Capítulo 110: Chapter 110: Trap
Although Bill Rossi was just one of the many inconspicuous agents within CAA, his understanding of the industry was unmatched by Murphy, a newcomer.
Murphy had seen Bill Rossi's capabilities and was inclined to trust his words.
He turned to Bill Rossi, curious. "Tell me more."
"As you mentioned earlier, the Big Six distribution companies offer up to thirty percent distribution fees for films produced by their own studios or subsidiaries. This is a pure commission without including marketing expenses, unlike for external films," Bill explained.
Murphy nodded. These weren't industry secrets. Distribution meant distribution fees, and major studios typically charged thirty percent for films they invested in.
Of course, they sometimes charged thirty percent for films from smaller companies, but this usually included marketing expenses.
In general, if it's agency distribution—films produced by external investors—in order to ensure a sufficiently large audience, negotiations with major studios over distribution fees often lead to compromises, usually settling between fifteen to eighteen percent.
The marketing expenses for this distribution method are calculated separately.
On the surface, this distribution fee proportion seemed strange. Major studios charged high distribution fees for their own productions, while external films had much lower fees.
"According to Hollywood accounting practices, every film distributed by the Big Six studios is handled by a separate shell company..." Bill Rossi immediately clarified, "So, the thirty percent distribution fee is paid to the distributor as a cost item for this external entity, which is essentially the same company."
Murphy wasn't stupid and immediately understood. "So, the purpose is to make the production company pay various expenses for the film. This way, the production company finds it difficult to show a profit. Even if there's a surplus after paying distribution fees, the writers, directors, actors, and other profit sharers will hardly see any profit. They'll only see deficits on the financial statements?"
"Bingo!" Bill Rossi snapped his fingers, raising a hand. "And this is a legal tactic. Even in court, it's difficult for plaintiffs to win against companies."
Murphy glanced at the ceiling. This industry was clearly more complex than he imagined.
Sensing Murphy's disbelief, Bill Rossi continued, "I have a real-life example."
Murphy's interest was piqued. "Could you tell me about it?"
This was valuable experience.
Even though the terms offered by various distribution companies were harsh, Bill Rossi's assessment and attitude toward Murphy were higher.
After a brief pause, Bill Rossi said, "Last year, Disney's Buena Vista Pictures Distribution released a film called 'Gone in 60 Seconds,' produced by Jerry Bruckheimer's studio under Disney's umbrella."
Murphy nodded, listening attentively, like he was still immersed in the study of filmmaking, which he hadn't abandoned.
The experiences accumulated now might help him avoid pitfalls in the future.
"The film grossed about $240 million worldwide. Disney probably took in less than $110 million," Bill Rossi recalled the relevant statistics he had seen internally at CAA, as he drove. "After receiving the box office split, Buena Vista Pictures Distribution began deducting various expenses, including over $90 million in marketing expenses, which included $13.4 million in advertising costs, $13 million in prints and advertising, as well as $600,000 for insurance, shipping, customs, check processing, and local taxes. This left around $100 million in box office revenue."
Bill Rossi shrugged. "Then, they started dividing the remaining revenue among investors, producers, and actors—after the theatrical release of the film with a cost of $134 million, it showed a deficit of about $90 million."
"Besides the hard numbers mandated by industry unions..." Murphy recalled the film, which starred Nicolas Cage, "Actors, directors, and writers couldn't possibly receive any additional share."
Murphy sighed, "Only the distribution company and the major studio behind them can consistently profit from such a business model."
"In most cases, yes," Bill Rossi nodded. "It also depends on the negotiations between actors, their agencies, and the studios. There's a lot of room for manipulation there. If your cards are strong enough and your agency is powerful, they'll still want to continue the partnership and will definitely share some of the profits. In this industry, those who climb to the top aren't fools waiting to be slaughtered."
He continued, "For example, today's A-list stars like Tom Cruise and directors like Spielberg don't sign contracts with production companies like these. They demand a share of the North American or global box office, rather than profit sharing, which leaves much more room for legal manipulation."
"It seems that if I want to collaborate with major companies," Murphy said, preparing for the future, "I have to be careful when signing profit-sharing contracts."
However, he added, "But I'm still far from being noticed by major production companies."
But Bill Rossi encouraged him, saying, "As long as you enter the mainstream film industry, you'll soon have such opportunities."
Murphy never lacked determination and nodded with a smile. Though the road ahead seemed distant, he would take each step.
Just like in the beginning, when even basic living was a problem, now was not the time to miss opportunities. He had successfully entered Hollywood and directed two films.
Although the second film hadn't found a distributor yet, Murphy's confidence was growing.
On the third day after the screening, Murphy walked into Fox Searchlight. This company had set the latest appointment time and hadn't left a good impression of Tony Guzman, from a strict standpoint, Tony Guzman had also stood him up.
Of course, Murphy wasn't narrow-minded enough to form opinions about Tony Guzman and Fox Searchlight over this matter. From a practical standpoint, he had to admit that for small directors and production studios like them, distributors were indeed high-end entities.
Unless he bypassed theatrical channels and directly threw the film into the video market.
"Boss, from what I know," an assistant in a Lion's Gate office said to Milton Johnson, sitting behind his desk, "He has already visited Miramax, Morris Entertainment, DreamWorks... several distribution companies, and today he has a screening scheduled with Fox Searchlight..."
Milton Johnson tapped the desk lightly with his fingers. "It seems he won't easily accept our terms."
As one of the high-ranking executives in Lion's Gate Films responsible for distribution, this was the most pressing issue Milton Johnson had been considering in the past two days.
How could he secure this film with the least cost, or utilize it to create outstanding performance?
That was the most important thing on Milton Johnson's mind lately.
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