DVD Sales Figures Turn Every Film Into a Mystery

Peter Jackson's three "Lord of the Rings" movies have brought New Line Cinema extraordinary fame and fortune. The trilogy won 17 Academy Awards, including one best picture Oscar, and sold $2.91 billion in movie tickets around the globe. The movies also were a huge hit on DVD, with overall sales totaling -- well, if you actually happen to know, please call Jackson's lawyers.

The avalanche of money generated by DVDs has transformed Hollywood, swinging profitability from the multiplex ticket window to the Wal-Mart checkout line. Income from the sale and rental of new movies, television series and classic films accounts for as much as 60% of a major studio's profit, as DVDs have become a consumer electronics phenomenon. Yet even in a business that trumpets every nickel of box-office grosses, a title's precise DVD profit remain one of the industry's best-kept -- and, increasingly, most divisive -- secrets.

Jackson grew so frustrated with New Line's accounting of his films' revenues that he sued the Time Warner subsidiary in February, an unusual fracture in what had been a mutually beneficial partnership. Among the many allegations in his breach-of-contract lawsuit, the New Zealand filmmaker says New Line shortchanged him in its DVD payments for the first of his three films, "The Lord of the Rings: The Fellowship of the Ring."

"You might think that a studio that has received billions of dollars of revenues would try hard, even hustle, to pay all it owes to its visionary filmmaker," says Peter Nelson, a Jackson lawyer. "But that didn't happen."

Interviews with a dozen leading talent agents, managers, lawyers and studio executives suggest that DVD compensation is likely to be among the hardest-fought negotiating points for years. The battle over DVD royalties is not being fought just in the courtroom; it is an ongoing clash in any number of show business contract negotiations.

The stakes are indisputably high. DVDs have provided the fastest-growing segment of show business returns, with 2004 domestic DVD sales reaching $15.5 billion and DVD rentals grossing $5.7 billion, according to the Digital Entertainment Group. Videocassette sales and rentals brought in $3.2 billion, while domestic theater ticket sales totaled $9.5 billion last year. The DVD windfall has taken on even greater importance now that overseas movie earnings are slowing.