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?
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Generally speaking a lot of business functions on the one-third rule. Based on revenue, One-third goes to make a product, one-third goes to overhead and the final one-third is profit. Actual profit margins will vary based on the business but it’s a good rule of thumb.
The movie industry also functions a little differently than most businesses. Each movie is its own company. Whoever distributes the movie will charge huge fees to the movie company. The individual movie might make gross profit at the box office but because of the fees charged by its distributor it will make zero net profit.
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