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.
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.
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.
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).
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