Fox's Profit From 'Star Wars' Will Be Anything but Phantom
Los Angeles, May 14 (Bloomberg) -- News Corp.'s 20th Century Fox can be sure that at least two things won't be phantom when it releases its latest ''Star Wars'' movie next Wednesday: an audience and profits.
Fox could earn as much as $100 million from ''Star Wars: Episode I -- The Phantom Menace,'' the George Lucas extravaganza that's likely to be one of the top-grossing movies ever. Fox, which didn't spend a dime making the $115 million film, will get a distribution fee that some estimate at about 10 percent of revenue after theaters take their cut.
Advance tickets went on sale two days ago as fans, many of whom have been camping outside theaters for weeks, began snapping them up and virtually guaranteeing that ''Star Wars'' will earn back its production cost in its first week or two of release. While Lucasfilm Ltd. owns ''Star Wars'' and will see the biggest bonanza from the movie and its related merchandise, 20th Century Fox gets to be the envy of Hollywood.
''This raises the visibility of the Fox studio since they were the chosen one for 'Star Wars,''' said Salomon Smith Barney analyst Jill Krutick.
Lucasfilm last year gave Fox the worldwide rights to distribute ''Phantom Menace'' and two other ''Star Wars'' films in theaters and on video over the next decade. The Fox TV network also will air the first of the trio. In return, Fox gave Lucas the copyright to the original ''Star Wars'' film, the only one of the original three that he didn't own.
Risk-Free Release
Typically, distributors of films produced and owned by others get about 15 percent to 20 percent of the box-office receipts, after theater owners take their cut. While Fox's fee is below average, its participation in the film is virtually risk- free.
''It gives them bragging rights,'' said Richard MacDonald, analyst at J.P. Morgan.
''Independence Day,'' another Fox film, currently holds the title for top-grossing five-day opening weekend. That film took in about $85 million when it was released in 1996. Including a preview day before the film's official opening, ''Independence Day'' had a six-day opening of $96.1 million.
With ''Phantom Menace,'' Lucas will reimburse Fox for its costs of film prints and advertising during the film's run. Lucas also paid the expense to upgrade four theaters on which he will screen digital copies of ''Phantom Menace.''
''Phantom Menace'' will be released in about 2,950 theaters.
Perhaps the most valuable benefit to Fox, though, is something for which a dollar figure can't be assigned. The movie could become what Hollywood executives call a ''tent-pole'' picture, a film that helps support the studio's slate of upcoming movies and drives home the Fox name to moviegoers, analysts said.
'Part of Fox Legacy'
''Star Wars' is part of Fox legacy. When the Star Wars ship comes across the screen, it's preceded by the Fox logo and fanfare. That's very important for any studio,'' said Tom Sherak, head of the studio's domestic film group.
Fox will run about 2 1/2 minutes of previews of its own coming releases before the two hour-plus feature begins.
Lucasfilm and Fox have also tried to ensure the film's success by making theater owners follow some conditions, such as agreeing not to shift the movie to smaller auditoriums after a few weeks and setting a minimum run such as 12 weeks in some big cities.
''We wanted to give the studio more control over the film,'' Sherak said.
Having the three-picture agreement with Lucasfilm also takes some pressure off Fox to find ''event'' movies to release, especially during the competitive summer months.
''It guarantees a big opening with a Fox name on it for three summers in the next 10 years. Sometimes that's all it takes to lift all boats,'' said Rich Ingrassia, film industry analyst with Paul Kagan Associates.
Early Darth Vader
Fox released the third film of the original ''Star Wars'' trilogy in 1983. The three together generated about $1.8 billion in ticket sales worldwide. ''The Phantom Menace,'' a ''prequel,'' goes back in time to depict the early years of Anakin Skywalker, who later becomes the evil Darth Vader.
Even tepid reviews haven't stopped long lines from forming at theaters or prevented Internet users from clogging a Web site run by MovieFone Inc., the largest U.S. movie ticket service that's the sole distributor of ''Star Wars'' tickets on the Web.
MovieFone yesterday said more than 4 million people used its phone and Internet services since it began selling the tickets, and 95 percent of the tickets sold were for ''Phantom Menace.''
''We got a group of people together and constantly bombarded MovieFone until someone made contact two hours later and bought six tickets,'' said Rob Reti, a strategy consultant in New York City who plans to see ''Phantom Menace'' on Wednesday at the famous Ziegfield theater.
May/14/ 99 16: |
