[Chapter 259: Linton Building]
After eight weeks of screenings, Happy Death Day was released from North American theaters just before the New Year. It raked in a final North American box office of $91.72 million. As Linton Films was a new distribution company, its predecessor, Miramax, mainly handled art films and hadn't yet proven itself in distributing commercial blockbusters.
The company's bargaining power with theater chains was nowhere near that of the seven major Hollywood studios. The tiered profit-sharing agreements Linton signed with theaters in the early release period were far less favorable than Universal's terms, especially during the critical first two weeks, when most of the box office surge happens. Universal's profit-sharing percentages were significantly higher.
In week one, Linton Pictures took 65%; in week two, took 62.5%, and by week three, 60%. By the fourth week, the share dipped to 45%, then dropped by five percent each week until it bottomed out at 25% in the eighth week. Based on Happy Death Day's box office breakdown, Linton Films netted approximately 53% of the theater box office revenue.
After the theatrical run ended, the distribution department entered a tense phase of revenue reconciliation and intellectual property management. They vigorously audited accounts with theater chains, pressed for outstanding payments, settled with affiliated stores, coordinated TV broadcast rights auctions, and invited video rental companies to bid on videotape rights.
Within two weeks, per their contracts, the theaters settled payments, and Linton Films received a total theatrical share of $48.61 million.
Merchandise sales also exceeded expectations. Though they had been a bit conservative on initial merchandise, everything sold out with no unsold stock. Dolls representing characters played by Cristiana, Monica, and Noriko Sakai collectively generated $28 million. Ghost face masks brought in another $2.6 million.
Overall merchandise sales for Happy Death Day hit $30.6 million. After deducting production, logistics, channel fees, and royalties for star likeness rights, the company netted $12.24 million in profit.
Cristiana, Monica, and Noriko Sakai earned $3.2 million, $2 million, and $400,000 respectively in likeness rights. Moreover, all three opted to sell their overseas likeness rights to Universal based on North American results. This generated $6.4 million, $4 million, and $800,000 for the dolls alone, far surpassing their film salaries.
The company also scored major successes in TV and videotape rights; to public television, seven-year broadcast rights for $5 million, cable TV, for seven-year rights for $4 million, totaling $9 million, with fees to be re-negotiated after seven years.
Video rental and sales rights were sold exclusively to Blockbuster for seven years with a base transfer fee of $10 million plus 30% of the rental and sales revenue, renewal after seven years.
Universal bought overseas film rights for 42% of the North American box office share, generating $38.52 million.
All told, Happy Death Day brought in $118.37 million in revenue for Linton Films, excluding the 30% revenue share from video rental and sales and soundtrack earnings. The bulk of horror film revenue traditionally comes from video rentals and sales. The distribution division forecasted at least $20 million in video rental and sales revenue within 12 months, promising more long-term income.
Soundtrack sales forecast profits of no less than $8 million.
Notably, all this income belonged solely to Linton Films, with no profit-sharing with other distributors.
The film cost $6 million to produce and another $6 million in marketing and promotion, so achieving a tenfold revenue return was truly a remarkable commercial triumph.
...
Seeing these massive profits, Robert breathed quickly and sincerely said, "Boss, we need to control issuance better, or else half the profits could quietly slip away."
"Naturally," Linton replied. "Distribution companies sit at the industry's upstream, which is why we went through so much effort to acquire Miramax and build our own distribution channels."
"Boss, you have a sharp eye. The profits from distributing this film almost paid back our acquisition cost for Miramax. That's fantastic."
"Actually, the most amazing outcome is that our distribution department has matured and earned its reputation from this battle. They are fully capable of handling our own future films' North American distribution. Moreover, other production firms will seek distribution deals with us on their commercial films, and the revenues we generate will rival those from production."
"Boss, luckily the huge profit from Happy Death Day counted toward 1994. Yet even without that, our profits last year exceeded $400 million. Even subtracting the Miramax acquisition, private jet, new building, and film investments, we still had a tax base over $100 million. Isn't paying taxes this season a bit heavy?"
"There's no alternative. We must pay our due taxes. We can only look to Henry and Mary's tax management methods for guidance. Also, since we contracted the Ocean Tower purchase, keep a close watch and urge them to speed renovations without compromising quality. See if it's possible to accelerate buying two new post-production suites before April to boost tax deductions."
...
Just last week, both the Silver Star Building and Ocean Tower completed their roof. Linton took Robert, Mary, and Megan onsite for inspections.
Considering location, cost, and practicality, they chose to acquire the Ocean Tower.
Negotiations yielded a substantial property discount, and the final purchase price was $160 million.
After the purchase contract was signed, Linton instructed Megan to rename the building the Linton Building. However, renovations would take time, and it wouldn't be ready for office use until the year's second half at the earliest.
With this new space, their offices would have plenty of room. After consulting the production department, Linton decided to invest in two state-of-the-art post-production suites. This would bring their total to three, eliminating post-production delays.
...
"Got it, I'll keep watch. By the way, Boss, what do you think of the co-production deal with Universal?"
"You guys keep discussing. My bottom line is that as long as the price is right, Universal can distribute all our company's films overseas. Unless it's a major investment or blockbuster, for those big productions, we can consider giving up part of the investment share. For smaller projects, there's no need for them to be involved in production or North American distribution."
*****
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