RevenueLoan Blog

May 31, 2011

Summer Blockbusters 2011 & Revenue-Based Finance: Fast Five

Filed under: Movies — rsbelcher @ 3:43 pm

Fast Five: Vin Diesel and Paul Walker

As discussed in this blog and elsewhere, revenue-based finance has its roots in entertainment (as well as oil, natural gas and mining). [If you missed Randall’s slideshow from the Angel Capital Association meeting in February on why revenue-based finance was developed in the entertainment business, particularly for expensive feature films, it is available here .]

Well, Hollywood is expanding the idea to now include how it pays its actors. Universal Pictures has developed something it calls the “gross pool”. No, this does not refer to the swimming pool at my friend Ben’s beach house after Memorial Day Weekend. The “gross pool” refers to the pool of cash available to pay actors after the costs of the movie have been netted out of the box office receipts.

Universal Pictures has put the gross pool, which is really a royalty payment system, into effect on “Fast Five”, the latest installment (yup, the fifth) of the “Fast and Furious” franchise. This is a savvy move by Universal Pictures. The franchise has been very successful for the studio, with Vin Diesel and Paul Walker driving much of that success. Paying them market rates to make a fifth installment would cost a fortune; after all there is only one Vin Diesel. The earning power of these two stars could possibly put the profitability of the film in jeopardy.

That said, making this film was relatively low-risk — the fan base was built-in and the franchise was well established; therefore the marketing virtually took care of itself.

This structure was a win-win: the movie gets made and everyone makes money. True Paul and Vin aren’t getting what the “could have” made, but it is likely that without this agreement the movie wouldn’t have been made at all.

While Paul and Vin brought considerable star power to the first “Fast and Furious”, they brought less so to the second and subsequent films (they weren’t even in the third one, save for a cameo hinting at the strong possibility of a fourth). Increasingly the brand and story has become the “star power” that draws the crowds. We can assume they were compensated well for the first movie, but the “gross pool” structure makes more sense at this point in the franchise’s life cycle.

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2 Comments »

  1. Thank God! Somonee with brains speaks!

    Comment by Vyolet — June 11, 2011 @ 3:42 am | Reply

  2. Walking in the presence of gniats here. Cool thinking all around!

    Comment by Infinity — June 11, 2011 @ 10:22 am | Reply


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