The Katzenberg Memo, Part 11
In January 1991, Jeffrey Katzenberg, then the head of Disney’s motion picture divisions, wrote a memo that ended up being circulated throughout Hollywood. Even though it is 21 years old, it is remarkably relevant to the current movie business. For example, the United States was in a recession as we are today. The movie industry was confronted by numerous financial challenges tied to technological advances and cultural shifts, also as we are today.
Over the next few weeks, I will be posting the entire memo. If you have any interest in screenwriting or working in the film business, you should read it. Why? Because it gives you a wide-open view of how studio executives think. After all, any script you write and circulate in Hollywood doesn’t exist in a vacuum, rather it funnels through a system, one that operates based upon the business principles and practices of studio heads like Katzenberg.
Today: Ancillaries.
Ancillaries
One of the reasons that big budget action movies are thought to have revenue floors is because of the ancillary markets. Ten years ago, theatrical grosses represented 80% of revenues. Today they comprise only 30%. What’s more, international box office has grown by 50%, whereas domestic box office has been relatively flat.
These fairly compelling statistics could lead one to believe that (a) there’s a lot more money to be made out there, which can justify bigger and bigger budgets, and (b) movies can be successfully made by targeting one or more of the ancillary markets.
Ergo, the spate of big-budget, star-driven action movies, which in theory play well in any language.
If this logic is so overwhelming, then how can one explain a film like “Dead Poets Society?” The only thing more remarkable than its domestic box office of nearly $100 million was its international box office, which exceeded domestic by 24%.
We’re talking about a film in which the subject matter was specific to a certain place and time in America, in which the biggest action scene consisted of some kids running through a forest and in which the “talky” screenplay offered overseas moviegoers the chance to hear some anonymous native-speaking voice-over actor impersonate Robin Williams impersonating John Wayne doing Macbeth. This would seem to be a film that was tailor made to flop in international markets. So, how could it have defied “conventional wisdom” to such a great extent?
Because it told a good story.
The ancillary markets are wonderful. They increase the rewards for a successful film. But consider their name. “Ancillary” is defined in Websters as “subordinate, subsidiary, auxiliary, supplementary.” So, one must ask the question: What are the ancillary markets subordinate, subsidiary, auxiliary and supplementary to? Answer: The domestic theatrical market.
In almost every instance, the performance of a film in the ancillaries echoes its performance in domestic theatrical. It is the engine that drives the product through the distribution pipeline. And the fuel that powers the engine is the story. A clean, well-refined, high-octane story can transport a film over all kinds of terrain, down the carpeted aisles of pristine first-run theaters, past the floors of sticky fifth-run theaters, around the globe, onto home video, off satellite dishes, through cable and over the networks.
But, if the story is low grade, so too will the performance be, no matter how large the engine or how shiny and well-packaged the vehicle.
To count on a single element to carry a film in a particular market — such as an action star in international theatrical — is like playing Russian Roulette. Each time the formula works, the cost goes up, the stakes get higher and you get closer to the inevitable time when your luck runs out… and all that’s left is an ugly mess.
Our job is not to count on re-cycled formulas, but to create and develop fresh, new stories. By so doing, we will give our projects the best chance to take off in their initial domestic theatrical runs and then to keep on succeeding through whatever subsequent entertainment technologies await them.
There is no studio that knows the value of ancillaries more than Disney. From this June 2011 THR article:
Merchandise for the Cars franchise has generated total global retail sales of more than $10 billion since its launch, making it one of Walt Disney’s top franchises, the company said Thursday.
— —
The rollout of retail merchandise for summer theatrical release Cars 2 began in mid-May, and retail projections show that it will exceed the performance of Toy Story 3 last year to become the largest merchandise program in licensing industry history, according to Disney.
So you have to chuckle when you read these two comments:
But, if the story is low grade, so too will the performance be, no matter how large the engine or how shiny and well-packaged the vehicle.
Hm. Check out the performance of all the Pixar movies:
Year Title Worldwide Gross Rotten Tomatoes IMDB
1995 Toy Story $361M 92 8.21998 A Bug’s Life $363M 91 7.31999 Toy Story 2 $485M 100 8.02001 Monsters, Inc. $585M 95 8.02003 Finding Nemo $868M 98 8.22004 The Incredibles $631M 97 8.12006 Cars $461M 74 7.42007 Ratatouille $621M 98 8.12008 Wall-E $521M 96 8.52009 Up $731M 98 8.32010 Toy Story 3 $1,063B 99 8.62011 Cars 2 $550M 37 6.5
Notice anything about Cars? It has the lowest Rotten Tomatoes and second lowest IMDB ratings of all the Pixar titles up through 2010. So in light of its "low grade" nature amidst the vehicles -- literally! -- being all "shiny and well-packaged," what could we expect Disney to do when there is this second sentiment on display:Our job is not to count on re-cycled formulas, but to create and develop fresh, new stories.Why, green light a sequel, of course!Studios are for the most part lead a pretty bifurcated life. On the one hand, they are obsessed with franchises, sequels, prequels, and remakes. On the other hand, they are on a constant search for "fresh, new stories." Sometimes as with Cars, the most successful merchandising brand in Disney's history, it's a no-brainer to make a sequel.To read Part 1 of the Katzenberg memo, go here.For Part 2, go here.Part 3, go here.Part 4, go here.Part 5, go here.Part 6, go here.Part 7, go here.Part 8, go here.Part 9, go here.Part 10, go here.To read the entire memo, go here.
Comment Archive