Update on August 9th Days of Future Past blew past industry expectations – including mine – grossing twice the average of the X-Men franchise and 60% more than its previous peak. Most of this came from foreign markets (69% versus the series’ historical average of 57%) – with the film actually falling $2M short of 2006’s X-Men III: The Last Stand domestically (it’s also worth mentioning that the international market has grown 60% since 2006). As a result, this revenue will be considerably lower margin for Fox (the Majors typically collect only 40% foreign box office receipts, compared to 55% domestically). Overall, Days of Future Past did beat X-Men’s average theatrical returns (an estimated -19% v. -26%), but it’s immense budget means that the film will have lost $7M more, or $79M total (though this is less than half of X-Men III’s $163M shortfall). Furthermore, the film’s $750M haul does not solve Fox’s core problem: the inability to establish a content platform. Days of Future Past will certainly deliver a profit after adding in ancillary revenue, such as OTT licensing and home video sales – but this will still be far below those collected by Disney/Marvel and may result in only a modest overall return given the $400M+ spent bringing it to market. That being said, the film appears to have re-catalyzed the franchise (something First Class failed to do), which may enable more spinoffs and more successful films going forward. This should not be discounted, as it would make the film an investment – not a profit center itself. Also, I was wrong. That shouldn’t be discounted either. LB (Note: I have updated all graphics below to reflect the film’s final results).

On May 23rd, Fox will release its much vaunted X-Men: Days of Future Past, a film with narrative ambitions that are exceeded only the enormity of its budget. Days of Future Past represents the seventh entry in Fox’s X-Men series, which began in 2000 and has since grossed 2.3 billion at the global box office. In 2011, Fox partially rebooted the franchises with X-Men: First Class, which was set in the 1960s and detailed the origins of characters such as Magneto and Mystique, as well as the assembly of the ‘X-Men’. With Days of Future Past, Fox is bringing together its multigenerational casts and storylines into one star-studded, time-traveling super-film. To finance this spectacle, Fox has reportedly spent more than it has on any film in its history other than Avatar. With that investment in mind, it’s worthwhile to take a look at the performance history of the X-Men franchise – and when one does, it suggests Days of Future Past will likely be a significant disappointment for Fox.

A brief caveat first: Trying to determine the perfect “formula” for success in Hollywood is as sought after as it is impossible. The complexity of pop culture, release dates and filmmaking ensures that no two films are ever alike – even if they are in the same genre, starring the same cast, or an original and its carbon-copy remake. As such, it’s easy to overanalyze data. Despite these limitations, I’d argue that the performance and demand for the X-Men franchise’s six films-to-date (released over the past 14 years at $1.6B in combined production and marketing costs) is as close to prognostication as one can get.

After estimating marketing and advertising spend, Days of Future Past will have cost Fox nearly $365M to produce and distribute – representing a nearly $25M increase over 2006’s X-Men III: The Last Stand and 40-90% more than each of the last three X-Men films. After appropriating for participation and back-end fees from actors, writers and investors1, Fox will have spent roughly $450M on the film. With theater operators retaining approximately 45% of box office receipts domestically and 60% internationally, Days of Future Past would need to gross between $775 and $980M (depending on participation) just to break even. Large though those figures are, they’re not entirely outlandish in today’s franchise-obsessed market. 49 films have crossed the $775M barrier globally – half of which were released in the last five years. Twenty of those films have even exceeded the billion-dollar mark, including Fox’s last big bet (Avatar) and Disney’s own star-studded Avengers. Yet, the X-Men franchise has never been as lucrative as its hundred million dollar ad campaigns would suggest (or as Fox likes to believe).

The highest grossing X-Men film topped out at only $460M globally, with the series averaging only 60% of Days of Future Past’s $775M low-target. While The Avengers’ $1.5B box office haul surprised both industry analysts and series precedents, the film’s star (Robert Downey Jr.) had previously led two of the franchise’s five films to $585M and $625M highs – exceeding the best-performing of the six X-Men films by 27% and 36%. It’s also worth noting that 2011’s First Class, which dominates Days of Future Past’s cast and screen time, represented the series’ lowest entry since the original X-Men (which actually sold 20% more tickets).

However, this isn’t the only reason why Fox should reign in its enthusiasm.

While the original X-Men film generated more than $150M in revenue from home video sales in the US (DVDs and Blu-Rays), none of its five sequels have come close to touching that figure. Last year’s entry, The Wolverine, generated only $70M in revenue – 55% less than X-Men (and 67% less after inflation). Though a good portion of this decline has come from the rise of digital sales and all-you-can-eat OTT services, industry sales volumes are down only 27% over the same period. What’s more, the market grew nearly 55% between 2000 and 2006, during which X-Men’s DVD/Blu-Ray sales fell by near 35%. This is not suggestive of a franchise with much latent demand. Instead, it means Fox is even more reliant on X-Men’s performance in the theatrical-window.

Fox no doubt hopes that critical support will help drive (or at least be correlated with) would-be audience members to the theaters. However, audiences have never been responsive to critical acclaim in the X-Men franchise. In fact, First Class’s most notable accomplishment was a series-record of 89% on Rotten Tomatoes.

As I’ve written in prior posts, blockbusters are rarely theatrically profitable. To generate positive returns, studios rely on a wide variety of ancillary revenues, such as home video sales, Pay TV/OTT, licensing, merchandise, theme park visits and so on. Over the past few years, we’ve even seen studios tolerate ever-higher theatrical losses in the hopes of establishing a creative platform upon which a wide variety of multimedia products and experiences can be built and sold. However, Fox has a major problem here: it only owns the film rights to the X-Men series. Unlike Disney (which owns Marvel Entertainment) and Warner Bros (which owns DC Comics and is building its own Avengers-style megafranchise), Fox is therefore entirely dependent upon film revenues to turn a profit. While this doesn’t mean Fox’s theatrical losses can never be recouped in ancillary film sales (such as DVDs or syndication), it makes theatrical losses particularly dangerous. It also prevents the multi-platform storytelling that may soon be the key to success in today’s franchise-saturated market.2 (For reference, Sony is in a similar position to Fox with its Spider-Man series, but its worst performing entry outgrossed X-Men’s best by nearly $300M, or 64%).

Given this film-focus, we’d hope to see increased theatrical returns/results as Fox has established and built out the X-Men franchise. Unfortunately, there’s only evidence that X-Men hasn’t scaled for Fox:

X-Men’s box office receipts (or audience size) have remained relatively stable around the $400M since the original X-Men film’s release – despite dramatically varied cast sizes, production costs or creative ambitions. As a result, increased film investment (a la Days of Future Past) has continually worsen theatrical returns (which are then amplified by that escalating investment cost). Conversely, Marvel (which is famously cost-conscious) has seen enhanced returns as it builds out its cinematic universe.

Now, part of the reason why Fox has been willing to invest so heavily in Days of Future Past is in the hope that its character-crammed storyline will improve their chances of developing another spinoff series, such as Wolverine (which will have its third entry in 2017), and/or catalyze its relatively anemic prequel/reboot series. Given their film-only rights, this isn’t an unreasonable idea. However, Days of Future Past needs to generate 1.65x the series’ average at the box office just to maintain average franchise returns for Fox. Should it deliver significantly below this, the film could end up costing Fox more than it is likely to gain through newly-enabled spinoffs or a more potent First Class. With mega-blockbusters Godzilla, Edge of Tomorrow and Maleficent bookending the film’s release date, super-performance seems unlikely; as I’ve previously demonstrated, audience attendance rarely flexes to the strength/availability of a film slate.

The unfortunate reality for Fox is that the X-Men series has provided the best returns when its budgets are restrained. Despite hundred-million dollar ad campaigns, critical acclaim and the mainstream acceptance/adoration of the Marvel Cinematic Universe, underlying interest in the X-Men series appears to have a disappointingly low ceiling. Recognizing this fact is critical – not just because the studio is looking to expand X-Men’s theatrical presence, but also because audiences may be tiring of super-franchise filmmaking. Days of Future Past may pay off handsomely, but it’s more likely that Fox executives will find themselves wishing for the most coveted of superhero powers: time travel.