The Big Boys of HollywoodThe six major studios act as the toll collector when it comes to getting movies out to the public. Those six studios—Disney, Sony, Universal, Warner Bros., Fox and Paramount—each collect a distribution fee. This fee is amassed from the movies they produce and finance. as well as other people’s movies they distribute. The studio takes its share from the gross of the box office whether the movie is a big hit or not. These six studios dominate distribution because of their ability to influence a national audience for movies.

The studios have maintained this powerful position through keeping excellent terms with chains that own multiplexes over the past 30 years. They grant favors to these chains by extending their payment period, readjusting the terms of their poorly-performing movies, avoiding harmful competition between the multiplexes and making sure they have consistent franchised movies that bring in customers who spend their dollars on popcorn and refreshments.

Multiplex chains turn around and give these studios a lot of control over the staging and booking of wide openings. An example would be trailer-teasing, months in advance, which allows them to come up with marketing strategies. This forces any outside producers and financers to pay the distribution fee if they want to compete.

The distribution fee is typically 30% on the films that the studios finance themselves. Each Hollywood movie is set up as an independent company, off the books. The distribution fee is set up to appear as a cost that is paid to someone on the outside, although the same studio owns the distributor. This is set up so that the film does not show a profit even though the studio still makes a profit from the distribution fee.

If the films are financed by an outside party, the distribution fee is often subject to contentious negotiations. Most outsiders will pay approximately 18% in order to reach a large audience. The cost of distributing a movie is only 8 percent, therefore the studio brings in 10% of pure profit off the gross revenues of a film that someone else financed and carried the burden of taking a risk.

Outsiders who know the business well can negotiate the fee down to 12%. This is still a major win for the studio which will gain a 4% profit on their gross. There are also some outsiders known by Paramount as “a few gorillas,” whose movies are necessary for a studio’s success. They only pay 8%. In this scenario, the studio makes no profit.

These non-profit arrangements are minimal. The distribution deals with outsiders bring in huge profits that are not on the studios’ dime. A good example is the fact that Disney profited more than $80 million from outsiders in 2005. This is just a short overview of what makes these six studios the big boys of Hollywood.