With the release of "Warcraft 2", the latest box office in North America has finally been released.

72 million!

It really shocked many people's eyes, you must know that when "Warcraft 1" was released, the box office on the first weekend was only more than 50 million, which was not a small number at the time, and now "Warcraft 2" has gone further, not only making all kinds of media excited and almost bloody, but also people in the industry have been looking sideways. Of course, there is more than one good movie "Warcraft 2", and everyone is not someone who has never seen the world. But in the film circle, I have always been not optimistic about movie categories such as manga and game changes, and the previous superhero movies were just tentative and wait-and-see, and now the madness of "Warcraft 2" immediately gave many Hollywood filmmakers a shot in the arm.

Although everyone knows that the box office of a movie does not represent the final income, in fact, there is still a ratio between the box office of the movie and the final income, and through this calculation method, everyone can probably judge how much money "Warcraft 2" can make in the end. And the final result shows that Yuanfang Group is going to make a lot of money this time. Not only Hollywood, but also the domestic film and television industry is also stunned, in fact, this time the trend of "Warcraft 2" is really too exaggerated.

Although there are differences in the profit models of the Eastern and Western film markets, the film box office is one of the main sources of economic benefits for the industry while indicating the degree of market activity, which is related to the purse of every subject in the industrial chain.

The topic of box office earnings is two-fold, the first of which seems simple: how do you divide the box office revenues? However, it has proven to be a long-standing controversy: some filmmakers say that theaters withhold most of the box office revenues, while others say that almost all of the box office proceeds go to filmmakers. Producers and exhibitors are complaining about the unfair distribution.

This then raises the second question: How much do filmmakers and the rest of the world get? The challenge is different: the distribution of box office proceeds varies greatly from film to film. However, most films go through the same basic steps of repatriation, which means that a common path between box office revenue and profits for filmmakers and investors can be explored. In order to understand the distribution of box office revenues, it is wise to have a thorough understanding of how the money flows back into the hands of the filmmakers.

In the foreign film industry, the acquisition and distribution of film revenues is called Recoupment Waterfall. Proceeds from various sources flow back into the hands of filmmakers through some third parties. In the process, the third party can recoup its previous investment in the promotion of the film and charge a pre-agreed service fee. After one party pays the appropriate fee and keeps the remuneration they are entitled to, the remaining funds are passed on to the next party.

The backflow waterfall is different for each movie, but most follow the following pattern (take a feature film as an example):

The yield box size is not designed to scale. In other words, compared with theatrical revenue, non-theatrical revenue is only a small part, and "other" revenue includes movie derivatives, film tie-ins, film adaptations, movie soundtracks, etc.

P&A stands for copy and advertisement, which is the amount of money that a distributor pays to provide a film to theaters and promote it to the public.

In the case of independent films, for example, production companies often distribute their own films around the world. Theoretically, this would save on third-party fees paid to sales agents and distributors, but in practice, production companies pay similar fees to their own distribution departments. On the one hand, because the production company's own distribution company is a legally separate entity (subject to antitrust laws), and if it does not do so, official profits are reduced, and thus everyone else's share of profits is reduced. In smaller markets, production companies may use third parties if they feel that setting up their own distribution department is too costly to operate in the long run.

The final part of the backflow is the "producer's net profit", which is the remaining funds flowing into the production company's (or its designated collection agent's) bank account. Usually it needs to be redistributed, which will be paid in full to the investor first, and then go into the investor pool (i.e., the investor's profit) and the producer's fund pool (shared by the relevant crew members who deserve). In the UK, in many cases, a real-life investment transaction may be a little more complex than the process described above, for example, where each investor can negotiate different terms and conditions to be paid before others, or to receive a fixed income instead of a constant percentage of the total profit.

Big stars can ask for a pro-rata share of the total proceeds instead of the net proceeds in the producer's pool. This explains why, even though the film is not technically profitable, celebrities can make millions through "profit sharing".

Some film budgets can be covered by tax rebates, which means that a "$30 million film" could be able to repay all investors in full with much less than that.

Let's say you have a feature film with a production budget of $30 million and a total global box office of $75 million. After deducting the initial investment of $30 million, the investor made a profit of $1.8 million, with a return of 106%. From the perspective of the film industry, the results are good (making profits), but from the perspective of traditional investors, it can be quite poor, especially considering the time taken and the time before the returns. In addition, the producer pool receives the same amount of funding, which means that if the actor is promised a 5% share of the producer's profits, then the actor will receive just under $90,000 after deducting the upfront fee.

Compared to the $30 million budget, the $75 million global box office is average, but the reality is quite different.

In reality, due to the different industrial policies and specific circumstances of the film market in various countries, the final return waterfall of films can rarely be calculated clearly, after all, countries may have different tax rates and regulations on the content of film distribution. However, each publisher can negotiate special terms, including different P&A requirements and charging arrangements. Some publishers can pay a fixed amount instead of a percentage of the proceeds (which is common in the country). Sales agents usually charge different fees for different regions, for example, local films are cheaper because they are easier to market. In some cases, interest on prepaid fees is taken into account. Finally, it is necessary to calculate the impact of currency fluctuations on returns, etc.

Although the film grossed $75 million worldwide, the producers only got a share of $34 million, because there were two major deductions before the box office proceeds arrived. The first is taxes. Business tax varies widely from country to country, with a 10% rate used for example and 20% in the UK. Some countries also impose other taxes, such as India, which levies an entertainment tax of 2%-50% depending on the type and size of the film. As we all know, in my country, 5% will be deducted as a special fund for films, and 3.3% of the tax will be deducted.

The other is the proceeds withheld by the theater (exhibitor or theater). This is a controversial figure, as there is a deep disagreement among different sectors of the film industry on the percentage of detentions. Stephen interviewed more than 1,000 filmmakers in 2014 and gave an average of 49% for distributors and 43% for exhibitors. In 2015, more than a third of UK cinema staff interviewed claimed that the reason for the high ticket prices was that the theatres had to hand over most of the revenue. There is also a common saying that desserts are expensive because theaters "only get 10% of the ticket price, so they have to find a way to make money elsewhere".

In order to find out the truth, the British scholars also got to know some insiders in the country's distribution and exhibition circles, some of whom have deep qualifications. It is believed that the following figures and facts can accurately reflect the current situation in the UK market.

The vast majority of mainstream films distributed in the UK are deducted from value-added tax (VAT) (sales tax in the UK) and then split between the exhibitor and distributor. Other models are sometimes used, such as "House Nut" (where the exhibitor withholds X pounds of the proceeds and then splits them) or "Four Walling" (where the distributor pays a fixed screening fee and receives the full box office proceeds minus the handling fee).

There are no uniform numbers. The exhibitor-distributor sharing model may be different for each film, which is also the focus of the deal.

Over time, the distribution of revenue has gradually benefited exhibitors. Distributors can usually negotiate a better revenue share within a week or two of a movie's release, but the longer the film runs, the more box office revenue is withheld by the exhibitor. For example, a publisher may reap 55% of box office revenue in the first and second weeks, 50% in the third week, 45% in the fourth week, and a minimum of 30% in the last few weeks.

Only the distributors of the biggest films usually make more than 50% of the box office, and almost always have only one major distributor, and that is within the first or second week of the film's release. As one expert put it: "A 55% cut is generally good for a distributor, and some of the big films that have been released recently have gotten that share." "Recently, a major studio got a 65 percent share of the box office in the first week of its release with a huge sci-fi movie, but people think it's just an exception.

Independent film distributors typically get a 28%-35% share. This means that exhibitors withhold up to 72% of box office revenue for some "professional" films (art films, small foreign language films, documentaries, etc.). Most "professional" films have a minimum guarantee in case the distributor receives too little. The typical model is a "35% minimum guarantee of £100", where the exhibitor must pay the distributor 35% of the box office proceeds or £100, whichever is greater.

The UK has one of the highest box office revenue sharing for exhibitors, partly due to the relatively high cost of media advertising in the UK, and partly due to the history of transactions between UK cinemas and distributors.

The strength of both exhibitors and distributors is changing. As more and more films enter the UK market, exhibitors have more capital to demand preferential terms for all but the biggest productions. At the very top, however, major studios are spending more on films and marketing than ever before, which means that distributors of popular blockbuster films are getting much more box office revenue in the weeks leading up to their release. Exhibitors squeeze small films, and big movies squeeze exhibitors.

Throughout the global film industry, the distribution of box office revenues in the industry chain is a controversial topic. But most people are hesitant to talk about substance, and they don't usually say it until someone with knowledge of the situation agrees not to give their name. It is obviously a taboo for things that involve industry insiders, such as the terms of public transactions. In the UK, some of these may involve non-disclosure agreements and competition law (which restricts the business information a company can share with competitors, etc.), but most seem to stem from a more general sense of confidentiality.

And in the UK, despite almost all complaints about secrecy and opacity, few are willing to be the first to come forward. The same situation is also common in China, so it is difficult for us to obtain relevant data on the distribution of box office revenue in the domestic film industry chain through public channels. In the contest around the distribution of revenue, the comprehensive strength with the film as the core is the fundamental determining factor, although all kinds of complaints are endless, but on the whole it is still fair.

As for China, generally speaking, there are three masters on the head of filmmakers.

The first is the General Directorate of Broadcasting, which is the executive ministry that oversees all broadcast, film and television content in the territory. is a huge government agency. It has a film authority, which is dedicated to film management.

Then there's China Film, a large state-owned conglomerate that has the exclusive right to import foreign films into the country. China Film is also the largest producer of local and co-produced films, and the largest distributor of domestic and foreign films.

Finally, Huaxia, founded in 2003, is the second largest and the only other distribution company to distribute foreign films other than China Film. Huaxia Film Company cannot import films, and its distribution capacity is not as large as that of China Film Group.

Films that enter the country are generally divided into several categories.

For example, a share-sharing film is a film imported from abroad by China Film, distributed by China Film or Huaxia, or both, and licensed by a foreign supplier to obtain a specified share of China Film's total revenue from the film through an agreement. Usually, only Hollywood blockbusters can be introduced as account-sharing films. The first part of the book, Harrison Ford's The Outlaws, was released on November 12, 1994. Subsequently, 10 part-of-account films were allowed to enter China Film every year. In 2002, the annual quota was raised to 20. In 2012, its quota rose to 34, 14 of which had to be 3D or IMAX films.

Then there are buyouts, which are foreign films that are purchased by local distributors in the country for screening in the country at a fixed price. Buyout prices typically range from tens of thousands of dollars to hundreds of thousands of dollars.

The first buyout took place in the mid-'80s, when China Film bought the theatrical rights to Superman (1978) from Warner Bros. for $50,000. Most buyouts are distributed by domestic film distributors. China Film and Huaxia also make a small number of buyout transactions every year. Typically, local distributors seek out foreign films through film festivals or film markets such as the Cannes and the China Film Market (AFM), or foreign producers offer their films to local distributors to seek cooperation, and the local distributors submit their films to China Film for import licensing.

After obtaining an import permit, the local distributor submits the film to China Film or Huaxia General Distribution. In other words, the actual distribution work is carried out by local publishers. In fact, China Film or Huaxia only provides distribution authorization, and receives almost 1/4 of the total revenue of the film.

There are two forms of buyouts: one is a one-time buyout, as mentioned above, most buyouts belong to this category, and the second is a split buyout, which operates in the same way as above, but when the total revenue of the film in China Film reaches a certain level, the foreign producer can also collect a certain share of the film's revenue in addition to the buyout price. For example, the well-known "The Expendables 2", "God of War" and "Snow White's Magic Mirror") in the previous life are all account-sharing buyout movies.

After 05 years, account-sharing movies became popular, and the buyout quota was expanded to 30 that year. Only 4 or 5 buyout quota films can be Hollywood/American films, while the others must be from Europe, Hong Kong and Treasure Island, South Korea, Fuso, Australia, India, Latin America, etc., or from multinational co-productions.