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The original post for this episode can be found [here](http://johnaugust.com/2011/undervalued-simplicity-and-wga-coverage-for-videogames).

**John August:** Hello, and welcome. My name is John August.

**Craig Mazin:** My name is Craig Mazin.

**John:** You are listening to Scriptnotes, a podcast about screenwriting and things that are interesting to screenwriters.

Craig, you are sick aren’t you?

**Craig:** I am sick. I have got the late November virus.

**John:** Is it a cold? How would you describe your illness?

**Craig:** Yeah, it’s definitely a cold. I am one of those… [clears throat] people. I am going to do this throughout the podcast, please forgive me.

**John:** Yeah, I am going to have Stuart go through and cut out every cough. It would seem like —

**Craig:** [coughs]

He’s not going to cut out that one, is he? [laughs]

Sorry. I am one of those people that rolls their eyes whenever someone says “Oh, I have the flu.” You don’t have the flu. You have a regular virus. You just have an upper respiratory infection, 99 times out of a 100. I think we have covered this before.

**John:** Yeah. I had a bit of a cold situation two nights ago, where it was one of those things where you can feel your body starting to… like my skin, I could just feel something strange about it. I will always know if I have a cold because if I try to take a shower, the water just feels really weird on my skin.

**Craig:** That is weird.

**John:** So I had that happen. I am not crazy. You have had the same thing, right?

**Craig:** I have not had that, I must admit. Not even in the worst illness have I ever experienced any kind of… I don’t know what you would call that.

**John:** Oh, whenever I get a cold I can always tell like the cold is coming on because like my skin just feels a little bit different. It’s not the surface of my skin, it’s like a few millimeters underneath my skin feels wrong and different.

**Craig:** Wow.

**John:** So anyway, I had that. The cure for that cold, just in case anyone is curious, is Maker’s Mark. Maker’s Mark bourbon whiskey is how you fix that. So I broke out the bottle and had a little Maker’s Mark and now I am fine.

**Craig:** That is essentially what Nyquil is. It’s just Maker’s Mark with a decongestant.

**John:** It’s cherry flavored Maker’s Mark.

**Craig:** Exactly.

**John:** So other than being sick, have you had an okay day?

**Craig:** Yeah, pretty good. I have got a script due out in a few weeks, so I have been cranking pretty hard. On Friday, by the time you get to Friday if you have been doing a good steady five page clip a day, you kind of start feeling a little bit like a melted chunk of ice or a puddle of disintegrated brain goo. So I am excited that it’s Friday.

**John:** You get that candy-bar-in-the-car quality.

**Craig:** Yeah, kind of soft, damaged.

**John:** I did no writing at all today. So here’s my day, since we were talking about people’s workflows. I started today with a meeting with Todd Strauss-Schulson, who is a director who did the Harold and Kumar movie, which I loved.

**Craig:** The most recent one?

**John:** Yeah, the most recent one.

**Craig:** Alright.

**John:** It was great. So I had followed his short films that he made before this and this was a chance to sit down and have coffee with him. So when people talk about like “Oh, what is a general meeting?” That is a general meeting. We weren’t talking about any specific project down the pipe, just like “Hey, who are you” and “Let’s get to know each other a little bit.”

So I had that coffee. I had a meeting at the WGA to talk about… Every year, or every two years, they try to do a survey of working screenwriters to figure out what the big issues are. So this was a test run on the survey for what this next survey is going to be so that they can ask all of the feature screenwriters what the issues are about late payments and sweepstakes pitching.

This writer, Craig Mazin, was originally supposed to be there but he didn’t make it.

**Craig:** Yeah, he didn’t show up because he was writing and coughing.

**John:** He was a candy bar melting in the car.

**Craig:** Yeah.

**John:** So it’s always encouraging to be sitting down and looking at the issues ahead. Also nice to be able to think about the issues ahead without having to think about how to fix them because so many of those creative issues are really intractable. We are not going to wave a magic wand and suddenly fix sweepstakes pitching.

**Craig:** Yeah, unfortunately, most of the things that they ask about and get responses on are sort of evergreen problems. So we keep asking what are the problems and screenwriters keep saying “This, this and this.”

**John:** Yeah.

**Craig:** [laughs] It’s a little frustrating. At some point the survey itself almost becomes this weirdly mocking thing.

**John:** Yes, this is self-fulfilling prophecy.

**Craig:** Yeah.

**John:** What’s potentially interesting about getting the data on this is that you can maybe start to recognize what studios and what mini-majors are the worst at some of these things and possibly you can effect some change based on the report card aspect of that.

So if studio X is notorious for bringing in 20 writers on a project that they don’t ever end up even making, then maybe that could be more publicly disseminated and people will know to not go in for every one of those crazy sweepstakes pitching situations.

**Craig:** Well, that would be nice. Unfortunately, I think the way that the business is right now and the economy and the level of development that is going on, writers will go in on those sweepstakes pitches. I wish they wouldn’t, but I can’t tell them not to. I certainly can’t judge anybody who needs a job who is trying to get a job. They are not illegal.

**John:** No.

**Craig:** They are just obnoxious. I would argue counterproductive. To me, the way to get studios off of that is to just make a compelling argument that the scripts will be worse because of them. I could make that argument, I just don’t know if they agree or care.

**John:** Yeah, because you are never going to be able to show that the script was worse because of it because you can’t fork the universe and show the two different development paths you took, one of which you brought in like eight writers to try to beat something out and one which you just hired the best writer who showed up.

**Craig:** That’s right. You can’t actually prove it. But the primary argument that I make about these things is when you force writers to jump through that many hoops in that kind of gladiator-style audition for work, you can be assured that when you do choose a writer and that person sits down to work, they are spending half their time working on your script and the other half doing the exact same thing they had to do for you for someone else to get the next job.

**John:** Exactly. You create a culture in which writers are only giving partial attention to the project in front of them because they have to keep looking for that next job, because the process has been drawn out for so long.

**Craig:** Exactly. I get why they do what they do. But the truth is between that factor of bifurcating the attention of the writer, the other factor is frankly, there is really no demonstrable connection in my mind between who does the best song and dance in the room and who is going to actually write the best script.

If you find somebody that you trust who has a good track record and you believe in them and they have a basically good take on it, that should be enough. But hey, I don’t run a studio.

**John:** One day, but not now.

**Craig:** One day. [laughs] God forbid.

**John:** So the rest of my day, jumping ahead, was spent working on, we suddenly have a Macintosh app that we are going to be releasing fairly soon. We were working on a different app which we will get to eventually. But along the way, there’s something I actually did for the Big Fish musical that I said “Hey Nima, we should be able to do this, right? I am not crazy. This is actually a pretty easily solvable problem.” Of course two days later he had it figured out.

**Craig:** That guy is a genius.

**John:** It’s because Nima’s a genius. Nima Yousefi, he is a listener and a friend of the show. So Nima worked on this thing and it looks like, “Hey, it’s actually really great and useful, and actually a much more useful app for many people than what we were originally working on.” Which brings me to a larger issue that came up a couple of times since last two weeks, is that this most recent project was actually really easy. It kind of feels like too easy. It feels like you are cheating because it’s just actually too simple.

In a weird way I think we undervalue things that come to us really easily because we have been through so many times where it’s been a struggle and conversely we overvalue those things. A better example might be for the Big Fish musical, we have been working on it for years and years and years. So there is maybe 20 songs. Not all of them are singing songs, but there’s 20 pieces of music. Some of them we have gone through like 14 different versions and drafts of them, like classically the “I Want” song, where the character sings about what he or she really wants. That’s the one we keep going to again and again. Or the opening number will be something we go to again and again.

There is one number that everyone loves in the show. But literally Andrew and I — it was late in an afternoon and we just banged it out three years ago. It kind of feels like cheating because we know we have worked so hard on every one else — on every other number — but that one just clicked and it was right and it was simple.

**Craig:** Yeah, it’s a frustrating thing, frankly, that your success as a creative person isn’t as simple as work in, quality out. It just doesn’t work that way. You are right. It kind of violates our weirdly Calvinistic work a day ethic.

I frankly am guilty of… You know there are days when you sit down, and suddenly you have this great run. Five pages pour out of you and they are really good and you feel great about it. Then you think “Well, I am not going to work the rest of the day.” You feel guilty. Whereas I feel curiously proud of myself if I beat my brain into a mush to get three pages out over the course of the day because they were really hard.

**John:** Yeah.

**Craig:** It’s kind of dumb, frankly. I should stop doing that.

**John:** Yeah, you should stop doing that because one of the other dangers, I think, is that those pages that were really hard to write, you are overvaluing how good they are because you know how hard they were to write. If they are only even kind of okay, you are more reluctant to change them because you know how hard they were to write. Sometimes you are willing to throw a perfectly good scene under the bus because you just dashed it off. But you are not really aware of the actual quality of the scene. You are so keyed into how much work you put into it.

**Craig:** Yeah, that is right. I think directors get that better than anybody because you could go out and direct a scene for three days at night in the cold and it’s dangerous work and it was brutal to even get it up on its feet and you argued to get the money for it. You could pile on an enormous amount of circumstances. Then if you watch the movie and it needs to be cut, you cut it out. That is a good lesson. You are right, just because you poured in a ton of effort doesn’t mean it’s valuable.

**John:** There’s a few of my movies, Corpse Bride was a pretty quick work but Charlie and the Chocolate Factory was sort of famously, was really three and a half weeks to get to my first draft. It was like “Oh, that wasn’t enough work.” I felt kind of guilty turning it in, but it was done. It was ready and they needed to shoot the movie. Most of the scenes I never went back and touched again. So you compare that situation and that movie was really successful to other movies that I have killed myself on that were either never shot or they were shot and they were a difficult process the whole time through.

You don’t know. I think you should probably just celebrate the times that they have worked out great rather than killing yourself on the times where it was a slog.

**Craig:** I totally agree. Let’s give ourselves a break.

**John:** Yup. Let’s also answer some questions because I…

**Craig:** Yes. I have got my question list right here.

**John:** I was in New York for two weeks and was away from the actual question bag. So a lot of stuff stacked up here.

So let me get to the first one here. Shannon, in Tucson asks, “I am a man with the name Shannon.”

**Craig:** Ha-ha. [laughs]

**John:** “As you may imagine, this has caused me some difficulties and embarrassing moments. I have come to think that choosing a different first name, I am thinking Andrew, would solve the problem. Is this a good reason to choose a pseudonym, or am I overreacting about my name?”

**Craig:** [laughs] Well, Shannon, it’s a personal thing. If it’s uncomfortable for you and awkward, then yeah why not change your name. It’s your name. It’s who you are. I had a friend in high school named Kevin Zeidenberg. Kevin’s mom was Filipino and his dad was Jewish. Kevin looked pretty Filipino. So he would get that look, the “you are not what I expected when I heard the name Kevin Zeidenberg.” I think some people sort of relish that slightly Ricky Gervais-style awkward moment and some people don’t. It’s your name; it’s your career. If you want to change it, do it.

**John:** Yeah, I agree. Pick a new first name, use your initials, whatever you want to do. It’s absolutely fine. As people who would look me up on Wikipedia would know, August is not my original last name. You knew that, right?

**Craig:** I did. Your original last name was… [laughs] sorry, I was going to make a joke that would get us kicked off of iTunes.

**John:** Yeah, that would not be good. It was a Germanic last name and really tough to pronounce and simple to look at, like “Oh, I could say that.” Then you actually try to say it like “Oh, wait. I don’t know what my vowel sounds are in this name.” So I recognized as I came through, having this name my entire life up through college that the first 15 seconds of any new conversation with somebody would always be about correcting how they mispronounced my name.

So I was doing myself a favor and everybody I would meet in the future a favor if I would just pick a simpler last name. So I just picked my dad’s middle name and it’s been cake since then. I legally changed it.

You don’t have to legally change your first name to use a pseudonym, but it just became easier for me to do that before I moved out to Los Angeles and started a new life. It’s made running from the police much simpler.

**Craig:** So much simpler.

**John:** Yeah.

**Craig:** Yeah, good point.

I have a question for you.

**John:** Alright.

**Craig:** This is coming from… do we say their names?

**John:** Yeah, we do.

**Craig:** Yeah like Shannon, we can talk about Shannons, we can say this because this is Mike Amass.

Question: “To flip the coin on the helpful Movie Money episode of our podcast, would you like to air your thoughts on the current state of self-distribution. John, I know you watch the team behind One too Many Mornings, and might still be entertaining the notion of self-distribution for future personal projects. Could you shed any light on how filmmakers like Kevin Smith and Edward Burns are enjoying total freedom, total freedom, John, to create and maybe, just maybe, might be making some decent money at it?”

**John:** Yeah, I have seen this question, I racked my brain to think of who is actually doing this now. So Kevin Smith, clearly with Red State, which is a movie he made, I think, basically on his own money. Then he famously took it to Sundance, and then obviously wasn’t going to really sell it, he was going to self-distribute it.

Edward Burns, we were on a panel with Edward Burns, weren’t we?

**Craig:** In Austin, two years ago.

**John:** I had to sit next to Edward Burns, and he’s a handsome man. You don’t feel uglier then when you are sitting next to Edward Burns.

**Craig:** He is dreamy.

**John:** He is dreamy. See, objectively dreamy, and a really nice guy. He made a movie called Nice Guy Johnny, which I saw, which was good and really, really small. It has the stakes of a postage stamp, but really charming, and sort of the way he made it at a really small budget, and made exactly the movie he wanted to make.

Then the Polish Brothers, who I was on a panel with many years ago, and they have done many and bigger movies, but they did a tiny movie called For Lovers Only, which was sort of a fantasy of the kind of movies they do. They just traveled around France and shot in black and white with this beautiful actress. It looked good. I saw the trailer, I haven’t seen the movie yet.

There are some directors who are doing this, and hopefully some of them are making money. You are sort of vertically integrating yourself, so rather than going to someone to give you money, you are raising the money yourself. Rather than going to a distributor and signing over most of your future income on something, you are doing all that work yourself.

It’s a tremendous amount of work, so a movie like The Nines, I guess we could have self-distributed it, but then you have to become a master of all these things you don’t really want to have to know about, like how you book theaters, and how you collect money from theaters, which is really hard.

Because how are you going to get the money back out of the theater? You are just counting on their goodwill to report honestly and give you the money that you are owed? The advantage a distributor has is they have the next movie. If you are not paying them for the previous one, they are not going to give you the next one. You have nothing else to pull that money out down the road.

I think iTunes is one of the better ways to think about doing it. With The Remnants, which was a web series pilot that I shot a few years ago, we got the rights back to it, and we had some discussion about doing it as a teeny, tiny feature. Who knows, at some point we might still do it. I discussed with the people at iTunes what that business model is, and what cut we get, and how we could make that all work out. Also, had a conversation with Hulu about it.

There is probably ways it could work, it’s a little bit easier if you have some name and reputation, like Kevin Smith, Edward Burns, the Polish Brothers, so you could have a little bit of leverage with the distributors, the online distributors, and that you can actually generate press. That is one of the challenges you always have with an independent film, is like how are you going to get mainstream media to pay enough attention that people are actually going to find your movie?

I would have enough of that now that I could probably do it, so it’s something I am really thinking about doing. It’s just it ends up being a tremendous amount of time and effort that may not have the best payoff and reward. You may not be able to put it in front of as many people’s eyeballs as you really hope.

**Craig:** Absolutely correct, a big, uphill battle there. I should also add, I think that when Mike suggests that Kevin Smith and Edward Burns are enjoying total freedom to create. I would argue that they have less creative freedom than Gore Verbinski had on the last Pirates movie, because the biggest restriction on creative freedom is money. When you are stuck with a micro-budget, you really are squeezed. Sometimes wonderful movies come out of that because it requires tremendous discipline. But it’s a mistake to think that there’s more creative freedom with less money. It’s just a different set of problems.

**John:** I will push back a little bit on that. I think creative freedom doesn’t mean that you get to do anything you possibly ever want. Creative freedom isn’t anything you can possibly imagine you can make. To me, creative freedom is no one is going to tell you no. With a smaller budget, even on The Nines, which wasn’t as small a budget as some of these things were, I did have a lot of creative freedom, because we were fewer people around to tell me no on things.

**Craig:** I get that.

**John:** When something wasn’t possible because we didn’t have the money, it was always, “Then how is the movie changing to accommodate our actual limitations?” I didn’t have to change anything to meet someone else’s taste.

**Craig:** You chose to make a movie that would fit within the preexisting constraints of your budget.

**John:** Absolutely.

**Craig:** That’s why, Mike uses the phrase “total freedom to create.” Really, I am just quibbling with the word total, and nothing else.

**John:** Yeah. I see your point now. Total freedom to create versus total creative freedom, slightly different things.

Let’s move on to Daniel from Oakland. He asks, “My brother claims that studios don’t like to see a film do better overseas, because they see less of a cut overall than if a film does better locally, in the US. Is there any truth to this?”

**Craig:** I don’t think so, unless a studio is splitting the domestic and foreign distribution with another entity. I don’t see why they would be particularly concerned. There are quite a few movies that do better overseas than here. In fact, this year, the best example I can think of is Kung Fu Panda 2, which underperformed at the domestic box office, but was an absolute blockbuster overseas.

Another great example is in fact the aforementioned Pirates of the Caribbean 4, which also underperformed here, but was even bigger overseas, it was unreal overseas. I think in the case of Pirates, Disney has a domestic distribution arm, and an international distribution arm, in Buena Vista Pictures International, sees a huge cut of that money. I don’t know, maybe I am wrong.

**John:** I would imagine in the past, probably, that could have been more of a case, where they had a harder time pulling the money back in from overseas markets. That is possibly like, once upon a time that was actually true, but now it’s actually not as true, because given that the bulk of big movies’ money comes from overseas, I am sure they have gotten much, much better at pulling that money back in.

I will say that psychologically, I think the executive at whatever studio in Culver City, would kind of prefer that the movie making a ton of money here, just because people pay attention to that. Feeling like you have a big hit is better than having a movie that underperforms.

**Craig:** Yeah, that’s absolutely true. There is kind of a weird stigma about a movie that is soft here, but plays big overseas. It’s got almost an underlying xenophobia, like, “Your movie was for people that don’t even speak English.” [laughs] People that didn’t get the prior intent of the movie because it’s all color and noise, or something like that.

Look, there are other examples of movies that do extreme splits, pro-domestic and anti-overseas, and that’s also damaging. Talladega Nights comes to mind. I think it made $100 million here, and literally something like $12 million in the rest of the world.

**John:** Yeah, the thing was that it doesn’t translate, or it doesn’t travel. That can also be the case, and it was the knock against African-American actors for a long time, until Will Smith came along and broke all those barriers too, is that the Eddie Murphy comedies would do really well here, but overseas, people wouldn’t go see them. That seems to be something of the past now.

**Craig:** Seems like it, yeah. Here is a question for you from Tom. “A number of movies have made it to Broadway, and I understand Big Fish will as well. As the writer of a screenplay, what do you ask for to keep you in the mix should your script move on to the stage?”

**John:** Here’s the messed up thing about writing a Broadway show that is based on a movie, is the screenwriter of the movie has zero claim or stake to anything in his or her script. Just nothing, because the studio is considered the author of the screenplay, and that is one of those separated rights that we are not holding on to in the ways you might hope that we could hold on to. Separated rights, actually holds the story, that’s part of the whole mess.

The truth of Big Fish is that if Sony had wanted to make a musical of Big Fish, they could have gone to any other writer they wanted to, that writer could have taken any words from my script, and put them into the Broadway musical, and used them without paying me a cent, and without my name being anywhere on it, it is kind of messed up. With Big Fish, it was honestly me grabbing hold, and saying, “I really want to make this musical,” and having to get the rights back from Sony, and having to get Daniel Wallace’s book reattached, so that we could do it.

As the screenwriter, you have very little hold on the Broadway musical version of your movie, unless it’s an original screenplay that you have the retained story credit.

**Craig:** Yeah if it’s an original screenplay where you retain story credit, or if it’s an adaptation where the story of the movie was unique, to the extent that they awarded you Screen Story by.

**John:** In retrospect, I should have tried to get screen story credit on Big Fish, because if you actually compare the book to the movie, they are so different in so many ways that I suspect I probably could have gotten it.

**Craig:** Right, it sounds like you did a workaround anyway, so that’s good.

**John:** Yeah, next question. Adam asks, “As someone who wants to write/pitch comedies, what value do you place on being funny during meetings? I am not referring to acting out hilarious scenes/characters, but perhaps an anecdotal story or joke interspersed to help build rapport. In other words, how do you try to sell your own comedic brand with the expected level of professionalism?”

**Craig:** I don’t like this question very much. Look, here’s the thing. If you are funny, you are funny, and if you are not, you are not. This question, forgive me Adam, it sounds like the kind of question a not funny person asks, because you shouldn’t be trying or calculating any of that.

The idea of a pitch meeting is there’s two parts. There is the meet, where you are actually pitching the movie, and you are correct to suggesting that acting out “hilarious scenes” and characters is a tricky thing to do. The other part is just you, talking to the people who will employ you, and giving them a sense of the kind of person you are, and what it will be like to work with you, and what you think funny is, and the quality of your wit, or lack thereof.

You can’t calculate that, you shouldn’t even be thinking about calculating it. Just be yourself, and if you are a funny person, let that come through. If you are not, probably shouldn’t be working in comedy. Sorry, I hate to be a bummer.

**John:** [laughs] I can understand his concern, it’s that when you go in to pitch a story, and you are trying to tell a story that you think is funny, you really want to have laughter come back, but studio executives don’t laugh a lot. They are not hysterically entertained people. You will hear stories of like, “Oh my God, there was this hysterical pitch, and everyone was laughing. People were crying, they were laughing so hard.” That is more the exception than the rule. You want people at least nodding and smiling, and acknowledging, “Oh, I see why that would be funny.”

**Craig:** Yeah, the thing is I like being funny just in the regular I am myself, and let’s just chit chat and be funny. That’s great. When it comes to actually pitching a movie, typically what they will say is, “Look, we know that you are a funny writer, we have read your scripts. What we are interested in is what’s the story, what are the characters, what is the theme, what are the ideas behind it?” In that regard, it’s a little bit like pitching a drama.

You are not required to do vaudeville or standup for them, because like you said, they are frankly not that interested. It’s like you are talking to somebody who represents standup comedians. They have heard it, they get it. [laughs] Just act like you have been there.

**John:** Yeah. Good advice.

**Craig:** Thank you.

**John:** Craig, in the lead up to the show you had said that something you wanted to talk about was videogames, because you are kind of a connoisseur of videogames, especially now, it feels like everything came out at the same time.

**Craig:** It is that season. It’s the holiday season, and they dropped the big, the big, big, big ones. We had two huge ones come out within a week of each other.

**John:** You are talking about Scribblenauts for iPad, right?

**Craig:** [laughs] I am talking about Scribblenauts for iPad, which has moved $14 billion worth of app money. No, I am not talking about Scribblenauts. I am talking about Call of Duty: Modern Warfare 3, and the Elder Scrolls V: Skyrim, both of which pulled in nearly Avatar-sized grosses within a week of their initial release. They are absolute monsters out there right now.

**John:** Here’s where I am aware that I don’t watch all that much real television, because I have seen enough Modern Warfare commercials and billboards and stuff that I have some sense of what it is. Now, correct me if I am wrong, but you get to play Jonah Hill. So, can I play Jonah Hill and can I pull a grenade and just like sit on it?

**Craig:** I, I don’t…

**John:** Watching the commercials, that’s what I am getting is I get to be actually Jonah Hill and I could run into a line of fire if I chose to?

**Craig:** You can absolutely, yes, sit on a grenade if you want. You can sacrifice yourself. I mean…

**John:** But, can I be Jonah Hill while we are doing it?

**Craig:** You mean, actually be Jonah Hill?

**John:** I want to see Jonah.

[laughter]

**John:** Can I have Jonah Hill die frequently in front of me? That’s really my goal.

**Craig:** No. [laughs]

**John:** That’s what I feel like I have been promised in your commercials is…

**Craig:** You can’t.

**John:** …I can be like the guy from Avatar or I can be Jonah Hill.

**Craig:** You cannot be Jonah Hill. There’s only one Jonah Hill.

**John:** Because I don’t play any of the sports games but like Madden Football, you get to play like a famous athlete, right?

**Craig:** That’s right. The idea there, yes, in Modern Warfare you are playing some grizzled secret Black Ops dude.

**John:** Yes.

**Craig:** Yes. In Skyrim you are an elf.

**John:** And in Skyrim you are an elf. So, you said you wanted to talk about that. I heard the name but it’s just like I thought it was like the new James Bond movie. I didn’t know what is Skyrim. I thought it was bizarre so I finally found the trailer. It looks great.

**Craig:** It is great. It’s pretty cool, and this is something that I have been kind of on about. I am getting a little wonky guilt here for the end of the podcast. This is something I have been talking about for literally five years. Our union…let me back up for a second and talk about what it means to be a militant. There’s this understanding that militants are the people that go out there and fight the companies hard to win gains and moderate are the people that just sort of talk and, maybe, get the crumbs off the table.

**John:** So, the moderates are the Scribblenauts and the militants are the Modern Warfare.

**Craig:** Correct, exactly. I have often been viewed as a Scribblenaut. [laughs] The truth of the matter is I think that I am, in fact, a real moderate…I am sorry, a real militant. I am a militant in the sense that if I see an opening where I think fighting will work, I want to fight. I think that the people we call militants in the union, sort of the Patrick Verone wing, are not actually militants, they are really suicide bombers because they just throw themselves at stuff that we can’t win at all.

They talk about sort of the glory of incinerating themselves for the cause. But as you and I both know, suicide bombers don’t ever achieve anything other than spraying themselves over a street.

**John:** Yes.

**Craig:** So, here is where we have been a suicide bomber. In organizing, we have gone after such impenetrable suicide bombing targets like American Idol or feature animation. Why are those impenetrable? Because American Idol, one can make an argument that there is writing going on, but one can also make an argument that there isn’t writing going on.

It’s basically Ryan Seacrest chatting with judges and then people sing. Somebody, producers are nudging it towards narrative but it’s a fuzzy case. In animation, obviously, animation is written but there’s another union that already has jurisdiction over it. That’s IATSE, I-A-T-S-E, and the Animation Guild 839.

So, these are suicide bomb targets, pointless. What is not a suicide bomb target are videogames, particularly videogames that are made here in the United States.

There are some huge videogame companies that are not U.S. companies and we can’t really get jurisdiction over people that aren’t working here in the U.S. It’s just a federal labor law. So, Enix I think and Squaresoft and Ubisoft, these are all big overseas companies. But, ZeniMax and Bethesda, the companies that make Skyrim, that is an American company.

They are in Maryland, in fact, and Skyrim and the Elder scrolls before it, Oblivion, are the most obviously written videogames ever because they are based on quests. You meet characters. They have storylines that they present to you with dialog. Let me go one step further. The videogame contains hundreds of readable books that the videogame writers wrote. It’s so obviously written, and I have been talking about this for a while. I just feel like…

Okay, here’s what kills me: Skyrim just made, it just grossed in one week, I believe, $700 million worldwide. That’s in a week.

**John:** Yes, a lot of money.

**Craig:** A ton of money. The writers of the game have no credit protection. They have no residuals or income from reuse. I don’t know if they get healthcare. I don’t know if they get pension. Most importantly, I just don’t know who they are. I feel like that is a great target for the guild to try and organize, same thing with Infinity Ward which makes the Call of Duty series, same deal.

**John:** Yes. I can tell that, particularly the videogames, to me that feel like they are actually movies. You look at the Sony one I never forget, the Naughty Dog, one they also just released, the one that will actually play this Christmas because I have a break, Uncharted.

**Craig:** Uncharted, that is a very narrative videogame, yes.

**John:** Yes. I mean, it deliberately feels exactly like a movie. There are movie people who are writing that. So, it feels like that is the kind of situation where you should be able to get some people protected. Yes.

**Craig:** Frankly, what does it cost? We go to Bethesda. By the way, I believe Les Moonves sits on the board of ZeniMax. It’s not like we don’t have these sort of pre-existing relationships. We go to them and say, “Listen, we want to organize your shop. As is our right by federal law, we want to be able to talk to the employees and let them know about the union and have them take a vote.”

**John:** Yes.

**Craig:** I mean, in the end what’s it going to cost that company? Are they really going to get a huge chunk removed from their $700 million of gross proceeds in the first week? Hell no, hell no. But, you don’t see us trying, and you don’t see us trying because we are repeatedly distracted by nonsense and suicide bomb targets. I really wish we would stop.

**John:** I am here with you.

**Craig:** We rant. I love it.

**John:** We rant. So, what is the next step? So, the next step is to find…

**Craig:** The next step would be for the guild to open its sleepy eye and say, “Okay, we are actually going to assign an organizing effort to this.” We would have to talk to the Writers Guild East and do it jointly with them, I suspect. Then the next step would be to actually reach out to those writers, visit the company, sit down, see if we can’t come to an agreement ahead of time if the writers are so interested, and help to find that process and to find some credits for them and get a contract in place.

Rather than doing it sort of game by game, Bethesda and ZeniMax and Infinity Ward are shops. They make a lot of games. They make incredibly successful games that are clearly written. So, let’s organize those shops.

**John:** Do you go in with, “This is the contract we would like to see” or do you go in with like, “We will figure this out but this is…” Basically, do you already figure out what exactly you want these people to be getting?

**Craig:** No. First, what you have to do is get the employees to essentially agree to allow the Writers Guild to become their collective bargaining agent. Once you have gotten to that point, essentially, it becomes a union shop. Then, the next step is to negotiate a contract.

**John:** How do you distinguish out between people who are doing writing work and people who are doing producing work?

**Craig:** Well, in the case of what we do, it’s very simple. The test is we create literary material. I would argue that it should be the exact same thing for these videogames. Are you putting words down on paper?

**John:** Okay.

**Craig:** If you are putting words down on paper that are being used to make moving images on a screen in the case of these videogames, we clearly have the capacity to cover you and define your work. Nobody else is. It should be us.

**John:** I am for it, I am for it. Done.

**Craig:** Good.

**John:** Resolved.

**Craig:** Resolved. [laughs]

**John:** [laughs] Mostly this podcast we are just talking about stuff. But, here, like clearly we fixed this whole system and we paid money for the guild. We paid health and pension for videogame people who wouldn’t otherwise have it.

**Craig:** Yes. I mean, I feel really good about myself right now.

**John:** You absolutely should. So, Craig, I am not going to be able to play all these videogames. So, which videogame should I play?

**Craig:** Because I know you, I am going to tell you, you should play Skyrim and you should be aware that I have just given you a small little piece of crack for free. If you like it, come back and get more.

**John:** Because you know I had a World of Warcraft problem that actually I had to like stop cold turkey.

**Craig:** Here is the thing: This has everything that World of Warcraft has in terms of…the stuff you liked about World of Warcraft is here. But, it’s not endless. Really what it is is probably 200 or 300 quest lines that crop up and interact, some of which are very involved, some of which are one offs.

So you get pulled through this thing because, essentially, it’s combining your love of videogames and, maybe, your love of fantasy with a writer’s need to know how the narrative ends. So, right now, I have, I don’t know, maybe, 15 active quests or more. It’s killing me because I wonder how they all end but I can only do one at a time.

**John:** Yes. See, I was banking my fantasy videogame jones for Diablo III which is going to be coming eventually from Blizzard.

**Craig:** Yes.

**John:** It’s in beta testing now. But, I would say the advantage of Skyrim…are we playing on X-Box or PS3 or what is it?

**Craig:** I am playing on the X-Box but it’s available for PC or PS3 as well.

**John:** Okay. So, the advantage to these games is that it wouldn’t be on the main computer, so therefore, I would know that I am not writing because I would know that I am not sitting on my chair at that computer.

**Craig:** Oh, yes, no question. We have a little out building on my property where it’s like a little rec roomy kind of thing that’s sort of standing.

**John:** It’s where you keep the Gimp, right?

**Craig:** It’s where I keep the Gimp, occasionally, when, yes, [laughs] when a little fly wonders into my web. I take the Gimp out and we have a party. But, it’s also where I play videogames. I told my wife and my kids, after 10:00 daddy goes away. Daddy goes to Skyrim. But my son, Jack, who is 10, it’s a great bonding experience for us. He just sits next to me and just watches and exhorts me to kill everyone. [laughs] It’s great. Sometimes I have to explain, “You know, daddy can’t kill this person. I need this person alive.”

**John:** Yes.

**Craig:** He looks at me just in disgust, the way that Patrick Verone looks at me, like a Scribblenaut. [laughs]

**John:** Years from now when your son turns to horrific violence, they will try to know why. It’s like, “I sat beside my father and watched him kill and kill and kill.”

**Craig:** Kill and kill and kill. Yes. Actually, there is one of the quest lines is there is something in Skyrim called the dark brotherhood where you join this group of assassins and your job is to go out and kill people. There’s, maybe, 20 quests just for that alone. I just did one with him where I had to go to a wedding. [laughs]

I had to kill the bride while she was addressing her guests. It had to be while she was addressing them. I don’t know why and I did it, and he was so delighted and he kept sort of playacting it over and over. Like, “She was standing there and she was like, ‘Oh, thank you for coming to my wedding …’ and then ah” [makes sound] . It was great, great father-son moment.

**John:** I am sure as he related the story back to your wife she was charmed and delighted.

**Craig:** He probably understands already that she wouldn’t care. So, I don’t think he talks about Skyrim to her. I have no doubt that the other kids in his class are getting an earful. I will likely be called into the principal’s office.

**John:** Yes. But, a small price to pay for the enjoyable saving or destroying of some fantasy kingdom.

**Craig:** Yes, I get to play videogames and my son loves me, win-win.

**John:** Totally.

**Craig:** Yes.

**John:** Win-win on the podcast. You did that, Craig.

**Craig:** Good podcast.

**John:** All right, and we will talk to you soon.

**Craig:** Thanks a lot.

**John:** Take care.

**Craig:** Bye.

The original post for this episode can be found [here](http://johnaugust.com/2011/how-movie-money-works).

**John August:** Hello. My name is John August.

**Craig Mazin:** My name is Craig Mazin.

**John:** And this is Scriptnotes, a podcast about screenwriting and things that are interesting to screenwriters. How are you today, Craig?

**Craig:** — Caught me mid-sip again. I’m doing fine today. Doing fine. How about yourself?

**John:** I’m doing really well.

Now Craig, whenever I bring up a television show, your standard response is that you have not seen it because you don’t watch any television shows. So I thought today I would ask what was the last movie you saw in the theater?

**Craig:** The Help.

**John:** The Help. Did you enjoy The Help?

**Craig:** I did enjoy The Help, I have to say. I thought that it was very well directed. Viola Davis, who I mention frequently, is a spectacularly good actor, and I like watching her in pretty much everything. I wasn’t familiar with her until I saw Doubt, and she’s only in Doubt for two scenes really.

But she has this one scene with Meryl Streep that is just unreal, I mean just spectacular, and a great example of a scene where the director just got completely out of the way and just covered it over a two-shot and just let the actors do what they do.

**John:** Yeah. The director’s name is Tate Taylor and actually a person I’ve known for a very long time. He’s part of the same crew with Melissa McCarthy and Octavia Spencer, so it’s been great to see him have such a success.

**Craig:** Yes. Tate Taylor did not direct Doubt. He directed The Help.

**John:** No, no, no. The Help. So The Help was also a tremendous success. That was one of the breakout movies that did not cost a lot of money, made a tremendous amount of money at the box office, and should therefore be completely profitable. Isn’t that correct?

**Craig:** Yeah. Well, [laughs] yes and no. It depends. Define “profit,” John.

**John:** Well, I think that’s exactly what we’re going to try to do today. I thought of this actually this weekend. I went to go see Puss in Boots, the animated Puss in Boots, which was actually really good. But I hadn’t seen the Shrek movies for a long time, so this was the first time getting back into that world. It was really nicely done.

But as I was buying my ticket, I started to think about like, “Wow. How much of this ticket is actually going to go back to the movie versus the everything else of it all?” So this is going to be an upper-level discussion I think because it’s not talking just about the words on the page but just how the film industry works and how money in the film industry works. So let’s put on our big brains and talk through the whole thing.

**Craig:** Yeah, that’s worse than big-boy pants today. Well, it’s a good thing we’re talking about it because it actually is very relevant for what we do. Screenwriters are in a constant state of employment-seeking. We write movies. Movies are expensive to make, still, no matter what anybody tells you, and even more expensive to market.

So we are relying on people to pay us and to support the films that we want to write. If we’re going to do that, if we’re going to dance that dance, it’s probably a good idea for us to understand how the business works from their end, because it directly impacts us.

**John:** Yeah. Well, one of the most fundamental things I think we have to understand about how film economics works is that every movie is considered its own company. It’s considered its own venture. So The Hangover 2, it was set up as its own company to produce a movie called The Hangover 2. All the accounting for The Hangover 2 exists within this bubble for this one movie.

So they will charge any possible expense against this movie for The Hangover 2, and the money that comes in will eventually get a portion to it. The same for The Help. The same for every different movie. On independent films, like The Nines, there’s a little bit more transparency because you’re seeing exactly what money is spent and what money is coming in.

On bigger movies it becomes more complicated, because there’s just so much money coming in and going out. But ultimately they’re set up the same way, which is that each film is its own venture and has its own accounting for profit and loss. Almost no movie is going to show a profit because of the things we’re going to talk about today.

**Craig:** Yeah, they’re certainly not going to show a net profit as defined by the studios. Look. It’s all tautological, and a net profit is what they define net profit as. There are certain facts that don’t change, and the facts are some things cost money and some things make money. Obviously, movies tend to make money. That’s why these businesses continue.

These studios, regardless of the fact that the ownership has changed hands over the years, most of them have been around for decades and decades. They are among the older businesses in the country. So obviously, movies make money. How they define making money, the rest of it, that’s the accounting stuff. So there are two ways we can approach this, which is, “How do movies actually make money?” And then, “Why do they keep saying they don’t?”

**John:** Yeah. So let’s break it into two different categories. There’s the money that you spend and the money that comes in. So first let’s talk through all the stuff that’s about the money that you’re spending in order to make a movie and market a movie. After we’ve made the movie, then we’ll start talking about the money coming back in from people buying tickets and buying DVDs.

So let’s first just talk about the money that we’re spending. The first thing if you’re going to approach making a movie is you have to buy the rights to something.

**Craig:** Oop! You’re already too late in the timeline. There’s something before that. The very first thing that will eventually be considered an expense of your movie are the salaries of the people at the studio.

**John:** The overhead.

**Craig:** Yup, overhead. Just business. Cost of business.

**John:** Generally, a 10 percent overhead is charged against a movie, although it can change based on the terms in people’s contracts.

**Craig:** Right.

**John:** So yes, there are preexisting costs called “overhead,” which are going to be a percentage of the total budget of the movie. As you start to approach making this one individual movie, the first thing you’re going to do is get the rights to something, or you’re going to buy a script that will become the underlying source for something.

So if you are making The Help, for example, you are going to buy the rights to Kathryn Stockett’s book I think. I hope I get her name right. So you have to buy the rights to her book. You need to hire a writer to adapt the book, which in this case is Tate Taylor.

Those are your first line out of expenses that you’re talking about for your movie. So however many, if it’s $100,000 you bought her book for, if it’s $100,000 you paid for the script, those are your first expenses that you’re running down.

Shortly after that, you have a director who you’re hiring on to direct this movie. You have the producers who are going to be producing this movie. A whole other podcast can be about producers and what good producers do and what terrible producers do, and why people get producer credits who probably shouldn’t get producer credits. But there will be producers, and those people are accounted for at this point, too.

You have actors. You have talented actors like Viola Davis and Octavia Spencer and everyone else who’s in that movie. Those are additional salaries that you’re paying for in this initial part of the process. Everyone whose salaries I’ve mentioned so far, those are considered above the line. So studio budgets for movies have what’s called “above the line” and “below the line.”

Above the line is the rights to the material, the writer, the director, producers, the actors. Is there anything else that usually gets counted above the line?

**Craig:** No, that is the above the line. The phrase comes from the fact that there’s an actual line, because the notion is “above the line” is the material and the “talent.” Then “below the line” is the crew and the physical expense of making a movie.

**John:** Yeah, and so really talented people are below the line. So you’ve got costume designers below the line. Your cinematographers are below the line. Your editors are below the line. But they’re not considered that above the line talent. Where it could become helpful to discuss the difference between above the line and below the line is certain kinds of movies will be very expensive above the line and very inexpensive below the line.

For example, when they were making those really high-concept Jim Carrey comedies, those were a classic example of “You’re paying Jim Carrey $20 million, but your whole budget in the movie is maybe $40 million.”

**Craig:** That’s exactly right.

**John:** It’s a huge chunk of the budget. Increasingly, I would say that I don’t see that split quite as much because it tends to be like you’re paying somebody a ton of money and then you’re also making an incredibly expensive movie beyond that.

**Craig:** Yeah, or in the case of a movie where it’s a smaller film but you want a big star, they get creative with paying the star out of the real profits of the movie as opposed to guaranteeing them a massive payment up front.

**John:** Exactly, but above the line is all those billboard names plus all the actors, the writer, director, producers. Below the line, everybody who’s physically responsible for making the movie, so their salaries plus the actual expenses of shooting the movie, taking the movie through post, color correction. Everything that leads up to “Here is the finished movie that we can deliver and show to the world.”

So when you add together the above the line and the below the line, you have what’s called the “negative cost,” which is confusing because it sounds like it’s a minus number. It’s not. Negative cost literally refers to the cost to get you to the film negative that you are going from there be able to generate all the prints that you’re sending out to the world and releasing theatrically.

So when you see in a Variety story, like “this movie had an estimated negative cost of $80 million,” they’re referring to that’s how much they spent to get the movie finished.

One weird thing that didn’t occur to me until I started really getting profit statements on movies that I’ve worked on is you think the negative cost is just done at a certain point. Like “Okay, we delivered the movie. So the negative cost won’t go any higher than that.” But it still does, because they still find new things to charge against the movie years down the road.

**Craig:** That’s right; that’s right. Yeah, the accounting becomes amazing. Truly amazing.

**John:** So after buying the rights to material, hiring writers, hiring a director, hiring actors, hiring a crew, you went and shot the movie. You took the movie through post. You’ve delivered the movie to a studio. Now is the time to spend the money to market the movie and to create the actual physical prints that will go out to the world. So that’s called P & A, or prints and advertising.

Back when I was in the Stark Program, they would have us budget $2,000 per print for releasing theatrically. So literally it’s a 35-millimeter print that you are having Technicolor or Deluxe make and then ship to the theater and stick in the projector and show to the world. I don’t really know what the correct accounting is for a print now, especially if it’s digital, but there still can be a fee charged for every print to every theater.

**Craig:** There’s a cost. Yeah, there’s a cost involved in just making the prints, and they still make a ton of physical prints for movies. I think probably most movies are still physically projected. That part of the process also includes, I believe, dubbing and subtitling for foreign territories.

**John:** Yeah, and it seems like a weird thing, “Oh, well, $2,000.” Like $2,000 isn’t really that much compared to the budgets of these movies. But if you’re releasing on 3,000 screens simultaneously, that’s $6 million you just spent to make the physical prints.

**Craig:** Yeah. No, it’s definitely real money for sure.

**John:** It’s real money.

**Craig:** The “A” in P & A is the killer though. [laughs]

**John:** Yeah, so “A” is all the advertising. When you think about advertising, your first instinct is naturally going to TV, which I’m sure is still the bulk of what people are spending for…

**Craig:** For sure, yeah.

**John:** …marketing. So it’s every 30-second spot, every Super Bowl spot you’re buying for $1 million for that one launch thing. So that’s the easy money to think about for P & A. For independent films, you may never have a TV commercial, but you’re still spending on advertising because it gets down to the little banner ads you buy on websites.

You’re paying co-op money to the theater owners for the little listing in the newspaper that says, “Now playing at this…” and “Here are the show times.” You have to pay for every one of those little things. You’d assume that, “Oh, well, that expense would just go to the theater owners.” It doesn’t. You actually are paying for those newspaper ads in the free weekly newspaper.

**Craig:** Yeah. Theater owners don’t spend anything to advertise any particular movie. That is entirely on the studio. So every television ad, every bus side, every billboard, every radio spot, every promotional contest, stuff online, events, the premier. [laughs]

Everything, even the cost of sending the stars to New York to be on Letterman or wherever they go, all of that stuff ultimately comes under publicity and advertising. It’s all folded in as part of this massive expense. Increasingly, that number is starting to rival the budgets of some movies and in some cases actually more than budget.

**John:** Oh, yes. In some cases it’s far exceeding the actual budget of the movie.

**Craig:** Yeah, and that’s the thing that changed the most. I started in marketing in the early nineties, and that’s the biggest change to me in this business if I can look at one thing. It’s not so much that they’re making fewer movies. I actually think they’re making fewer movies because of this thing. This thing is that it costs so much more now to attract people to a movie because our attention is so divided now.

It’s not that we don’t like going to movies. It’s that we have less time in the day to notice what movies are coming out, so they have to bombard us and blanket and publicize movies in a way that they did not have to do before. That is enormously expensive.

Because of that expense, they then have to ask in a way they used to ask, but now it’s become almost an essential question, “Should we even make this movie?” If the movie costs $40 million, but it costs $60 million to sell it, what is the more important question? “Is this movie good?” Or, “Can we sell it?” Obviously the answer is, by $20 million to them, “Can we sell it?”

**John:** Yeah. So, it’s important to understand that there is a budget for the advertising and for what all the marketing is going to be for the movie. That is not part of the same budget for the movie itself.

So the line producer isn’t looking at the marketing budget for the movie. The line producer is looking at how much money he has to get this movie physically shot and delivered. The marketing budget is handled by completely different people. A good producer has his or her hands on both the production budget and the marketing budget and has a strong say in both of those. But it is beyond even the director’s control how much money is there and how it’s going to be spent.

**Craig:** Yeah, and the marketing budget is also elastic to a point. The budget for a movie is negotiated between the filmmakers, the producer, and the studio, based on the script and based on the cast and based on the expectations of what this movie could eventually bring back in income.

But the marketing budget expands and contracts based on the end result. They can look at a movie and say, “This is a dog. We’re dumping it. We’re not going to spend that much.” Or they can say, “This is great. We are tripling your marketing budget.”

I know that on the first Hangover, I think they saw the initial cut of the movie and went, “Alright, let’s spend way more than we spent on the movie to sell this, because it’s a hit.”

**John:** Yeah, that’s going to be the case. Another good example would be the Saw movies or any of the low-budget horror movies. They look at one of those and it’s like, “Oh, there actually is great potential here.” So they’re going to spend ten times their shooting budget on advertising because they feel like they can make their money back out of it.

**Craig:** For sure.

**John:** Other things that get included in the overall cost of making the movie: We have the negative cost. Negative cost would also fold in interest. So basically, in order to have the money to make something, you are taking out a loan. Now usually, you’re actually taking out a loan from the studio itself, but they are charging you interest. So, in a way, it is the studio paying itself, is how it goes.

**Craig:** And insurance.

**John:** And insurance, overhead. Insurance is both the policy for in case a stuntman dies, but it’s also insurance to make sure that the film can get completed if there are other catastrophes. Because the last thing you want to have happen is you get 80% done with the movie, and then you can’t actually finish the movie. A movie that can’t be finished or can’t be delivered is… It’s a horrible situation, because you have burned all this money and you have no way of getting the money back out.

So you buy insurance and a bond, a completion bond, to make sure that you will be able to finish shooting the movie. In some cases it does kick in. A star dies. When River Phoenix died during that Dark Water or whatever that movie was —

**Craig:** Right.

**John:** — That became an insurance claim because you have to figure out what you’re going to do with that movie.

**Craig:** Every movie, at some point or another, has an insurance claim. I went down Monday when I was directing, because I had bronchitis. The doctor literally pulled the plug on me and sent me home. That is an insurance day. Every day costs money. People showed up. They cooked food. They built props. They were waiting around. That’s money.

**John:** Yeah. On Go, we had an insurance claim for a camera malfunction – basically had negative flashing and we had to go back and reshoot. So that was two days of reshooting, where we had to really press our case for, “We have to reshoot these things. There is no technical solution for this. We actually have to go back and reshoot.” That does happen on a lot of shows.

While it is not an expense that you have while you are shooting the movie, what is ultimately charged against the overall cost of making the movie will be things you’re paying out to first dollar gross players and residuals. Those are going to be costs that will be charged against the movie ultimately.

There are other things that are siphoning money off from the film, which, for screenwriters, is good, because residuals are a very good thing. Residuals will kick in even though the movie will never, itself, become profitable.

**Craig:** Right. Residuals are based on gross receipts. The other major expense that every movie incurs, and this is the fun one, is the distribution fee. A studio does not distribute. The studio that makes a movie does not distribute the movie. They own a company that distributes the movie.

So every Disney film is not distributed by Disney. It is distributed by the Buena Vista Pictures Distribution Company. What is a distribution company? It’s a bunch of people in the same building, employed by the same people, who work with the theaters to place movies.

Distribution is an incredibly important thing because big studios tend to be able to get any movie into a theater, into lots of screens if they so desire, because they trade on the movies that the theater owners know are going to be big hits.

So, “I have Pirates of the Caribbean coming down the line for Christmas. You need to take this movie now and put it in your theater or I’m not going to give you Pirates of the Caribbean.” “Okay, I’ll take it.” So there is a real value to the distribution company. They obviously do a lot of work.

But, in the end, here is the deal: This is one of the areas where the studios pull a fast one on us. They basically say, “It costs $30 million. Our distribution company charged us $30 million to distribute this film.” Well, what that means is that they moved $30 million from their left pocket into their right pocket. It’s the same company. They’re charging themselves money and then telling you that it is an expense.

**John:** Yeah, there are exceptions to that. When George Lucas hires 20th Century Fox to release the new Star Wars movies, it really is a separate company kind of releasing it. But in most cases it is exactly the same people who made the movie that are the people who release the movie.

**Craig:** That’s right.

**John:** It would be useful to step back and take a look at the three big players of how movies are made and released. You have the production company, the people who basically make movies. You have the distribution company, who take movies that have been shot and distribute them to the people who can show them. You have the exhibitors, who are the people who actually are physically showing them, who are the theater owners.

**Craig:** Right.

**John:** Once upon a time, those were all the same people. That was vertical integration. So, 20th Century Fox would make a movie, distribute a movie and show it in its own theaters. I forget the name of the classic lawsuit that broke up that model.

**Craig:** I can’t remember it either.

**John:** It’s like Taft-Hartley. But it’s not Taft-Hartley.

**Craig:** Yeah.

**John:** We’ll put that in the show notes, but the studios are not allowed to own movie theaters anymore. So Pacific Theaters or AMC Theaters have to be their own separate companies. The distributors, which are really the studios, negotiate with the different theater owners to figure out who is going to play what movie and how that is all going to work.

**Craig:** Right. The theater owners basically – the way the studios make money off of movies is the theater owners pay them a rental charge, because they are renting the print from the studio. Obviously, they don’t own it. So they pay them a flat rental fee. Then, of course, they give them a percentage of the box office receipts.

**John:** Yeah. Let’s — I’m going to just put a boldface header here. This is the second section of what we’re talking about. So we’ve talked about all the money that goes out. Now, we’re starting to talk about the money that comes back in.

**Craig:** Right.

**John:** This is how people make money on making movies. It’s by showing them in theaters and showing them on TV and everything else. So with theaters, we are negotiating with AMC or Loews or one of these places. We are agreeing to basically split the box office with the theater owners.

**Craig:** Well, to some extent.

**John:** Yeah, to some extent. Generally, in negotiating with theater owners about which theater we are going to show them in and which screens we are going to have, it’s an ongoing conversation. But you are trying to get into the right houses at the right size.

You say, “Okay, opening weekend we will make a 90/10 split and we’ll pay you a certain amount per theater.” There’s like a – each theater has a house nut. So, “This is how much we are going to pay you for the right to show our movie in your theater.” Does that make sense?

**Craig:** Yeah.

**John:** I’m putting that kind of poorly.

**Craig:** Basically, here is the deal. It’s all a negotiation. If I’ve got a movie — let’s use Harry Potter. Everybody wants Harry Potter. It’s a guaranteed hit. There’s no chance it bombs.

So Warner Brothers says to a theater, and typically a theater chain, a very large chain, “We will give you Harry Potter at this level, but that’s a favor from us to you, because we could give it to your competitor across the street. We’re giving it to you in return for the first weekend,” which is where the big bulk of money is made.

Often times, a third of the entire box office run is made that first weekend. “We’ll make sure that you don’t lose money showing it, and maybe we will give you a little piece of the box office, but the bulk of it comes to us.”

As weekends progress, that split trends more towards a 50/50 kind of thing. And it’s because every movie is different, it’s hard to say ultimately, “What do theaters keep from box office?” because everybody says – they look at box office reports and they say, “Wow, Harry Potter made $400 million in the U.S. That means Warner Brothers made $400 million.” No. The theaters keep a lot of that. Someone once told me it’s sort of like a 60/40 thing.

**John:** Yeah. If you average out all the weekends and how it all flows.

**Craig:** Yeah, 60 is to the studios, and 40 is to the theaters.

**John:** But another truism you will see cited is that the theaters make more money off of concession sales than they do off of ticket sales, which doesn’t seem to make sense at all. Because if you buy a ticket for $11, not everyone is spending $11 on candy and popcorn.

Whether that statistic is true or not, the thinking behind that is that the theater owners keep all the concession money for themselves. They are not splitting any of that money back with the studios who are making the movies.

**Craig:** Exactly. Yeah. The theater owners are constantly… there is a war going on. I don’t know if people understand this. There is an endless struggle between exhibitors and studios. Obviously, they need each other, but they have cross purposes.

Theaters, obviously, want to make as much as they can. The studios want to make as much as they can. So the studios tend to win the whole box office battle. The theaters, in order to make their money back and to be profitable, obviously, they want to constantly raise ticket prices, which the studios constantly fight against them doing, because studios want more people showing up.

The theater owners obviously keep increasing prices on concessions. The big one that the studios hate is the theater owners run advertising, which pisses audience members off. Then, in return, what the theater owners hate is that the studios, in order to generate more money for themselves, want to shrink the time between the time that the movie is in the theater and the time that you can buy it on DVD.

As piracy spreads, studios are panicked that no one is going to go to the theater or, if they go, they won’t buy the DVD because they can get it that night on Bit Torrent or something. The theater owners hate that, because it means that the theater experience is being cheapened and isn’t as special. It’s this endless war.

Then, one last thing: Another big war is technology. Studios want theaters to have excellent projection. They want them to have 3D. They want them to have better sound, digital delivery. The theater owners are saying, “Great, but that’s entirely our burden. That’s a capital expense on our end and it costs you nothing, so help us.”

**John:** And, to some degree, studios are hamstrung to directly invest in the theaters, because they’re not supposed to be owning theaters.

**Craig:** Right.

**John:** Yeah. So it would behoove everyone if everyone had better projectors. It would be best for people who are going to see movies. It would be best for distributors, because that way they don’t have to make as many prints and they can digitally deliver prints and they love that.

It’s better for the theater owners ultimately, because there is less physical stuff for them to have to handle and they can get by with fewer projectionists. There are reasons why it is good for everybody. It’s just that switching over to a new projection system is really expensive.

**Craig:** Right.

**John:** So that’s why when they build new theaters, they tend to have nicer projectors and everything is more digital. In the older theaters, it’s hard to justify converting them.

**Craig:** Yeah.

**John:** But it comes down to even things that seem really cheap. There was a fight recently over 3D glasses and who should be responsible for providing 3D glasses. Should it be the theater owners or should it be the people who are producing the movie? It can be a very low margin business, so the cost of those $0.50 glasses can add up.

**Craig:** Yeah, for sure. No, it’s an interesting study in forced partnership. I mean, it’s economic. I’m sure they teach it in some sort of class.

**John:** The only statistics that you are likely to be able to find out about how a movie is doing is by box office. So we talk about domestic box office or worldwide box office, and so it’s important to remember that box office is really a function of how many tickets were sold and at what prices.

That’s the public figure that’s actually ever disclosed for a given movie. Privately, that’s not what really matters to studios. Studios are looking at what is called film rentals, which is, “How much of the money from the theaters is coming back to their pockets?”

**Craig:** Right.

**John:** That’s what is letting them know which movies are successful for them or not successful for them. Those film rentals that are coming back to 20th Century Fox or to Warner Brothers. That’s where they take off their distribution fee. I think 35 percent is the standard distribution fee now?

**Craig:** Yeah. Yeah.

**John:** So 35 percent of whatever is coming back to Fox, they are saying, “35 percent of that is going to the 20th Century Fox distribution arm,” and is not counted towards the actual, individual movie.

**Craig:** Which is, sort of, on its face, kind of dumb. The fact that it’s even a percentage is counter-logical.

**John:** Exactly. If it really was a cost, then add up the cost and charge that cost to the whole movie, rather than making it a percentage.

**Craig:** Yeah. No, it’s a scam. [laughs] It’s a total scam.

**John:** Yeah. So, agreed there are issues that you can take with studio accounting, its complexity, its…

**Craig:** Its scamminess.

**John:** Its scamminess.

**Craig:** Yeah.

**John:** The distribution fee is certainly one of the biggest ones. I would say distribution fee, interest and overhead are all easy targets for it and that when you really dig in, if you have to go through an audit on a given movie, you find that there are a ton of expenses that are thrown against a movie that may not really be legitimate expenses.

**Craig:** Correct. Correct.

**John:** Yeah. For example, if you are lucky enough to have a movie that is considered for an Academy Award campaign, every possible expense that they could think about to throw – in terms of trying to win you an Oscar — will get thrown against the movie. So every party, every screening, every possible thing will get charged to your movie. That’s going to be a tremendous amount of money.

**Craig:** By the way, those are actual expenses. I don’t mind those. [laughs] It’s the ghost expenses that make me nuts, but what are you going to do?

**John:** Yeah, but when you say, “Where do the expenses stop?” Should you be charging the studio executive’s hairstylist against the Oscar campaign?

**Craig:** Well, it depends on the hair.

**John:** Yeah, if it’s great hair.

**Craig:** Right.

**John:** If it wins the Oscar, then it’s worth every penny.

**Craig:** Right. Exactly.

**John:** Right now we have been talking about the theatrical experience, which is clearly the first step for most of these movies. But, a lot of movies are going to be making more of their money on home videos. That used to be videotapes. Then it was DVDs. Now, it’s iTunes and all of the other places that people can get movies legitimately and see them on their flat screens of some kind. Pay cable. Free cable. Broadcast television.

And an important thing to understand about when you start making television deals for things is that a lot of times ABC is not buying your movie. They’re actually buying a package of movies. They’re buying five different movies from Sony for $40 million and they’re buying the rights to show those movies several times.

Where that becomes troubling is, if Charlie’s Angels is one of those movies — there are five movies let’s say — so Charlie’s Angels is one of those movies and the other four movies are four movies you’ve never heard of, and you would never, ever want to see, they will try to account for those equally. They will just divide the $40 million among those movies and Charlie’s Angels will not show the profit that you think it should show.

**Craig:** Shenanigans. More shenanigans.

**John:** Yeah, just shenanigans. So when you start to have audit fights or have issues, that’s the kind of thing that comes up often, how they are apportioning things.

**Craig:** That’s what they do. Also, airlines are a big source of revenue for the companies. Hotel rooms — Lodge Net and all that stuff. There is a ton of money in that ancillary market, the afterlife. What is interesting about the aftermarket is, unlike the expense of releasing a movie theatrically, where you are making those expensive prints and delivering them and pouring a ton of marketing in, the ancillary stuff is really profit magic for the companies, or has traditionally been.

The movie is done. It’s got awareness. Hopefully, it was a hit. If so, you are literally just, in the case of iTunes, pressing a button and getting paid and doing nothing else. Someone who ran the studio one said to me that the best way to make money in the movie business is to own a library of movies and to not make movies.

Libraries kick off money every year, every title, without fail, with very little expense, very little cost associated with that. So as the VHS and DVD market boomed, you could see the movie business expanding to just chuck as many movies out there, because there was just this pot of gold at the end of almost every rainbow.

Even if the movie was a disaster, theatrically, somehow it always seemed to make money overseas and here through DVD and home video. Less and less the case now. That is another reason why the movie business has contracted a bit.

**John:** When you see studios freaking out about piracy, this is why they are freaking out about piracy. A tremendous amount of their income was coming from those things down the road. So that guy who was videotaping the movie in the theater is costing them, in their perception, sales of DVDs or iTunes sales or legitimate sales down the road, and they can’t ever possibly make those back.

It’s also crucial for screenwriters who are hoping to make more movies. We only get residuals on those things down the road. We don’t get any residuals on the first theatrical run of a film. Residuals are things that get paid to us from all of those other little bits, the airplane runs and the DVDs.

**Craig:** Not airplanes, actually.

**John:** Airplanes is first, isn’t it?

**Craig:** They count airplane as part of the theatrical release. I don’t know why. But you’re right, everything else in the release of it is where our residual base comes. Frankly, that’s where the profit in the movie business is. If you were to say today, that by fiat, the movie business could only make money by showing movies in theaters, I think, honestly, that every studio would just shut down.

**John:** Pack up and go home.

**Craig:** Yeah, because they cannot make the economics work. Making movies has become extraordinarily expensive. It’s a little counter-intuitive, because you think, “These cameras are getting cheaper and it’s so much easier to deliver content.”

But the other truism is that we have come to expect a certain level of spectacle with movies that is enormously expensive to achieve. Even when you find interesting filmmakers out there doing it on the cheap, it’s still, overall the rule of thumb is that, if you’re going to deliver a big, huge action movie, you need to spend money or it’s just not going to look like a big, huge action movie.

At least, that’s the studio calculation. So they need DVDs and video. They also need DVDs and video tapes to pay for the bombs because there are bombs. When you make a movie for $40 million and it loses $20 million, that is a big hit.

**John:** Yeah, they want to create a portfolio of movies, so that the hits will even out with the misses. Obviously, whenever somebody new comes to Hollywood, whenever new money comes to Hollywood, they, very smartly, say, “We’re only going to make the successful movies and we’re not going to make the bombs.”

The truth is that you don’t know which movies are going to be successes and bombs. So you try to plan carefully for what those will be. The challenge, I think, in our current situation is that the movies that are successful tend to be the incredibly, incredibly expensive movies. So we’re only making those incredibly expensive movies and we’re not making more of these mid-range things. We’re not making very many of The Help, and The Help is a godsend if that is your movie.

**Craig:** It’s very profitable. Then you look at movies, comedies in particular, I think, are extraordinarily profitable. Obviously, The Hangover, Bridesmaids, Horrible Bosses are movies that don’t cost a ton. That’s why comedy, I think, will always be a staple.

It’s not because people like them. Obviously, they do, but they like lots of movies. Horror movies and comedies tend to not require a ton of cash to make, but they can be just as successful or popular as action films are.

**John:** Yeah, because they don’t have to be home runs. You can hit doubles and triples and make a tremendous amount of money. I should back up and say, when I say, “Oh, they’re tremendously profitable,” again, we’re not talking that on the accounting of each individual film that they’re profitable, because they won’t be.

**Craig:** None of them are.

**John:** None of the movies, I think, that we have talked about today are going to show a profit on their actual, individual statements. But they are profitable for the people who made them, because they got to charge that 35 percent distribution fee. They charged their overhead against them. They charged everything they possibly could against them and they have a nice chunk of change because of that.

**Craig:** Yeah. Look, they run these models. That’s a word you hear all the time now. They model the budget based on what they think the movie will do theatrically and what that, then, implies the movie will do on video and OnDemand and iTunes.

They know before they roll a foot of film what they think the movie is going to make. Usually, they are right. They usually have a pretty good sense of it. But — I lost my train of thought.

**John:** It’s okay, because a bus just showed up.

**Craig:** Oh, a bus showed up.

**John:** People who are listening on good headphones may notice that Craig works at a bus stop.

**Craig:** Yeah.

**John:** You have to have more than one line of work if you are a screenwriter these days. You have to have many irons in the fire.

**Craig:** Got to stay in touch with the people. Do you know what I mean, John?

**John:** Yeah. So, he gets his best stories working as a shoe shiner. I think it’s good that you are keeping your working-class roots going there.

**Craig:** Yeah. Really, you can smell the urine in the air. I love this bus stop.

**John:** [laughs] Craig, thank you so much for a good and lengthy discussion on how the film economics work. I hope we all learned something today.

**Craig:** God, I hope we have. I sure do.

**John:** One of the things that I actually thought about this as the intro to how we were going to talk about this today, is, as I mentioned before, I am working on Big Fish, the musical. Broadway has a whole different economic model behind it in how it all works.

I am just now starting to learn it and it’s just bizarre. So we are at the stage now where we invite really, really rich people in to listen to the show and they write big checks to invest in the show, hoping that it is a huge success.

But, I honestly can’t say I understand exactly how they would get paid out in success, or God willing success, or why it’s a good idea for them to do that. Obviously, hopefully they want to support great art. But there is actually a profit and a business model and I can’t say I fully understand it yet.

**Craig:** This is one of the ways that I am a creative person. I don’t mind money. I like money, but I don’t understand it, to be honest with you. I don’t understand the ins and outs of it. Frankly, it doesn’t inspire me to talk about finance. I don’t really get it.

So, the people who do get it, I think, they do just much better than we do, because they really understand how it works. To me, it’s just a check. I don’t know.

**John:** One last thing we should slip in here is merchandising. There’s not going to be a perfect answer for this. But if you are making a movie that has toys — let’s say you made a little movie called Star Wars — toys are going to be an incredibly important part of how you are making a tremendous amount of money.

Some of the money from merchandising will be counted towards your movie and some of it won’t — which is a way of saying that those little, small things in your contract that seem like you’ll figure that out whenever they kick in, can become very, very important. So the degree to which all the ancillary toys and such become part of the accounting of your movie is really dependent on how good your lawyers were.

**Craig:** Yeah. You know guys, the deal is if a movie fails it doesn’t really matter what was in your contract. But in success, you and the people that owe you money will go hand-to-hand combat for a while. You see it in TV. When TV shows get syndicated and 20th Century Television sells the show to FX and it’s all the same, it gets so complicated. An industry of lawyers and people deal with it.

For those of us who write, I think the most important thing is to just be cognizant of how these guys make their decisions. So when it comes time to write your script, just know if you write a period piece that is a very adult drama, the studio is going to look at it and go, “Well, I see a whole bunch of budget costs that wouldn’t be in a horror movie.” Just be aware that it’s a little bit of an uphill battle. Just know how they think.

**John:** Yeah. So Craig, they’ve already come back to you. Hangover 3 is going to be PG-13 and there are going to be a lot of toys. Is that correct?

**Craig:** Hangover 3 will be rated R. [laughs] But there may be toys.

**John:** Toys are great. We love toys.

**Craig:** Love toys.

**John:** And we love talking about movies. So, thank you again, Craig, for another great podcast.

**Craig:** Thank you, John.

**John:** We’ll talk soon.

**Craig:** Bye.

The followup post to this episode can be found [here](http://johnaugust.com/2011/more-on-movie-money)