Box-Office Analysis: 'Warcraft' Avoids "Utter Failure" But Will Still Lose Money

The video game adaptation tanked in the U.S., but blasted its way to one of the best showings of all time at the Chinese box office.

Legendary Pictures and Universal's Warcraft easily is the most lopsided Hollywood release in modern times.

As it winds down its global run, fully 89 percent of its $430.1 million global gross to date has come from international. And more than half of all revenue ($220.8 million) came from China after the film bombed in the U.S. with $46.6 million.

"Warcraft is a strange box-office beast and unlike anything the industry has seen," says analyst Jeff Bock. "If China didn't end up grossing what it did, this would have been an utter failure. Now it's only a mild concussion. In fact, sequels have been OK'd with less — just look at Legendary’s Pacific Rim."

Those close to the $160 million-budgeted video game adaptation say the loss will be only about $15 million. But any deficit stings, because Warcraft is the first movie Thomas Tull's Legendary has released since the company was bought early this year by China's Dalian Wanda Group for a reported $3.5 billion. However, the losses could have been far worse.

Other veteran film execs put the red ink in the $30 million to $40 million range, though the higher figures don't account for an unusual deal for digital rights in China valued at $24 million, along with a flush merchandising pact there equaling $20 million, according to insiders.

Universal, which released Warcraft in the U.S. and every foreign market save for China, should come out OK since it is entitled to a 10 percent distribution fee off the top.

There are a number of co-financing partners on the film, minimizing the risk for any one party. Legendary put up 45 percent of the budget, followed by Universal with 25 percent. Three Chinese ventures put up the rest of the money — internet giant Tencent (15 percent), China Film Group (10 percent) and Huayi (5 percent) — while China’s Taihe has a nominal stake.

Warcraft might have done mega business in its home country, but the Chinese investors made deals for worldwide profits, not for just China, meaning they are subsidizing the entire globe. (If there are any hard feelings, no one’s speaking up.)

One insider says Warcraft proves the might of the Wanda-Legendary partnership in China, where the movie received the widest release of all time and a massive marketing campaign and had a long list of promotional partners. (China’s contribution of $220 million represents 57 percent of the total foreign cume and 51 percent of the global total.)

“You’re almost better off just making it for the Chinese audience,” says analyst Eric Handler of MKM Partners. “It did OK in some other markets where the game was big — including Germany and France — but China really saved the day.” Handler doubts there will be a sequel to Warcraft, but a more bullish source says there’s already a tentative plan for a follow-up, although that person agrees the budget would have to be brought down.

And if there were a follow-up, Legendary would get more back from the box office in China, around 43 percent, compared to 25 percent, since it would be deemed a co-production now that Legendary is owned by Wanda.

“If Legendary does produce a sequel or trilogy, with only Asian markets in mind, could this be the beginning of a new era of blockbusters and big-budget sequels that can actually bypass North American audiences and still rally for a profit? This is the Chinese multiplier at work, as the People's Republic is surely on its way to being the No. 1 box-office market in the world,” says Bock.

A version of this story first appeared in the July 22 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.