— When "Harry Potter and the Deathly Hallows — Part 2," opens Friday, it ushers in a burning question, not about the fate of J.K. Rowling’s teenage hero — fans have known that since the final book was published in 2007 — but the fortunes of Warner Bros. Entertainment.
Like a wizard living among Muggles, the studio is going to have to acclimate quickly to a world without the magic of its decade-old franchise after the release of the eighth and final installment of the fantasy blockbuster series.
“This marks the culmination of an extremely profitable franchise and one that has in many ways defined Warner Bros. over the past several years,” says Anthony DiClemente, a media analyst at Barclays Capital. “It’s going to be a challenge for the company to find a franchise that can match Harry Potter.”
The Harry Potter franchise has, to date, earned the Time Warner division $2 billion in box office receipts plus an additional $1.5 billion in DVD, Blu-Ray and VHS sales in the United States alone, according to an IHS Screen Digest analysis of data from Box Office Mojo. The worldwide box office already is a whopping $4.3 billion, and analysts predict that the latest movie could add another $1 billion to the total, more than any previous movie in the series.
Warner has a few options to try and make up for these missing billions. Studio executives undoubtedly have studied the experiences of Scholastic, which went through its own post-Potter withdrawal a few years back, after the final book was published.
The book series pulled in $270 million for the publisher in the fiscal year of the final volume's release, a figure that has fallen to about $60 million annually since, according to a study of Scholastic financial data by Simba Information’s Children’s Publishing Market Forecast.
Michael Norris, senior analyst in the trade books group at Simba Information, says Scholastic changed its marketing over the years to capture a wider audience.
“They changed a lot of the imagery they were using to promote the book," Norris said. "Instead of having the imagery tied to one specific title it was much more tied to the entire series, the character and the setting.”
Warner Bros. mimicked this shift in its promotion of the movies in a bid to draw in viewers who hadn’t seen earlier movies.
By the time movie negotiations were taking place, Rowling almost certainly had enough clout that she was able to hang onto certain crucial rights, says Jeff Bock, a box office analyst at Exhibitor Relations Co.
That is why Warner Bros. can’t crank out Harry Potter sidekick spinoffs, prequels or TV shows to milk the franchise even further. The studio probably won’t let that happen again, Bock says.
“The real money is in the longevity of these characters,” Bock says. “That’s something they have to lock down in the contract, and most struggling artists will probably sell that,” he predicts. “They’ll definitely want to get a handle on exploiting that in the future.” (The studio did not respond to an e-mail asking for comment.)
What the studio does have is copious amounts of cutting-room material, behind-the-scenes footage, actor interviews and all sorts of ephemera it can use to boost DVD and Blu-Ray sales.
“Studios are pretty good at maximizing the revenues from catalogs. To have an eight-title franchise, they’ve obviously got huge potential,” says Helen Davis Jayalath, head of video at IHS Screen Digest. “There will be acres of material they’re keeping back for the extra-special box sets. It’s reasonable to assume we’re going to see additional collector’s editions and that kind of thing over Christmases to come."
The growth of 3-D movies gives Warner another potentially lucrative avenue for expanding on the popularity of the Potter franchise. The movie coming out this week will be released in 3-D, a Potter first. Jayalath says the higher prices for 3-D tickets could add significantly to box office receipts. If fans love seeing Harry in 3-D, the studio will ponder the next step: Should they rerelease the first seven movies in that format?
The potential return could be huge, given the already significant appetite demonstrated by fans for any new version of their hero’s adventures. But retrofitting a film into 3-D can’t be done quickly or on the cheap, as Warner learned after critics and audiences panned its 3-D conversion of "Clash of the Titans." Jayalath says the studio seems to have learned its lesson based on the fact that the last Potter movie was supposed to be released in 3-D, but the work wasn’t completed in time.
Bock says redistributing the films in 3-D could be a boon. He says Warner probably won’t decide this right away but will wait and gauge viewer response to the 3-D re-releases in development.
“Give it a few years, hopefully let the technology become even stronger and see what 'Titanic' and 'Star Wars' do,” he says. “When this generation is 10 years out, they’ll want to take their kids to see the movies in 3-D, and that’s where they might have a golden goose.”
Even if Warner Bros. is successful in recycling Harry Potter, it still has to find a new tentpole franchise. Bock says the likeliest place for the studio to look is in its stable of DC Comics characters.
“Warner really needs to figure this out and get Wonder Woman and the Justice League on track,” he says. “They have what most studios want in these great superhero characters. They’re sitting on a gold mine if they can make it work.”
Critics snubbed the recently released "Green Lantern," but Bock says Warner will keep pursuing the genre, pointing to the investment it already has made in the upcoming Superman reboot, "Man of Steel," and the final movie in The Dark Knight trilogy, both scheduled for release next year.
Another possible franchise option for Warner is raunchy, R-rated comedies. Warner had a hit with 2009’s "The Hangover," and its sequel was this year’s highest-grossing film until it was bumped out of first place by "Transformers: Dark of the Moon." But comedies are a riskier venture than superheros because they don’t always translate well overseas, and Bock says viewers tend to lose interest in the characters faster.
Barclays’ DiClemente points out that the digitization of media injects an additional element of uncertainty into the movie business.
“It’s difficult to predict how people will consume movies in the future,” he says. This added level of risk will prompt studios to fall back on tried-and-true moneymakers. “They’ll be trying to find franchises that already have an embedded brand and a base of fans they can bank on.”
“Superheros are Hollywood safety nets,” says Bock. “They just continue to make money no matter who they put in the suits.”