Kevin Smith's Red State Movie Nearing Profitability... Even Prior To Regular Theatrical Release
from the not-bad dept
We've written a few times about filmmaker Kevin Smith and why he's a content creator (not just filmmaker) you should be paying attention to if (like most of us around these parts) you're interested in new business models for content creators. That's because he's really done an amazing job (for years) combining the two key elements that we believe are at the heart of any new successful business model: connecting with fans and giving them a reason to buy. The key thing is that he doesn't go through the motions on either part (as many do), but really goes to great lengths, both in connecting and in giving really powerful reasons to buy.Lots of folks panned him for his plan to take his latest movie, Red State, on a nationwide tour this spring, followed in the fall with a standard theatrical release -- but via his own distribution efforts, rather than teaming up with a US distributor (they're still working with foreign distributors due to lack of familiarity or simple feet on the ground in those markets). As we noted at the time, the plan didn't seem all that crazy when you looked at it. He's done very successful Q&A tours where he just performs by himself. This time around he'd be doing the same thing... but with a movie. And, part of the reason why all of this works is because he's made a real, rather than superficial, effort to connect with his fans.
It seems like the plan is working so far. At the very end of a (somewhat touching, if slightly fawning) blog post about Quentin Tarantino, Smith mentions in passing some details about the economics of Red State, concerning the tour and other deals in place, which show that the film is pretty close to being out of the red (no pun intended, really) and into the black:
Over the course of the 15 shows of the Red State USA Tour, we made almost one million dollars from ticket and merchandise sales. A few times, we had the highest per screen average in the country. We started out with a record-making show at Radio City Music Hall and went on to average 1100 people per screening. Had we booked ourselves into smaller houses, we could’ve SOLD OUT every show; but being in the larger houses cost us nothing extra.Now, he claims that "this business bullshit should only be important to the investors," but I disagree. I think it's important and helpful for those who are blazing new trails to share whatever they're comfortable sharing so that others can learn from it. And, by learn from it, I don't mean to mimic it. I'm not talking about cargo cult copying. But learn from the general concepts, and see what can be applied to other situations.
And apparently, we managed to pull 1100 a night solely from our podcasts: when asked nightly if they heard about the show from a show at SModcast.com, an overwhelming 85/90% of the audience indicated yes (Jon swears it was 100% in Seattle). That bodes well for SIR.
You take what we made on the tour, you add that to the $1.5mil we’ve pulled in from foreign sales thus far (with a few big territories yet to sell). Add to that $3mil we’re on the verge of closing for all North American distribution rights excluding theatrical (which means VOD/HomeVideo/PayTV/Streaming).
The flick cost $5mil to make, but $4mil after the California tax incentive. One of the only things Jon and I promised the Red State investors in exchange for letting us handle American theatrical distribution ourselves was that their $4mil would be covered as soon as possible – something very few other production entities can promise or even offer. Invest a million dollars in almost any production, and you rarely if ever get your money back within five years, let alone the one year it’s looking like it’s gonna take for our guys to make their money back.
Add up all those figures above and you’ll notice our gains are higher than our spending. And without any dopey marketing figures to have to recoup, once we close the aforementioned deals (which Jonn Sloss & LawCo are working to close as we speak), simple math dictates Red State is in the black – long before any wide release. That’s music to the ears of any investor who only put up their money in September.
And, given a world with Hollywood accounting, where most movies are designed on purpose to "lose" money on paper, it's quite interesting (and nice) to see a different path being taken.
Now, there is one element that I'm not clear on and perhaps some of you with experience in the movie industry can help out. I tried to reach out to Kevin himself on Twitter, but the man's busy (and sick) and (from the sound of it) getting even less sleep than I do. Here's the part that I'm confused about: I'm familiar with startup investing, where investors (generally VCs) plow a bunch of money into a company in exchange for equity. In those cases, they don't ever expect to get paid back out of revenue, but through the eventual sale of their equity (hopefully for many, many, many, many times what they paid for it). However, in this case, Smith is talking about getting the investment back to his investors quickly (out of the revenue). So, if that's the case... do they still have a financial stake in the later success of the movie? Is it structured as a combination of loan and equity, where they have to pay the investors back first, but then there's also upside on the latter part? Because if they're just getting their principle back, that's nothing special. No one invests in something just to get their money back. They invest for upside. Does it work like a record label deal? Where the "investment" is really an "advance," and the first chunk of revenue all goes to paying back that advance, and then after you "recoup" (as is about to happen here), there's a royalty split? I'm guessing it's something like that, but it would be nice to know the details.
But, even without that information, one thing that is nice to see is an experiment in trying something different with how a film is marketed, distributed and monetized is already working. That's exciting.
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Filed Under: business model, funding, investment, kevin smith, profitability, red state
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Yes, but...
And yes, he is doing a better job connecting with fans by visiting each theater in person, but it's not much different from doing a Q&A on the "Tonight Show." I know it's different when he's there in the flesh, but I don't see any evidence of some of the more radical ideas that are normally celebrated around here. He's not letting people pay what they want or anything like that.
Oh wait. There is a big difference. An appearance on the "Tonight Show" is free and broadcast to everyone in what you might call a primitive, time-limited file sharing mechanism. Kevin Smith is putting his Q&A behind a paywall and if the bouncers at his gig are anything like the bouncers I've seen at many concerts, they'll be big and beefy and unlikely to be as kind or porous as the NY Times paywall.
So I guess my question to you is: why aren't you picking on Kevin Smith the way that you're picking on the NY Times? Why don't you haul out the old blah blah about how Smith is losing relevancy? Why don't you accuse him of "not getting it?"
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And a few other things
* The reason he was able to make so much money is because the price tag at the Music Hall was pretty steep. I can't be sure but there are 6200 seats and he claims a BO of $160,000. That's an average of $25.
BTW, I think the whole show was definitely worth it. He's a great artist and some of his movies have been amazing. ("Chasing Amy")
This is really about the triumph of the pay wall.
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Re: And a few other things
http://thepiratebay.org/torrent/5318265/Kevin_Smith_-_Chasing_Amy_%281997%29
and here it is on youtube
http://www.youtube.com/watch?v=lKoeRM5Aw-Y
he doesn't seem to care much. I don't see him suing anyone over it.
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Re: Re: And a few other things
In fact, he's specifically said he's happy if people pirate his movies:
http://www.techdirt.com/articles/20090908/0132166123.shtml
When asked about if unauthorized copies made him angry, he responded:
"See, I think 'How many more converts did I get from piracy?'"
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Re: Re: Re: And a few other things
Tell you what. As you seem to think that P2P "sharing" is a gift to artists, why don't you "share" his new film and see how he feels about high quality copies floating around the net especially now that he's not taking his pay up front. Why don't you ask him if he's really cool about sharing now that the future size of his bank account depends heavily on ticket sales.
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Re: Re: Re: Re: And a few other things
I'm not sure what that even means.
Tell you what. As you seem to think that P2P "sharing" is a gift to artists
Please show me where I said it was a "gift" to artists.
You can't, because I haven't. You really seem to have decided in your brain that I believe something completely different than what I actually believe and say. No wonder you're so confused.
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Re: Re: Re: Re: And a few other things
He doesn't encourage it, per se, but he recognizes the reality of it and also seems to understand that bitching about it is pointless, since most of the people who won't pay to see it just wouldn't see it in the first place if denied to opportunity to pirate it. And he's said multiple times that he'd rather have people see his films for free than not see them at all.
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Re: And a few other things
Does Ticketron even exist any more? But, um, who said "they're the evil empire"? And what does that have to do with anything.
* The reason he was able to make so much money is because the price tag at the Music Hall was pretty steep. I can't be sure but there are 6200 seats and he claims a BO of $160,000. That's an average of $25.
Um. Your point? That seems to support my point. He connected with fans and gave them a reason to buy. Also, FYI, he didn't sell out RCMH, and ticket prices were more like $60 - $100. But people are willing to pay.
This is really about the triumph of the pay wall.
Heh. Not a paywall. A paywall is about putting up an *artificial* barrier on an abundant good. What Smith is doing -- and what we've always recommended (but can't seem to comprehend) is *connecting with fans* and then giving them a *scarce reason to buy.*
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It is a paywall!
This is a completely artificial scarcity in this day and age. He could be taking questions from Twitter and live streaming his response but he's not. It's anti-innovation and if you try to circumvent it, the bouncers will clench together the digits in their hands and give you a little digital rights management.
Hah hah. It's wonderful to have you come over to my side, even though you'll try to come up with any rationalization to pretend that you're not celebrating a PAYWALL!
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Re: It is a paywall!
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Re: It is a paywall!
He could, but it's not necessary. If he can make more money not doing so, then that's fine too.
"This is a completely artificial scarcity in this day and age. He could be taking questions from Twitter and live streaming his response but he's not."
No, it's a genuine scarcity. People getting answers from him in person, people being able to ask him questions, is a genuine scarcity. An artificial scarcity is a scarcity that relies on (IP or other) laws to reduce abundance. That's not what he's doing. He's creating who's scarce nature isn't a result of IP.
No one here is against people making money by requiring payment for their questions to be answered in person. We're against IP law being used to provide scarcity.
"It's anti-innovation and if you try to circumvent it, the bouncers will clench together the digits in their hands and give you a little digital rights management. "
Again, no one is against charging for admission. Admission is a genuine scarcity, only so many people can fit into a limited space (I can't believe I have to explain this). The day that infinite people can fit in a limited space without inconveniencing one another with large crowds is the day that your argument has merit.
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Re: Re: It is a paywall!
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Re: Re: It is a paywall!
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Re: Re: Re: It is a paywall!
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Re: It is a paywall!
"The movie costs money"
"No it doesn't"
"Admission costs money"
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Re: It is a paywall!
First of all, he regularly *does* do stuff like that, and yet people *still* want to pay to see him in person (a real scarcity).
I'm having trouble believing you don't understand this basic point. Broadcasting is not the same as live.
This is a completely artificial scarcity in this day and age.
Um. No. It's not. Seeing someone in person is a scarcity.
He could be taking questions from Twitter and live streaming his response but he's not.
Actually, he is. That's part of how he connects with fans.
And, you know what, it makes them MORE interested in paying lots of money to see him live. Which is the point. The one way up over your head.
Hah hah. It's wonderful to have you come over to my side, even though you'll try to come up with any rationalization to pretend that you're not celebrating a PAYWALL!
You know, I have already explained to you why you are wrong. Repeating your wrong statement does not make you look smarter. It makes you look foolish. The first time it could have been ignorance. After you'd been taught, however... well, then we have to conclude something else entirely.
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ticketmaster
My point is that he's not doing anything new or different from the bazillion old and tired media companies that you constantly like to say "don't get it." He's signing a contract with a semi-monopoly, putting up a PayWall and hiring some bouncers to deliver DRM.
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Re: ticketmaster
The point is that making money without copy protection laws is possible. Contrary to popular IP maximist beliefs (and I know IP maximists don't parrot this so much anymore, but they used to), art and music and movies can and will continue without these protections. These copy protection laws aren't needed for these things to continue, and frankly, I don't want these copy protection laws to exist. I honestly don't care how much art or music, if any, is lost as a result of these laws being abolished either, there will be others who will create art and music just as well.
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Re: Re: ticketmaster
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Re: Re: Re: ticketmaster
How is it even a debatable issue that one-on-one interaction with a content creator is a scarce value service? Your argument is stretched beyond the realm of credibility, please pull it back before your brain falls out.
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Re: Re: Re: Re: ticketmaster
And it's not that he didn't go out of his way. It would have been much simpler to stay home, ask Twitter for the Q&A and then stream the answers out through some P2P feed. The technology is here.
Do you know the argument that DRM is "breaking" a book/song/ movie by reducing the functionality? That's what he's doing here by using technology that's hundreds of years old. Je is going out of his way to hire the hall and staff the doors with beefy bouncers who are quite happy for some one-to-one action with people who don't pay.
If this succeeds-- and I hope it does because he's a great artist-- it will be validating the paywall model.
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Re: Re: Re: Re: Re: ticketmaster
The fact that you are currently making my retarded nephew look intelligent should tell you a lot about your arguments.
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Re: Re: Re: Re: Re: Re: ticketmaster
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Re: ticketmaster
So, because some people hate Ticketmaster, *I* also have to think it's the evil empire? Weird.
My point is that he's not doing anything new or different from the bazillion old and tired media companies that you constantly like to say "don't get it."
And yet again, you show how badly you don't understand what's happening. No wonder you bitch and complain all the time. You're willfully ignorant by your own admission.
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Re: ticketmaster
For many years Ticketmaster has locked up most of the major venues with exclusive contracts. The ONLY way to get tickets for those venues was to buy them from Ticketmaster (in many cases even if you bought them at the door you still had to pay Ticketmaster). If you use those venues, guess what? You HAVE to use Ticketmaster!
The odds are pretty good that many, if not most, of the venues Smith used are under Ticketmaster contract.
If you argue "well he could have used different venues", just ask Pearl Jam (and a few other bands) how well that went (and how many corn fields they ended up playing in).
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Re: Yes, but...
That's not 'reason to buy.' I can think of a dozen movies released this year that wish they had to keep people away.
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Re: Yes, but...
...
It's just cash on the ticket counter or take a hike.
...
Kevin Smith is putting his Q&A behind a paywall"
No one here is against charging people for theater or concert admission, a point that you seem to conveniently overlook.
"An appearance on the "Tonight Show" is free and broadcast to everyone in what you might call a primitive, time-limited file sharing mechanism. "
A: It's not free, we pay in the form of watching commercials. and, in the case that it's broadcasted over Cable, we pay for that too
B: People have recorded and distributed these videos on Youtube
I don't see Kevin Smith suing anyone.
C: Despite the fact that broadcasters broadcast their content for free over the airwaves, they still make money, not so much because of copyright, but because of advertisers. and why should broadcasters be allowed to benefit from the widespread broadcasting distribution of monopolized content while others who would be more than willing to distribute their permissibly licensed content can't benefit from such distribution without going through some broadcasting gateway? I have just as much a right to those broadcasting spectra as the government/corporate complex, they have no right to take my right to broadcast what I want and then to tell me that I can't freely copy, modify, and redistribute what is broadcasted. Granting a monopoly on both content and distribution is wrong.
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Re: Re: Yes, but...
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Re: Yes, but...
I love this, because it so baldly demonstrates why you don't get what we're talking about here, bob. Your brain stops at "free." As we've said many, many times, "free" is only a part of what we're talking about and we only talk about it where it makes sense. Nothing in "CwF+RtB" says anything needs to be free.
Yet, because you don't understand that, all you care about is "where's the free stuff?"
And, no, that's not the reason to buy. But he IS selling a scarcity, which is seats. That's what we always talk about: finding the real, rather than artificial, scarcities.
And yes, he is doing a better job connecting with fans by visiting each theater in person, but it's not much different from doing a Q&A on the "Tonight Show." I know it's different when he's there in the flesh, but I don't see any evidence of some of the more radical ideas that are normally celebrated around here. He's not letting people pay what they want or anything like that.
Weird. It's like you've decided what you THINK I say is the proper business model and then get upset when it's not. I've never said "pay what you want" is the business model. In fact, I've regularly panned it, as not being appropriate in many circumstances. There are some areas where it makes sense, and I'm happy to point those out, because I think it's important to learn from them.
And, honestly, if you think that a live Q&A is no different from going on the Tonight Show, you REALLY don't get how this works. People pay to see someone live and in person. A lot. Because it's a scarcity. Which is the whole point. The one way way way up there over your head.
Oh wait. There is a big difference. An appearance on the "Tonight Show" is free and broadcast to everyone in what you might call a primitive, time-limited file sharing mechanism. Kevin Smith is putting his Q&A behind a paywall and if the bouncers at his gig are anything like the bouncers I've seen at many concerts, they'll be big and beefy and unlikely to be as kind or porous as the NY Times paywall.
Um. No. I don't understand why this is so complex and difficult for you, but it's really quite a window into your inability to comprehend.
We're not against paying, as you seem to assume. We're in favor of finding smart business models that get people to pay. But that's around selling *REAL* economic scarcities. Like seats in a theater.
What the NY Times is doing is trying to artificially limit an infinite resource.
That's the difference.
So I guess my question to you is: why aren't you picking on Kevin Smith the way that you're picking on the NY Times? Why don't you haul out the old blah blah about how Smith is losing relevancy? Why don't you accuse him of "not getting it?"
Because he's actually *connecting* with his fans and giving them a *scarce* reason to buy. That's what the NY Times is not doing.
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Re: Re: Yes, but...
This reminds me of the way that the late governor Huey Long reportedly said, "When Fascism comes to America, it will (be in the name of/come under the guise of/be called) anti-Fascism!"
Yup. It's a paywall all right. But you're happy to here trying desperately to pretend that it's an anti-paywall.
Oh, BTW, the NY Times has been charging for admission to talks for some time now.
http://nytimes.whsites.net/timestalks/
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Re: Yes, but...
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Re: Yes, but...
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CwF
If you don't think you can compete with free, you probably haven't considered competing *with free.*
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I remember Gene' black and white print of the Cage and his Star Trek blooper reel. Back before the Star Trek movie Star Trek III: The Search for Spock came out.
What I admire of Gene in retrospect was his continued connection with fans even after the re-establishment of the Star Trek franchise.
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Interesting...
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Independant film financing
There are couple of different ways a film can be financed. I am only familiar with the independent production way.
In the films I have worked on where I was close enough to the production to know what was going on, each film is setup as a limited partnership where the producer (or production house) is the general partner, and the investors are the limited partners.
So you could say - in a way - that each film is like a VC fund of its own, where the whole fund goes into one investment.
As limited partners they share in the revenues, but also -as with startups and VCs - there can be a liquidity event of some sort, where the property gets bought. For example a distributor or studio might buy a successful independent film to add to its catalog. (Later on the property might even get sold again, and again) Then the limited partnership winds down. I have also seen cases where the producer has bought out the property and wound down the LP.
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Re: Independant film financing
In indie-land, we'll usually pay back gross receipts minus some minor approved costs like very, very minimal overhead, accounting fees, and union residuals to investors first until they are made whole plus a set return (recoupment for the investors on my last film outperformed the S&P 500 by about 16% over 5 years from 2004-2010, which ain't sayin' much, but hey, at least it didn't *lose* money).
After making the investors whole "plus," the profit split shifted to a 50/50 with producers and investors (which, was as it turned out, just about um, zero... the film did no more business). But the deal itself was fair, and scalable.
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Re: Re: Independant film financing
Thanks for the info... Very useful.
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Re: Independant film financing
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Let's see if he does this for more than one project. Radiohead apparently would have some insight for him...
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Re:
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Financial model questions
To answer the question: once the $4 million goes back to the investors, all revenue above and beyond that recoupment figure gets split with the investors.
It's a fairly common investment model in the movie business; but since industry math can be byzantine, investors rarely see their investment back for years (in some cases, a decade). Since we have no marketing to stand behind in recoupment (and since the budget was so low in the first place), once the DVD/BD/VOD/streaming deals close, we're in the black. Basically, that means all money that comes in beyond the budget recoupment is now profit for The Harvey Boys to split with our two investing partners. So from now on - so long as we incur no future costs in releasing the movie, like television or outdoor marketing - the loot from every purchase of RED STATE (theatrically, VOD, BluRay, etc) now serves as the spoils of a small experiment that probably doesn't really matter to anyone else but me.
As mentioned (lots), this next flick HIT SOMEBODY is gonna be my last theatrical effort (and believe me: I'll be putting forth every effort to make it rock). Before I leave this business, I wanted to honor the curiosity of a frustrated younger version of me, who'd study the advertising costs and lament "I wonder if I could successfully release a flick with no traditional paid-for marketing?"
After years of trying to understand financial participation statements for the movies I've directed, I wanted the math on RED STATE to be so simple and easy to track, even a second grader could distinguish revenue. So far, so good...
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Re: Financial model questions
BTW, there's been some speculation here that you're okay with piracy. Do you think you could pull off this project by releasing the movie for free on Pirate Bay? Could you use Twitter and live streaming so fans could see the Q&A for free? Do you think a tip jar and t-shirt sales would suffice? Just asking because you obviously have plenty of experience.
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Re: Re: Financial model questions
He openly invited those who couldn't pay the added cost to see the movie in theatres this fall, or wait until it comes out on BitTorrent a little later and grab it for free.
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This movie is nothing more than one of his wet dream rants about things that he hates. It seems like Mr. Smith should hook up with Michael Moore and commiserate over their hatred of the better humans in the world(i.e. those that are not filled with ridiculous hate).
Perhaps Kevin Smith was diddled by a catholic priest(which would make since, with movies like Dogma), so he believes all Christians, or all of those on the "right", should be persecuted. Either way, Mr. Smith, leave us the hell alone.
Regardless, a 29% Rotten Tomatoes rating, along with other, very bad reviews, are going to do nothing more than sink this horrible movie. It would be nice to see other move away from big Hollywood distributors, but I would rather see better films do this.
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Way to not read his blog post, chucklefuck. That figure you're quoting does not include foreign and (upcoming) domestic distribution, nor potential home video revenue.
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Monty Zuma's Revenge
Whatcha doin'? Freeping Rotten Tomatoes?
Perhaps Kevin Smith was diddled by a catholic priest, but then again perhaps you were, & that explains your incoherent rage.
"..the better humans in the world.." I suggest you go see "Atlas Shrugged". Sounds like your cup of tea (heh).
Then ask yourself "Who is John Galt (and why is he such a douchebag)?"
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