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Many happy returns at the box office

Tentpole hits not always profitable

For the first time ever, the summer has seen three tentpoles cross the $300 million mark at the domestic box office: the third editions of “Pirates,” “Spider-Man” and “Shrek.” A fourth, “Transformers,” is quickly headed toward that benchmark.

But while much of the media has been obsessing about whether these megapics will drive the summer session to an all-time high, studio executives are concerned with something more basic: turning a profit.

On that standard alone, the summer is giving them reason to cheer. Exhibit A is a movie that isn’t even a tentpole: Universal’s “Knocked Up.” With box office and other revenue streams, Judd Apatow’s R-rated comedy has the potential to bring in more than $335 million, and it cost less than $30 million to make.

It is expected to ultimately gross $150 million domestically, make more than $86 million overseas (which “The Break-Up” grossed overseas last year) and could collect more than $100 million on homevideo. And then there are other ancillaries, like TV sales. Even after marketing and distribution costs are subtracted, it’s a gigantic haul.

In terms of profitability, other summer hotties include Dimension-MGM’s horror hit “1408” (nearly $70 million domestically, but costing under $25 million) and Fox’s “Live Free or Die Hard” ($242 million worldwide so far, after a cost of $110 million). Meanwhile, word of mouth is fueling everything from Disney-Pixar’s “Ratatouille” to Fox Searchlight’s “Once” to Picturehouse’s “La Vie en rose” as they continue their summer stints.

Generally speaking, the summer box office is sporting a glowing tan that’s showing no sign of fading soon. There are several high-profile releases still to come, while “Harry Potter and the Order of the Phoenix” — which saw the best opening numbers in the history of the lucrative Warner Bros. franchise — and DreamWorks-Paramount’s “Transformers” are still early in their runs.

Shaping up to be a record-breaking sesh, the summer is up 2% from 2004, the top summer on record, and up 7% from summer 2006, according to EDI. It’s also looking like a record-breaking year: Through July 15, box office was up 7% from the same frame in 2002, the best year on record.

In the past, things have begun to slow down in July, but not this year. Over the July 20 weekend, New Line’s “Hairspray” and U’s laffer “I Now Pronounce You Chuck and Larry” bowed. On July 27, Fox opens “The Simpsons Movie,” while U opens “The Bourne Ultimatum” on Aug. 3. New Line debuts “Rush Hour 3” Aug. 10.

There also have been no clunkers on the scale of last year’s “Poseidon.” But there have been two clear disappointments: Sony’s toon “Surf’s Up” and Universal’s “Evan Almighty.” U’s take from “Knocked Up” will help buffer the disappointment.

Otherwise, the entire spectrum of films is working, from tentpoles to midrange pics to niche titles, unlike in past years, where one category took a pounding. Last year, for example, “Pirates of the Caribbean: Dead Man’s Chest” was the only tentpole to cross the $300 million mark domestically.

Of course, no secret in Hollywood is more sacred than the question of profitability. Accurate production budgets and marketing costs are kept under lock and key, while those numbers that are leaked out can never be entirely trusted. And profit participants are well aware that even the most profitable films often stay in the red — at least when anyone asks for accounting statements.

Nevertheless, there are solid indications of what’s working and what’s not. The high profit ratio of midrange pics like “Knocked Up” does not mean that tentpoles aren’t making money.

Disney’s “Pirates of the Caribbean: At World’s End” has grossed a whopping $940 million worldwide, putting it ahead of “Spider-Man 3,” which is Sony’s best pic on record at a worldwide cume of $885.9 million.

Sony also touts the fact that it is the only sequel tentpole of this summer’s crop to have outperformed its predecessor.

Sony concedes that “Spider-Man 3’s” production cost was at least $258 million. And there were pricey gross participation deals for director Sam Raimi, star Tobey Maguire and other talent. As is the case with any tentpole franchise, there’s also a hefty print-and-advertising budget.

But make no mistake, it will be profitable, with other revenue streams like DVD yet to come. It’s just a question of how much.

One studio exec asserts, “There are tons of payouts with the tentpoles, but all of us will see profits.”

There is another caveat to this year’s good news. Some of the best performers will share their returns with private equity firms, which put up part of the cost. That is the case with “Transformers,” which represents the first big win for Paramount’s Melrose Fund.

One studio that has especially enjoyed a summer windfall is Fox. It avoided mega-budget event pics, intent on keeping costs down and first-gross players to a minimum to maximize profitability and stability.

Aside from scoring big with “Live Free or Die Hard” (returning Bruce Willis, who does have gross participation), Fox is making a profit on its $120 million sequel “Fantastic Four: Rise of the Silver Surfer,” which has made $234 million at the worldwide box office. The studio also says it didn’t spend more than $75 million on “The Simpsons.”

Fox execs say the budgets of their three summer films combined aren’t much more than the budget of a single tentpole.

As the summer started, there was much fear that Hollywood would see a lot of red, given the crowded schedule. There were numerous proclamations that the pack of megapics would use up all the sunscreen, leaving no protection for smaller titles. But a handful of midrange and niche pics are getting anything but burned.

Picturehouse’s Bob Berney says, “I think all of this shows that the marketplace expands to any degree. If there are movies people want to see, you can actually pile them on.”

“Waitress,” which Fox Searchlight picked up at Sundance for around $5 million, has grossed $18 million. Searchlight paid less than $1 million for “Once,” another Sundance pickup that has already grossed $5 million at the U.S. box office. Berney is scoring with Edith Piaf biopic “La Vie en rose,” which Picturehouse acquired for under $1 million. To date, the film has grossed nearly $7 million domestically.

But not all was rosy this summer. U stumbled badly with “Almighty,” which, at a reported budget of $175 million, is considered the most expensive comedy ever made. To date, pic has grossed around $90 million domestically and another $4 million overseas.

The season’s other big disappointment is Sony’s “Surf’s Up,” which reportedly cost around $100 million to make. The toon has grossed $57 million at the domestic box office and another $6.4 million overseas, although it won’t open in most foreign territories until August and September, when it will have less competition.

Even though Sony wasn’t able to catch a wave with “Surf’s Up,” the other two summer toons should bring home a nice bounty.

DreamWorks Animation’s “Shrek the Third” looks to be a strong profit-maker. Still early in its run, “Ratatouille,” which cost around $150 million to make, has already grossed more than $152 million domestically and another $30 million overseas for a total cume of $182 million.

Of the tentpoles, “Potter” and “Transformers,” which has made nearly $400 million to date worldwide, could have an edge up in terms of profitability. Michael Bay, who directed “Transformers,” has said the pic cost $150 million (he’s a gross participant as well); “Potter’s” reported budget is also $150 million.

For studios focused on big-ticket megapics, the sun is even stronger overseas, where tentpoles generally make more. Disney’s “Pirates 3” has grossed $634 overseas for a worldwide box office cume of $940 million; “Spider-Man 3,” $551 million for a worldwide cume of $885.9 million; and “Shrek the Third,” $369 million for a total cume of $687 million.

“Potter” has already grossed more than $193 million overseas for a worldwide box office cume of nearly $370 million. “Transformers” also is doing well overseas, although it is still rolling out in a number of key territories.

Contributing to the season’s global windfall: “There’s no World Cup soccer this year, as there was last year,” a studio distribution exec points out.

Investors even argue that “Evan” will do fine overseas, where it has yet to open in many markets (though U.S. comedies are tricky offshore). The movie could also perform well in a DVD release. And U is somewhat buffered because it shared the costs for that movie with Gun Hill Road, another equity fund.

So could “Evan Almighty” end up in the black? It’s not out of the question, because more than anything, this summer has shown that many a prayer has been answered.

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