Paid For TV: Feature Licensing Getting Costly and Common
As TV’s get thinner, bigger and better, people spend more of their entertainment time and money at home. There’s less allure to the theaters. For the TV Networks (and also aspiring TV/Net convergence services like Hulu) this changing dynamic represents big opportunity in the form of ad dollars. It’s also a big risk (lower audience share if they can’t compete with rivals in programming). To capitalize, networks are acquiring content voraciously. Movie producers seem all too happy to oblige. Just how big the stakes are became clearer today when News Corps FX cable network opened its coffers to buy exclusive programming rights.
In a deal with Marvel Studios, the cable channel bought the pre-release rights for five movies out Marvel’s comic book catalog. With the films not yet in theaters, the agreed on price was a formula tethered to performance. Specifically, the terms of the agreement provide for a license fee equal to approximately 11% of the domestic box office gross up to $200m (via Variety).
If May’s release of Iron Man, starring Robert Downey Jr,. or June’s Incredible Hulk with Edward Norton turn into blockbusters, the arrangement will yield $22m a film. At those rates, cumulatively, the total for the five film package (three titles are not yet named) could provide for a fee of as high as $110m.
Most likely, the numbers will be more manageable but still imposing. Superhero films in recent years have ranged from a weak $24.4m for duds like Elektra to a more than $403m for a major hit like Spider-man. On average, the 75 comic book adaptations since 1978 have churned $88.3million at the domestic box office. Only the top ten titles in that group broke the $200 million barrier. (data via Box Office Mojo).
Assuming, the five Marvel titles average a result of $130m, well better than average and equal to the top 15 position on the current list (a position held by 2003’s installment of the Incredible Hulk), the license fee will still equal a whopping: $71,500,000.00.
That’s a lot of money for free TV and FX isn’t the only TV network taking a gamble. TNT, TBS and USA have all recently bought rights to movies prior to their theatrical release too. Upcoming titles including Indiana Jones and the Kingdom of the Crystal Skull, the Sex and the City Movie and The Dark Knight are all locked up under similar agreements. (FX also recently bought several upcoming titles from Sony/Columbia including Will Ferrell’s “Step Brothers.”).
For the studios, part of the upside is the ability to hedge production costs by drawing revenue pre-release. Another benefit: the TV deals provide a creative and cost effective marketing tool. Case in point, as part of Marvel and FX’s deal, on the release days of the first two movies (the Hulk and Iron Man), FX will run a marathon of Superhero movies and fill the commercial breaks with ads for the two films. It’s TV’s equivalent of demographic super-targeting.
The exclusive rights FX bought will last for four years. During the period, Marvel will retain the right to sell a limited run of the films to broadcast TV. Pay TV rights, which are owned by Paramount and Universal under separate agreements with Marvel (as part of the movies’ production contracts) are not affected by this deal.
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