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So much THIS!
Episode IX will barely cross the 300 million!
MovieChat Forums > Solo: A Star Wars Story (2018) Discussion > [deleted]
I'd wait to see the first trailer. JJ knows how to hook an audience like him or not.
shareYou mean he knows how to use franchises soaked in Nostalgia in order to lure unsuspecting fans to see his terrible movies...?
shareYup. JJ has gotten by on great marketing campaigns, usually by shrouding everything in secrecy while giving "clues" through viral media. The end product is mediocre crap. He's a snake oil merchant disguised as a film maker.
shareRecent word has it JJ is Igers guy and KK wanted Johnson to continue with E9. Take it with salt but word also has it there is as much drama at Lucas film as there in the fan community.
shareTrue that!
Abrams made laughable Star Trek entries that were half-ass rip-offs of the 80's Trek and 90's Next Generation movies.
He's a hack.
i see another 500m drop, but not a flop. Justice League numbers at worse
shareIt won't flop in the same way, but it will be an interesting result. Solo was not the first sign of financial concern. TLJ has been insulated somewhat by its 1.3 Bil haul, even though if you look at its run it shows people were tuning out faster than the previous two films. That film was below projections based on its opening and made 800 mil less than TFA. I think that along with Solo is what caused Disney to pump the brakes a little.
I believe success for this Part IX is a gross between TLJ and TFA which will indicate Disney has issues to resolve but its not all lost. Anything below TLJ or even worse below a billion will be a distinct failure even if it does still profit.
Another thing to remember is that Disney invested 4 BILLION. This is a huuuuge amount and unprecedented when it comes to the film world... It means that in order to them to break even they have to make around $200M in pure profit every single year from now until the end of time (i.e. they need to cover the opportunity costs). This means that Disney isn't playing by the same rules as every other movie business, their Star Wars films HAVE to make massive amounts of money and they have to do it year on year or else what was the point? Solo losing money, ANY money, is absolutely disastrous for Disney, not only in and of itself but because it cracks the seal of invulnerability that Star Wars has. Plus, nobody wants to be associated with failure, and that is what Star Wars is doing right now: it is failing. Disastrously so. Disney's purchase of Lucasfilm, and their mismanagement of it, could end up being the poster child for how not to manage an IP.
shareAnd yet they couldn't have got a better start with TFA. They must rue the day they ever listened to Kasdan and decided to pursue Solo movie as until this there was no problems really.. R1 had performed well beyond expectations with 1b and even TLJ was expected to do notably less than TFA like happened with ESB/AOTC..(ok there'd been ALOT of TLJ controversy but not really of the 'SW is financially doomed' variety like there is now after Solo with speculation that Ep9 will do a JL)
share"couldn't have got a better start"
Maybe not financially, but creatively is another story.
The current situation all comes back to TFA. It shredded the universe, took a living breathing galaxy and shoved it into a corner; rather than creating a solid foundation all further stories had to be built on top of the hollow shell of TFA's 'mystery box' stuffed story line.
Look at Solo - who wants to see a film about Han's origins now that JJ erased his story arc, turned him into a geriatric moron who doesn't know where he parked his ship, and is now dead, murdered by the genocidal maniac son he failed to raise properly?
Not very many people apparently.
I'm not saying I don't agree with your synopsis, but I'm not following your math. If they make $200 million in pure profit, from Star Wars, every year for 20 years, they hit $4 billion. How is 20 years "until the end of time"?
shareGreat question Underdog_73 - the answer is here:
https://www.investopedia.com/terms/o/opportunitycost.asp
But to cut a long story short:
Disney didn't have to buy Starwars - they could have just stuffed the $4Billion in the bank (or bought shares or invested it elsewhere).
If we give them a very stingy return of 5% per year on the $4B Disney could be earning $200M a year with zero effort and very little risk - so in order for their purchase of Lucas film to be worthwhile they need to earn more than this amount.
In fact, due to compound interest they need to make more and more *each year*.
First year is $200M but then you start earning money on that so next year is 200 * 1.05 = 205, then the next year is 215.25 then the next is blah blah you get the idea...
This is how businesses value investments, it's not money in less money out it's what you make vs what you COULD have made. So right now Disney are basically fucked since they need to make huge profits year in year out (which is exactly why they were churning out Star Wars movies so quickly). Having said this, the big unknown though, as TandyMan says below, is what the merchandising and Theme park stuff makes.
Breaking even is simply getting the the $4 billion back, not the profit they could have made on it had then not completed the purchase. From a financial stand point, had they invested that money better, of course they could have done better with it, even interest alone, but breaking even doesn't take that into account. If they simply get the $4 billion back, they've broken even, which is where they started. Even.
But if your point is they can make $200 million off Star Wars forever, and never make the same money, had they simply invested, then you're right. It's the use of the term "break even" that doesn't fit.
Well I'm using the financial definition of the term, not the accounting one (this is something I do for a living) and I'm trying to avoid using finance jargon. If I called it - "the point at which the Net Present Value of the investment is zero" most people aren't going to understand. Or care!
And the point is, even if they make back $4B in pure profit, they won't be 'even', they won't be where they started - due to the opportunity costs and the time value of money. So Disney needs to make a LOT more money than a lot of people realise, roughly $200m a year ON TOP of what they need to 'break even' from an accounting perspective.
You're assuming 20 years of profit and no losses. Twenty years of good investments, no bad. You can't assume all positive outcomes and forget any possible negatives.
I won't debate what they could have done with that money or what would have happened if they didn't buy Star Wars. Maybe they would have made a worse investment instead, and in reality, they're better off since the purchase of Star wars prevented them from making that worse investment. These are assumptions we just can't take into account.
Yes, the opportunity is there to make a lot of money when everything works out favorably, but one simply can't assume that will or would happen. In your scenario no one could ever break even. Breaking even simply means getting back to where you started.
Will Star Wars make the money that $4 billion would have made without the purchase? It doesn't seem likely, but even if we forget all of Disney's other profitable assets, as long as that money recovers the initial investment, they've broken even, but lost any other "possible" income, had they gone a different way and made all the right choices. Again though, an assumption that can't be made when simply referring to breaking even.
"You're assuming 20 years of profit and no losses. Twenty years of good investments, no bad. You can't assume all positive outcomes and forget any possible negatives."
This is a good point and that 5% estimate on return is a finger in the air. But it's also another simplification as it wraps up lots of other factors, including inflation & risk. This theoretical return is called the 'Cost of Capital'
https://www.investopedia.com/terms/c/costofcapital.asp
and there are books written about the best ways to estimate it (it can never be known with absolute certainty). It's especially complicated for a transaction like this with cash and stocks involved but, just because something is hard to estimate doesn't mean we have to ignore it: unfortunately, we can't. The usual 'finger in the air' value is 15% so I was being very fair to Disney by using 5%.
"In your scenario no one could ever break even. Breaking even simply means getting back to where you started."
People "break even" when they recover the costs of their investment plus their opportunity costs. So for example, say Disney have made $2B profit on the films and that the 5% cost of capital is in fact, fair. There are 6 years of OC (they bought in 2012) so that gives us $4B * 1.05 ^ 6 = $5.36B so in order to break even Disney need to sell for $3.36B ($4B initial cost - $2B profit + $1.36B OC).
Again, the $1.36B is a total guess but the point is they can't just sell for $2B and be happy that they didn't make a bad investment. Hopefully you can see that even with a small number like 5%, after 6 years that equates to Disney needing over a Billion dollars more to recoup the value of their investment.
Not sure I'm explaining this well but this is the industry standard for evaluation investments and when I'm not skiving from work here this is what I do all day.
Think of it like this - if you give me $1B in 1950 and I give you back $1B in 2000 (worth around 16% of the 1950 dollars) have you 'broken even'?
Only half of the 4 billion was cash, other half was stock:
https://www.investopedia.com/stock-analysis/2012/disney-buys-lucasfilm-but-is-it-a-trap-dis-via-twx-nws1031.aspx
Good to know Froggy but that doesn't change the underlying logic. The opportunity cost of the stock still needs to be recovered.
But I didn't know Disney paid $4B for Marvel. Or $7.4B for pixar. That seems insane that Pixar cost almost double that of Lucasfilm.
Pixar was a growing brand early in its life, that may have upped the valuation just based on potential growth and longevity.
Pixar is also a technology and software company, which is big money. Their Renderman became an industry standard, for one example. They might even do military contracts, not sure.
The Star Wars theme park will probably make that in a year.
shareNot to mention how many other avenues they use for Star Wars profits. Not sure why anyone would think the movies are the only things going. Disney also bought Indiana Jones, and more.
shareThe toys haven't been selling and the last Star Wars video game lost a lot of money (although that was largely due to EA being jerks). Star Wars is still making money, don't get me wrong, but it's losing some of its glamour.
As for Indiana Jones, they are going to film the movie with a 79 year old Harrison Ford and I doubt they will have him passing the torch after the whole blowup over Shia LeBeuf. I don't have high hopes for that franchise.
No, they should do movies pre-Raiders and cast Alden Ehrenreich as Indy!
*ducks and runs as tomatoes fly*
As for Star Wars, they also have TV shows, novels, clothing, collectibles in general, general licensing fees paid by many companies that have a Star Wars license... I'm sure the list of Star Wars business ventures is much longer than either of us could imagine.
I'll doubt they'll ever do it but Indiana Jones should really be a tv series, not summer blockbusters.
shareDidn't they have an Indy tv series at one point?
shareThey had the Young Adventures of Indiana Jones, which is more about a kid Indy traveling the globe but being somewhat of a half educational show, half soap opera. It's on Amazon streaming. It's actually pretty charming once you get into it. Wonderful period sets and costumes. Then you had shows like Relic Hunter, which was basically Indiana Jones with a hot chick, but not as Tomb Raider as you'd think. A prestige format tv series could really satisfy in a way the movies never could.
shareI remember now, and Young Indy was a long time ago anyway. I completely agree with you, a new series would be great.
share