Potter Magic

With the debut of its first "Harry Potter" just around the corner, cameras set to roll on its second "Harry Potter" movie and the screenplay underway on its third, Warner Bros. is betting hundreds of millions of dollars on a strategic expansion into the lucrative franchise business.

Warner Bros.’ ambitious long-term plans for "Harry Potter" could include seven movies over the next decade based on J.K. Rowling’s best-selling fantasy-adventure tales.

Building perennial franchises with appreciating library value through movie sequels, prequels, made-for-videos, TV spinoffs and fat licensing and merchandising deals is a key mandate of Warner’s two-year-old management team led by Chairman Barry Meyer and President Alan Horn.

Meyer said that creating new brands and optimizing existing ones is seen as one of the four "key growth drivers" at Warner Bros., along with expanding its international businesses, developing emerging technologies and continuing to integrate its content with corporate parent AOL Time Warner’s operations.

The strategy is aimed at taking full advantage of AOL Time Warner’s expansive global media network. "We’re looking to extend these properties over multiple platforms," Meyer said.

A franchise such as "Harry Potter" could potentially generate billions of dollars in revenue over decades from worldwide box office, television, home video, DVD and record sales as well as lucrative licensing and merchandising deals for interactive games, theme park attractions and scores of products from plush toys to bedsheets.

It helps that "Harry Potter" already is a pop culture phenomenon and publishing sensation with more than 116 million copies of the first four books sold in 47 languages worldwide. And though there’s no such thing as a sure thing in entertainment, industry watchers say the potential of the Harry Potter franchise is about as close as anyone can get.

"It could be massive," said Jessica Reif-Cohen, media analyst for Merrill Lynch. "Big enough where it can move the dial on a company’s stock price and profits."

A box office bonanza would also be a nice shot in the arm for the studio whose only bona fide hit so far this year is Cats & Dogs. That said, between its strong performer Training Day and expected returns from "Harry Potter," Steven Soderbergh’s star-studded remake Ocean’s 11 and the Jim Carrey-headlined The Majestic, Warner expects 2001 to be a record year.

Warner movie distribution chief Dan Fellman expects "Potter" to open in more than 3,000 theaters. The Perfect Storm, the studio’s largest release to date, opened in 3,407 sites. The industry record holder is Mission Impossible II in 3,653 theaters.

Many Hollywood insiders, including Warner rivals, believe "Potter" could score the biggest opening weekend ever and claim more than $250 million in U.S. ticket sales. (Warner’s highest grosser was Batman with $251 million). "Its’s going to be huge," predicted Dick Cook, chairman of Disney’s Motion Picture Group, whose expected animated hit "Monsters, Inc." opens two weeks earlier, on Friday.

"Harry Potter" also is expected to be huge overseas, where it opens in Britain and some other foreign markets concurrent with its U.S. release. Reif-Cohen and other media analysts predict Harry Potter could pump more than $1 billion of profit into Warner coffers from worldwide sales in all media.

UBS Warburg analyst Christopher Dixon forecasts that over the next year alone, "You’re looking at a property that could generate $350 million in profits" from theatrical, home video and DVD sales, "to say nothing of its ongoing ability to realize a lot more."

And that’s from just one movie.

Warner owns all rights (except for the frozen theatrical stage rights) to Rowling’s first four books with options on the remaining three. The fifth book, which the author is writing, is expected to be published next summer, which would coincide with the video/DVD release of the first movie.

Though Potter could make a fortune, it’s not without risk. The studio is making the first two movies back-to-back and has already commissioned screenwriter Steve Kloves to begin the third installment, Harry Potter and the Prisoner of Azkaban, expected for release as early as November 2003 and no later than the first quarter of 2004.

Horn said the first production cost "north of $125 million" and subsequent movies will probably be "comparable in cost." With no major stars in the cast, the biggest expense is extensive special effects.

The production costs, Horn said, would have been even higher had Warner not realized "economies of scale" by shooting both movies in England in essentially the same locations and with the same sets and costumes. The sequel, Harry Potter and the Chamber of Secrets, begins shooting in London on Nov. 18 and will be released in November of next year.

"This allows us to take the enormous expense and amortize costs over two, maybe three movies," Horn said. Warner also was able to make what appears to be a bargain purchase of the rights. "We just happened to buy ‘Harry Potter’ before it was ‘Harry Potter,"’ Horn said.

Harry Potter and the Sorcerer’s Stone is a Warner Bros. film opening in Metro Manila theaters on Nov. 21.