Question:

Do big ticket sales at the American box-office drive subsequent video and foreign sales?

Answer:

    The relationship between the American box office and other markets has changed very significantly in the last five years.

Traditionally, a strong correlation existed between the U.S. box office and video and foreign markets: the bigger the box office, the bigger the video and foreign earnings. Indeed, studios once justified massive TV ad campaigns, even those that cost more than they could recover through ticket sales, on the logic that a better box office would jack up sales in secondary markets. Today, however, radical changes in both the video and foreign markets have upended that logic.

Prior to the DVD revolution, video chains and wholesalers based their advanced orders for rental copies on box-office results. If a film had a huge box-office opening, video chains would order 200,000 or more copies (at $60 to $70 apiece). But this buying formula ended when consumers began buying DVDs at mass retailers. By 2004, a single chain, Wal-Mart, was accounting for over one-third of the studios' video/DVD revenues. And merchandisers like Wal-Mart regard DVD sales simply as a means to an end: a way to lure consumers who may buy other products, such as television sets. To get these potential customers, stores cannot simply rely on box-office numbers, which are heavily weighted towards teens. Instead, they now take into account the subject matter of movies and the appeal of particular stars. The result: a box-office hit does not necessarily translate into a video hit.  Conversely, a film that does relatively poorly at the box-office-- such as  Eternal Sunshine of the Spotless Mind, for example-- can sell over one millions of DVDs in its video release.

The situation has also changed in foreign markets. As late as 2003, studios generally used a so-called staggered roll-out for major films: After opening in the U.S., films went on to open in one foreign market after another. This practice not only allowed studios to reuse their U.S. prints (thus saving themselves money), but--because big box-office numbers enhanced foreign interest-- it also gave studios leverage to secure better playdates overseas. Now, however, with the proliferation of video piracy, zone-free DVD players, and Internet file sharing, studios find it risky to delay foreign releases. “Waiting three or four months after domestic [release] to release our bigger pictures [overseas] is not something we can do anymore,” Paul Hanneman, vice president of Fox International, explained to Variety in 2005. “There is too much money at stake.” Given this new reality, major films now often open abroad on the same date that they open in the U.S., with the result that U.S. box-office results come too late to help enhance foreign openings.

For both the video and foreign markets, then, box-office success is no longer a vital part of the Big Picture as far as the studios are concerned.