As a followup to my previous blog post, where I claim that the EFF is pro-piracy.

There are a number of articles on the EFF website that make me think they are pro-piracy, or, at least, indifferent to the issue. For example, this article, posted a few weeks ago (and linked to all over the internet by pirates):

EFF: Most Pirated Movie of 2009 … Makes Heaps of Money

According to TorrentFreak, last summer’s Star Trek movie was the “most pirated movie of 2009.” So it seems that Paramount Pictures was prescient when it gave testimony before the FCC that used Star Trek as an illustrative example of how “Internet piracy” is poised to devastate Hollywood and (though the nexus here is less than clear) undermine residential broadband in America.

Funny thing is, Star Trek is on course to make more than $100 million in profits.

Here’s the financial breakdown, courtesy of The Numbers.com, which gathers financial data for movie industry analysts:

Production costs: $140m
Promotion costs: ~$100m
Global box office revenues: $385m
U.S. TV syndication rights: $30m
DVD & Bluray revenues (anticipated, based on sales and rentals since Nov. 2009): >$100m

When I first read the EFF’s article, my thoughts were that the movie studios picked a particularly bad example to cite as a victim of piracy. But, I also had doubts about judging the health of the industry based on one movie, and thought about the fact that Star Trek was highly rated by viewers, so maybe they can legitimately claim it should’ve made more. (Box Office Mojo readers gave the movie an “A-“.)

But, then I checked the EFF’s numbers, and I became less convinced of their argument. So, to clear up some of the sketchy numbers: According to BoxOfficeMojo, the production budget was $150 million (rather than $140 million). More importantly, “Global box office revenues” is the money taken by the movie theaters. I’ve read elsewhere that Movie studios and theaters split that money 50/50 (*see update). This means that, from the movie-production studio’s perspective, the box office revenues that they see are half of $385m.

When “DVD & Blueray revenues” say $100m, I believe that’s the amount of money paid by customers to retailers (e.g. Best Buy or Amazon), not the amount of money seen by the movie studios themselves. Like the movie-theater numbers, the movie studios might be seeing half or less of that $100m, because stores like Best Buy typically make half of the money from each sale. Plus, there’s some small packaging costs.

The updated numbers, from the movie studio’s perspective, should say:

Production costs: $150m (not $140m)
Promotion costs: ~$100m
Global box office revenues: $192.5m (not $385m)
U.S. TV syndication rights: $30m
DVD & Bluray revenues (anticipated): >$50m* (not $100m)

Using these updated numbers, then things look like this: Costs: $250m, Revenue: $272.5m. Total profit: $22.5m or 9% return on investment. And that 9% mostly disappears once you consider inflation and interest rates.

The EFF’s numbers suggest that Star Trek made a 115% return on investment. More importantly, the EFF article contains this:

As 2009 comes to a close, there is no evidence out there that “Internet piracy” is leaving us with fewer creators or fewer copyrighted works

I think that shows the EFF’s attitude towards piracy: it isn’t a problem despite what people say; it’s a non-issue, it needs no remedy, creators need no protection from piracy. Honestly, this sounds like something that the Pirate Bay could’ve written.

Update:
* I’ve seen a number of contradictory claims about how movie theaters and movie studios split the money on ticket sales. Whatever the case, it is misleading for the EFF to use the $385m “Global box office revenue” number without qualifying the fact that studios do not see 100% of that money, which is what the average reader will assume.
Source #1: “This percentage will vary from movie to movie depending on the specifics of the individual leasing deal. For instance, 2 movie theatre managers told me that for Star Wars Episode II: Attack of the Clones, the studio took 100% of the box office take for the first week of release… Now, as you move into the second and third weeks of release, the percentage starts to swing to anywhere from 45% – 55% that the theatre gets to keep. It gets better after the fourth week when theatres generally can keep up to 80% or better of the ticket sales.”
Source #2: “Except for a small operational fee paid to theaters, for the first two weeks that a movie was playing in theaters, 100% of ticket revenue went to the studio. In the third week, the studio would take about 90% of ticket revenue, while the theater would earn 10%. The fourth week, they’d split revenue 80/20, then the next week 70/30, then 60/40, until the level reached 50/50, where the division of money stayed until the end of the movie’s run.”
In response to Source #2, one commenter writes: “I study the industry and have 2 years of contract data between theaters and movie distributors. The average rental fee paid on all movies in that time period was 52%. In the first week, the highest it ever is is 70%, and it goes down from there. So you’re wrong when you say that theaters barely make any money on the tickets. They keep 48% of it on average.”
Source #3: “Upon initial release, for the first 10 days of a movie, the box office is split 80/20 in favor of the studio. For the next 10 days, it is split 60/40 in favor of the studio. For the next 10 days, the split is 50/50. For the next 10 days and usually a films final week in theaters the split is 30/70 in favor of the theater. If a movie makes it to almost 2 months in theaters the split goes to 20/80 (theater favor) for the remainder of the film’s time at the theater. For most films – this ends up being a 50/50 split over the entire run of the movie in theaters.”

It would be nice to get the numbers from some typical theater – something like “in 2009, we took in X dollars of revenue from ticket sales, and paid-out Y dollars to movie studios”.