'John Carter' Actually Made Money

John Carter has been reported as a big money loser. “John Carter loses $200 million,” screams the CNN Money headline. “The megaton flop known as John Carter imploded harder than any movie in recent memory” says a Forbes article. The problem is, these statements aren't true. John Carter made money.

So why the misinformation? Well, they do make for good headlines. “John Carter Will Earn Profit By End Of TV Cycle” is a lot less inflammatory, although that is a lot closer to the truth. And, the stories on John Carter show a lack of understanding about how film finance works. Even reporters in the business can get caught up in surface figures.

For instance, Box Office is commonly referred to as what a film earns. While Box Office is a flashy and easily accessible figure, it's not what the studio receives. Rather, for the Domestic market, a film will earn on average 55 percent of the Box Office as Film Rental for the Domestic market and 40 percent International. Film Rental is what the distributor receives, and it goes against the cost of the film. For a major studio that's usually the cost of production plus post production and advertising. The cost of production includes everything used to make the film—actors, writers, production staff, editing, the whole works. It's commonly called the Production Budget.

Also, while Domestic (US and Canada) Box Office figures are usually the first reported, they don't tell the whole story. The International market is at least as important as Domestic. And in this case, the International market was far more important.

For a film to earn a profit, the revenue from distribution has to exceed the cost to make and market the film. John Carter has done that. Taking some very high level figures, the situation looks like this:

Domestic Box Office: 73 million (Film Rental of 40 million)

International Box Office: 211 million (Film Rental of 85 million)

So, total Film Rental after the theatrical run is 125 million. The Production Budget was $250 million, so the film was still out half its production cost after Theatrical.

But no movie is expected to earn back its Production Budget from Theatrical these days. Generally, a film will hit profit from Video. Now, Theatrical is easy to understand—theaters sell tickets and the company that's distributing the film gets a cut. Video has many more channels, and they vary by country. In the US there's an initial sale along with release to Netflix or other revenue-sharing channels. Rather than dig into each possible source of revenue, we'll just note that in total, Video usually equals about as much to the studio as Film Rental. However, John Carter over-performed on video, taking in $36 million in sales in its first week of release in the US alone. So, the numbers are somewhat higher for John Carter.

Next up are Pay and Free TV. Pay TV is easy to think of as, well, channels you pay for, regardless of delivery method. For instance, you can get HBO on both cable and DirecTV in the US, and distribution methods are similar overseas. Free TV is channels that are nominally free, although most people also get them from cable or satellite now as well. Free TV can be a network run or, as in the case of the US, a sale to a station in an individual market, for instance Channel 13 in Los Angeles.

Pay TV and Free TV together add about half of what Video earned back to the distributor from early cycles, generally the first and second runs. Ancillary rights add another 5-10 percent.

Marketing and distribution were reported in the media as “up to $100 million.” That number is a bit inflated. Considering the pullback as the film neared release, it's probably more like $80 million.

So let's add this up:

• Total Film Rental: 125 million
• Total First Run Video Revenue: 150 million
• PTV/FTV First/Second Run: 75 million
• Ancillary: 10 million
• Total Revenue: 360 million
• Production Budget: 250 million
• Marketing / Distribution: 80 million
• Total Cost to Make / Market: 330 million
• Gross Profit: 30 million

But, first/second run is not the end of Video or PTV/FTV. Both have a “long tail” of small, ongoing sales and will continue to earn revenue over time. So John Carter has made a modest profit and will continue to do so.

So why the big screaming headlines about a $200 million write-down? Well, those are correct, so far as they go. A film company is required to match expenses with revenues. That means if you're expecting a big hit, you can push some of the cost you spent to make the film out to later distribution channels. When it became clear that John Carter wasn't going to be a big hit, Disney had to “write down” the value of the film so that its asset value matched the expected future revenues. But it wasn't a loss. It was just accounting treatment.

“John Carter: Modest Hit Thanks To International” is a far better way to characterize this film. Not flashy, but the actual truth.