I have seen it a lot of times: movies whose Box Office grosses are several times higher than their Production Budgets are considered Flops, or in the best case they “barely broke even”. Are there extra spendings outside of Production that can be even higher than the Production Budget itself?
In: Economics
I think the split on the gross movie tickets between the movie companies and the theaters is something like 55/45, so they need around twice the money just to get close to breaking even before marketing expenses.
Advertising for the movie could be as much as the movie itself. But sometimes a movie is considered unprofitable due to funny accounting. Basically, in Hollywood, they fiddle around with the accounting in order to make it look like movies don’t make money, so they don’t have to pay “net” profits to anybody.
Because the box office is not really what you think it is. See in the US the average price for a ticket is 7.96$ and so they took the number of ticket sold and multiply it by 7.96$ and VOILA you have your box office. That way it’s easy to know which movie sold the most.
The problem is that
1) The ticket didn’t necessarily sold for that amount.
2) A large portion of that money is going to the Theater to pay for their cost and only a portion of it go the the film distributer. In the US around 60% usually go to the producer, but for some hot in-demand new movie this could go up to 90% for a short period of time (supply and demand). But oversea it could go down as much as 20% depending on the deal.
3) The film budget doesn’t take into account the marketing, which can be as much as the film budget for large movie.
It vary greatly depending on the movie, but you most likely need a box office around 3-4 times the film budget to break even.
“Hollywood Accounting” is part of it and can be the reason why movies don’t officially “make money” for years, if ever.
However usually when you see someone mention it online it’s usually not that complicated. It’s based on two considerations: the Production Budget doesn’t cover marketing, and the studio doesn’t take 100% of the box office gross.
Marketing for a major release is typically very significant and sometimes can be assumed to be to equal the production budget.
The gross is shared by exhibitors, distributors and (in some countries) a film authority. Generally in US the production company also owns the distributor, but internationally that portion can be complicated, as can the portion of the gross taken by the theater owners.
Movies set up a dummy corporation that exists for the production and distribution of that movie. They “outsource” things like advertising to the studio who “charge” very high fees. Even if the movie takes in a lot of money, they have that very big advertising bill to pay off, so all the money goes up to the studio, and none stays with the company that actually made the movie, making it not profitable on paper.
Studios spend a FUCKTON on advertising, and distribution is not done for free. That also doesn’t include the money the movie theaters make. You know, leasing giant buildings in shopping malls and air conditioning them and paying for state of the art projection systems cost money.
People say, these charges are bullshit inflated numbers. Well maybe maybe not. You know why Marvel doesn’t make Hulk solo films right? Because Universal has distribution rights, and those rights are lucrative. The fact that the same studio making the movie also distributes it most of the time doesn’t mean the distribution fee is bullshit.
You can think of it the way a book publisher and an author split the money that comes in. The “negative cost” of a movie is what you’re referring to (production actually stops when shooting wraps, the SFX and editing and all that is called “post-production) and is analogous to when an author turns in a manuscript. All the nonsense that the publisher does is actually essential to getting people to buy the book, as anyone who has self-published can attest.
There are good movies that come and go with hardly any impact in the box office – think Idiocracy or Dredd. That’s because the studio in charge of distributing the movie decided to cut its losses and do the bare minimum.
If you’re thinking the studio fees are bullshit because a bunch of rich assholes make money without doing anything useful … is this your first time in Hollywood? That is literally almost everyone in Hollywood. The people in mansions up in the hills aren’t the hair and makeup artists or gaffers! For better or worse that’s how the system works. You might think Hollywood exists to make movies … it exists to make money for a bunch of assholes with spray-tans, and the fact they make movies is almost an accident. The same kinds of people work on Wall Street or in Silicon Valley.
I have a friend’s who’s father in law works s an accountant for films. Apparently even bad ones tend to make money. Very rarely is there an actual loss. However there is an expected return greater than what is put up. When I film doesn’t make back a lot it can be considered a flop as no one will want to touch it again as it’s a bad investment.
Forgetting hollywood accounting for a moment, if every investor was promised up to 3x their initial investment depending on gross then there won’t be any money left over if the movie only made twice its total budget. The investors all make money, but not as much as they would have if the movie did better, and with no money left over the film itself didn’t make a profit, even if all the stakeholders did.
[This video](https://youtu.be/JIoDfWgbVgU) has a pretty good explaination of the exact question you have. It demonstrates it by using the Harry Potter films as an example.
1) Advertising. On large movies, this can double the cost.
2) Studio budgets. Movie A might be funding the production of movie B while it’s being made, so the studio might need a certain profit from movie A to stay financially solvent.
3) Shell accounts. Studios can spend money through shell companies. This allows them to look broke, but the whole time they’ve basically been paying themselves. It’s not *quite* as simple or shady as that, but it’s close.
4) ROI. The return you make on a movie has to be compared to what that money could accomplish elsewhere. No one is going to invest in a studio that merely breaks even on every movie, and if creditors aren’t interested, a studio’s interest rates go up, making movies even more expensive, and so on.
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