By the end of July, Iron Man was screening in less than 400 theaters across North America, with daily box office revenue dropping below $200,000. The North American market could no longer deliver significant returns. However, over a span of fifteen weeks, the film had grossed $381.24 million in North America, surpassing all other summer releases including Pirates of the Caribbean: Dead Man's Chest, making it the undisputed champion of the 2006 summer box office season.
After losing this position for two years, Duke once again dominated the summer box office.
However, Iron Man's performance overseas was relatively weaker. Over roughly the same period, the film earned $312.66 million from nearly a hundred countries and regions.
Together, Iron Man's global box office totaled a staggering $693.90 million.
Although the total gross came tantalizingly close to the $700 million mark, both Duke and Warner Bros. were unsure whether Iron Man could actually break past that threshold, as the film's global box office growth had clearly lost momentum.
Some people were certainly eager to push Iron Man's final box office total past $700 million. From a long-term perspective, this would be nothing but beneficial to the plans for the Marvel series. Marvel executives were already prepared with a fund that could be deployed at any moment.
Apart from that, the DVD release of Iron Man was also in the works, just waiting for the film to exhaust the last of its box office potential in North America before hitting the market to rake in more profits.
Since the beginning of the new century, DVDs have become one of the biggest sources of income for Hollywood's major production and distribution companies. It's not even an exaggeration to say that Hollywood has been relying on DVDs for revenue. Some blockbuster films, such as Spider-Man and The Lord of the Rings trilogy, were able to generate over $100 million in DVD sales in North America alone during their first week of release. Most films that ranked in the top ten annual box office lists—barring very few exceptions—would eventually reach about $100 million in DVD sales.
The cost of producing DVDs is significantly lower than that of VHS tapes, which were once all the rage. The production cost typically doesn't exceed 1% to 3% of the wholesale price at which they are sold to retailers. Even after accounting for marketing and other expenses, the profit margins remain staggering.
Generally, production companies provide distributors with a promotional budget of around 5%, and at most no more than 10%.
Then there's rental revenue, which is more complex in terms of revenue sharing.
First, rental companies offer a base price—meaning that regardless of whether the discs are rented or not, the production company receives a fixed amount per disc, typically ranging from $3 to $10 each.
There are several rental models. Standard rental fees are the main source of income. Additionally, if the disc is not returned on time, the rental company treats it as a sale and charges the customer the purchase price. In the current standard model, the production company takes $1 to $2 from every rental, depending on the film's box office performance.
In other words, the higher the box office earnings, the higher the revenue share per rental, making box office success the foundation of a film's profitability.
As for sales, there is also a per-disc share, which is considerably higher—roughly $5 to $10 per disc.
Rental fees are not counted indefinitely. According to contracts, there is a validity period of about 50 weeks. After that time, rental companies must destroy a certain percentage of DVDs. The remainder must either be returned to the production studio or bought outright at a predetermined price per disc.
For a single blockbuster film, the production company can earn $5 to $8 million just from one rental company, and that's only for the rental portion. Sales revenue typically exceeds that amount. This means a popular film can earn Hollywood tens of millions—or even over $100 million—from DVDs alone, and most of that revenue is pure profit.
That's why people say Hollywood is profiting off DVDs.
However, anyone paying attention to the data knows that the DVD's golden age is nearing its end. A report from Warner Bros. showed that in the first half of 2006, DVD sales in Hollywood declined by 6.3% compared to the same period in 2005.
Although the DVD market still held nearly $2 billion in scale, those with long-term vision could easily see that this golden age wouldn't last. It might even decline drastically in the next three to four years.
Why is this happening? Is it because audiences are tired of Hollywood blockbusters?
Of course not. The audience base for Hollywood films has not shrunk. However, with the rise of online video platforms, the teenage demographic—which makes up the majority of the film market—has turned its attention to online streaming and downloading.
No one understands better than Duke how the rise of internet-based film distribution directly slashed Hollywood's DVD market by two-thirds.
Hollywood has never been short of elite minds, and many have noticed this shift.
On one hand, producers are trying to cut costs to ensure that each DVD generates the highest possible profit; on the other hand, while taking defensive measures, all major studios are preparing for the eventual disappearance of movies from physical discs.
In the future, film distribution will increasingly rely on the internet or video-on-demand services provided by cable and satellite TV companies. According to data from media research firms, this market already reached $800 million and surged by nearly 20% just last year.
Warner Bros. and Duke's studio have been planning ahead, preparing to release films simultaneously on DVD and via the internet or pay-per-view services, instead of waiting several weeks after the DVD release.
This approach could attract younger viewers who don't buy DVDs.
Another brewing shift involves allowing viewers to download films immediately after they leave theaters—even before the DVD release—by charging an additional fee for early access to high-definition versions.
In short, figuring out how to profit from films once they leave theaters—via the internet—is now the central focus of research at all major companies.
Some people have even set their sights on the revenue potential of online films.
It's well known that Hollywood is not some harmonious utopia. There's no room for softhearted or good-natured folks here. The industry is a battleground where countless individuals and companies fight for capital, fame, and profit. This constant struggle is reflected even in the infighting among Hollywood's major guilds.
The most well-known guilds in Hollywood include the Producers Guild, the Directors Guild, the Editors Guild, and the two Actors Guilds. Conflicts and disputes of interest exist among these four associations as well.
Of course, most of the conflicts are between the Producers Guild and the other associations. Currently, the contract between the Producers Guild and the Writers Guild is set to expire at the end of 2007. Representing the interests of the studios, the Producers Guild has already begun preliminary negotiations with the Writers Guild, but the negotiations have not gone smoothly. The Producers Guild is also reluctant to easily meet the Writers Guild's conditions.
In 1988, the Writers Guild once called on writers to go on a strike that lasted for 22 weeks, and through that, they secured a fixed percentage share of video tape and television broadcast revenues from the producers. Now, what they are eyeing is the internet revenue of films.
Not only the Writers Guild, but the Directors Guild and the Actors Guilds are also seeking a share of this revenue. However, they are receiving treatment completely different from that of the Writers Guild. Although they also have significant differences with the Producers Guild, there is still room for negotiation, unlike the Writers Guild, which has been outright rejected by the Producers Guild.
This also indirectly reflects the status of screenwriters in Hollywood.
The script is one of the foundations of film production, but in many projects, it doesn't seem to be that important.
Duke knows very well that the Producers Guild will make certain concessions to the Directors Guild and the Actors Guild, but will never easily back down to the Writers Guild.
A future strike is simply unavoidable.
He knows the strike will definitely happen, and he understands it will affect his income, but there's nothing he can do. This kind of conflict rooted in interests is not something that can be resolved by one person or a small group.
In fact, even if the strike achieves its goals, the status of screenwriters in Hollywood will not see much improvement.
Nowadays, everyone, including people from the production companies, believes the biggest weakness of Hollywood films is the lack of originality. You could also say that the Hollywood system is doing its best to suppress innovation.
Producers are afraid of the risks that come with innovation, so they would rather shoot sequels or adapt a bestselling novel or comic, than support a supposedly creative new script.
For example, if Duke had to choose between two scripts one being a new and novel story and structure requiring only $50 million to produce, and the other a cheesy script adapted from a popular comic that needs an $80 million investment he would undoubtedly choose the latter without hesitation.
Ninety-nine percent of Hollywood producers would make the same choice.
The remaining one percent, after receiving the creative script, would usually shelve it. A few individuals might find it somewhat interesting, add it to the so-called Hollywood Black List of scripts, and then let it sit there for years, waiting for someone willing to invest…
In the Hollywood film factory, the vast majority of films, even art films, must follow the rules of the assembly line, and scripts are no exception.
Even a script like "The Dark Knight" after Duke completed the outline and character settings was handed over to the writing team, with a total of 22 screenwriters participating in its development.
These writers had clear divisions of labor, separately writing the film's political scenes, romance scenes, action scenes… Even the dialogue was divided into types: threat, romance, humor, action, etc., and written accordingly.
A film on the scale of "The Dark Knight" is inevitably a product of the Hollywood assembly line. With such a large investment, if it's not made via the assembly-line method, Warner Bros. would definitely go crazy.
As August arrived, preparations for "The Dark Knight" became increasingly busy. Duke also traveled several times between Warner Studios, Hughes Aircraft Factory, and Chicago to inspect the progress on site.
Perhaps due to the success of "Batman Begins" creating some publicity, the Chicago government gave strong support to "The Dark Knight," and the mayor met with Duke twice.
When Duke returned to Los Angeles from Chicago in mid-August, he saw Heath Ledger, who had been missing for over a month.
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