C 30

In today's era, a North American box office total of $130.02 million is an impressive result. However, this significant sum of money will not fall into the pockets of any one person or company. From theaters to distributors, and from production to investors, many parties will share the proceeds.

In the last few days of June, the accounting firm representing Luke and Leah began close business dealings with Twentieth Century Fox and Lucasfilm, going over detailed accounts and finalizing the profit-sharing. Luke didn't need to be involved in this process directly; his presence would only complicate matters. While the professional accountants from PwC are expensive, they are trustworthy in terms of both their expertise and reputation. Additionally, the lawyers representing Luke and the other parties would oversee the entire process.

Twentieth Century Fox signed a standard profit-sharing agreement with theaters. After fixed expenses were deducted by the theaters, the profits were divided between the theater and the distributor according to different periods of the screening. After taxes and fees, Fox received approximately $62 million from the North American box office.

Lucasfilm had no control over this portion of the money. As the distributor, Twentieth Century Fox received a 15% commission on the North American box office—amounting to $19.5 million. After deducting their distribution commission, Fox also deducted various advance expenses, including $3 million for producing more than 5,100 copies of the film (at a unit price of $600), as well as $8.5 million for public relations, transportation, trial screenings, survey companies, box office monitoring, and other promotional costs. In total, Fox withdrew $11.5 million, leaving them with a gross profit of $19.5 million.

Fox's ability to handle large-scale distribution and publicity justifies their role at the top of the industry. Distributors possess broad publicity channels and robust distribution capabilities, which smaller companies can't easily replicate. If distribution were that easy to manage, studios like Lucasfilm wouldn't rely so heavily on companies like Fox and Paramount for projects like Star Wars and Raiders of the Lost Ark. Even major companies like Pixar and DreamWorks Animation had to turn to big distributors at various stages in their development, with DreamWorks even considering selling itself at one point.

After Fox took its share, the remaining $31 million was allocated as follows: more than $1 million went to pay the remaining one-third of actors' and crew members' salaries, as well as industry association expenses. The remaining funds were transferred to Lucasfilm, who, based on their agreement with Leah and other investors, chose not to take the guaranteed $2 million payout. Instead, they opted to receive 10% of the North American box office revenue, pocketing $13 million.

The remaining $17 million was distributed among investors, including Luke. Leah, who invested $10 million and covered two-thirds of the production cost, received over $10 million in return—a profit, albeit a modest one after taxes.

However, the North American box office is only one part of a film's revenue. Speed could also earn substantial amounts from other areas.

First, there were the television and video tape rights in North America. Twentieth Century Fox had the right to take 50% of the proceeds from these rights. They led the negotiations with Lucasfilm, Luke's agent, and other parties involved. Fox had extensive experience in this area, having previously negotiated the sale of the rights to Terminator 2—securing $10 million for the North American video tape rights and $7 million for TV rights.

Luke didn't participate in these negotiations, as he had little influence in a process dominated by Fox. After several rounds of negotiations, Speed's North American video tape rights were sold for $7 million, and the television rights were sold for $5 million. Fox took $6 million from these proceeds.

Despite some frustrations, Luke understood that this is simply how Hollywood works. Newcomers can't break the established rules, and pushing back too hard would make all of Hollywood his enemy. The film industry is not just about making great movies—there are also battles to be fought behind the scenes.

As for overseas rights, negotiations were tougher. It was the fifth round of talks, and a consensus had yet to be reached. George Lucas sent one of his executives to sit in on the discussions, showing support but leaving the lead in negotiations to Leah, the largest investor. Leah, in turn, passed the responsibility to Luke, who entrusted his agent, Nancy Josephson, with the task.

"The movie we're discussing is not a flop like Alien 3!" Nancy said, nearly shouting at the Fox negotiators. "This is Speed—Luke Rosenberg's Speed! A blockbuster that earned more than $130 million in North America! You paid $65 million for the overseas rights to Terminator 2, and its North American box office was just over $200 million. We're offering you a package deal for all overseas rights and sequel rights for Speed at only $50 million. Is that too high?"

Though passionate in her arguments, Nancy knew $50 million wasn't realistic for a film from a relatively unknown director and a star like Keanu Reeves. On the other hand, Fox's counteroffer of $25 million was insultingly low. After a long day of negotiations, the two sides finally agreed on a package deal for $37 million, covering all overseas and sequel rights. Luke's insistence on receiving payment within a month was key—his mother's loan was coming due, and failure to pay would lead to major financial complications.

In total, investors were left with a clear picture of their profits: $17 million from the North American box office, $6 million from video and TV rights, and $37 million from overseas rights—a total of $60 million. Luke, with a 1/15 share, stood to earn $400,000—quite the return on his initial $100,000 director's fee, even after taxes. His mother would receive $40 million, a terrifyingly high return on her one-year investment, even after taxes.