The Shawshank Residuals

The Shawshank Residuals

How one of Hollywood's great second acts keeps making money

 
By Russell Adams  in the Wall Street Journal

Bob Gunton is a character actor with 125 credits to his name, including several seasons of "24" and "Desperate Housewives" and a host of movie roles in films such as the Oscar-winning "Argo." Vaguely familiar faces like his are common in the Los Angeles area where he lives, and nobody pays much attention. Many of his roles have been forgotten.

But every day, the 68-year-old actor says, he hears the whispers—from cabdrivers, waiters, the new bag boy at his neighborhood supermarket: "That's the warden in 'Shawshank.' "

He also still gets residual payments—not huge, but steady, close to six figures by the film's 10th anniversary in 2004. Since then, he has continued to get "a very substantial income" long past the age when residuals usually dry up.

"I suspect my daughter, years from now, will still be getting checks," he said.

"Shawshank" was an underwhelming box-office performer when it hit theaters 20 years ago this September, but then it began to redeem itself, finding an audience on home video and later becoming a fixture on cable TV.

The film has taken a near-mystical hold on viewers that shows no sign of abating. Steven Spielberg once told the film's writer-director Frank Darabont that he had made "a chewing-gum movie—if you step on it, it sticks to your shoe," says Mr. Darabont, who went on to create "The Walking Dead" for AMC.

The movie's enduring popularity manifests itself in ways big and small. "Shawshank" for years has been rated by users of imdb.com as the best movie of all time (the first two "Godfather" films are second and third). On a Facebook page dedicated to the film, fans show off tattoos of quotes, sites and the rock hammer Andy, played by Tim Robbins, used to tunnel out of prison. Type "370,000" into a Google search and the site auto-completes it with "in 1966." Andy escapes in 1966 with $370,000 of the warden's ill-gotten gains. The small Ohio city where it was filmed is a tourist attraction.

In the days when videocassettes mattered, "Shawshank" was the top rental of 1995. On television, as cable grew, it has consistently been among the most-aired movies.

In a shifting Hollywood landscape, film libraries increasingly are the lifeblood of studios. "Shawshank's" enduring appeal on television has made it more important than ever—a reliable annuity to help smooth the inevitable bumps in a hit-or-miss box-office business. When studios sell a package of films—many of them stinkers—a "Shawshank" acts as a much-needed locomotive to drag the others behind it.

"It's an incredible moneymaking asset that continues to resonate with viewers," said Jeff Baker, executive vice president and general manager of Warner Bros. Home Entertainment theatrical catalog.

Warner Bros. wouldn't say how much money it has gleaned from "Shawshank," one of 6,000 feature films in a library that last year helped generate $1.5 billion in licensing fees from television, plus an additional $2.2 billion from home video and electronic delivery, according to SEC filings. But it's on the shortlist of films including "The Wizard of Oz," "A Christmas Story" and "Caddyshack" that drive much of the library's value, current and former Warner Bros. executives say.

"Shawshank" was adapted from a novella, "Rita Hayworth and Shawshank Redemption" by Stephen King, who sold the rights to then-unknown director Frank Darabont in the late 1980s for $5,000. When he wrote the script several years later, it circulated quickly through Hollywood.

Martin Shafer, a co-founder of Castle Rock Entertainment, was at an airport when he got a call from a colleague. "She said, 'You've got to read this script right away. This story pays off like a slot machine,'" Mr. Shafer recalls.

Castle Rock, which took its name from one of Mr. King's fictional settings, was interested and executives there reached a deal with Mr. Darabont. But when studio co-founder Rob Reiner read the script, he broached the idea of directing it himself. He'd already directed films based on Mr. King's work, "Stand By Me" and "Misery," and he'd just made "A Few Good Men" with Tom Cruise and was looking to team up with the actor on a new project. So Castle Rock offered Mr. Darabont a "pay-and-play" deal under which he would get a few million dollars and a guarantee to direct another movie, if he agreed to turn "Shawshank" over to Mr. Reiner. "We were making [Mr. Darabont] a multimillionaire," Mr. Shafer said.

Mr. Darabont said he took a night to think about it. "But it was never an option," he said. "Most of it boils down to, 'Why are we here?' That was a passion I was very determined to pursue and not just sell to the highest bidder."

Mr. Darabont cast Mr. Robbins as Andy Dufresne, a banker who is wrongly sent to prison for the murder of his wife and her lover, and Morgan Freeman as Red, an omniscient lifer who befriends Andy on the inside. In the book, he is a redheaded Irishman.

Mr. King recalls: "I said, 'Frank, at that time there were like 16 black men in the state of Maine, and you still want this guy to be black?'"

Mr. Darabont chose the Ohio State Reformatory in Mansfield to serve as the fictional "Shawshank" prison, so the cast gathered there in the summer of 1993 to start filming. The prison, which had been closed a few years earlier due to inhumane conditions, was "one of the creepiest places I've ever been in," said William Sadler, who played the dimwitted inmate Heywood.

Despite the grim surroundings, the actors sensed they were part of something big. During rehearsal, "We were joking around and looking at each other in joyful wonder that we all ended up in this movie," said Mr. Gunton, who played the sadistic Warden Norton.

Then it came out and nobody seemed to notice. Though the film received mostly positive reviews (some complained it was too long and corny), it brought in just $18 million at the box office. "Shawshank's" participants cite a variety of reasons for the film's early struggles, including a confusing title with religious connotations, no female roles and competition from the year's two megahits, "Forrest Gump" ($330 million in domestic box-office) and "Pulp Fiction" ($108 million).

"Shawshank" only began to get moviegoers' attention after the Oscars, where it received seven nominations (but won no awards) and promptly was rereleased in theaters. The second run grossed an additional $10 million and primed it for its debut on home video, which at the time was still a robust revenue source.

If Andy Dufresne was the movie's on-screen hero, off screen it was Ted Turner, whose Turner Broadcasting System had acquired Castle Rock in 1993. His TNT channel took the cable-broadcast rights to the film in 1997 and made "Shawshank" an anchor of its "New Classics" campaign.

Over the next few years, TNT and other Turner channels ensured that "Shawshank" never again would suffer from a lack of exposure. "Mr. Turner, bless his heart, chose to show the movie every five minutes," Mr. Darabont said.

"Shawshank" was becoming that priceless entertainment property—a repeater. Viewers watched it again and again. Those who initially may have been turned off by the idea of a prison drama born out of a wrongful conviction were drawn in by likable characters who inhabit a world where the true horrors of prison are left largely to the imagination. The movie's wholly satisfying conclusion—a universal fantasy—gives people hope.

"It took a while," said Mr. King. "It was like that song, 'On the Dark Side' [by John Cafferty & the Beaver Brown band, 1983]. "All at once, after a period of time, it became a big thing. So it wasn't like a Harry Potter thing that goes to the theater and—boom. In that sense, I think it was like 'Casablanca.' It's one of those movies that we think of when we think of that iconic American movie experience."

Mr. Sadler, like his co-star Mr. Gunton, says he can't go a day without someone mentioning the film. And yet when it comes on? "I get stuck on it like everybody else," he said.

In Mansfield in north-central Ohio, tourism officials five years ago established a tour to capitalize on what had become the area's biggest draw. The prison, courthouse and oak tree where Andy leaves money for Red are among 14 stops on the Shawshank Trail, which one weekend last summer drew about 6,000 people.

"Shawshank's" last 20 years offer a guided tour through the myriad and evolving revenue streams of the entertainment business. After grossing $28 million at the box office in North America and another $30 million overseas, it went on to the video rental market and by the end had made about $80 million in sales, Warner Bros' Mr. Baker said. Television licensing fees to date likely have surpassed U.S. box-office receipts, according to a person familiar with the studio's finances.

As a general rule, studios pocket about half of box-office revenue (less than that overseas), two-thirds of home entertainment sales, and almost all of TV licensing revenue. Based on those margins, "Shawshank" has brought in more than $100 million.

"Shawshank is the quintessential catalog movie," said Tom McGrath, a veteran studio executive who spent more than a decade at Viacom Inc.'s Paramount Pictures.

As viewers watch movies in new ways—streaming on Netflix and other services on different devices—top-tier library films get new customers. Long term, that's good news for studios in a world where DVDs are disappearing. In the short term, studios are still treading carefully into new technologies, in part because there is "some debate over how to know what some of this stuff is worth, digitally," according to Rich Greenfield, a BTIG analyst. "Shawshank" isn't available to stream on Netflix, like other valuable properties.

On cable, "Shawshank" is at an age when the licensing value of many films diminishes, but its strength hasn't wavered. "Shawshank" and other films are now being licensed for shorter periods to a bigger and hungrier universe of distributors. "Shawshank" has aired on 15 basic cable networks since 1997, including six in the most recent season, according to Warner Bros. Last year, it filled 151 hours of airtime on basic cable, tied with "Scarface" and behind only "Mrs. Doubtfire," according to research firm IHS. "Shawshank," despite its virtually all-male cast, was the most-watched movie on Oprah Winfrey's OWN network in the latest season and in the top 15% of movies among adults 18-49 on Spike, Up, Sundance and Lifetime.

The movie's profits to date may sound small in a world where some films gross $100 million in a single weekend. But such figures only begin to show a movie like "Shawshank"'s long-term importance for a studio's financial picture. That's why there are six big studios: Smaller ventures that lack a reservoir of films have trouble surviving flops.

"Libraries are the basic profit engines," said Edward Jay Epstein, author of "The Hollywood Economist: The Hidden Financial Reality Behind the Movies." "When you license a movie from your library, the money goes directly to your bottom line," he says.

Films like "Shawshank" pad their studios' bottom lines in less-direct ways, too. Studios generally license movies in packages, sometimes bundling one or a small number of hits with dozens of lesser films. So-called "package leaders" such as "Shawshank" can give studios leverage in negotiations with licensees, and prop up the weaker films in the catalog.

"You say [to a cable executive], 'I can give you 'Shawshank' and their eyes light up," a former distribution executive at Warner Bros. said. "You don't market it. You don't spend any money pushing it."

Mr. King never cashed the $5,000 check Mr. Darabont sent him for the right to turn his story into a movie. Years after "Shawshank" came out, the author got the check framed and mailed it back to the director with a note inscribed: "In case you ever need bail money. Love, Steve."