Once the celebration party wrapped up, the work related to 'Real Steel' was temporarily put on hold. Gilbert went to his office at Watermelon Studio as usual. There were no vacation plans this year; Aunt Ellie wasn't letting Allie go. Naomi Watts, Cameron Diaz, and Charlize Theron were all busy with their own gigs. So, Gilbert just decided to be a regular nine-to-five office guy, sipping tea and reading newspapers.
He also kept an eye on the progress of the two companies he'd invested in. After a few months of development, Banana, thanks to its first-mover advantage, was a few steps ahead of Yahoo and kicked off its angel round of financing. Even though the company was still in the red and hadn't turned a profit, venture capital firms were bullish on Banana's potential. In the angel round, the company secured fourteen million dollars in funding from three venture capital firms, giving up only twenty percent of its shares. This twenty percent was split among the three firms, ensuring that no single firm owned more than ten percent, allowing Gilbert to maintain firm control over the company's equity.
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In March, Yahoo also announced its official launch, signaling the start of the portal and search engine wars. Raising capital at this time was crucial. Without it, they probably wouldn't have the funds to compete with Yahoo.
Another social networking site, Facebook, had already expanded to its Series A funding, securing another twenty-four million dollars. With this funding, Facebook continued to grow, and thanks to the rapid development of the internet, Facebook became the number one photo-sharing and social networking site in the United States. Of course, after Facebook emerged, other social networking competitors also popped up in North America. Some social networking sites even started experimenting with targeted ad delivery and managed to turn a profit. This once again proved that the profit potential of ad delivery based on real-name social networking was pretty significant.
Of course, some companies went in the opposite direction. While Facebook went the real-name social route, others went the virtual social route, which was also a viable path. Seeing some companies making money through advertising, the venture capital firms investing in Facebook couldn't sit still and pushed Facebook to launch its advertising business quickly. After all, Facebook was the number one social networking site in the U.S., occupying a huge market share due to its first-mover advantage and continuously expanding. If it continued to expand, it would create an internet "Matthew effect" and eventually dominate the market.
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Gilbert and Facebook executive Mark Ruhl discussed this, deciding that unless Facebook's user base broke one million, they wouldn't consider commercial operations for now. This approach was actually well-supported. Last September, the Washington government announced the "Information Superhighway" construction plan, kicking off the internet's rapid development. Statistics from April 1994 showed that internet users made up five percent of North America's total population. But this percentage was rising fast, and the next few years would see a period of massive internet growth.
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Wary of the dot-com bubble, Gilbert constantly urged Facebook and Banana to develop cautiously, avoiding aggressive moves. Although these cautious measures were criticized by the investment market, several aggressively developing companies had already surpassed Facebook and Banana at this time. Netscape, founded in April, gained favor with venture capitalists thanks to its Netscape browser and was even planning to ring the Nasdaq bell in August. Gilbert even got involved in their funding round, investing one point five million dollars and becoming a minor shareholder in Netscape. At that point, Banana was only just planning its Series A funding.
But regardless of whether they went public or not, the potential of both companies was undeniable, so the investment market remained very optimistic about them. These two companies were long-term holdings, and along with Apple, Gilbert planned to hold their stock for a long time. But this didn't stop Gilbert from riding the wave of this massive internet boom to buy stock in other internet companies. Microsoft, Cisco, Oracle, and other stocks were hot and constantly appreciating, so Gilbert just tried to buy as much as he could. He also kept an eye on some startups, looking for familiar names. If he found any, he'd invest. Then, he'd just have to time it right and sell off before the internet bubble burst. Gilbert didn't know the exact timing, but he remembered it being around 2000 to 2001, so he'd sell those stocks in an orderly fashion before 2000.
The specific operations would be handled by his investment manager, David; Gilbert just had to set the tasks. Professional matters should be handled by professionals. Whether it was starting a company or investing, he just needed to control the overall direction.
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These were all things outside of filmmaking and didn't drain much of Gilbert's energy. With a little oversight on his two companies' development, Gilbert settled into a normal routine.
"Sophia, what's Nicolas Cage up to these days?" Gilbert asked Sophia about her cousin during an afternoon tea chat one day.
"Oh, him," Sophia pouted. "He's been busy partying with a dozen leggy models."
Nicolas Cage liking parties with leggy models wasn't exactly a secret. When Gilbert first found out, he was pretty surprised; he never expected Nicolas Cage, who seemed like such an honest guy, to have been so wild in his early days. But then he realized it was normal; this was North America, after all. Even though Gilbert was in close relationships with three women, he was actually an anomaly in Hollywood. Some even maliciously speculated that Gilbert didn't actually like women and was just using Naomi Watts and the others as a cover for his preference for men. Of course, no one dared to ask Gilbert that question directly.
Sophia asked curiously, "Why are you looking for Nicolas? To make a movie?"
"Of course," Gilbert said, as if it were obvious. "I don't like men, and I don't want to throw leggy model parties, so naturally, I'm looking for him to make a movie."
"Is it that 'Alcatraz' project?"
"That's the one. Can you ask him if he has any open dates to work with me?"
"Alright, I'll ask him another day," Sophia agreed.
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At this time, Nicolas Cage had starred in films like 'Wild at Heart,' 'Deadfall,' and 'Red Rock West.' Most of these were B-movies and independent films, making Nicolas Cage seem like a true art-house guy.
Sophia quickly found Nicolas Cage. "Gilbert wants you to be in a movie."
"Which Gilbert?"
"Is there any other Gilbert in Hollywood?"
"Oh, your boss," Nicolas Cage said, sounding completely uninterested. "Doesn't he always make blockbusters? I'm not interested."
Seemingly anticipating her cousin's thoughts, Sophia Coppola said, "I think you should really talk to Gilbert in person. You might change your mind."
"Change my mind?" Nicolas Cage didn't think he'd change his mind; he was only interested in art films and leggy models. But since the other person was a well-known, talented Hollywood director, flat-out refusing wasn't a good look. So, Nicolas Cage said, "Alright, Sophia, why don't you have Gilbert come to my house to visit and talk face-to-face?"
Sophia knew her cousin pretty well and warned him cautiously, "What are you planning?"
"Nothing," Nicolas Cage shook his head. "What could I be planning? If there's any problem, you can come find me."
Sophia Coppola quickly relayed Nicolas Cage's request to Gilbert and warned him to be careful. Gilbert wasn't going to go initially, but after Sophia's warning, he immediately got curious. He really wanted to know what Nicolas Cage was up to, so he decided to go meet him alone.
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It was a pretty ordinary first weekend of June. 'Real Steel's North American box office had accumulated one hundred sixty-nine million dollars, and its overseas box office had accumulated one hundred seventy-three million dollars, bringing its global total to three hundred fifty-five million dollars—a pretty good result. The PG-13 rating was a huge advantage in achieving that North American box office, meaning the film had a broader audience base. And as 'Jurassic Park' raked in huge box office numbers worldwide, making Hollywood blockbusters even more popular globally, it also created favorable conditions for 'Real Steel.'
The movie was still in theaters. In North America, it was entering the phase of accumulating box office revenue over a long period, while several overseas markets were still waiting for it to open. Although the final results weren't out yet, it seemed likely that 'Real Steel's global box office would reach four hundred million to four hundred fifty million dollars. Through its box office, 'Real Steel' would turn a profit.
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After the first weekend of June, North American theaters saw their first box office payout. Disney handled North American distribution and had always been strong with North American theater chains. Based on Gilbert's past successes, Disney got the highest revenue-sharing percentage for this box office split. Using a tiered revenue-sharing model of ninety percent, eighty percent, sixty-five percent, and forty percent, Disney received one hundred twenty-six million dollars in box office revenue from 'Real Steel's first four weeks in North America. After the fifth week, Disney's share dropped to the same standard as other Hollywood studios, usually only twenty-five percent.
Additionally, the revenue-sharing agreement stipulated that all box office revenue after the twelfth week would go to the theaters, with the producers and distributors no longer participating in the split. Of course, this clause varied; some movies had it, while others didn't and continued to participate in revenue sharing until the film left North American theaters.
Some might ask, how could North American theaters accept such harsh box office sharing terms? In China, the domestic theater revenue-sharing model meant movie studios would be lucky to get forty percent or more. This is due to different market systems. You have to remember that in his past life, many film companies actually owned their own theater chains. If they invested in a movie and showed it in their own theaters, they'd get two layers of profit from the movie's revenue split: as a producer and as a theater owner. It might look like the producers and distributors were losing out, but through the theaters, all the profit actually stayed in their hands.
However, the revenue-sharing model in the Chinese film market wasn't always like this. Before 1994, Chinese film companies could get seventy percent of the total box office, theaters got twenty-four percent, and six percent of the box office had to be submitted to the government. This unchanging revenue-sharing percentage was even more extreme than the dominant revenue-sharing model between Hollywood and theaters in North America. But because the Chinese film market was so small back then and didn't generate much box office revenue annually, it wasn't very noticeable. Based on these numbers, 'Shaolin Temple,' rumored to have grossed one hundred sixty million RMB at the box office, would have given the film company one hundred twelve million RMB in revenue. 'Shaolin Temple' was a 1982 film.
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But North America is different; theaters and Hollywood studios have a partnership. Because Hollywood produces the content, and theaters can't do without Hollywood's quality content, Hollywood film companies have always been very strong when it comes to revenue-sharing percentages. Especially Disney, their revenue-sharing percentage is outrageously high. Of course, this situation would change in about a decade or so. But for now, Hollywood film companies are indeed in a strong position when dealing with theaters.
After the first box office payout, the one hundred twenty-six million dollars in revenue needed to be split among Disney, Warner Bros., Watermelon Studio, and eight small investors. As the North American distributor, Disney needed to deduct a fifteen percent distribution fee, which was about eighteen point nine million dollars—this was Disney's pure profit.
In addition, promotional and advertising costs, one-third of the cast and crew's salaries, and costs for film prints, storage, and transportation also needed to be deducted. These combined to nineteen million dollars. After these deductions, the remaining shared box office was eighty-eight point one million dollars. And it wasn't over yet; director Gilbert also had a ten percent share of the total North American box office, which meant another twelve point six million dollars was taken by him. Luckily, Bruce Willis had only just become an A-lister before starring in this movie, and his previous film had flopped at the box office. So he wasn't yet eligible for a box office share agreement; otherwise, even more money would have been deducted.
Therefore, the final first box office payout was only seventy-five point five million dollars, which wasn't even enough to cover the film's production costs. Watermelon Studio, which held an eighth of the investment, was able to take nine point four three eight million dollars from this seventy-seven point five million dollars in shared box office. Having invested ten million dollars and only getting nine point four three eight million dollars back, Watermelon Studio seemed to have lost money. And let's not forget taxes; after taxes, comparing this income to the investment would result in a significant loss. If this were the case, all funds and investors investing in Hollywood movies would be losing their shirts.
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Fortunately, that's not the case. North American theaters are still showing the movie, and after the twelfth week of screenings, there will be a second box office split with the theaters. In addition, the film is gradually being released in overseas markets. Except for a few regions, the general revenue-sharing split between Hollywood and overseas markets is usually thirty-five percent for the producers, seventeen percent for the distributors, and forty-eight percent for the exhibitors. Unless there are special clauses, this is generally the split.
Although overseas box office revenue hasn't been split yet, based on the current overseas box office, the producers can expect to receive sixty point five five million dollars in box office revenue, and Watermelon Studio can expect to get around seven point five six eight seven million dollars from that. Including the North American box office, the film has already turned a profit.
But the most crucial thing is that this isn't the end, because there's still a lot of potential in the overseas box office, and it can achieve pretty good results. Furthermore, box office revenue is only one part. North American TV rights and video rights are still being negotiated and can also generate profit. In addition, according to statistics, within one month of 'Real Steel's release, merchandise sales generated approximately nine million dollars. This might not seem as much as box office revenue, but these are long-term revenues that can continuously generate profit for ten or twenty years.
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All in all, even though this movie didn't meet Gilbert's own expectations and even slightly disappointed his core fans, regular audiences, film companies, major investors, and brands were all very satisfied with the film's commercial value. Because the North American box office exceeded one hundred fifty million dollars, the brands that had placed product placements earlier kept their promises and gradually rewarded the 'Real Steel' crew. This portion of the reward usually isn't shared by the film companies; it's directly divided among the entire crew based on their level, serving as a reward for their contributions to the film.
From the above, you can see that a movie's revenue is calculated from multiple aspects and is quite complex. Unless you're fully involved in auditing all the accounts, even the most seasoned and experienced accountants would get confused. Fortunately, Gilbert was prepared and had a team led by accountant Kevin involved in all aspects of the film from the very beginning. He wasn't doubting that Disney and Warner Bros. would intentionally rip him off; it's just that even if some things haven't happened, you still have to be prepared.
Gilbert usually just listens to reports about these complex financial transactions and then cares about when his money will arrive. North American box office splits are usually quick, settling within six months to a year, while overseas box office is more troublesome, often dragging on for a year and a half, or even two or three years. But these are all future problems. After focusing on the first North American box office payout, Gilbert accepted an invitation to visit Nicolas Cage's home.