We've Got Hollywood Covered

Why America Doesn’t Count at the Box Office Anymore

The reason for the summer’s huge foreign box-office: far-flung new markets, global release strategies and a weak dollar

Hollywood is on global expansion overdrive, with the international box office racking up a larger percentage of overall film revenues than ever before.

The reason for all this continent-spanning success is a recipe that combines three critical ingredients:

For one, modern-day exhibition is paving new roads in far-flung markets like Guangzhou, China and Kaliningrad, Russia.

Also read: $476! 'Harry Potter' Shatters Global Box Office Record

Second, filmmakers are crafting their product for the international market like never before, spinning out superhero films and  3D spectacles that often play better in foreign climes than they do in this country.

Third, international performance has become more carefully strategized, with day-and-date releases increasingly becoming the rule for major films.

By now it's no secret that foreign markets are the one bright spot of growth in the movie business. Last year, according to the Motion Picture Assn. of America, revenue was flat in the U.S. and Canada at around $10.6 billion while the global market reached a record $31.8 billion, driven by a record $21.2 billion overall international grosses.

The foreign box office accounted for a record-high 67 percent of all revenue. And in 2011, there's every indication that percentage will go up. (See chart below)

Also read: Why the Foreign Box Office Leads: 'Fast Five,' 'Thor' Open Overseas First

“We’ve been engaged with this since the late 1980s," Jeff Kleeman, executive producer of “The Change-Up,” told TheWrap. "I just think it takes the town a long time to shift paradigms. It’s hard for us to relearn the rules.”

It’s no longer a question of if, and how many, tickets a movie will sell in Duluth, but how it will play in Krasnodar. (That's in Russia.)

Hollywood has made no secret of its global appetites, but this summer, the impact of its rabid focus on the worldwide markets is particularly pronounced.

In May, Disney's "Pirates of the Caribbean: On Stranger Tides" set a new foreign-opening record, capturing $260.4 million in one weekend. That record was soon shattered by "Harry Potter and the Deathly Hallows: Part 2," which opened to $314 million abroad. 

“It’s the one area of the business that is continuing to grow,” Ashok Amritraj, CEO of Hyde Park Entertainment, told TheWrap. “The digital space hasn’t grown as fast as we would like. Global markets haven’t reached their peak. There are more theaters being built and more territories coming on line.”

Though industry trades dutifully focus on domestic opening weekends, the real story is the enormous grosses this summer’s slate of tentpole films has been racking up abroad.

From “Pirates of the Caribbean: On Stranger Tides” to “Kung Fu Panda 2,” films that have underwhelmed domestically, are racking up monster numbers overseas. “Pirates” grossed a so-so $238 million in the United States with a whopping 76 percent of its more than $1 billion take coming from abroad.

“Kung Fu Panda 2” earned a lackluster $160 million domestically, but was rescued after foreign markets over-performed to the tune of $437 million.

Three summer movies, “Pirates 4,” “Transformers: Dark of the Moon” and “Harry Potter and the Deathly Hallows: Part 2,” have reached or will soon hit the $1 billion mark. Last summer, only one film, “Toy Story 3,” passed that rarefied barrier.

Of course, it’s not just that more people are going to movies in foreign countries. The declining value of the dollar is also skewing the domestic-international box office split in favor of foreign. As the dollar weakens, foreign box office translates into a higher haul in US$ for the studios.

And there are rising opportunities in the demographic shifts in key regions such as South America. 

“We were in Brazil two weeks ago. There are 80 million people entering the middle class there in the next few years,” Harry Sloan, former MGM chairman and CEO the new investment fund Global Eagle, told TheWrap. 

The tentpole mandate at studios such as Disney and Warner Bros. is partly responsible for the global success of this summer’s slate of superhero and franchise fare. Other breakouts are: “X-Men: First Class” ($347.4 million worldwide, 57 percent coming from international), “Fast Five” ($603.5 million worldwide, 65 percent coming from international) and “Thor” ($447.4 worldwide, 60 percent coming from international).

Studios are becoming increasingly adept at selling their films to fit the cultural norms of the countries in which they’re being released. Paramount’s decision to re-title “Captain America: The First Avenger” simply “The First Avenger” in Russia and South Korea so it would appear less jingoistic is a sign of this sensitivity.

A granular awareness of opportunities in specific markets has also taken hold — for example, both Universal and Paramount took advantage of an Australian holiday during the spring, opening "Fast Five" and "Thor" Down Under before the U.S., with solid results.

“We have to even further adjust marketing campaigns to what people are receptive to in foreign countries,” Vincent Bruzzese, president of the Worldwide Market Picture Group at market research firm Ipsos OTX, told TheWrap. “In Japan, they want their superheroes to display modesty or altruism, whereas if you did a marketing campaign of a superhero movie in this country we want them to kick ass. You do the same campaign there and they come off as arrogant and it wouldn’t work.”

Perhaps a nimble approach to marketing is part of the reason that Hollywood has even emerged as an effective exporter of genres that historically have not performed well. Take comedy hits such as “The Hangover Part II” and “Bridesmaids.” Thanks to gross-out gags and in the case of the “Hangover” follow up, an exotic locale, the movies are disproving the old prejudice that all comedy is local.

“The Hangover Part II” grossed $562.9 million worldwide with 55 percent of its take coming from foreign territories, while “Bridesmaids” made $234.9 million worldwide with 30 percent of its gross racked up internationally.

“American culture continues to dominate, which means comedies are translating better than ever before in foreign countries,” J.C. Spink, a producer on “The Hangover Part II” and “Arthur,” told TheWrap.

But all these big-budget pictures need a home, and consequently the major theater chains are busy enlarging their foreign foot prints.

No one has been more aggressive than IMAX. In part through foreign partnerships, the number of IMAX screens increased by 28 percent last year, rising to 370, with 130 of those locations opening abroad. Overall, IMAX is predicting that the United States can support 450 screens, while foreign markets can shoulder an additional 800.

China, with its strict cap on the number of foreign films allowed to be released within its borders, continues to be a frustratingly impenetrable target for Hollywood fare.

When those restrictions begin to loosen further, though, it too is well positioned to greet the big-budget films studios are churning out. The country added 1,500 screens last year, bringing the total number to 6,200.

“[Global box office] is expanding because the audiences are expanding in different international markets,” Sean Daniel, the producer of “The Mummy,” told TheWrap. “If you look at certain growing markets they are matched by the increase in screens opening in those same markets.”

With an eye toward maximizing these fresh audiences and minimizing their marketing costs, studios have shown a greater willingness to release films on the same day throughout the world.

“Deathly Hallows: Part 2,” "Transformers 3” and “Pirates 4” all saw their opening weekends swell after they rolled out concurrently across most major territories. And again, “Thor” and “Fast Five” went a step farther, premiering abroad before making their Stateside debuts.

So de rigueur has day-and-date become that during an earnings call on Tuesday, analysts pressed DreamWorks Animation CEO Jeffrey Katzenberg on why he was hesitant to release his company’s films all across the globe at the same time.

Katzenberg may be one of the only moguls who has yet to fall in love with the new roll out.

“We spend a great deal of effort and time to make sure we release our movies when our audiences are available to us,” Katzenberg said. “As much as we’d like to think the world marches to us, it doesn’t.”

True enough, but it’s not going to keep Hollywood from trying to get everywhere from Rio de Janeiro to Stavropol to start moving to its beat.