Film-Tech Forum ARCHIVE: Can someone explain the business behind the renting of 35mm prints?

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Posted by Matthew Sonnenshein (Member # 1372) on 09-02-2002, 09:30 PM:

I kno the standard in Hollywood right now is for production companies and theatres to enter into agreements involving the renting of 35mm prints.
I was wondering why don't theatres purchase 35mm prints from the production companies?
How much does the purchase of a Recent 35mm Feature cost?
Anyother information on this subject; please share!!!

Posted by Paul Linfesty (Member # 214) on 09-02-2002, 09:46 PM:

What you are purchasing is a licensing agreement to show a film. Hollywood maintains ownership of the film's print (even though prints sold off for "silver extraction" end up in private collector's hands).

In the old silent days, exhibitors did buy film outright, but that changed when films started becoming big box office attractions, such as The Great Train Robbery (basically a short) and Birth of a Nation (aka The Klansmen).

There have been experiments to change distribution practices. THE SAVAGE IS LOOSE (1974), with George C. Scott, Trish van Devere and Scott Campbell featured prints sold outright to theatres, but this film bombed big time. Another different distribution pattern invbolved General Cinema theatres co-financing ITC films (Voyage of the Damned, Cassandra Crossing, Capricorn One, Hanover Street, as well as others). The arrangement was that any US distributor that picked up these films (Avco Embassy, WB, Columbia) were required to service GCC theatres with prints and advertising materials (posters, ad slicks, etc) without collecting any rentals. I think Capricorn One was the only film that did any decent biz, and this didn't last long.

Posted by Claude S. Ayakawa (Member # 1401) on 09-02-2002, 09:48 PM:

The Toei motion picture company of Japan did exactlly that when they sold brand prints of their latest release to Consolidated Theatres here in Hawaii in the fifties and the theatre chain made a lot of money from them over the years. Most of the movies were Samurai action films and I remember enjoying they very much. They were shown so many times over the years and even when the color had faded to just a majenta image, people still wanted to see them when Consolidated used to have special Japan Day showings at their art house, the Varsity Twins. The showings have been discontinued because the majority of the prints have become unstable and they were all destroyed a few years ago. I do not know if Consolidated had to pay a percentage of the ticket sales to Toei during the first run showings in addition to buying the prints or the company just paid a flat fee to buy the films and whatever they made at the boxoffice was all theirs to keep.

-Claude

Posted by Scott Norwood (Member # 30) on 09-02-2002, 10:14 PM:

Presumably, prints are rented (licensed) rather than sold because most films have a relatively limted "shelf life," and can rarely return to mainstream theatres and make a profitable run after the film's initial release. Thus, it isn't worth the up front cost ($1-2k per print, on average) for the exhibitor to purchase the prints, nor is it worth the trouble and expense to store them, especially since a film like "Glitter" or "Cool as Ice" didn't do business in its initial run and certainly won't have many repertory bookings, either.

The situation is different for IMAX and many other special-venue operations, where prints are often purchased. These films do tend to have a long shelf-life and can be profitably shown even decades after their initial releases (well, maybe not the Nsync film, but certainly the space and nature documentaries).

Posted by Matthew Sonnenshein (Member # 1372) on 09-02-2002, 11:32 PM:

Thanks for the answers. I have one more question. Can anyone explain the entanglements of the box office and the renting of the print. Why does Hollywood get so much? Have they always had such a great negotiating position?

Posted by Matthew Sonnenshein (Member # 1372) on 09-02-2002, 11:41 PM:

Another question. Sorry about my curiosity.
Overseas is that the status quo too. The licensing system, i mean.
Also does anyone have a suggestion about a book on the history of cinema. I'm really getting into understanding the trends and practises and influnce of film and I hope one of you can help.

Posted by Paul Linfesty (Member # 214) on 09-03-2002, 12:48 AM:

Well, it depends on what you mean by too much. My guess is that the payment of guarentees and advances by first-run theatres is pretty much dead, since megaplexes seem to get every major film, as opposed to the days when single screens had to bid against each other for films (although the illegal practice of product splitting went on in many markets). One thing that hurts is that movies have a much shorter life in theatres than they used to. So the distributer, who has always gotten the lion's share of the box office for the first few weeks, really cleans up. Titanic was that rare film that was still drawing first week business when the theatre was getting the lion's share of the box office.

Variety reported in the seventies that the aggregate rental percentage in the U.S. was 37 percent. But that took into account all the secondrun, third run and flat rental houses that still existed in big numbers in those days. Today, with most of those non-first run engagement thetares eliminated, and with shorter first runs, the percentage is more in the 55 percent plus category.

To put this in historical perspective, David O. Selznick's Hollywood book (highly recommended, IMHO) said that Selznick's usual distributor, United Artists, always got around 35 percent of the boxoffice for first-run engagements (it should be noted that back in the 30's and 40's, snack bars were rare, especially in the big first-runs). MGM was the top moneymaking studio, and their "A" pictures commanded 50 percent. But they were able to demand and get an "unprecedented" 70 percent for the first-tier reserved seat engagements of Gone With the Wind.

Today, a first run contract is usually 90/10, which means that after an agreed upon house allowance ("nut")has been subtracted from the total, the distrib gets 90 percent and the theatre, 70 percent. However, the distrib has built-in "floors" based on actual boxoffice without alowances subtracted. For example, 70 percent for the first period of time (measured by a week or weeks), then 60, 50, 40, and 35 out the door. It becomes a case of whatever is higher. The nut may or may not reflect actual theatre expenses.

There have been exceptions. The NYC first-runs, for example, had no floors built into their contract. Variety used to report on individual theatre grosses, and always listed the nuts for Manhattan first-runs because of this rule. Example, a theatre such as the Ziegfeld might have a $30,000 nut (this was back in the 70's), the theatre grossed $31,000 for the week, the distributor would get only $900. Only in New York. In the rest of the country, the 70 percent would have kicked in. Co-opt advertising was also a racket in Manhattan. If a movie played in 5 or less theatres in Manhattan, a first run would get to place the ad, charge the distributor a 10 percent agency fee AND charge the regular one-time rate for the ad, even though as daily advertisers the chain would get significant reductions in ad cost. But NYC theatres were called "loss leaders." International distributors would look and see what specific theatre got a booking and based on that would decide how much to pay for the rights. In this day and age of the megaplex, I have no idea to what extent this practice still occurs.

Posted by Jeffry L. Johnson (Member # 453) on 09-03-2002, 01:19 PM:

So, you're saying that a NYC first-run theater would not pay 70% of their $31,000 gross sales, just the 90/10 over house nut? In other words, instead of the exhibitor owing $21,700 the exhibitor owed $900.

That's awfully hard to believe.

Posted by Paul Linfesty (Member # 214) on 09-03-2002, 03:22 PM:

Yes, that's true, at least in the old single screen era in Manhattan. Distributors almost always lost money in this market. Cineplex Odeon once paid 30 mil to pick up only 11 screens. Why? Becuase of this incredible arrangement. Variety used to make a note for the Manhattan gross section each week that explain the subtraction of the "nut" from the gross, and many articles about the business written in the seventies commented on this practice.

Also, according to Variety, first-runs in Westwood usually paid a flat 44 percent of the boxoffice, no matter what. Because these were also "loss-leader" theatres.

Posted by Martin Brooks (Member # 1269) on 09-03-2002, 06:06 PM:

quote:
Variety used to make a note for the Manhattan gross section each week that explain the subtraction of the "nut" from the gross, and many articles about the business written in the seventies commented on this practice.

Variety was still printing the "nut" in the early 90's, but they did not explain the subtraction of the nut, and frankly, I do not remember ever seeing that. What they did print was: "The "nut" refers to the theatre's physical operational costs-rent, personnel, maintenance, taxes, insurance and other overhead items-on a per-week basis."

Here are a few sample numbers of Manhattan grosses from the May 18, 1992 issue of Variety. The number in parens represents the number of seats and the average ticket price.

Angelica 2: (264, $7) Nut-$9750 "Mediterraneo" 5th week $22,392.
Angelica 3: (264, $7) Nut-$9750 "Night on Earth" 2nd week $39,167
Art Greenwich 1 (350, $7.50) Nut-$9000 "The Player" 3rd week $29,139
Astor Plaza (1525, $7.50) Nut-$25,000 "Sleepwalkers" 5th wk $9068.
Beekman (538, $7.50) Nut-$16,900 "The Player" 5th wk $46,471
Criterion 3 (398, $7) and 7 (191, $7) "Basic Instinct" 8th wk $16,951
Embassy 3 (300, $7) Nut-$7000 "Wayne's World" 7th wk $4333 in 6 days
Festival (545, $7) Nut-$13,000 "Casablanca" 5th wk $6191
Fine Arts (586, $7.50) Nut-$19,000 "Howards End" 9th wk $58,242
Gemeni 2 (441, $7) Nut-$12,000 "Basic Instinct" 8th wk $15,001 in 6 days

Posted by Paul Linfesty (Member # 214) on 09-03-2002, 06:34 PM:

I think I stopped seeing Variety in the early 80's. I kn ow that in the seventies, at least, they had the added explanation. But there have been articles in the trades about the booking practices in Manhattan, at least back then. I have no idea of current practices.

Posted by Jesse Skeen (Member # 586) on 09-03-2002, 08:13 PM:

I have a 35mm print of the movie "Tunnel Vision" (the 1976 sketch-comedy film), the company that distributed it is long out of business but what would I have to do to legally show this publicly? The print is in good condition.

Posted by Bill Gabel (Member # 1105) on 09-03-2002, 08:32 PM:

The company maybe out of business, but someone owns the rights.
That title shows about 6 different labels on video (tape and DVD).

When National Film Services in Los Angeles closed a few years back.
There was a few hundred prints of titles from companys that went
out of business. Like a movie called "Night of the Comet", it was
released by Atlantic Releasing Corp. (Out of Business), but the
video rights were at CBS/Fox. Now the video rights are at Paramount.

I would check to see who owns the copyright to the film, to be safe.
That's if you plan to show it to the public.

Posted by Richard C. Wolfe (Member # 431) on 09-05-2002, 01:12 AM:

Paul

In a 90/10 deal, where do you get this figure that the theatre gets 70%? If the distributor gets 90%, then the exhibitor gets 10%, after the house expense has been deducted. If the 90/10 isn't earned then the exhibitor pays the top percentage which may be 70%, but then only gets to keep 30% for himself. There is only 100% of anything. You are saying that the distributor gets 90% and the exhibitor gets 70%, which of course totals 160%. This sounds like accounting for Enron. Please explain.

Posted by Paul Linfesty (Member # 214) on 09-05-2002, 09:46 AM:

Well, that was a typo (I clearly meant 10 percent).