Like if a movie cost $200 million to make, then the break even is 500 million.
I heard that the .5 accounts for marketing/ PR. But why does it need to make the remaining 2x to break even? If it cost 200 million. Then the .5 is 100 million. So it should only cost 300 million to break even.
Why would it need the additional 200 million and get to 500 million to breakeven?
In: 409
If a movie sells $200 million worth of tickets, the company that made it does not receive $200 million. Some of that goes to the theaters, some of that goes to taxes. If it’s ticket sales abroad, then the government for that other country takes its cut too.
Supposedly if the budget is 200 million, they spend another 100 million on ads. Wouldn’t that make the budget 300 million then? It would to me.
Because the movie studio doesn’t get all the money from ticket sales. The ticket price is split between the studio and cinema showing the movie.
In general the studio gets 50-60% from the domestic market (US-Canada), 40% from International markets and just 25% from China.
Chinese distribution does pay for all the marketing in China unlike how the studio pays for marketing in other countries, so it’s not as bad.
Also the movie budget only accounts for the production of it. It doesn’t include marketing and distribution costs.
It’s very hard to get concrete numbers as big studios act as their own distributors and manage their own marketing campaigns.
But thanks to leaks and industry insiders we have been able to compile enough data to get the rule of thumb. If a movie makes about 2.5-2.7x it’s production budget, it has broken even. (2.7x is for movies that made the bulk of their money in China)
The movie industry is suffering from the same disease that the game industry has right now.
Financially speaking, they are more than happy to let the perfect be the enemy of the really good. They don’t want a whole lot of money. . . they must have ***all*** the money. If given the choice between no money and a whole lot of money, they’ll just fold their arms and pout out of the room, because what’s the point? They’d rather have no money if they can’t have ***all*** the money.
Short answer: [Hollywood Accounting](https://en.wikipedia.org/wiki/Hollywood_accounting).
Creative accounting so that in the end there’s no profit and therefore they don’t have to pay employees whose contracts are based on net profits, and also don’t have to pay any royalties.
This includes things like shuffling money around among subsidiary companies that all charge each other fees, or packaging costs in such a way that the money that would have been profits from one movie is used to cover losses for other movies that weren’t hits, and accounting using estimated costs instead of actual, estimated in such a way that the overhead can eat most of the profits, regardless of actual costs. Also padding variable costs once the early numbers are in and they know how much more they need to spend for it to be a loss.
Hugely successful movies can make 10x their costs and still report a loss. Then people have to sue the studios to get paid. And the lawsuit often ends up being settled for a fraction of what the company should’ve paid out.
Ah, the movie business: where making millions means paying everyone and their cousin twice. Hollywood math at its finest!
I’d also like to add that “breaking even,” i.e. getting the same amount of money out that you put in, from an investment point of view would be considered a failure, because you could have just put your money in the bank or the stock market and made an (almost) guaranteed return.
Something no one is saying: “a success” isnt the breaking even, it’s **making more money than the same budget spent elsewhere.** A studio has $200 million to spend on a movie: if they make $250 million on that investment, but could have made $500 million investing that money in a different movie, that’s $250 million left on the table. Effectively a **loss** of $250 million.
Every investment, everywhere, is judged based on what else you could have gotten doing something else.
Because the studio doesn’t keep all the money charged by the movie theatres. Now making a huge amount of money during a film’s opening weekend is very important, because the contracts are back-loaded for the screeners, and front-loaded for the studio. But it’s not over. The distributor takes a cut, and so do any big-name talent who were able to negotiate a cut of the gross. For example, Sir Alec Guiness negotiated for two percent of the gross profit of Star Wars, which netted him an immediate $7 million.
But there’s more. Most money on a film production is *borrowed*, and therefore the payments back to whomever lent it are structured with interest. I won’t get into the incredibly complex world of film financing, except only to say that when you borrow $200 million, you have to pay back more than $200 million before you start showing profits, and the longer you wait between borrowing and repayment, the more interest you’ll have to pay.
Guess even blockbusters can’t escape the clutches of taxes and greedy theater owners! Showbiz, huh? 🎥💸
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