Spielberg’s ‘Lincoln’ Risks Losses for DreamWorks Studio

Steven Spielberg spent tens of millions of dollars and about a decade to get his movie about Abraham Lincoln to the big screen. Will the effort pay off for his DreamWorks Studios?

“Lincoln,” an early favorite to win Oscar nominations, is no shoo-in at the box office. The movie, opening today in limited release, chronicles the 16th president’s campaign to end slavery, starring Daniel Day-Lewis. It faces competition from two of the biggest pictures of the year -- “Skyfall,” the latest James Bond installment, and the finale of the “Twilight” vampire series.

Spielberg, whose movies have included blockbusters such as “Jurassic Park” and “Raiders of the Lost Ark,” has had mixed results with historical drama. “Schindler’s List” reaped profits and the best-picture Oscar, while “Amistad,” depicting the trial after a slave rebellion, was a commercial disappointment. “Lincoln” is estimated to generate $94 million in North American ticket sales, according to researcher Box Office.com, which may mean it will lose money unless it pulls in crowds overseas.

“‘Lincoln’ needs to catch on internationally to be profitable,” said Phil Contrino, vice president and chief analyst at BoxOffice.com. “Ninety-four million domestically would be seen as successful, but success at home is not enough these days. I’m sure they spent a lot of money marketing it.”

DreamWorks Studios has split the movie’s expenses with partners Participant Media and Twentieth Century Fox, part of News Corp. (NWSA) They spent about $65 million to make “Lincoln.” Typically, another 50 percent to 100 percent of a movie’s budget is spent on marketing. If those breakdowns hold, the total cost would be between $97 million and $130 million.

Finish Line

Revenue splits from ticket sales vary, though U.S. theaters usually take about 50 percent. Such a division means DreamWorks Studios and its partners would take in less than $50 million from domestic ticket sales if the movie were to perform as expected. To make money, they would have to make up the difference from overseas theaters, DVD sales and other sources, according to Contrino.

“This movie, because of the quality of it, is going to hang in there,” Stacey Snider, the Los Angeles-based studio’s chief executive officer, said in an interview. “It isn’t where we start. It’s where we finish.”

Snider said she expects the movie to do well, without offering specifics. Another dialogue-heavy film, “The King’s Speech,” competed with a “Harry Potter” in 2010, building slowly to $414 million in global sales and winning the best- picture and best-director Oscars.

Legislative Bribes

“Lincoln” opens in 11 theaters, including locations in Los Angeles and New York, before expanding nationwide on Nov. 16. In the film, Spielberg shuns his trademark action sequences to focus on the president’s determination to pass the Thirteenth Amendment in early 1865, which permanently ended slavery.

For Spielberg, the film is the result of a lifelong fascination with Lincoln. He told reporters last month he began pitching the role to Day-Lewis eight years ago, and worked with playwright Tony Kushner for almost a decade to develop the script.

Ultimately, they focused on a few weeks near the end of Lincoln’s life, as he badgered, bribed and intimidated members of the House of Representatives. Lincoln was desperate to pass the amendment before the Civil War ended, worried that his Emancipation Proclamation, issued in 1863 under special war powers, was unlikely to survive the peace.

Even in the North, many politicians were ambivalent about granting equality to blacks. Scenes in the movie show legislators, all representing union states, debating whether the amendment should simply end slavery or put blacks on equal social footing with whites.

Father, Husband

Tension over the political wrangling often spilled over into the Lincoln household, allowing the filmmakers to examine Lincoln’s burdened family life as well as the weight he carried because of war casualties and political struggle.

“We needed to focus on a working president and father and husband,” Spielberg said at a press conference promoting the film. “We couldn’t do that with a ‘greatest hits’ list of Lincoln’s life. We would have been giving you just headlines and nothing of Lincoln’s character.”

Screenings at the New York Film Festival and the American Film Institute’s AFI Fest have helped to build anticipation. “Lincoln” received 94 percent approval in reviews compiled by Rottentomatoes.com, and, perhaps more important, a “want-to- see” rating of 98 percent. Goldderby.com, which aggregates critics’ Oscar predictions, lists it among probable best-picture and best-director nominees.

7,000 Biographies

“Skyfall,” from Sony Corp. (6758) and Metro-Goldwyn-Mayer Inc., has already taken in $321 million outside of North America. For a domestic theater run starting today, the latest 007 is estimated to take in $230 million. “The Twilight Saga: Breaking Dawn Part 2,” opening next week, is projected to generate $294 million at the U.S. box office.

“The reviews indicate that it delivers a strong emotional current and I think viewers will respond to that,” Contrino said of “Lincoln.” “It’s hitting very well on Twitter. Every time they put a new trailer out there, there’s a lot of activity.”

The film is based on historian Doris Kearns Goodwin’s “Team of Rivals: The Political Genius of Abraham Lincoln,” one of more than 7,000 books that have been written about him, Spielberg said.

“There is more written about Lincoln than movies made about him or television stories portraying him,” Spielberg said. “He’s kind of a stranger to our medium.”

‘Amistad,’ ‘Schindler’

“Amistad,” released in 1997, generated $44.2 million on a production budget of $36 million, according to Box Office Mojo. 1993’s “Shindler’s List” was a home run financially and critically. The film, made for $22 million, returned $321.3 million in global ticket sales and won seven Oscars, including best picture and best director.

Success with “Lincoln” would provide a financial boost to DreamWorks Studios, which has struggled since becoming independent in 2008.

Spielberg, former Walt Disney Co. (DIS) executive Jeffrey Katzenberg and Geffen Records founder David Geffen created DreamWorks SKG (DWA) in 1994, envisioning a studio that would combine live-action films, animation and record production. In 2004, the animation unit was split off into publicly held DreamWorks Animation SKG, led by Katzenberg. The remaining live-action DreamWorks was sold to Viacom Inc. (VIAB)’s Paramount Pictures in 2006, before breaking off on its own two years later under Spielberg and Snider, the former Universal Studios chairman.

Bad Timing

The timing, at the outset of the financial crisis, was almost disastrous. It took almost a year for DreamWorks Studios to land as much as $850 million in financing that included a $325 million loan led by JPMorgan Chase & Co. (JPM) and an equity stake of an equal amount from Mumbai-based Reliance Big Entertainment. Disney, based in Burbank, California, agreed to lend as much as $200 million to gain U.S. distribution.

The path since then has remained rocky. “Cowboys & Aliens,” a sci-fi Western featuring “Bond” star Daniel Craig, cost $163 million to make while generating $175 million in worldwide ticket sales, according to Box Office Mojo. The comedy “Dinner for Schmucks” brought in $86 million on a $69 million budget. One hit was “The Help,” which cost $25 million and generated $211.6 million worldwide.

‘Better Mousetrap’

In April, DreamWorks Studios reached a new financing agreement that provided a $200 million infusion, and signed foreign distribution deals that give the studio a measure of financial stability. In the future, Snider said she expects fewer co-productions like on “Lincoln” and on Spielberg’s next film, “Robopocalypse,” which also has Fox as a partner.

With that movie, a science-fiction thriller, DreamWorks Studios returns to the commercial action fare that made Spielberg the top-grossing director of all time, based on domestic ticket sales. The studio also is planning “Need for Speed,” based on the auto-racing video game, and has set the Vince Vaughn comedy “The Delivery Man” for release in October.

“We really spent the last period of time figuring out how we can protect the downside, how we build a better mousetrap,” Snider said.

To contact the reporter on this story: Michael White in Los Angeles at mwhite8@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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