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
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.
Latest Answers