — when we live in a very different and interesting time of our own?

It’s as if all our top music acts were Fleetwood Mac cover bands and we just listened to new versions of Landslide every year. I took my love, I took it down..

It’s time to move on. I mean I get why it happens, but it’s time.

What I’m excited about is today and the next wave of creative energy. There is a new mood and aesthetic ready to be fully born. Stories and vibes you couldn’t have imagined 5 years ago. There are gaps in the market.

But I don’t see who is bringing the next new vibe into being. Comedy barely exists. Tent poles are formulaic. The indie world feels a bit stuck (as discussed here).

A friend was musing about investing in individual films recently. My view is that it’s much safer to invest in a company that makes many films instead of investing in one film at a time. So I thought I would take a look at the box office and see what it is telling us about what such a company might focus on today.

What is the viable plan for a new studio today that is focused on originals?

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I want to preface this discussion with six meta points that I think are important before thinking through the details of any new media endeavor.  

1. You have to believe in and anticipate cultural change. This shouldn’t be controversial, but deep in their hearts a lot of people don’t believe in change. Believe in it. Be a part of the change, not a part of the past, even the recent past. Styles and idioms give way to new styles and idioms. Can you be on the cutting edge of that?

2. The politics of everything are difficult to ignore these days, which creates risks and opportunities. You will need to take a point of view on this.

3. On aesthetics and narrative, the template for film narrative has long been — has been for most of the life of film — theater and novels, and of course, previous films. One of the important things I am seeing in film now is that the aesthetic is increasingly influenced by games and anime. Some people don’t get it. They don’t understand it. There was something they didn’t like about Everything Everywhere — but young people loved it.  Be aligned with this change.

4. Any plan for a new content entity, whether in TV, film or games, has to have a unique point of view. The world has no need for a generic “content provider.” If you are pitching a pizza restaurant, cook the investor your special pizza. 

5. Any plan, if it is to be worth investing in, should plan to be the new center. The plan should never be to become the 52nd film producer or distributor but to be the new center of at least some important segment of the industry.

6. And finally, as I’ve said before, a new business should be a movement. It should  be something customers can be unabashedly into. And team members certainly should be evangelists. It must have values and benefits and style so that they have something to love and evangelize. 

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Zooming out, the business opportunity in film is better than it has been in a long time. The market is mostly back (see below), the streamers need films, and the streamers want to cut costs so the prospect of retaining more rights or pre-selling just foreign and hanging on to some library rights is more realistic than it recently has been.  

Are Movies Back?  

Box office is up 20% from last year. But ticket sales are down 21% vs. 2019 (releases are also down 21% from 57 to 45).

My assessment is that clearly the audience knows where their local theater is and is interested in seeing the right film. Super Mario grossed $573MM in the US. 

I haven’t clearly seen that the art house audience is wholly back. Or, rather, since Everything Everywhere grossed $77MM in the US, whether a particular type of art house customer is back. The Moonlight, Manchester by the Sea, or, let’s say, King’s Speech audience. Tar was well reviewed but grossed $6.7MM in October 2022. Asteroid City just opened to $9MM, Wes’s best opening ever. But then it fell off 53% in week two. My verdict is that the movie audience is mostly back but the softest area is this Film Forum/ Metrograph scene. Or to look at this through a different prism, I think 18-34’s are back and the 40+ film aficionados who used to populate the Westside Pavilion are not. Will that still be the case in a year or two? There will probably have been further recovery, but I think trying to have a movie with a bit of fun, like Everything Everywhere or Get Out, is a good idea.

One other thing to bear in mind. Word travels faster than ever. Look at Indiana Jones and The Flash. If the audience decides there is something about your movie they don’t cotton to, it’s more punishing than it used to be. 

But on the whole I believe that movies are back.

Below I am going to take a look at select films to discuss issues and results at two budget levels as we think about the new studio opportunity. 

So let’s play a game. Let’s assume that we are trying to put together an independent studio that ultimately will seek out a pay one deal with a streamer but that is not just making movies for release on a streamer (because I would call that a production company). Moreover, we have enough capital to green light our own movies without getting approval from foreign buyers. But let’s also assume that our capital is limited. We are not going to be making $80MM or $100MM films.

Category One: the ~$5MM Movie

• Target USBO $10MM

• Target Int’l $13MM

This is a select list of films, mostly films that worked, sorted by total global box office to budget ratio —

source: the-numbers.com; IMDb Pro; BoxOfficeMojo.com

(Here is the list of the 100 top grossing $3MM to $7MM films produced since 2015.)

The risk in this category in general, because you will tend to lack elements, is that you get bupkis. That is, if you don’t have a star and your reviews are only 7/10, you can really go to zero here. So this list is hiding a large graveyard of movies that didn’t get picked up. It’s a risky zone.

Of the big successes, it’s mostly horror. Some big concept-driven wins. My concern in that genre is that these results are no secret and I expect to see a ton of horror movies in a year or two; also, Jason Blum is the best at this and, you have to imagine, has the best flow. You are probably after Jason on the priority list for these projects. Personally, this is just not my genre.

If you can get an indie with a strong creator at this level, like Luca Guadagnino or Whit Stillman, or a name like Julianne Moore in Still Alice it can be a win. But I added The Worst Person in the World because it received a 96% on RT (86% audience score) and a 90 on Metacritic but … people didn’t go in February of 2022. Just another art house “are they back yet?” datapoint. Also, one I could have added here is You Hurt My Feelings (2023), the Nicole Holofcener film, which was probably in this budget zone and is topping out at $4.7MM domestic. Between streaming and older mask wearers staying home and some arthouses having closed, things have changed in a way that is specifically bad for this type of film. Would Still Alice do $19MM today?

This budget level can also work for more specialized audiences, like the faith-based titles, though you might argue that to do those right you will need a whole specialized team. But something like Bros could have fit in this zone. It did $11MM domestically. A bomb at a budget of $22MM, but great at $5MM.

And My Little Pony is nothing to shake a stick at. The sequel opportunity is greater than most of these other films.

Bottom line, if something is truly amazing at this level, like Moonlight, you’re going to do it. If there is a name and it’s fun, go for it. More indie titles will be available at this price point because of the ambiguity in the space right now. Movies that might have been produced at $12MM in 2017 will be squeezed down to $6MM due to the Worst Person in the World effect.

But there is a trade off because, commonly, one is going to want to buy a bit of “insurance” and get some elements into a movie, driving it into a higher budget zone.

The ~$15MM TO ~$30MM Movie

Some comps: 

(Here is the top 100 films made since 2015 at budgets between $15MM and $30MM inclusive.)

Triangle of Sadness, Tar and The Unbearable Weight of Massive Talent, especially the last two at $25MM and $30MM, is where you’re going to see big time budget pushback. Triangle and Tar were nominated for Best Picture and few saw them. Triangle goes to $5MM. Tar and Unbearable go to $12MM or they don’t get made. I didn’t even put in She, Said, which cost $32MM and grossed $5.8MM. Really, in my book, none of these get made except Triangle at $5MM, because they’re off tone. Audiences want more fun now. If they wanted your tendentious political rant, they would look you up on Twitter.

David Poland recently pointed out that movies have been trending from getting 20% of their box office on their first weekend to 40% so far in 2023. Let’s say that’s a bit of an outlier and call it 35%. Still high stakes! So for the $30MM pictures, your goal if you want to gross $50MM, is to open with $17.5MM. You want to open on 3,500 screens (you likely won’t have IMAX screens) at $5,000 per screen.

So the idea is to do some (fun) prestige pictures with elements in this zone around $15MM and comedies like Bad Moms, Big Short and Crazy Rich Asians, and actioners like Drive, Baby Driver and John Wick throughout the range.

The Strategy 

The correct strategy for one person will not be correct for another because you have to do what you’re the best at. It also helps to do what other people aren’t doing. Therefore, I’m pro-comedy and anti-horror.

In all, I think four categories look investable — comedy, indie, kids and mid-budget action.

First I would observe that comedies are generally disfavored. Comedy has declined from 20% to 6% at the box office:

Some have said that this overstates the decline because many comedies are made for streaming. But to be honest I don’t see them and also the question is not whether there is comedy on Earth but whether there is latent theatrical demand for comedies. There is no evidence that theatrical audiences are disfavoring comedies. What I see is that people aren’t greenlighting comedies. And that is an opportunity. I would also say that I believe that the world is ready for a new generation of comedians many of whom are building a significant following on social media. So I think the opportunity for comedy is strong. 

No Hard Feelings recently came out with Jennifer Lawrence. It opened to $15MM on 3,208 screens and fell off 48% in its second week. It will probably top out in the 30’s, which is not going to suffice for a $45MM film. No offense to anyone but I think it is very much to Lawrence’s credit that she opened this film. I don’t understand who the movie is for. The premise is that she’s hot and 30 and he’s nerdy, neurotic, sexless and ~15 and … comedy ensues. I don’t get it. Literally who is this for?

People say comedy doesn’t travel by the way but look at Dirty Grandpa. $36MM US/$69MM international. Crazy Rich Asians ($63MM international). The Big Short ($63MM international). Bad Moms ($71MM). The ratio is less than average but getting 80% of US from international, like The Big Short, is a reasonable goal. 

Bottom line. The Hangover grossed $277MM in the US. Tropic Thunder grossed $110MM. The reason people are not making comedy has nothing to do with the audience. This should be a brand defining pillar, much as horror is to Blumhouse. 

Indie

The point of indie is to not be generic and boring and to aspire to something great and unforgettable instead. I think this is a strong and promising category but looking at the numbers it is much easier to get on board if it’s funny or has genre elements. 

But the new budget zone for this category is $5MM to $15MM, even with genre elements. I’m not even going to discuss something like Babylon or the $80MM prestige picture, in general. You just have to be a riverboat gambler. Or to put it another way, you have to be a massive streamer where you’re pretty insulated from any underperformance.

Kids

Look at A Dog’s Purpose and Paw Patrol and My Little Pony. The economics here are just irresistible and, since Disney is faltering, it is an opportunity. 

Mid Budget Action 

When you say “mid budget action” it sounds generic and boring like “we’re going to copy John Wick.” But if you understand and advance the new aesthetic I think it will be exciting and completely new. 

So my verdict is that there is an opportunity now and the opportunity is in these zones.

But there is one more thing that I would add to our little venture.

THE IP FACTORY

We all know that IP is helpful. Look how Super Mario brought in $573MM domestic and Elemental (totally original Pixar movie) has grossed $97MM.

I said I was bored by all this old IP (and attendant arguments), but I am not bored by new IP. I haven’t commented much on the kids titles above, but several have been very successful.

All of these strong, open platforms such as TikTok, YouTube, Webtoons, Wattpad, at al. create an opportunity to introduce ideas to audiences at scale and then double down where we get traction, like some combination of a VC fund and a studio. AI and other modern animation tools cut costs and save time when we develop a workflow that uses them to augment the efforts of very talented humans.

It doesn’t really matter how many times you fail. It matters that you succeed and wind up with your Avengers, CocoMelon, Pokemon, Bluey, and/or Gorillaz.

There needs to be a team down the hall from the movies team, that is systematically creating original IPs, launching them on platforms, gauging customer reaction, building online communities, and doing this 100 times, incorporating learnings and getting better and better. You know, we can make a cartoon in Japan and license it into BiliBili or Iqiyi in China. You don’t think we can come up with 10 China soccer super hero anime cartoons and have one of them work? Get great talent. Get a great workflow. Double down where you get traction. Build communities. Release content on a regular cadence. Build the next generation of franchises from small sprouts.

In ten years, you’re not going to be naming your Big Sur place Tar, but you might name it My Little Pony.

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Roy Price was an executive at Amazon.com for 13 years, where he founded Amazon Video and Studios. He developed 16 patented technologies. His shows have won 14 Best Series Emmys and Globes. He was formerly at McKinsey & Co. and The Walt Disney Co. He graduated from Harvard College in 1989.