Revealed: The reason Batman Movies never make money.
Have you ever heard the story about the guys who bought the rights to the Batman films from DC Comics? While working for DC Michael Uslan made a proposal to his boss to buy the rights to the Batman films. DC had assumed the Batman franchise was dead and as a result, they were open to the idea of selling Michael an option to make the films — films no one else wanted to make. In 1979 Uslan partnered with Benjamin Melniker, a former MGM studio executive, to raise the necessary capital to purchase the option. I learned about Uslan’s story while listening to a piece on National Public Radio this morning. You can read more about it here, it is a fascinating story.
If you’re like me the first question you had after hearing the story was, “how much?” How much did it cost Uslan and Melniker to option the movie rights? How much did they make on the subsequent films? The radio and online reports simply say, “an undisclosed sum”. I decided to do a little digging. Through court records I was able to uncover a lawsuit between Uslan and Warner Brothers that gave me half of the answer.
Ulsan and Melniker’s original option deal was with a company called Casablanca Productions. The company would eventually become called Polygram. Under the so-called “Casablanca Agreement” the pair were to be paid a “certain fixed and contingent compensation if a Batman motion picture were produced.” By 1981 the pair had yet to produce a Batman movie and in the meantime Warner Brothers had acquired the rights to the agreement. In 1988, Uslan and Melniker and Warner Bros. signed a written amendment to the Casablanca Agreement. Under the amendment, the pair were entitled to receive $300,000 in fixed compensation for Batman, plus a $100,000 “deferment” once the film generated a certain level of receipts, plus 13% of the so-called “Net Profits”.
Despite the fact that Uslan was an entertainment lawyer and Melniker was a former MGM studio executive they agreed to a “Net Profits” deal. Anyone familiar with the movie business realizes that no film, even the highest grossing film in history, generates a “Net Profit”. Oops. After working on the Batman movie for more than a decade Uslan made less than $200,000. Realizing that he’d been working for less than minimum wage he and his partner decided to sue. Batman was the most successful movie Warner Brothers had ever made, but based on the definition they used for the term “Net Profit” the film was a financial disaster (at least for Uslan and Melniker).
During the trial, Uslan claimed the ”Net Profits” definition he agreed to was unconscionable. The definition included: a 10% advertising overhead charge; Warner Brothers’ retention of any economic value of United States tax credits created by the payment of taxes in the foreign territories where Batman was distributed; application of a 15% production overhead charge on participation payments to third parties; application of a 15% production overhead charge on the $100,000 deferment; all of the interest charges; the costs charged by Pinewood Studios in England for holding sets and stages after completion of photography; application of a 15% production overhead charge to the costs incurred at the Pinewood Studio lot; and the inclusion in “gross receipts” of only 20% of the revenue from videocassettes, less a distribution fee. Welcome to the big leagues Batman!
The court agreed that the deal was unfair, but they noted that since the King’s Bench decided Slade’s Case in 1602 courts could NOT refuse to enforce contracts simply because they weren’t fair. The court ruled in favor of Warner Brothers and Uslan and Melniker only make between $300,000 and $400,000 for each film. The only remaining question I have is how much the pair paid for the option to the film rights.