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When Hollywood Loses Control: How Foreign Box Office Owns the Movie Business

The new "Transformers" movie is only the latest example of what's now established: Foreign box office holds the power over American movies.

Optimus Prime in TRANSFORMERS: THE LAST KNIGHT, from Paramount Pictures.

“Transformers: The Last Knight”

Credit: Paramount Pictures/Bay F

Producers often accuse studios of “Hollywood accounting,” but the rise and rise of foreign box office may have introduced studios to Chinese accounting. According to reports, the MPAA has hired a firm to audit ticket sales in China. That’s of grave concern when China is often the biggest market for American movies — and one that provides only 25% of its revenue to studios.

READ MORE: China’s Box Office Fraud: How Phony Ticket Sales Hurt the Film Industry

More importantly, it’s a vivid illustration of what’s become a very inconvenient truth: While tentpole movies are essential to Hollywood, Hollywood no longer controls the tentpoles. The real power lies in the foreign box office for those blockbusters, with China as the retaining wall.

Last weekend, “Transformers: The Last Knight” earned $70 million in its first five days in North America. It’s a very weak showing compared to the last installment, which earned about $100 million in three days. Stories are similar for “Pirates of the Caribbean: Dead Men Tell No Tales” and “The Mummy,” among others, all with the same rationalization: Foreign is strong, and will/could make up for domestic shortfalls.

Technically, that’s true. “Transformers: The Last Knight” — like half of the 20 biggest releases so far this year — will likely do 80 percent or more of its business overseas. Paying too much attention to that statistic, however, is to look the wrong way. As domestic returns plummet, so does Hollywood’s ability to create a healthy movie business.

READ MORE: Studios Are Right: Rotten Tomatoes Has Ruined Film Criticism — Opinion

In 2000, there was no such thing as a top movie that made 20% or less of its revenue from North America. Today, there’s 10 of them — and there’s likely more on the way. (See the list at the bottom of this story.)

The numbers tell us American audiences’ opinions of American movies will continue to be discounted. As more top films struggle at home, an increasing portion of studio release schedules will include films with marginal domestic interest. The biggest budgets will be allocated to films of foreign interest, not domestic. That means the box office stagnation we’ve seen this year will continue, and likely grow worse.

The most current example is “Transformers: The Last Knight.” Through Sunday, it grossed about $264 million worldwide, with about 25 percent from domestic. In 2014, “Transformers: The Age of Extinction” did about 45 percent of its business in the first five days; an equivalent performance would place the domestic take for “Knight” at $150 million. The new film should hit $600 million overseas — which would make for a 20 percent allocation for the U.S.

Statham The Rock Fate of the Furious

“The Fate of the Furious”

That decreasing American share is a trend demonstrated by other recent franchise entries. “The Fate of the Furious” is 18 percent domestic; “Furious 7” was 23 percent. The current “Pirates” is at 24 percent domestic, but Japan has yet to open; the film will certainly fall under 20 percent domestic, compared to 23 percent in 2011.

Like “Fate of the Furious,” “Transformers” and “Pirates” will likely end up with worldwide totals above $800 million. That means three of the five biggest films so far in 2017 will do less than a fifth of their business in the domestic market.

Milla Jovovich in Resident Evil: The Final Chapter

“Resident Evil: The Final Chapter”

Three more films with low domestic shares are franchise entries with little reason to continue for domestic consumption. “xXx: The Return of Xander Cage,” “The Mummy,” and “Resident Evil: The Final Chapter” will all likely continue despite dreary domestic results. “xXx” has done only 13 percent of its business domestic, “Resident Evil” a measly nine percent. “The Mummy” sits at 20 percent with Japan still to open, so that will fall further.

Next page: The top 20 films worldwide, including three you may have never heard of.

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