Long before the recent writers and actors strikes, Marvel Studios was already on the ropes. In July 2021, the studio that could once do no wrong released Black Widow, an action adventure about the eponymous super-spy played by Scarlett Johansson. Saying that Black Widow lacked muscle is something of an understatement as recently released filings reveal that although it grossed $379.8 million, its profit came to just $67 million.
In the pre-pandemic world, the movie would have been a sure-fire hit as the character was immensely popular in the previous Marvel movies. However, post-pandemic audiences aren’t looking for more of the same, they are looking for something a little different as evidenced by the recent ‘Barbenheimer’ phenomenon.
Not only was Black Widow yet another superhero movie, it focused on a character who died in 2019’s Avengers: Endgame so her arc was already complete. The movie was set long before Endgame so audiences knew that Black Widow would make it through the adventure giving it even less tension than usual.
Its premiere was pushed back for more than a year due to the pandemic and when the movie finally came out in July 2021, Disney took the controversial decision of releasing it simultaneously on its Disney+ streaming platform where subscribers could access it for a month at an additional charge of $29.99.
The National Association of Theatre Owners blasted the decision and blamed it for a 67% fall in box office receipts in the movie’s second weekend, making it Marvel’s worst performer in that period. The decline was reportedly compounded by a spike in piracy of the movie as Deadline claimed that it had been pirated more than 20 million times leading to a loss of around $600 million of revenue for Disney. The studio wasn’t the only loser.
Johansson’s contract gave her a cut of the theater takings which were dented by the simultaneous streaming release. It led to Johansson suing Disney with sources telling The Wall Street Journal that she had lost more than $50 million because of Disney’s release strategy.
Although the suit was eventually settled, court filings before then revealed that during the month that Black Widow debuted on Disney+, it made more than $125 million in online revenue.
As the world was still in the grip of the pandemic, Black Widow grossed just $379.8 million in theaters which is the 30th-lowest tally of all 32 Marvel movies. Theaters get 50% of the spoils with studios receiving the remainder giving Disney $189.9 million from Black Widow. Combined with the online revenue, it comes to total takings of $314.9 million which left Disney with one of the lowest profits that any of its Marvel movies has ever generated.
Calculating its bottom line involves knowing how much the movie cost to make which would usually be a closely-guarded secret. Studios tend to absorb the costs of individual films in their overall expenses and they aren’t itemized individually in their financial statements. The exceptions are ones shot in the United Kingdom and this includes Black Widow.
Movies made in the UK benefit from the UK government’s Film Tax Relief scheme which allows studios to claim a cash reimbursement of up to 25% of the money they spend in the country.
At least 10% of the core costs of the production need to relate to activities in the UK and in order to demonstrate this to the government, studios usually set up a separate Film Production Company there for each picture.
These FPCs have to file publicly-available financial statements showing everything from the headcount and salaries to the total cost of the production and the amount of cash reimbursement they receive.
The government’s regulations state that each FPC must be “responsible for pre-production, principal photography and post-production of the film; and for delivery of the completed film.” Accordingly, there is no doubt that their financial statements show all of the costs of each picture. It isn’t even possible for studios to hide costs in other companies as the law also states that there can only be one FPC for each film.
The companies usually have code names so that they don’t raise attention with fans when filing for permits to shoot off-site. The Disney subsidiary behind Black Widow is called Romanoff Productions UK in a nod to the heroine’s secret identity, Natasha Romanoff.
Its financial statements show that Disney spent a total of $288.5 million (£229.3 million) on making Black Widow. It is 44.3% more than its estimated budget with one of the biggest single costs being the combined $12 million (£9.4 million) paid to the crew which peaked at 397 people.
There is no doubt that the movie cost more to make than even Disney expected as the financial statements reveal that the “final cost of the film was in excess of the budget”.
It doesn’t appear to have been due to the pandemic as the financial statements confirm that “production on the film was approaching completion” when Covid-19 came to light.
Although it’s unclear why the movie was over-budget, there’s no doubt about how the production team managed to mitigate the impact of this.
The helping hand came from the UK government which gave Black Widow a $41 million (£32.6 million) cash reimbursement according to the financial statements. Combined with the $314.9 million takings, it gives the movie total income of $355.9 million leaving it with a profit of just $67.4 million after the $288.5 million costs have been deducted.
As we revealed, Marvel even made a $183.4 million profit from Doctor Strange in the Multiverse of Madness, which wasn’t considered to be a resounding success, and was also released during the pandemic. True, Black Widow has been available on Disney+ for free since October 2021 so technically it could drive subscription revenue. However, there is no way of telling whether customers signed up just to watch that movie as they get access to all of Disney’s other content as well.
Likewise, the total income just relates to the movie’s theatrical run so does not include home entertainment revenue like Blu Ray and DVD sales.
However, on the flip side, it is understood that the costs do not include marketing of the movie as the UK government’s rules state that there is “no requirement” for this to be shown on the financial statements. There is no indication that it is. In fact, this seems highly unlikely as studios’ marketing teams promote multiple movies at the same time so their salaries could not be allocated to individual films.
This view is endorsed by the financial statements as they clearly describe the business as being “involved in the production” of movies. Accordingly, they should show the production costs with the marketing spend incurred separately by the studio.
However, perhaps the biggest cost that isn’t shown on the financial statements is the settlement with Johansson. Sources told Deadline that her compensation exceeded $40 million so it’s possible that Black Widow actually made no profit at all. It set the scene for Marvel’s new era of lackluster financial performance, and it may need to use all of its powers to turn that around.
Just four years ago Marvel Studios was one of Disney’s biggest cash cows. Not only were its movies critics’ favorites but they were also bankable number ones with each one often generating hundreds of millions of dollars of profits. Then came the pandemic.
Covid-19 did far more damage to movie studios than just temporarily bringing the curtain down on theaters. It forced tight-knit post-production teams to work from home whilst actors had to follow strict medical protocols just to get on set. Test screenings had to be done online leading to an abundance of leaks with highly accurate plots appearing online sometimes months before the release.
Morale was dented, costs ballooned and productions were repeatedly delayed. So too were release windows as theaters reopened at different times with different capacities all over the world. Studios premiered movies on their own streaming platforms to compensate for this which created short-term and long-term challenges.
In the short-term, it angered theater owners as it made it even harder for them to bounce back from lockdown. Actors who got a share of the box office of their movies also objected as streaming subscribers tend to pay for access to the studio’s entire library rather than individual films. Putting all of the content on online platforms also created a long-term problem as it gave pirates a one-stop-shop to break into.
Marvel was rocked by a combination of these factors, and it has released a string of box office disappointments over the past few years.
Its films are now criticized for sub-par computer generated imagery as a glut of streaming shows has led to overworked visual effects artists. Its bloated pipeline has also created fatigue with consumers whilst the interconnected nature of the plots, which was once Marvel’s strongest asset, has become its biggest liability as it means that if viewers miss one movie they might not watch future instalments for fear of not understanding them.
The nadir came in March this year with the arrest of Marvel actor Jonathan Majors, who plays a time-traveling conqueror called Kang. This unexpected development threw Marvel’s plans into the unknown as Kang is at the heart of many of its upcoming movies. Majors was arrested on domestic violence charges which he denies and he will get a chance to explain why when he goes on trial in September.
Two months after his arrest, Marvel released Guardians of the Galaxy Vol. 3, which went on to become its highest-grossing film of the year so far with total takings of $845.5 million, according to industry analysts Box Office Mojo. However, even that was a bittersweet milestone as James Gunn, who spearheaded the Guardians series, has left Marvel to helm the rival DC Studios.
Read the full article here