Big Earners, Missed Profits & The Necessity of Transmedia

Vanity Fair magazine just released its list of the biggest earners in Hollywood for 2010. I’m going to reproduce the top 15 and make some comments from a Transmedia perspective – especially pertaining to Avatar.

1. James Cameron – $257m ($248m in backend on Avatar)
2. Johnny Depp – $100m (including $40m backend on Alice in Wonderland and $35m upfront on POTC 4)
3. Steven Spielberg – $80m (including $50m in Universal theme-park royalties and consulting fees)
4. Christopher Nolan – $71.5m (including $69m fees and backend on Inception)
5. Leonardo DiCaprio – $62m (including $59m in backend on Inception)
6. Tim Burton – $53m (including $50m backend on Alice in Wonderland)
7. Adam Sandler – $50m (including $45m in fees for starring in Just Go with It and Jack and Jill)
8. Todd Phillips – $34m (including $13 in backend on The Hangover – which was released last year!)
9. Taylor Lautner – $33.5m (including $25m in Twilight-related fees)
10. Robert Downey Jr. – $31.5m (including $15.5m in backend on Iron Man 2 and Sherlock Holmes)
11. Will Smith – $29m (including a $20m fee on MiB III and $5.5 for producing The Karate Kid)
12. Joe Roth – $28.5m (including $27.5m backend on Alice in Wonderland)
13. Kristen Stewart – $28.5m (including $25m in Twilight-related fees)
14. Jerry Bruckheimer – $27.5m (including a $10m producing fee for POTC4)
15. Robert Pattinson – $27.5m (including $25m in Twilight-related fees)

Franchises Rule

615 movies were released in the year 2010. The fifteen top earners above reaped their many millions from only a handful: Avatar, Alice in Wonderland, Inception, The Hangover, Sherlock Holmes, Iron Man 2 and Twilight. In fact, The Hangover, Avatar and Sherlock Holmes were released in 2009 and still generated more revenue through ancillary sources than most films released in 2010.

Of the list above, only the Twilight actors, Will Smith (who will see a lot more in first dollar gross from MiB) and Adam Sandler generated the majority of their income from fees. The rest of the talent earned their money through backend participation – by taking a slice of the gross and/or profit made by the franchises. It is clear, therefore, that tentpole franchises generate enormous amounts of revenue – presenting a much better business proposition than a single film. However, because talent takes such a big cut of the box office, it is imperative that studios seek to maximize revenue through Transmedia and consumer products. Which leads me to…

James Cameron Won…. But Fox Lost

By any metric, Avatar was a colossal success. It made $2.7 billion at the box office worldwide and James Cameron took home around $250m of that – suggesting that he had a deal for a little under 10% of the gross on the film.

With that said, it is worth thinking about Avatar not merely as an individual film, but as a transmedia franchise. In that regard, Fox may have dropped the ball; see these comments on the Yahoo movie blog:

But the king of the Vanity Fair list, writer-director James Cameron, garnered $257 million, snagging $248 million alone from back-end deals based on the theatrical, DVD, and pay-TV performance of “Avatar.” By comparison, the $5 million he got from “Avatar” licenses and the $4 million he earned from revenue generated by his older films are mere drops in the bucket. (And that’s not even including the $50 million he got in 2009 from back-end deals on “Avatar.”

In 2010, James Cameron made $248m from the Avatar movie, but only $5m from licensed products related to the franchise. That appears to be a huge discrepency suggesting one of two things: (a) Cameron had a hugely disadvantageous deal on licensed products and transmedia spinoffs; (b) Fox did an appalling job of expanding the franchise.

The Avatar movie was accompanied by a console video game and a selection of merchandise. However, all signs indicate that Fox underestimated how well received the film would be and, accordingly, failed to anticipate how hungry Avatar fans would be for more content. Indeed, the recent announcement of the Avatar sequels seems to confirm this – they are slated for Christmas 2014 and 2015 and, as yet, there has been no announcement of additional story content to span the gap.

This is a huge problem for Cameron, who always conceived Avatar as a bigger world (and believe me, he’s not lying), and Fox – which is missing out on probably half a billion dollars a year in Avatar-related profits. In the process, it emphasizes the critical importance of having a robust Transmedia plan in place well before you release the first installment of your franchise. Now, there will be a five year gap between Avatar stories with little or no substantial content in-between. Will fans’ enthusiasm for Avatar diminish in that time? Probably not – but it won’t grow either.

Fans could be watching an animated series, playing a series of video games or an ARG, reading novels and graphic novels and becoming more deeply immersed in the mysteries of Pandora. Of course, it is critical that all of these elements add richness to the story world as per Transmedia principles, but they could have added a critical financial buffer for Fox and Cameron as they prepare to spend millions on developing and shooting the sequels.

Compare to the path taken by Disney’s Tron: Legacy – a far less financially successful film at the box office, but one that is doing extraordinarily well in consumer products. There is an animated series ready to roll, which will likely be joined by novels and graphic novels – all of which will recruit more fans for the next film. And, of course, a teaser trailer for that film has already been shot – proving to fans that Disney is serious and committed to the franchise, unlike with Avatar where it took some knee-jerk panic negotiating with Cameron to get the sequels on the slate. It’ll be interesting to see what Sony – which seems increasingly committed to Transmedia – does with Men in Black 3D and Spider-Man.

Alice, Twilight and Theme Parks

There are a few more points that spring out from the list. The first two are interrelated. Alice in Wonderland was an enormous success, surpassing Disney’s wildest expectations and providing a huge payday for Johnny Depp, Tim Burton and Joe Roth. Twilight, it hardly needs to be said, has been a cult phenomenon. But both are facing a crisis. To my knowledge, Disney has no current plans to release further content set in the Alice universe, and has no Transmedia plan in place to extend the story. It’s going to have to think of a way to provide some, otherwise it has no chance of generating another billion dollars from the franchise.

Twilight presents an even bigger crisis – not for author Stephanie Meyer or lead actors Stewart, Lautner and Pattison, but for Summit Entertainment. Summit built its entire studio on Twilight and, as a closed franchise, there is nothing that it can do to extend the franchise – except reboot the movie series and tell the stories again (which nobody wants to see). It’s going to have to play hardball with Meyer and offer her a lot of cash to write new installments – preferably ones that pull the world of Twilight wide open to allow for a lot more varied and dynamic stories – or it’s going to be back to the drawing board to find another comparable franchise, which strikes me as a million-to-one shot.

Finally, I found it interesting that Steven Spielberg made a lot of his money this year from royalties consulting on the Universal theme parks. Now, Spielberg is a total anomaly – there aren’t many talents (apart from maybe Bay and Bruckheimer) who can demand significant royalties on rides. However, it does show that theme park rides are immensely profitable and should be considered in the transmedia business plan of any major franchise.

Housekeeping Update

In the interest of candor, I’d like to offer an update on my professional situation. I have been offered – and accepted – the opportunity to work with Starlight Runner Entertainment in a freelance capacity. Obviously, I’m thrilled to have the chance to with the SLR team; it was one of Jeff Gomez’s presentations that sparked my initial interest in Transmedia and I’ve been a strong advocate of his principles on this blog since day one. It’s a friendly, exceptionally talented team, and I’m looking forward to learning a great deal.

Substantively, the content and philosophy of this blog should not change. I have signed an NDA at Starlight, and consequently will not be covering in detail any property that the company is actively working on. While I understand concerns readers may have regarding impartiality, I can assure you that I will continue to cover developments in the space as comprehensively and fairly as I can.

Storyworlds Conference

I want to also take this opportunity to publicize the upcoming Storyworld Conference and Expo, which will take place at the Wyndham Hotel in San Francisco between October 31 and November 2, 2011. The foundation for this event – which promises to be one of the most significant conferences about Transmedia storytelling to date – was put into place by two very smart Transmedia advocates and practitioners – Guy Gonzalez and Alison Norrington. I am delighted that Alison, who is one of the best and brightest voices in the space, will be Conference Chair for what promises to be an extremely informative event for anybody working in the entertainment business – from development to licensing to business affairs. You can find out more over on Alison’s blog.