Economics of the MCU

[metaphysician]

I was always under the assumption the general rule of thumb is box office return of 2 1/2 x production cost = break even.

Yep. Which given the production costs of Avengers was 230M, would mean the break even gross would be. . . 575M, a vastly more reasonable figure. Particularly given that a lot of marketing "costs" aren't actually real money, they are in mutual licensing agreements and the equivalent. When Disney wants 7/11 to make Avengers slushies, no money changes hands. Instead, Disney "pays" 7/11 in "license to use Avengers imagery", and 7/11 "pays" Disney in "contractual obligation to make and promote Avengers merchandise." Everyone is happy, and *both* parties can claim the dollar value equivalent of the consideration granted as a cost, even though no dollars are actually exchanged.

As for the 1.1B number, I suspect it wasn't intentionally made up. I suspect it was calculated by someone who didn't really know what they were doing, based on numbers that may not have been accurate. However, it was almost certainly publicized and distributed because it fit a convenient, salable narrative, thus being worth attention, the ultimate currency of journalists and commentators. And once one person tosses out the number, everyone else can report on it as "news".

 

[jmc]

Yep. Which given the production costs of Avengers was 230M, would mean the break even gross would be. . . 575M, a vastly more reasonable figure. Particularly given that a lot of marketing "costs" aren't actually real money, they are in mutual licensing agreements and the equivalent. When Disney wants 7/11 to make Avengers slushies, no money changes hands. Instead, Disney "pays" 7/11 in "license to use Avengers imagery", and 7/11 "pays" Disney in "contractual obligation to make and promote Avengers merchandise." Everyone is happy, and *both* parties can claim the dollar value equivalent of the consideration granted as a cost, even though no dollars are actually exchanged.

As for the 1.1B number, I suspect it wasn't intentionally made up. I suspect it was calculated by someone who didn't really know what they were doing, based on numbers that may not have been accurate. However, it was almost certainly publicized and distributed because it fit a convenient, salable narrative, thus being worth attention, the ultimate currency of journalists and commentators. And once one person tosses out the number, everyone else can report on it as "news".

I didn't say I was correct, I just said that seems to have been the rule of thumb. When it was announced that HP7 actually didn't make any money in spite of it's box office I was blown away, which makes me believe the brake even point for film is a lot higher than we initially are lead to believe, so whilst I concede the number may be misquoted or taken out of context, the fact there's precedent in another high profiled film means what we know about box office really isn't all that much.

 

[titansupes]

I didn't say I was correct, I just said that seems to have been the rule of thumb. When it was announced that HP7 actually didn't make any money in spite of it's box office I was blown away, which makes me believe the brake even point for film is a lot higher than we initially are lead to believe, so whilst I concede the number may be misquoted or taken out of context, the fact there's precedent in another high profiled film means what we know about box office really isn't all that much.

Woah, what? Link please?

 

[Zarex]

To put it more into perspective, Marvel made 6 billion off of merchandising in 2011...that's right, BEFORE the Avengers.

http://adage.com/article/media/avengers-bulking-6-billion-marvel-licensing-machine/234572/

I can only imagine how much they made in merchandising last year and what they stand to make this year.

And in 2010 they generated $5.6 billion from merchandising, and $4.9b the year before that.

http://www.thewrap.com/media/article/report-disney-made-286b-2010-licensed-merchandise-27526

With Avengers and TASM having come out last year, I have to imagine Marvel generated around $8-10 billion in merchandising in 2012.

A key point to remember is that the agreements Disney has with manufacturers to sell Pixar, Marvel and Princess merchandise are licensing agreements, and more closely resemble the company's relationship with Sony and FOX than with the activities of the MCU. The fees generated from licensing their products are what ends up on the corporate financial statements, and I've seen that estimated at about 10% of merchandise sales. So the $8-10 billion in 2012 merchandise sales may end up adding $1 billion in fees to Disney - certainly nothing to sneeze at, but probably not much higher than what Marvel Studios earned from ticket and DVD sales for that year.

 

[Mr.M]

You need deals with the manufacturers. That's probably greater than 50%. Then you need deals with the retailers. That's another 50% or so. Then you need to advertise the products. Who foots the bill? The retailers or Disney? Or both? Then you need actual sales. With the movies as hot as they are, I am sure they have no problem selling games and toys during the Holiday season to buff their last quarter earnings. So it's never what it is at face value. Everyone is scrapping for every penny in this economic climate. It's affecting everyone from Disney to Uncle Bob.

 

[Zarex]

You need deals with the manufacturers. That's probably greater than 50%. Then you need deals with the retailers. That's another 50% or so. Then you need to advertise the products. Who foots the bill? The retailers or Disney? Or both? Then you need actual sales. With the movies as hot as they are, I am sure they have no problem selling games and toys during the Holiday season to buff their last quarter earnings. So it's never what it is at face value. Everyone is scrapping for every penny in this economic climate. It's affecting everyone from Disney to Uncle Bob.

The advertising & manufacturing are all paid by the licensee. For these deals, Disney just collects the fees.

 

[metaphysician]

A key point to remember is that the agreements Disney has with manufacturers to sell Pixar, Marvel and Princess merchandise are licensing agreements, and more closely resemble the company's relationship with Sony and FOX than with the activities of the MCU. The fees generated from licensing their products are what ends up on the corporate financial statements, and I've seen that estimated at about 10% of merchandise sales. So the $8-10 billion in 2012 merchandise sales may end up adding $1 billion in fees to Disney - certainly nothing to sneeze at, but probably not much higher than what Marvel Studios earned from ticket and DVD sales for that year.

OTOH, that 1B is pure profit, from Disney's perspective. They don't actually put any money in to get it. The only thing it costs them is opportunity cost, in terms of "what else could we have used this license for?" Which, for most of the major merchandising deals, is probably negligible.

 

[Mr.M]

So merchandisers have to pay Disney for the rights to produce and sell the Disney products? So how does Disney have any recourse if it is not happy with how their "brands" are being made and distributed? Just go to the next highest bidder? Seems kind of inefficient. What if Disney says, "We want "X" of these units sold by said date at said price." What if the quota is too high for the retailers to realistically meet? Could they not ask Disney for financial or marketing assistance? You know, actually financing from Disney to help sell the "brand"? Don't know why that isn't the case, if you guys are right about that.

 

[Mr. Dent]

I don't think it matters to Disney how many products actually get sold. They get paid either way thanks to the license. Obviously though, since manufactures keep coming back their stuff is selling.

 

[Grommers]

Being in canada, and only knowing that one of the major players in the theatre business (famous players), my friend's the manager there, and basically most of the contracts they get with the movie industry, is they will play there movie, and say for the first 4-5 weeks, the studio who made it will get ALL the ticket sales, anything else after that the theatre gets.


In some ways I agree with marvel's stance on how much they get paid, at the same time, I disagree.

The reasons, I agree are, most actors are vastly over paid. It's just ludicrous and really hurts the budget of the movie. Now at the same time, if they are getting paid less, when will we as a consumer see those savings?

Never.

If Marvel put it out saying, there movies would be cheaper to see if they didn't pay there actors as much, hell I'm all for it. I hate paying 20$ to go see a movie in imax, or at least 10-13$ for a regular theatre. The experience just isn't THAT good, I just don't have alternatives.

There was a time when the big budget movies, were only 4-5$.

Now, it's a crummy situation, because we as a consumer don't have much say regardless, let's all be honest, it's nice to go out and see a movie every once in a while, it's almost mandatory as a discussion piece in most social circles.

So, with that said, I agree with Marvel to not pay them more, but I disagree with Marvel (and theatres) for charging the ridiculous prices they do.

So with that said, I'd rather the actor's get more money because hell it beats there CEO just pulling in more of that dough $$.

 

[pr0xyt0xin]

I agree with anyone who fights for equal treatment in the workforce. And I'm one of the few who probably believes the talent of Chris Hemsworth/Tom Hiddleston/Samuel L Jackson was worth just about as much as RDJ.

BUT! These people already make ungodly amounts of money for being a part of something I'd kill to be a part of for free. If the millions they make "is not enough" and we see the MCU stumble because of this, I will be unhappy. With both Marvel and the talent.

 

[Infinity9999x]

So how come the article about this who RDJ/negotiation deal seems to be everyone on the internet but on the Hype's main page? Is the story not confirmed?

Also, if it's really true that some of the actors are only getting paid 200,000 as some of the articles suggest, that really is pretty pathetic. NPH on How I Met Your Mother gets paid that per episode.

 

[jmc]

Look, I know it's easy for some of us to say 'these people makes millions...' etc, but the company they've made movies for are making a hell of a lot more and frankly the actors deserve a fair share of it. Without the actors these films are nothing. They should be paid relative to the films success. Every fan on here should be siding with the actors here because Marvel can't cry poor any more especially with Disney now behind them. I can already tell some people in their posts are struggling to be on the actors side, the truth is people the talent isn't expendable.

 

[Whiskey Tango]

Also, if it's really true that some of the actors are only getting paid 200,000 as some of the articles suggest, that really is pretty pathetic. NPH on How I Met Your Mother gets paid that per episode.

I would suggest not taking every article read at face value.

 

[eddy]

re:to the toy licenses. I work in Walmart and I know for a fact that Wally World orders tons of stuff regardless if the product is selling well at all. They use their stores like a warehouse and we have more product than what we know what to do with. Even if we're still sitting on these products(toys, bed sheets, tooth brushes, beach towels, you name it, i've seen it.) then the companies have already made their money. When we have to get rid of this stuff, we usually end up absorbing the costs if we can't dump it on another store.

 

[ViscaBarcaInter]

The interesting angle here is the suggested idea that RDJ is battling to help the other actors get better pay for the second Avengers film, which is easy to do when you've already banked your 50M and didn't do jack to boost anyone else's wage during the first movie.

In all seriousness though, whilst RDJ should be paid the top amount as the star, the overall pay should be more balanced across the cast. If Marvel have anyone locked down on a contract though, they shouldn't budge an inch. It is fair for actors to ask for big money on massive films, since the studios will make plenty after all. Despite the continuing "creative accounting" stuff they spread. All about keeping later payments down, such as royalties, back end payments, and keeping certain subsidies and so on.

The movies will get made, don't worry about that folks.

 

[Zarex]

In all seriousness though, whilst RDJ should be paid the top amount as the star, the overall pay should be more balanced across the cast. If Marvel have anyone locked down on a contract though, they shouldn't budge an inch. It is fair for actors to ask for big money on massive films, since the studios will make plenty after all. Despite the continuing "creative accounting" stuff they spread. All about keeping later payments down, such as royalties, back end payments, and keeping certain subsidies and so on.

The movies will get made, don't worry about that folks.

I don't agree with the idea of balanced pay. To use a sports example, would it be "fair" if LeBron James had a closer salary to that of Miami Heat teammate Sean Battier? LeBron gets paid the max NBA salary (and by having a max salary he is underpaid by quite a bit) because he is worth at least that much in ticket and merchandise sales. Downey is in the same position in that his portrayal of Iron Man drives people to the box office and moves merchandise off of the store shelves. Despite the $50 million+ paycheck, Disney/Marvel has yet to overpay for his services.

That's not to sat that Evans, Hemsworth and company shouldn't get a significant bump in pay, especially if the sequels they headline take off. But, unlike Downey, they haven't proven their worth over 4 box office smashes.

 

[InternetPeople]

I overpay whenever I go to the theatre. Millionaires and billionaires