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The Shawshank Residuals


The Shawshank Residuals WSJ com

Source: http://online.wsj.com/news/articles/SB10...

"Shawshank's" last 20 years offer a guided tour through the myriad and evolving revenue streams of the entertainment business. After grossing $28 million at the box office in North America and another $30 million overseas, it went on to the video rental market and by the end had made about $80 million in sales, Warner Bros' Mr. Baker said. Television licensing fees to date likely have surpassed U.S. box-office receipts, according to a person familiar with the studio's finances.

As a general rule, studios pocket about half of box-office revenue (less than that overseas), two-thirds of home entertainment sales, and almost all of TV licensing revenue. Based on those margins, "Shawshank" has brought in more than $100 million.

"Shawshank is the quintessential catalog movie," said Tom McGrath, a veteran studio executive who spent more than a decade at Viacom Inc.'s Paramount Pictures.

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The movie's profits to date may sound small in a world where some films gross $100 million in a single weekend. But such figures only begin to show a movie like "Shawshank"'s long-term importance for a studio's financial picture. That's why there are six big studios: Smaller ventures that lack a reservoir of films have trouble surviving flops.

"Libraries are the basic profit engines," said Edward Jay Epstein, author of "The Hollywood Economist: The Hidden Financial Reality Behind the Movies." "When you license a movie from your library, the money goes directly to your bottom line," he says.

Films like "Shawshank" pad their studios' bottom lines in less-direct ways, too. Studios generally license movies in packages, sometimes bundling one or a small number of hits with dozens of lesser films. So-called "package leaders" such as "Shawshank" can give studios leverage in negotiations with licensees, and prop up the weaker films in the catalog.

Stashed in: Business Facts, Are You Not Entertained?, Monetization, Hollywood, Morgan Freeman, Content is king., Film, Shawshank Redemption

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Hollywood is forever in search of the next Shawshank Redemption for this very reason.

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