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
You’re a producer who just finished a movie, and spent $200 million to make it. If you want your money back, people have to pay to you to see it. So you’ve distribute it, and you’ve gotta tell people about it. That means paying for billboards, radio, trailers, tv ads, online ads, McDonald’s toys, flying your cast around the world for interviews and premieres. Call that $100 million for a highly visible global campaign.
So to make your money back, you now need to earn $300m at the box office from ticket sales.
But you’re not the only one who gets to make money here. For your $200m big budget movie, you had to hire a big budget cast and director whose agents negotiated a share of the gross revenue. Let’s say they, collectively, get 15% of box office receipts. So for you to make your $300m, you actually need to sell $350m in tickets.
But you don’t own the movie theaters, and they’re not free. They’ve got to pay staff, electricity bills, maintenance, upgrades to video and sound systems to keep up with the competition, etc. And presumably they want to make a profit too. So let’s say they’re gonna take 30% of the ticket sales.
So now your *share* of the box office has to be $350m, so boom – the actual ticket sales needed are $500m. Just to break even.
But it doesn’t actually stop there either. Making movies is risky. Sometimes they flop. The $200m it cost to make the movie, that wasn’t your own money. It was the studios, and executive producing partners (which in the movie biz is really just a fancy word for “investor”) who put it up. They put in millions of dollars that were tied up – for a big budget movie – for two, maybe three years.
For a big risk like this, they want a big return, otherwise they’d invest in something more predictable. They could’ve just invested in the stock market and earned ~7% per year for three years, which would have been less likely to flop, and could be cashed at at just about any time. So to overcome that alternative, you need to actually get them their money back plus at least 25%. Otherwise, future investors won’t be interested in working with you again. So you actually need to earn *another* $100m, bare minimum, for it could even start to be considered a small success.
So your $200m movie needs to make at least $600m, or else your career is through.
Same as any business. If I bring in $100k, I get to keep about 30-33k of that. The simple rule for me is 1/3 goes to taxes, 1/3 goes to expenses, and 1/3 goes to me.
Because usually when we refer to a movie’s budget we are referring to a production budget to actually make the film, but there’s other costs associated with making movies, such as distribution and advertisement costs
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