The decision to skip VOD and DVD releases means studio won’t see a penny in returns
Sony Pictures will take an estimated $90 million financial hit as a result of its decision to scrap the release of “The Interview,” TheWrap has learned.
The studio’s decision to forego a release of any kind — no streaming, video-on-demand, DVD or Blu-ray – means it won’t see a penny in returns on the Seth Rogen-James Franco comedy, according to individuals with knowledge of the situation.
With no box office grosses or ancillary returns, it’s all about the cost, and Sony is looking at a write-down comprised of the following:
>> A production budget of about $45 million;
>> A domestic marketing budget of $35 million;
>> An overseas marketing budget estimated between $10 million to $12 million.
Approximately $5 to $6 million of the marketing can be cancelled and probably recouped in the days ahead of the release. But given the late date, it would more likely have to be returned in a trade-out, on “Annie” ads, for example, according to individuals with knowledge of Sony’s functioning.
The studio had penciled in expected domestic grosses of $80 million for “The Interview,” and $130 million worldwide, those individuals said. It’s harder to estimate the home entertainment returns, but given the spotlight the hacking scandal put on it, they may have been considerable.
Sony has taken heat on social media and from the Hollywood creative community for pulling the movie, and not at least offered the film on VOD. One media report suggested that a total write-off was required to qualify for an insurance claim.
Still, “this could have been the biggest VOD title in history,” said an executive at a rival film company, who estimated it might have doubled the $8 million-$10 million that recent on-demand hits like “Snowpiercer” and “Margin Call” took in.
It had major DVD potential too, said B. Riley analyst Eric Wold.
“There are good reasons to skip digital on this one,” he said. “Who needs North Koreans hacking into their emails? But this would have been a real positive for Sony Pictures Home Entertainment in the first quarter.”
To make matters worse, the losses on the film itself will pale in comparison to the toll the hacking and data dumps will take. Lost production, revenues and the liability the company will face from the release of employees records by the hackers could well push the toll into the hundreds of millions of dollars. The 2013 Playstation hacking was much smaller in scope, but still cost Sony $170 million.
And that’s not factoring the cost that Sony will pay down the road as a result of relationships damaged by the release of sensitive data on creative talent and business partners.