Over the past half dozen years, the American movie industry has benefited massively from overseas box office, and a number of movies that underperformed domestically rocked out overseas. A number of movies made over $1 billion worldwide. But that could be about to change, thanks to a strong dollar.
As recently as last summer, Transformers: Age of Extinction underperformed in the United States but still made over $1 billion worldwide. The reason we're getting a Pacific Rim sequel is purely due to overseas box office. Ever since 2009's Terminator Salvation and 2010's The Last Airbender, we've seen a number of domestic flops do better overseas.
But now, a number of currencies are dropping against the dollar. And this means studios are seeing less money from the same number of overseas ticket sales.
According to the Hollywood Reporter, this has hurt the final Hobbit movie as well as the latest Hunger Games film:
Battle of the Five Armies had grossed north of $620 million offshore as of Jan. 29 for a worldwide total of $867 million. Were it not for the exchange-rate debacle, the film could have crossed $1 billion...
For years, film companies, like all U.S. corporations that export goods, have benefited from favorable exchange rates and a weak dollar. During that period, international box office has seen dramatic growth, so the proceeds were mighty. But in the autumn, rates began historic declines as the dollar gained strength and other currencies tumbled. In December 2013, one euro equaled $1.38. A year later, that dropped 11 percent. As of Jan. 29, one euro equaled just $1.13. Things are even worse in crisis-ridden Russia, where studios are getting back 50 percent less than they did a year ago. Studios also are seeing diminished returns in Australia and Latin America.
"We've never seen a drop in so many currencies at once," says Nancy Carson, executive vp at Warner Bros. International. "We're getting hit everywhere."
No doubt the Avengers sequel and Star Wars Episode VII will still cross the $1 billion line this year — but it's going to be harder for movies to hit those heights, if this goes on.