Surprise! 'Straight Outta Compton' boosts Warner Bros. too

Warner Bros. may have lost Straight Outta Compton to Universal, but there's a silver lining: Sources say it will earn at least $5 million -- and possibly millions more -- from its share of the movie.

The studio is one of several net profit participants -- including producers Ice Cube and Dr. Dre, who also stand to make multiple millions after forgoing their up-front fees. (There are no "first-dollar" or "gross" participants.)

How the net profits are defined, of course, is crucial. Insiders believe Warners gets its money at "cash break zero" -- that is, when production and marketing costs have been covered, without factoring in Universal's 10 percent to 12 percent distribution fee.

Let's assume the movie crosses $300 million worldwide (though nobody is predicting where it will top out). Roughly half of that goes back to Universal in "rentals" -- that is, $150 million.

The studio then peels off $29 million in production costs, plus an estimated $60 million for marketing, leaving a net profit of around $61 million. With roughly 5 percent of the pie, Warners makes more than $3 million from theatrical revenue.

But that's not all. The studio also gets a cut of home entertainment, pay and broadcast TV -- which could double or even triple its take. (Historically, theatrical profit was estimated to be around one-third of the total; recently it has inched up to almost half.) That means it could make another $3 million to $6 million, and more if Compton continues to surge at the box office.

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That's nowhere near the amount Universal and co-financier Legendary Entertainment will make, but not bad for a picture in which Warners had no risk.

Still, it's a bittersweet pill for Toby Emmerich, the president of Warners' New Line Cinema, who developed the movie for six years before Warners' green-light committee deemed it too expensive.

The project began with writers S. Leigh Savidge and Alan Wenkus, who in early 2004 brought their script about N.W.A co-founder Eazy-E to Bill Straus, a former New Line executive turned producer.

For the next two years, Straus developed it with Circle of Confusion's David Engel, spending much of that time fighting just to get a meeting with Eazy's widow, Tomica Woods-Wright, who controlled the music rights. Eventually, a friend got her the script.

"She came in to Circle of Confusion, and we met with her," said Straus. "The first hour she was very guarded, and then she took off her shoes, she started crying, she got emotional -- and it was a beautiful meeting. It ceased to be a business meeting, and more like group therapy."

With Woods-Wright onboard, the group took the project to Emmerich, who attached Ice Cube and his producing partner, Matt Alvarez, who essentially took it over.

"Cube and I probably in 2002 had started talking about making an N.W.A movie," says Alvarez. "But Cube felt he wasn't quite ready to tell that story." One reason he changed his mind: "If you don't get involved, they could do it the wrong way."

Cube wanted the story to focus on the group and not just Eazy-E, and he and Emmerich hired screenwriter Andrea Berloff (World Trade Center) to rework the script.

Attempts to persuade Dre to join the team dovetailed with a labyrinthine attempt to buy the music rights.

Read More: 'Straight Outta Compton' Heading Straight Outta America

Executives came and went along the way (Luke Ryan, Michele Weiss, Dave Neustadter), all pushing to make the film. When F. Gary Gray was hired to direct, and Dre agreed to become one of the producers, the team was ready to move forward.

But Warners had a budget threshold. Looking at other music- and African-American-themed pictures, it wanted to limit Compton's cost to the mid-teens. That was too low for the producers, who asked to take it elsewhere.

"Toby was an advocate for this movie," says Alvarez. "He came out of the music business, and he'd run the music division at New Line. He would have made this no matter what."

Emmerich agreed to put it in turnaround. Universal snapped it up.

Writer Jonathan Herman was brought in to rework the Berloff script, adding elements of Dre's life that had not been included in previous drafts. (Others writers, such as Cheo Hodari Coker, also contributed to the script.)

Universal gave the movie a go-ahead in early 2014 -- only for everything to crash again during preproduction. With costs now in the mid-$30 millions, the studio halted work until the 145-page screenplay could be trimmed.

"We were at an impasse with Universal in terms of the script that we had and the amount it was going to cost," says Alvarez. "We all agreed to shut down preproduction, and worked on the script to get it down to a place where we were able to find a happy medium."

Part of that happy medium involved Cube and Dre agreeing to advance some of their own money, as well as lose their up-front salaries.

"They technically did write Universal a check for accounting purposes," says one person familiar with the deal. "But after opening weekend, they were reimbursed immediately."

The picture was go. The budget was set at $29 million. And after crossing the $100 million mark at the box office this weekend, the only question that remains is how far Compton will go.

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