Quentin Tarantino has officially shelved his next project, The Hateful Eight. The director made the decision after the film's script leaked a few days ago, and as you can expect, QT enthusiasts aren't happy. In addition to having obvious parts for two of my favorite actors -- Christoph Waltz and Bruce Dern --The Hateful Eight was supposed to be a sprawling, epic Western with all the violence and extended dialogue of a typical Tarantino movie.
Besides the fans, there's another group of people who are likely disappointed by this news: movie studio executives.
The Tarantino take
Because the average Quentin Tarantino movie does extremely well at the box office.
|Quentin Tarantino's Directorial Career, Full-Length Films|
|Death Proof (Grindhouse)||2007||$25M||$67M||-62%|
|Kill Bill: Vol. 2||2004||$152M||$30M||407%|
|Kill Bill: Vol. 1||2003||$180M||$30M||503%|
He's directed a total of eight full-length films in his career, and only one -- Death Proof, part of the Grindhouse double-feature -- failed to make at least four times its initial budget.
Considering Hollywood's typical return on investment per movie is between 30% and 40%, it's remarkable that Tarantino's films generate such lofty profitability figures. The reason is simple: Most of his projects don't require expensive special effects or set pieces, and thus, they require less studio money than the average summer blockbuster.
The fact that his budget has increased with every new project since Reservoir Dogs is a testament to Tarantino's ability to make profitable movies, but even his most expensive -- Django Unchained -- was still a few million dollars cheaper than the average MPAA-rated film.
Put simply, QT is an executive's dream. So how much money might The Hateful Eight have made if it was released next year as originally planned?
This is a tougher question to answer.
The modern Western
Although Django Unchained was the world's highest-grossing Western ever, the genre is littered with commercial letdowns like 3:10 to Yuma and Seraphim Falls.
Judging by the low number of films produced in this style, studios have largely avoided the risk of a flop in recent years.
|Movie Production By Genre, 1995-2013|
|Genre||Movies Produced||Box Office Take Per Movie (U.S.)|
One thing still intrigues me though: Westerns take in more money than Romantic Comedy, Musical, Horror, and even Drama films on average. To understand why, think of the movie industry as an interaction between supply and demand.
Fans demand movies, and in turn, movie producers supply them. Certain genres are currently in high demand, such as Action films, so studios supply a lot of them. Others, like Westerns and Musicals, are in lower demand, so studios produce fewer of those.
As is the case in any supply-demand relationship, the price explains exactly where both sides -- fans and studios in this case -- are interacting. Because the average box office take of Westerns is significantly higher than other low-demand genres, it theoretically implies that there's a shortage of this kind of movie, i.e. there's a lack of supply.
If there weren't a lack of Westerns, they wouldn't take in more money than Comedies and Dramas, which are far more popular.
It stands to reason, then, that Hollywood is ripe for another Western to follow in the footsteps of Django Unchained, and interestingly enough, the last five with budgets over $100 million have done fairly well.
|The Past Five 'Big-Budget' Westerns|
|The Lone Ranger||2013||$260M||$215M||21%|
|Cowboys & Aliens||2011||$174M||$163M||7%|
|Wild Wild West||1999||$222M||$170M||31%|
With that in mind, a reasonable box office estimate for The Hateful Eight would take the average ROI of Tarantino's films, and the average ROI of the past five big-budget Westerns: This comes to 477%.
Assuming a 477% return on a $125 million budget -- a modest increase from Django Unchained -- that equates to a profit of almost $600 million, and a total box office take of more than $700 million. Of course, that would make The Hateful Eight the new highest-grossing Western of all-time, which isn't as crazy as it sounds considering Tarantino's last project.
Given a budget of at least $100 million, the The Hateful Eight would still be one of the top-grossing Westerns in history if it simply matched the profitability of less successful films like The Lone Ranger and Wild Wild West, both of which had ROIs near the industry norm.
This may represent a worst-case scenario, but as long as Tarantino avoids Will Smith-esque one-liners, this shouldn't be a problem.
It was never released which studio was being considered to work with the now defunct movie, but if recent history is any suggestion, Tarantino may have gone with Sony's (NYSE: SNE ) Columbia or Comcast's (NASDAQ: CMCSA ) Universal; each had a hand in his last two films. The privately held Weinstein Company would have likely been involved in distribution.
As for now, the director has said he will turn The Hateful Eight into a novel and move onto another project. Candidates for his next film include: Killer Crow, a revenge-themed WWII film; Faster Pussycat! Kill! Kill!, which follows killer go-go dancers; a sequel to Pulp Fiction; or according to The Wrap, "a prison movie of sorts."
No matter what Tarantino decides to make, there's little doubt it will do well at the box office. Judging by the apparent shortage of Westerns, though, and the fact that every recent big-budget film in this genre has been profitable, he may want to reconsider if The Hateful Eight should really be canned.
At the very least, QT, I'd recommend you sleep on the decision for a few weeks.
The next step
Want to figure out how to profit on business analysis like this? The key is to learn how to turn business insights into portfolio gold by taking your first steps as an investor. Those who wait on the sidelines are missing out on huge gains and putting their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal-finance experts show you what you need to get started, and even gives you access to some stocks to buy first. Click here to get your copy today -- it's absolutely free.