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
Using your numbers, it would actually be a $600M break even.
$300M to the theaters (they take half)
$200M production
$100M marketing
$600M
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.
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.
It doesn’t. It’s what the studios do to try and convince people that they can’t pay the points. So now they are making up this b.s. about the movie not being profitable. Hollywood accounting used to be a well-known phrase.
The ticket at the box office is with VAT included (sales tax). Remove that. Then there’s the P&A (publishing and advertising) costs, as you mention. But then there’s a payment structure based on how the film is financed. Rarely (i.e never) is the budget just a single studio ponying up $200 million. There are deferrals, various investing schemes, minimum guarantees and much more. Workout going into detail for all of these things, let’s take minimum guarantees as an example. If you make a movie for 10 million, and you manage to presell it to 10 territories for 1 million each, you’ve fully financed the film with minimum guarantees. Now the movie makes 10 million at the box office. Not only doesn’t that cover your costs, you don’t see a penny of it because the distributors have already paid you that money and you spent it to make the movie.
Sal’s pizza shop might be happy with 7 points back on the dollar, but if you’re putting up 100s of millions, well…you hope to do a little better.
Doesn’t really answer the question, but hear me out, here’s how Hollywood could start making loads of money.
By stopping making movies. Those represent huge expenses, sometimes the studio has a blockbuster, sometimes a flop.
But every year in the USA, there are 3.6 million babies born. That 3.6 million future filmgoers that *have never seen Star Wars in a movie theatre*.
Hollywood should just stop making movies and re-release old classics for new clients.
In addition to other answers here about tickets, I’ll also add that marketing is very expensive and often not set as part of the budget you see the number of
Some of the most creative accounting ever used is done in the movie business. Makes the government look like pikers
Question related to this, how do some successful movies never make a profit like the original Star Wars films?
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