How do movies that gross many millions of dollars over their budget still result in the production company losing money?

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For example- I looked at The Mummy (2017) on Wikipedia, which had a budget of $125-195 million, and grossed $410 million worldwide at the box office, yet it also says the studio lost $95 million. How is that possible?

In: 99

That’s the budget to make the film.
There’s still the money you need to spend promoting and advertising the film.

However films these days are designed to lose money.
Actors often negotiate to get a share of the profit. And they don’t get paid if the film doesn’t make a profit. So studios make a “company” for the film, then charge that “company” an exorbitant fee for everything. So the film technically loses money, while they get all the profits.

First of all, the budget you see is just the production budget. Generally you need to make at least 2X-3X the production budget in the box office. The production budget doesn’t include marketing or lots of other costs to break even. (as a side note, when you give a range on the budget like that, it probably means its actually at the high end)

In addition, the movie doesn’t get all of that box office. The real math here is complicated, especially for US movies released internationally, but on a good day, maybe they get 50%-60% of the global box office.

So If the movie costs $150M to make, it may have needed to make closer to $400M to break even.

But even then, thats just on the books. For how accounting is really done on movies (the famous “hollywood accounting”) its much more complicated what money gets counted where, so in reality, the “movie” might lose money, by design, as the money is instead made by other companies involved, while the movie eats all the costs.

It’s called “Hollywood Accounting” and the losses are purely on paper. Designed to withhold any profit sharing agreements that may have come into agreement through the many hands that help create the movie.

In addition to all the answers stated here, the studio or production companies do not get all of that gross revenue. The movie theater chains will get a certain amount too, and the percentage gets even smaller when it comes to the foreign market.

They do what is called Hollywood accounting. This is where you make sure a movie makes a loss without actually making a loss.

One of the easiest ways that they apparently do it is through promoting the movie. The company that they will use to advertise the movie will be a separate company but owned by the same people who own the movie. They then charge a stupidly high amount of money to advertise the movie. This is usually counted as an extra expense outside of the movie’s budget. So this can be used to greatly reduce how much a movie makes even though the company (companies) involved actually spent very little money compared to what they are claiming. It’s just their own money moving through different bank accounts and being written off as an expense.

Other ways are that they charge costs from other movies to ones that they need to lose money.

I’m sure there’s a wiki for ” Hollywood accounting ” its why we never got a sequel for forest gump, the screwed the author

It’s a process called [“Hollywood Accounting.”](https://en.wikipedia.org/wiki/Hollywood_accounting)

The studio overstates their costs in every way imaginable — including paying a shell company extortionate rates for “marketing” — until the movie appears to have lost money on paper.

The marketing expenses are usually higher than production budget for a big Hollywood movie. Let’s say a movie grossed $500 million, that means studio earns roughly $200 million. So if the production budget and marketing budget total around $210 million, that means there was a loss of $10 million for studio.

I have to mention Winston Groom, who wrote the book the movie Forest Gump was based on (55M to make 678M box).

Forrest Gump was published in 1986, and was adapted into a 1994 film of the same name starring Tom Hanks in the title role of Forrest Gump. The film propelled the novel to best-seller status, and it sold 1.7 million copies worldwide. However, Paramount Pictures utilized Hollywood accounting to deflate profitability numbers of the film and Groom received no payment for his 3% profit share in it.

You older brother tells you that he is going to the store and if you give $5 then he will give you half the candy he buys. When he gets back hes got a bag full of soda, chips, and 2 lollipops of which he gives you one.

Hollywood math… The studio production company can claim and pay various expenses to itself, for marketing/production, etc. So that the movie never makes much money. This is done so that anyone who would get part of the profits doesnt get anything. In our example you took a share of the profits(candy) of which there was little, you should have taken a share of the gross(everything, chips/soda/candy).

I’ve heard that movie accounting is the most creative writing of all.

Pro tip – get points of the gross, not the net!

If an actor has a profit share say 10% the company can do stuff like overcharge for hire of assets from other companies they own, Hugh management fee, loads of other tricks to try to stop said actor recieving maybe 100,000,000s in profit share if the film.

its a tax scam. a lot of them are doing it. i think john oliver has an episode on it. they also hint about it in tropic thunder about how theyll deal with speedmans loss. and marketing budgets often equal the budget for the movie. for that movie especially they were marketing the hell out of it because they wanted a marvel style franchise to launch off of it.

Because the budget of the movie isn’t the total cost to the studio, and the box office isn’t the total revenue to the studio either.

The box office gross isn’t how much money the studio made on a movie, it’s the total of all the ticket sales. When you go to a movie theater and buy a ticket the theater keeps some of that money, generally somewhere between 40% and 50%, though it can vary from film to film. So if The Mummy made $410 million at the box office the studio probably made somewhere around $200 million and theaters made somewhere around $200 million. So the amount of money that a studio makes on a movie is very roughly half the box office gross.

The other aspect is that budget of a movie is just the production budget to actually make the movie, it doesn’t include the costs of things like advertising and distribution. So on top of the costs of making the movie you need to pay people to design the posters, and pay for ads, press availability, and things like that. For a major blockbuster those costs can be really big. For example according to [Deadline](https://deadline.com/2017/06/the-mummy-tom-cruise-box-office-bomb-loss-1202114482/) The Mummy reportedly had marketing costs of around $150 million. So the studio needed to make that money back *in addition* to the budget. So the budget of the film was somewhere between $125 to $195 million, but the total cost to the studio was between $275 to $345 million.

As a result of these two factors a major Hollywood film generally needs to make around twice or three times its production budget to turn a profit.

like all companies there is a projected profit. they say “we will make 500 million off this movie.” when the sales come in and are at 400 million profit they have lost 100 million because it did not meet the projected income.

this is why companies like netflix, amazon and others claim a loss.

They do what is now called Hollywood Accounting: [https://en.wikipedia.org/wiki/Hollywood_accounting](https://en.wikipedia.org/wiki/Hollywood_accounting)

You basically keep increasing your expenditures post-factum as you make more profit, so in the end you only just break even or lose money.

A movie costs $100 million to make and then they spend another $100 million advertising it.