Legendary Pictures boss Thomas Tull has minted money backing Batman Begins, 300 and a little movie called The Dark Knight. But will Watchmen be the end of Tull’s winning streak?
Founded by Tull in 2005 with $500 million from Wall Street banks and private-equity firms such as ABRY Partners and Falcon Investment Advisors, Legendary established a 25-picture, five-year co-financing deal with Warner Bros. in which the firm would fund half of each film’s budget in exchange for 50% of the profits.
But after the first seven movies covered by the deal had mixed results at the box office, Legendary got Warner Bros. to significantly reduce the off-the-top distribution fee the studio takes before profits are split, giving the firm access to a larger pool of cash from each film. As part of the renegotiation, Legendary also agreed to invest an additional $1 billion and co-finance 15-20 more movies, including last summer’s The Dark Knight.
We don’t know exactly how much money Legendary got and still expects to receive in profits from The Dark Knight, but the company’s investors will absolutely get their money back, a source close to the deal says. In fact, since Warner and Legendary recouped their production budget once The Dark Knight topped $185 million (aka opening week), that should leave hundreds of millions to be split between the two.
Another insider tells us that while it’s too soon to estimate the rate of return for Legendary’s investors since its deal with Warner Bros. isn’t done yet, both the equity and debt investors are in good shape. The Dark Knight far exceeded Legendary’s expectations, our source adds, describing the performance of Legendary’s deal so far as “spectacular,” a word not often used to describe Wall Street film-financing arrangements, unless it’s followed by “failure” or “disaster.”
That brings us to Watchmen and how its results affect Legendary’s “spectacular performance.” The consensus among those in the know seems to be that it won’t do nearly as well as The Dark Knight but it will still be a strong performer for the fund. One of our sources estimates that Watchmen might wind up like Superman Returns, in that it would do just well enough that investors would get their money back. And since Legendary’s 50-50 deal with Warner Bros. likely applies to all revenue streams including DVD and TV sales, there’s a good chance Legendary’s investors will recoup their contribution to the film.
If Watchmen bombs, however, Legendary has plenty more chances to make some movie money. This year alone, it’s backing April’s Observe and Report, June’s The Hangover and October’s Where The Wild Things Are. Indeed, Watchmen’s stumble may only illustrate the long-heralded benefit of slate deals: multiple shots at box-office glory.
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