The Best Director

Chapter 30: Will there be a second movie for him?

Translator: Nyoi-Bo Studio Editor: Nyoi-Bo Studio

In Paranormal Activity’s fifth week of showing, it continued to top the North American weekly box office with a revenue of $24.1583 million, marking its fourth consecutive week at the summit; in its sixth week, as schools across North America began to reopen, there was a sharp drop in movie ticket sales, and Paranormal Activity only took in $11.5017 million in box office receipts, though it ended its streak of weekly box office championships at four weeks, it still managed to rank third for that week.

With the box office declining at this percentage, Paranormal Activity’s potential in North America seemed almost exhausted. As the number of theaters showing it gradually decreased, by the time it was phased out in North America, managing to earn another $10 million would be an achievement. But without a doubt, this movie had already become a miracle, a myth. A production cost of $10,000, combined with a marketing budget of less than $1 million, it had grossed $154-2 million at the North American box office!

Lionsgate was already preparing for international distribution, as there was already a buzz on the internet from movie fans in countries across Europe and Asia expressing their anticipation for the film. It was certain that the international release would be profitable. Although its popularity might not match that of North America, taking in tens of millions at the box office to push Paranormal Activity’s global revenues over $200 million seemed to be a feat within reach.

This “supernatural phenomenon” left every movie company and analyst with their jaws dropped, wondering what kind of film could yield a return ratio of 15,000 times its cost? Paranormal Activity provided the answer. A Wall Street financial analyst told the media with a sigh, “The most profitable movie of 1998 was not Titanic, but Paranormal Activity. Once it hits overseas screens and releases on DVD, the return on this movie might even reach 30,000 times. Lionsgate and Wang Yang are simply a ‘cash-grabbing couple’!”

Lionsgate was now America’s most envied movie company, the small company had shot to fame, making frequent news appearances, and they were being called a “business miracle”; the virus-like marketing strategy of Paranormal Activity also impressed professionals who found it hard to believe that the “rumors” that first appeared online were not orchestrated by Lionsgate.

Naturally, there were many movie companies that did not want Lionsgate to have an easy time; they told the media, “The promotional tactics of Paranormal Activity were all the idea of that Chinese director, who told us about them when he came to our company seeking distribution. That guy had a complete plan, and he told us, ‘My strategy can drive a lot of, a lot of audiences into theaters, believe me!’ But we were unwilling to resort to such trickery, yet Lionsgate did and they are all shameless swindlers.”

The fact is those movie companies were just sour because they missed out on Paranormal Activity, and several acquisition managers got fired, suspended, or demoted, including Stephen Thomas from Artisan Company. Hearing that his company was one of the “fifty-four” that had rejected Wang Yang, the chairman of Artisan called on the CEO to hold him accountable, which resulted in Stephen Thomas being made the scapegoat and he was sacked.

By the sixth week of showing, as some theaters ended their screenings of Paranormal Activity, Lionsgate also began receiving pre-tax film rentals submitted by the theaters.

The current North American box office for Paranormal Activity stood at $154-2 million, which of course had to be divided between Lionsgate and the cinemas. So how is a film’s box office revenue divided? That depends on the specific distribution contract signed between the distributor and the cinema chains.

There are several ways to go about this, one of which is called a guaranteed minimum price. In this type of agreement, the distribution company pays a lump sum to buy out a certain period of screen time from the cinema. For example, Lionsgate pays ‘Vital Projection’ cinema $100,000 for the rights to screen on one of its screens from 0:00 to 6:00, for one month. Then for the next month, regardless of how many tickets Paranormal Activity sells, all the box office revenue is yours, and the cinema will not take a dime from you.

However, this method is not popular. In North America, the mainstream model for cooperation between distribution companies and cinemas is revenue sharing. The percentage of sharing is usually negotiated and contracted before the film’s release. Over the years, a standard sharing ratio has been established, which is now basically a model called “90/10—with—a floor of 70%”.

This model means that, on a weekly basis, you take Paranormal Activity’s total weekly box office revenue for a cinema, subtract the initially agreed upon necessary fixed expenses of the cinema, such as cleaning costs and electricity bills, etc., and then multiply by 90%. The resulting figure is what Lionsgate gets as film rental.

But this is just Plan A, as this model also signs a Plan B simultaneously, which is to take the total box office revenue without deducting the cinema’s screening expenses, and directly multiply by 70% (this percentage is generally negotiated between 60-70%), and the resulting number is the distributor’s share.

So, distributors typically look at which number is larger between A and B and choose the larger one as their share of the revenue from that cinema for the week.

Of course, generally, the “90/10” is only for the first three weeks of screening, then the fourth and fifth weeks shift to 60/40, the sixth week to 50/50, the seventh week to 40/60… The specific shifts depend on the contract – whatever was agreed upon at signing.

In any case, from the release to the dismissal of a film, the total box office revenue is generally split approximately 50/50 between the distributor and the cinema.

So someone might ask, is there a possibility that cinemas underreport box office figures? First, distribution companies hire professional survey companies to conduct checks at cinemas, sometimes openly, sometimes covertly; second, America has a strict judicial system, including tax authorities, keeping watch, so instances of underreporting or falsely reporting box office figures are very rare. Basically, no cinema company would be foolish enough to damage their reputation and face legal sanctions over such petty greed.

The sharing model for Paranormal Activity was exactly “90/10—with—a floor of 70%”. After six weeks of screening, out of the $154.2 million box office, Lionsgate received $91.76 million, close to 60% of the pre-tax distribution, minus close to three million in cost expenses, including marketing fees, copy fees, shipping fees, printing fees, etc., the total pre-tax profit for the six-weeks box office was over $88.75 million.

There was no pre-tax profit over $100 million in North America, and considering that currently, only over 500 cinemas are still screening Paranormal Activity, and the sharing ratio has dropped to 40/60, by the time the film is completely withdrawn, the pre-tax profit is not expected to exceed $100 million. Therefore, Wang Yang agreed to a 40% revenue-sharing scheme with Lionsgate.

So, after the finance department of Lionsgate completed the accounting, they began to pay various corporate taxes to the Internal Revenue Service. Fortunately, Lionsgate was considered a small business and was therefore eligible for some preferential policies, but it still paid close to 20% in taxes. After taxes, only a little over 71.58 million US dollars remained, and Wang Yang received 28.632 million.

But the matter didn’t end there because Wang Yang still had to pay federal personal income tax, California personal income tax, and other taxes to the IRS. The types of taxes in America are too numerous for an average person to even begin to understand, let alone how to properly avoid paying them. Therefore, Wang Yang once again visited the “Integrity” law firm and consulted the lawyer Hebrew Karl for a long time to finally understand that, after paying taxes on the 28.632 million, he would be left with approximately 21.4 million.

Of course, Wang Yang wasn’t going to immediately file and pay his taxes at the IRS because, in America, individuals generally pay their taxes once a year, and the deadline for personal tax filings is April 15. As long as you file by that date, it’s fine. If you don’t file by then, it is considered tax evasion, and the person would be awaiting an investigation and heavy fines from the IRS.

Wang Yang didn’t plan on delaying his taxes, but the movie’s dividends were still being deposited into his account. It would be most convenient to clear all of this year’s taxes in one go next year. After all, he had acquired over twenty-one million in assets and had become a multimillionaire overnight.

Although Lionsgate did not disclose Wang Yang’s specific dividend figures to the media, the media still uncovered some details, leading them to speculate that Wang Yang’s dividends were over ten million. This speculation was tacitly confirmed by Lionsgate as well. Distribution manager Jon Feltheimer said, “He has obtained wealth that many people would never achieve in their lifetime, and he’s only 18 years old, isn’t that young? I hope he treasures it and wish him good luck!”

“The Youngest Multimillionaire,” was the newest title given to Wang Yang by The Los Angeles Times. The article brought in professional analysts who estimated that Wang Yang’s net worth had already exceeded twenty million, and with “Paranormal Activity’s” overseas and multi-channel distribution, his net worth would quickly rise to over thirty million.

Wang Yang didn’t care much about these media reports; he neither denied nor responded to them. Compared to “The Youngest Multimillionaire,” he preferred the title “The Youngest Director.”

After acquiring this large sum of money, his lifestyle hadn’t changed much. He still rented the same apartment, but he replaced all the furniture that was too worn out to use anymore. He also purchased a set of high-end home theater equipment and went on a spree buying many movie DVDs to collect and enjoy. Besides, he bought a standard two-door sedan for convenient transportation. The media’s attention toward him gradually cooled off, partly because he was not willing to cooperate. For instance, Vanity Fair invited him to a photoshoot and an interview, which he declined. He preferred staying at home, reading books, and watching movies rather than participating in photoshoots. For one, he was not interested at the moment; for another, he wanted to detach himself from these activities sooner rather than later.

Magazine interviews, celebrity parties… he couldn’t indulge in these things, couldn’t let himself spend all his energy on them. He was still young; he needed to keep improving, not to get lost in the temptations that came with success, until he got kicked out of the game. He constantly reminded himself, “Wang Yang, you’re just a rookie, you’re nothing. Look at the follow-up reports on the creators of ‘The Blair Witch.’ Do you want to become like them? Remember why you started! To be a director, to make movies.”

So, Wang Yang declined the exclusive interview with Vanity Fair and some party invitations. He knew that what ultimately decided a movie’s success wasn’t how many parties you attended or how many magazine covers you graced; it was the movie itself.

After the post-release publicity of Paranormal Activity was over, he faded from public view, spending his days at home reading and watching movies, occasionally chatting on the phone with good friends like Jessica, and sometimes going out to have fun. His life was very peaceful. During this time, he joined the Directors Guild of America (DGA), though his profile remained low, it still got mentioned in a gossip tabloid, and then, towards the end of September, he made the news again.

The news was due to Lionsgate announcing to the media a new filming project; they were going to shoot Paranormal Activity 2, and had purchased a single sequel’s rights from Wang Yang for 5 million US Dollars.

Yes, Wang Yang pocketed another 5 million. Initially, Lionsgate was only willing to offer 1 million, but Wang Yang wouldn’t even entertain them, responding with a firm “NO,” then leaking some information to Jon Feltheimer, “New Line, Artisan… many companies have contacted me. They know I still have the sequel rights and they want to buy them.” This was true. Now it was companies like New Line, Artisan, and others coming to him, sincerely discussing deals, to which Wang Yang also said “NO.”

However, he was not committed to Lionsgate; although he was grateful for the opportunity Lionsgate had given him, Paranormal Activity had also brought them tens of millions in profits; nobody owed anyone anything. He would give the sequel rights to whichever company met his terms.

Consequently, Lionsgate’s bid kept rising until it reached 5 million, but Artisan seemed set on acquiring it, raising their offer to 7 million and a 20% share of the total box office. In the end, Wang Yang chose Lionsgate: 5 million plus a 20% share of the total box office. He had several reasons for his choice: one, he had a good relationship with Lionsgate; two, he genuinely worried Artisan might default on paying the share; three, when it came to producing sequels of horror films, Lionsgate had always done well in the future. Although the market needed time to digest Paranormal Activity, releasing the second part a year later should be profitable. It wasn’t about how much the 20% share would be; what mattered was to keep the Paranormal Activity brand intact.

Having spent so much money, Lionsgate placed a high value on Paranormal Activity 2. As soon as they purchased the rights, they heavily publicized it while announcing Wang Yang would not direct Paranormal Activity 2. Lionsgate’s star, Jon Feltheimer, told the media, “Our decision to not invite Wang Yang for the direction is because we want to change the style of the film. The setting of the second part will be an office, which obviously is not an 18-year-old’s forte.”

Many fans anticipated this, except for a small portion who said, “I won’t watch a Paranormal Activity not directed by Wang Yang,” most were taking a wait- and-see approach. The media also expressed their views on Wang Yang’s future when reporting this news. The Los Angeles Times said, “Although this lucky young man’s net worth increased by another 5 million, he has just been ruthlessly abandoned. He lost the director’s seat for Paranormal Activity, and now, it seems that no movie company is willing to hand him a microphone.” Chicago Sun-Times brought up something Wang Yang had said during The Oprah Winfrey Show, “No, I don’t think I’ll be shooting horror movies for now.” The tone of the Chicago Sun-Times was quite malicious: “Did Yang already know that he wouldn’t be asked to direct Paranormal Activity 2? A colleague asked why didn’t he choose to invest in a sequel himself, another turn of 10,000 into a 100 million? I think that’s where his shrewdness lies, directly taking 5 million and then enjoying life, isn’t it nice? Now the question is, if Yang doesn’t make DV horror films, what can he make? Oh, will he even have a second movie?”

Upon reading the report, Wang Yang joked with Rachel on the phone, “He’s right, I don’t have to do anything, just sit at home and collect money, that’s great.” Rachel laughed, “Yeah, it fits right in with your retirement plan.” Wang Yang chuckled and smiled at her, “No, I don’t want to retire anymore, I’ll have a second movie, I’ve told you, a musical.” Rachel asked, “Yang, have you really decided?” Wang Yang nodded and said seriously, “I have.”

The apartment lobby had changed; the couch with several large holes was gone, replaced with a wicker sofa; the computer had been moved out of the bedroom, onto a brand-new wooden desk adorned with some books, camera models, and a pot of daffodils.

Wang Yang sat in front of the desk, staring at the blank document on the computer screen, frowning in thought; what should he shoot for his next movie?

After entering a period of decline in the 70s, by the 90s musicals did have some outstanding works, like Disney’s 1995 “Pocahontas,” which was both a critical and commercial hit, but it was an animated film; and for live-action musicals, “Evita” was barely able to break even and that was mainly because the film’s leading lady was Madonna.

Why are only “pseudo-musicals” like “Pocahontas” huge hits nowadays?

A big reason is that musicals have evolved from their “golden age,” to focus more on the plot, as opposed to a simple story with non-stop singing and dancing. In the future, the revival of musicals will depend on the integration of both story and musical elements, allowing audiences to enjoy the narrative and the performances simultaneously, with the musical numbers serving the plot, rather than having them exist awkwardly apart.

How did musicals revive in the future? In 2000, “Dancer in the Dark” emerged as a dark horse and stunned the film industry; then in 2001, “Moulin Rouge!” landed Nicole Kidman an Oscar nomination for Best Actress; in 2002, “Chicago” reaped both fame and profit, selling big at the box office while sweeping numerous awards, including Best Picture at the 75th Oscars (2002- 2003). And going even further, there would be “Black Swan.”

In fact, these films are not pure musicals; their most attractive feature lies in their plots and the messages they convey. Films like “Chicago” and “Black Swan” explore human desires, with the musical elements merely serving the narrative.

The artistic nature of this kind of musical drama is high, the production is large, and choosing the right female performers is crucial; only actresses with leading lady-level acting abilities can handle them. With his current circumstances, even if he offered a 20 million dollar salary, no leading lady would star in his movie; they don’t lack money, they don’t lack offers, and they would not act in a film at risk of winning the “Rotten Tomato Award for Best Movie.”

Therefore, this type of film is not his current choice; he would go for the second type instead, youth and high school musicals. Such musicals have a long history, with classics like 1978’s “Footloose” and 1983’s “Flashdance,” focusing on the mentality of the youth of that era; either in their determination towards dreams or in pursuit of love.

If this kind of film is made well, it can trigger an unmatched wave, instantly sweeping over the global student demographic.

And the next wave was triggered in 2006 by a TV movie, “High School Musical,” which coincided with “Step Up,” leading to a full-fledged revival of the youth and high school musical genre, saturating the entire market with famous ones like “Camp Rock” and “Bring It On,” and countless lesser-known films.

“High School Musical?” Wang Yang murmured softly to himself. The film was undeniably good, as it captured the essence of youthful high school musicals, featuring an uplifting and motivational theme; contemporary music and dance numbers; and an appealing cast of handsome boys and beautiful girls. It was no surprise that it received an overwhelming response from the student demographic.

Wang Yang carefully analyzed the difficulty if he were to make “High School Musical.” The scenes were set in a high school campus, a place he was familiar with, no problem; the shooting process required no complex camera work, no stunts, no special effects, no problem; and for the cast, Jessica, Rachel, and Zachary were all suitable choices, after all, Hollywood might lack Oscar- winning actors, but never young and somewhat talented hunks and beauties.

The only issue he had with making a musical was choreography and composition, but he could hire professional dance instructors and composers for this work, which in fact posed no problem.

However, it was 1998. If he released “High School Musical,” would the market accept it? Wang Yang rested his chin on his hand, frowning as he pondered this question, trying to analyze it rationally.

He too was young, and if there were an excellent, trendsetting high school musical now, he would go to the cinema to see it. The reason was simple; he loved to dance and sing, and there were many like him, as evident by the always crowded dance floors in bars—the allure of dance and music never fades, no matter the era; every generation of youth longs to express their passion through singing and dancing!

But this reason alone wasn’t enough, because he could directly go to a club to dance, rather than to a cinema to watch a movie; so the film had to provide something more than just performances,

Like him, he missed high school life and appreciated themes of positivity and chasing dreams, so he would watch “High School Musical.” That was the perspective of a once-expelled college student; and a high school student would watch it too because they wouldn’t experience such exciting stories in real high school life. They longed to immerse themselves in the world of the film, to pursue and achieve their dreams like the protagonists, and to experience a beautiful romance.

Additionally, if everyone else went to see it, wouldn’t he be out of touch if he didn’t take a look?

That’s why “High School Musical” was a hit and why “Footloose,” with a production budget of six million US dollars, was able to rake in nearly 400 million at the box office worldwide. These films carried the aspirations and pursuits of beauty of young people; they wanted to be like those characters.

Therefore, school musicals are always timely, and now, the market demand for this genre is almost overflowing. This generation of young people also wants to have a “Footloose” of their own.

And “High School Musical” from 2006, whether in terms of story content or filming style, would still be suitable for today’s audience in 1998.

But “High School Musical” was a TV movie. It premiered only on Disney’s television channels, with Disney merely intending to test the waters, without much promotion. Unexpectedly, this film sparked a “musical” frenzy across campuses in America, then swept the globe, drawing over 170 million viewers and making teenagers around the world crazed about musicals all over again. The overwhelming popularity caught Disney by surprise, so they produced “High School Musical 2” and continued to broadcast it on television—its popularity persisted. Then they moved “High School Musical 3” to the big screen, grossing 252 million worldwide.

So if “High School Musical” had been released in theaters directly, could it have been a success? Wang Yang wasn’t sure, but the chances of success were very high. In fact, the response to “High School Musical” was the biggest of the trilogy; “High School Musical 2” made new attempts, moving to a resort setting, which made the plot structure more complex. Though it broke viewing records, fans were disappointed and expressed their disillusionment. “High School Musical 3” returned to the school setting with a simplified story structure, but some critics and fans still condemned it as a profit-churning film with no new ideas.

It can be said that the latter two installments of the trilogy were largely supported by the popularity of “High School Musical,” essentially resting on their laurels. This is a case of strong initial efforts followed by steady decline and eventual exhaustion. Moreover, there’s a mindset among viewers: I could watch the first two parts on TV, so why should I go to a theater for the third one? If it had been targeted for the big screen from the beginning, viewers wouldn’t have thought that way. Still, “High School Musical 3” managed to earn a box office of 252 million.

Beyond that, the success of the “High School Musical” series wasn’t merely about breaking viewership records or the 252 million in ticket sales; there was also the huge sales for the film’s DVD, the film soundtrack CD topping sales for the year, and the consistently sold-out tour of the stage musical… These are all due to the enormous influence of “High School Musical,” so with proper marketing, taking “High School Musical” directly to the big screen could very well become the next “Footloose.”

Of course, if it were to be filmed, many changes would be necessary. TV movies are designed for the small screen experience, considering performance style and presentation, which are quite different from cinema films. This isn’t a limitation of the production budget, but rather that TV movies are just that— TV movies, with their own set of standards. If “High School Musical” were intended for the big screen initially, it would require changes to follow the standards of cinema films.

Lost in thought, Wang Yang was pondering over changes like the film’s pacing when his cellphone suddenly rang. Shaking his head, he picked up the phone from the desk. Seeing Jessica’s name on the display, he pressed to accept the call and spoke while looking at the pot of daffodils, “Hey, Jessica, what’s up?” “Hi, Yang,” Jessica said with a sweet voice and a laugh, “Nothing much, I just wanted to chat with you. Oh!” she apologized sheepishly, “are you busy? Am I interrupting you?”

“Not at all, just thinking about some things,” Wang Yang replied nonchalantly with a laugh, then suddenly asked, “Jessica, can you dance?” He knew that Jessica was supposed to film a youth inspirational musical film “Sweetheart Spicy Dance” in 2002, in which her dance was certainly enchanting, guided by choreographers, but he wondered if she knew how to dance now.

Jessica paused and hummed curiously, unable to figure out why Wang Yang would ask if she could dance. Was he asking her to dance? Her heart skipped a beat, but… she shook her head and said, “No, I can’t. I haven’t learned to dance.” Hearing the disappointment in Wang Yang’s voice, Jessica frowned slightly and asked tentatively, “Yang, do you want to go dancing?”

“Not now, not right now,” Wang Yang laughed, then shared his thoughts with her, “I want to make a school musical film.”

Jessica’s heart clenched with surprise. “Oh my God! Really? You’re making a school musical?” Then she realized the reason Wang Yang asked if she could dance—it implied a role for her in the movie. My goodness, what did I just say! Oh no! Jessica felt a sense of urgency and patted her forehead.

Wang Yang hummed affirmatively and began fiddling with the camera model on the table, saying with a smile while walking to the kitchen to pour water, “You know, I love making films, and I happen to have quite a bit of money now. So why not make one? A school musical is the project I’ve set my mind on. It might cost a few million, but I’ll foot the bill myself.”

Oh my God! A school musical, but she couldn’t dance… Jessica was at a loss, furrowing her brows and asking, “Yang, is there a role suitable for me?” “I haven’t finalized the script yet, but there’s always a role suitable for you in a school film,” Wang Yang stood up, heading to the kitchen for water, and added with a laugh, “But I need someone who can dance…” Before he could finish, Jessica interrupted him anxiously, “Yang, I can learn!”