Top 10 Film Industry Stories of 2011: #3
Box Office Billionaire's Club
By David Mumpower
December 29, 2011

She's going to win this beauty contest easily.

One of the dirty secrets of the movie industry is that ticket sales are in near constant decline. This has been true since the ascension of network television back in the 1940s, but 2011 bore witness to a spectacular overall box office failure. North American consumers purchased roughly 1.24 billion tickets, the fewest since 1995. To put this in perspective, the number one movie that year was Batman Forever, three Batman movies ago.

Yes, the vanishing movie goer epidemic is terrible news for content creators as well as exhibitors. In spite of the North American box office horror, many of the major titles in release in 2011 wound up with respectable overall box office revenue. The reason why is simple. The long awaited shift in box office behavior has occurred.

After years of meticulous enterprise designed to broaden the appeal of Hollywood cinema abroad, these new theaters overseas have begun to provide the long awaited return on investment. Due to prudent construction investments in recent years, Hollywood became a global industry with the proof in the splits of their major releases. While domestic receipts fell a whopping half a billion dollars from 2010, a record number of titles joined the prestigious Box Office Billionaire’s Club due in large part to foreign receipts. The importance of North American box office has been diminished to an unprecedented degree in 2011, with all signs pointing to even larger overseas percentage splits in the coming years.

Entering 2011, only seven titles in the history of the industry had accumulated global receipts in excess of a billion dollars. Those films are Titanic, Avatar, The Dark Knight, Alice in Wonderland, The Lord of the Rings: The Return of the King, Pirates of the Caribbean: Dead Man’s Chest and Toy Story 3. While Alice in Wonderland still sticks out like a sore thumb, this overall group represents the upper echelon of Hollywood cinema. 2010 was the first year for multiple releases to enter the Box Office Billionaire’s Club. Given the lackluster quality of the 2011 release schedule, few analysts were expecting this feat to be matched, much less surpassed. And yet this is exactly what transpired.

The title everyone ceded a spot in the Billionaire’s Club was Harry Potter and the Deathly Hallows Part 2, the climactic entry from the most popular franchise in box office history. To the surprise of absolutely no one, Potter 8 earned $1.33 billion, which is the best global performance ever for a title James Cameron did not direct.

The other entry that probably will not shock you is the third Transformers release from Michael Bay, Transformers: Dark of the Moon. The first two titles earned $709 million and $836 million respectively. As such, a bump to $1.12 million seems reasonable, albeit a failure of the Karma Police after the atrocity that was Transformers: Revenge of the Fallen.

The unexpected entry in the Billionaire’s Club is Pirates of the Caribbean: On Stranger Tides, a universally derided money grab that did in fact grab a lot of money. After Pirates of the Caribbean: At World’s End failed to reach a billion dollars, ending with $958 million, there was little reason to expect a generally unwanted follow-up to exceed its predecessor. Somehow, this is exactly what happened as On Stranger Tides has managed $1.04 billion, within striking range of Pirates of the Caribbean: Dead Man’s Chest as most lucrative performer in the franchise. How did this happen for this unwelcome sequel in particular and all three titles in general? This is the crux of the conversation.

Only one title in the Pirates of the Caribbean franchise has failed to earn at least $300 million domestically. Yes, that title is On Stranger Tides. The other three titles averaged $346 million with the “worst” of them finishing with $305.4 million. On Stranger Tides exited North American theaters with a comparatively paltry $241.1 million. How did it get to a billion dollars? The answer is obviously through overseas revenue.

The first three titles were all wildly popular overseas, averaging $550 million in overseas box office. On Stranger Tides surpassed the previously most lucrative international title, At World’s End, by over $150 million. Its $800 million worth of overseas revenue is well beyond what The Curse of the Black Pearl earned globally.

Consider that the domestic/international split between the first three titles was almost exactly 50/50. Only 23% (!) of the revenue for On Stranger Tides was earned in North America. It accounted for less than half of the overall box office split of its predecessors. As such, On Stranger Tides was a disappointing performer in the perception of the average North American consumer yet it has become a box office triumph once we examine its overseas appeal. This is the fundamental change in box office behavior among all the major blockbusters this year.

The final Harry Potter film demonstrates this behavior as well. As mentioned earlier, the title accumulated $1.33 billion worth of global box office yet its domestic take was $381 million. This means it has earned roughly $950 million overseas. Placing this performance in perspective, only eleven titles in movie history have earned this much globally. In point of fact, Harry Potter 8’s international revenue has surpassed the total revenue of all previous Potter titles.

Transformers: Dark of the Moon earned $763 million or 68% of its total revenue abroad. This is in stark contrast to Transformers: Revenge of the Fallen. That title attained only 52% of its grosses overseas while the first Transformers release was at 55%. In terms of actual dollars, the Transformers franchise has expanded as follows. After the original acquired $389.8 million, the sequel increased only somewhat to $434.2 million. With Dark of the Moon, international revenue has spiked to $763 million, only $61 million less than the combined total of its predecessors.

The Harry Potter franchise is not as shocking in terms of percentage increase from title to title, but its actual dollars gain is even more impressive. Harry Potter 8 has earned over $400 million more overseas than Harry Potter and the Sorcerer’s Stone. This is a testament to the steady growth of international box office.

In a time of unprecedented year over year decline in domestic box office, Hollywood’s finest content creators are not in the expected state of panic and the reason why is simple. Over the past decade, they have cultivated an exponentially larger audience than the one that has been the industry’s bread and butter for nearly a century. We live in a global economy now and Hollywood has changed or at the very least evolved their focus to include billions more people. 2011 signifies the year where the tipping point toward overseas box office revenue has been reached.