It seems like even before the first weekend is over, all the box office analysts have already declared the success or failure of the movie. I know personally, I don’t see a movie until the end of the run, so I don’t have to deal with huge crowds and lines and bad seats, it’s safe to say that nearly everyone I know follows suit. Doesn’t the entire run – including theater receipts, pay per view, home media sales, etc. – have to be considered for that hit or flop call is made? If not, why?
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Diminishing returns. Lets take the recent Little Mermaid remake as an example. Here’s what it earned domestically each of the first 4 weeks:
1. $145 million
2. $60 million
3. $36 million
4. $20 million
Each week is substantially less lucrative than the previous. In this case more than half the earnings occurred in the first week. Based on this kind of data (along with data from lots of other movies over time, number of theaters released, review scores, etc.) you can build a pretty accurate estimate of how much the movie will eventually earn overall.
Its not an exact science. Sometimes movies that start small get a huge wave due to word of mouth. Sometimes a movie takes off in one of the larger overseas markets despite doing so/so domestically. But those are exceptions. Most of the time the data is good enough to make a call fairly early on.
It also depends on how much the movie cost to make. If it was a very cheap movie, even modest returns can turn it profitable. On the other hand if it was very expensive, it can be quick to see it won’t make much, if any, profit, even over time.
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