Ocean's 14?

About a week ago, I had the chance to go to the Arlington Park Racetrack, which is a venue quite close to where I live, in which you can watch and bet a little bit of money on the ponies. It was my first time I had ever been to a horse racing track, and I have to say it was quite a lot of fun to put down some money. I can see how a lot of people can get addicted to it and gambling in general.

Unfortunately, I wasn't able to come away the big winner for the day. I probably ended up losing around $20 or $30, but over a stretch of about 5 or 6 hours, I don't think thats too bad. Either way, I had a lot of fun.

I was with some of my friends and I'll tell you the story of one guy in particular. I have to admit that this is one of the most improbable scenarios I've ever seen, and I guess it part of the motivation for my most recent idea.

A friend of mine was betting some money before a race. He was putting $10 down on various types of bets. He put down a show, in which he had to pick a particular horse who will come first, second, or third, a win, in which he had to pick the horse who is going to win in order to succeed, but after this had about $1 left to put down on a bet. He didn't really know anything about the horses or the race in general, so he decided to go with this particular type of bet called a superfecta.

I came to learn that a superfecta is a particular type of bet in which you have to correctly predict the first four horses that come in. That is, you have to pick the first, second, third, and fourth horses in the exact order in order to make any return on your wager. This is by far and away one of the most ludicrous, outrageous, and downright improbable things to ever occur in my opinion.

I had hard enough trouble correctly predicting a horse to come in the top three, a show, and now here was this most ridiculous bet called the superfecta. Regardless, my friend decided to make the minimum $1 wager (and in my opinion, it's pretty much throwing away that $1). So, we were revved up and looking forward to the next race. I had a couple bucks on the race and was hoping to see my combinations come in.

And then, before you knew it, the race had finished. It's a quick burst of excitement, and then it's over. Yet again, none of my horses came in the order I would have liked to see them. However, my friend sitting right next to me was looking over his betting receipts and was frantically looking up at the television screen with the results and then back again at his receipts. I asked if any of his combinations came in.

Apparently, after needing further verification from about three other people, my friend had correctly predicted the superfecta. We were all speechless. How is it possible that my friend who knew absolutely nothing about betting on horses came through with the mother of them all?

The superfecta ended up paying out huge. The payout is dependent on the odds of the four horses that you predict, but due to the severe unlikely nature of this actually occurring, the payout is typically always a large amount. In this case my friend made a quick $125 by simply making a $1 bet. Not a bad day at the races.

The first thing that this got me thinking about, and I'm a little embarrassed to say it, is how on earth it would be possible to fix such an event such as horse racing? I was just thinking that with such an immense payoff, figuring out a way to fix one event could make a bundle of cash very quickly. However, very soon into my thought process, I started to think of more effective, and legal, ways in which to capitalize on the coolness of horse racing.

This is what led me to my idea of Ocean's 14. The Ocean's series has all revolved around very slick, cool, and fun ways of stealing money from Las Vegas or valuables from museums. Each movie has been really entertaining and has a blockbuster cast to go along with it. I thought what might be interesting is if they altered the theme slightly and entered the realm of horse racing.

In all of the Ocean Movies, there is always some ingenious plan that works flawlessly. Half of the time, you think they're all about to get busted, and even when they do get busted, it was all seemingly part of the plan. It would be really cool to see what sort of awesome strategy they could come up with to fix a crazily unpredictable event such as horse racing. They have already exhibited quite a competency in fixing Vegas, so why not move into a new realm, the realm of horse racing?

Yet, I also realized that there wouldn't be a good enough reason to make a fourth movie in a series if it wasn't necessarily going to be profitable. This led me to investigate the benefits of actually creating a fourth Ocean's movie.

• Explanation

My sample was made up of movies that have a minimum of four in the series. My results include 9 movies that have had four parts in their series. This list includes:

1. Harry Potter
2. Rocky
3. Indiana Jones
4. Star Wars
5. Star Trek
6. Rambo
7. Superman
8. Saw
9. Die Hard

For each of the 9 movies, I gathered information relating to the Gross Box Office Revenue each part in the series brought in, the Budget for each movie in the series, and then, based on this information, evaluated the Net Box Office Revenue for each movie in the series. For all of the movies, I made sure to adjust for inflation. In order to accomplish this, I used WestEgg.com, which is an inflation calculator that dates back to 1800. All the figures are therefore based upon 2007 dollars.

After compiling all of my data, I then made a determination about each movie in the series return on investment (ROI), which is easily calculated by taking the gain from an investment and subtracting the cost of an investment and dividing this difference by the cost of investment.

In our scenario, the mathematical equation is depicted as:
ROI = ((Net Box Office Revenue - Budget)/Budget)

I thought ROI would be a good measure to evaluate going forward with a fourth Ocean's movie, because it represents the benefit and rate of return that the large investment for the movie would necessitate.

Finally, at the end, I averaged my data from the 9 different movies with a minimum of four parts in the series to determine whether the intent of creating a fourth movie truly had any merit.

• Results

The data that I gathered can be summarized in the following chart:

First, let us take a look at some of the data. The highest grossing film in this sample of movies was the original Star Wars from 1977. When you adjust for inflation, the film grossed over 1.163 Billion dollars. That came from a measly investment of just 46.86 Million dollars. On the opposite spectrum of that, the lowest grossing movie was the fourth sequence in the Superman series. I am personally a big fan of Superman, and am unsure as to why this film did so poorly in 1987.

According to Imdb.com, the Internet Movie Database, the tagline for this movie was, "Nuclear Power. In the best hands, it is dangerous. In the hands of Lex Luthor, it is pure evil. This is Superman's greatest battle. And it is for all of us." It only grossed 29.32 Million dollars, and actually ended up losing 2.43 Million.

These two movies help contrast the impact of the first movie in a series and the fourth movie in a series. The highest grossing movie, Star Wars, was the first in the series, whereas, the lowest grossing movie was the fourth in the series. This is a general trend, as the average gross for the first movie in a series was 308 Million, and the average gross for the fourth movie in a series was 167 Million (a reduction of %).

However, in order to truly get to our desired valuation of ROI, it was important to seek out information regarding to the budget of each movie as well.

As you may notice, there is a wide array of budgets used on movies. However, to try and organize some of this data, it is best to look at what the overall average of budgets do as another movie is made in a series. My data leads me to the following deduction: the more movies one makes in a particular series the larger the budget gets. On average, I found that the first movie's budget was around 69 million, while the budget of the fourth movie was typically around 89 million (or an increase of 29%).

The largest budget was used in the original Superman movie. It had a budget of 186 million. The smallest budget was used on the original Saw movie. It cost a mere 1.35 million. The Saw series has consistently had the lowest budget in the group and thus has helped their ROI tremendously.

Next, it would be helpful to look at the Net Revenue that is associated with movies in a series with a minimum of four movies. To find net revenue, you just take the gross revenue and subtract the budget requirement for the movie. This will also be helpful in determining ROI.

Our chart of Net Revenues for these 9 movies reveal that as another movie is added to the series, the variance in the net revenue becomes less substantial. For instance, in the net revenue amongst the first movie in the series, the net revenue varies by 94% (1163.33M to 60.78M). However, by the time the movie gets to the fourth in the series, this variation decreases tremendously. The upper and lower bounds of Net Revenue have shrunk from 400.3M to -7.3M, a far tighter space. This ultimately means that there is far less uncertainty when it comes to how well the movie should fare.

On average, the Net Revenue from these 9 movies varied from 333M, for the first movie in a series, to 119M for the fourth movie in a series, or a decline of 64%.

The final piece of the puzzle was to determine whether or not going ahead with producing and investing in the fourth film in a series was indeed profitable. The mechanism through which this was evaluated was based on our model of return on investment (ROI).

The results of this are well summarized in the following graph:

Your attention may first be drawn to the extreme spike in the ROI for the first movie in the series of Rocky. This is valid observation. The first Rocky movie was unbelievably successful, but only needed a budget of 4.2 million to produce a net box office revenue of 442.81 million. This is a ROI of 10,443%. The following Rocky movies were successful, but not nearly in the same stratosphere.

As a general trend, I was able to determine that on average, the first film in a series of a minimum of four returns 1,782%, the second, 403%, the third, 175%, and the fourth, 35%. These are significant declines, but the ROI is still quite decent even in the fourth movie.

Additionally, it is important to add that just because the overall average shows a positive ROI, this is certainly not always the case. For instance, Die Hard, Superman, Rambo, Indiana Jones, and Harry Potter have all had instances in which they have had negative ROI.

• Ocean's Movie Recommendation

Based on my analysis, I have the following recommendation for the potential creation of a fourth movie in this series.

According to Imdb.com, Ocean's Thirteen (the most recent movie in the Ocean's series), grossed 117.2M, had a budget of 85M, and therefore netted 32.2M. The ROI on Ocean's Thirteen was dismal, -62%. According to Those Answers Inc. estimates on the change in average gross, average budget, and average net revenue earned between the third and fourth movies in a series, Ocean's 14 can expect the following results:

• An 11.2% decline in Gross Revenue
• A 16.3% increase in budget spending
• A 21.4% decline in Net Revenue

Therefore, Ocean's 14 should expect to gross 104.1M, have a budget of 98.9M, and therefore net 5.2M. This predicts a ROI of -94.7%. Additionally, both Ocean's 12 (2nd in the series) and Ocean's 13 (3rd in the series) had negative ROI's which does not predict any more favorably for a positive ROI in the 4th movie in the series.

The series of Harry Potter, Rambo, Superman, and Die Hard have not achieved positive ROI since falling into negative territory. There is no direct evidence to support the possibility of Ocean's 14 having this capability.

Therefore, although it would be a really fun movie and very entertaining to watch, Those Answers Inc. does not recommend a fourth motion picture in the Ocean's series.