Media Money with Julia Boorstin

American Gangster: Will Pirates "Sink" Movie Profits?


"American Gangster"--starring Denzel Washington and Russell Crowe--is one of the most highly anticipated Oscar contenders. It's not hitting theaters until a week from today, November 2nd, but it's already available on Manhattan's piracy central, Canal Street, and in downtown Los Angeles.

And now there are web sites that you can use to easily download a version. The newfound speed and quality of pirated material is more bad news for the movie studios.

Take Universal Pictures whose parent company is GEwho also owns the operator of this site CNBC. They spent $100 million dollars and years making this movie, and likely dozens more millions marketing it. It's expected to be an Oscar forerunner and projections put its opening weekend box office take at $40 million dollars.

So how bad is Gangster's piracy for Universal? Actually, not as bad as it sounds. This kind of "prestige" movie, an Oscar chaser, generally targets an older, more suburban audience, which frankly, is unlikely to pirate. This kind of audience who floods theaters and makes the studios money leading up to the Oscars is pretty protected when it comes to piracy cannibalizing their ticket purchases.

And the big budget looks fantastic on the big screen--sure to draw people to theaters. This, the opposite of what happened when a low-budget horror movie like "Saw" is pirated. People don't care as much about seeing "Saw" in its big-screen glory.

But here's the problem: Universal is also going after another audience not usually targeted with this Oscar fodder--the urban audience. But the urban audience is much more likely to pirate movies for one thing, because that's where the majority of copied DVDs are sold. NBC easily picked up a copy on Canal Street in NYC this morning.

And it's those urban centers where Universal is probably wasting its marketing dollars. Another huge problem: the movie doesn't open in most international markets until February, which means that piracy could seriously eat into the international DVD and box office revenues, an increasingly important revenue stream for Hollywood.

And for a movie as expensive as this one--$100 million is considered a huge budget for a non-franchise movie--Universal needs every revenue stream it can get, precisely why it's targeting the urban audience.

Pirates vs. Hollywood

But, I have to say, the buzz about this movie has been sooo good--I think the core audience at least--the Oscar demographic--will turn out in droves. Internationally? It depends if Universal can crack down and shut down the file sharing web sites. But piracy is a problem that's not going away.

Questions?  Comments?