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
There’s this thing in business called an efficiency ratio. If you spend $100 to attract $200 in revenue you have a profit margin of 100%. If you decided to expand your business and spent all $200 in revenue and received $300 in revenue, your profit margin decreases but your take home is exactly the same. This is because your efficiency ratio is reduced on those sales.
With movies the cost to produce the film isn’t the first or last cost of getting a movie to the movie theaters. There’s a promotional budget… and for these big films it’s into the hundreds of millions of dollars.
After that you have your source of revenue. The movie theater is going to get their cut of the ticket sales and you get your cut. Some deals make it worse like RDJ wanting a cut of ticket sales for all Marvel films (making him a billionaire). But then you can offset that by deals including a cut of concession sales.
Because of this the efficiency of these large films is absolutely brutal. If you’re getting 1/3 of the ticket price in revenue and have to introduce distribution and marketing costs the ability to break even is hard.
This is also the big reason why RomComs and teen movies took off in the late 90s and early 00s. Even a flop like Freddie Got Fingered (an underrated film of course) which lost money at theaters (lost $1M on a $14M budget) was low risk and essentially began making money from DVD sales and eventually digital sales.
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