Saturday, May 24, 2008

Question: Does a movie need to make 2.5x its budget in order to break even?

Question for the Emperor: Does a movie need to make 2.5x its budget in order to break even?

So marketing isn’t always all that big and doesn’t always scale. I mean, the average movie is probably paying 25 million in marketing, with the bigger going up to 40 million. The smaller movies may only pay 10 million or so. The blockbusters might hit around $100 million in marketing costs (or $150 for the mega blockbusters).

The real costs go to theaters and distribution (40-45% of gross).

2.5 times the production costs sounds about right, but the production costs and marketing costs are variable, and the distribution/theater costs are almost directly related to the gross. Some smaller movies might be closer to 2.1 times, while some extreme examples probably get even higher. Let’s look at an extreme example…

Sony’s Spider-Man 3 (effects by Sony Imageworks)

Production Budget: $258 million

Marketing Costs: about $150 million

Gross Worldwide Income: $890,871,626

Theater/Distribution Costs (based on 45%): $400,892,231

Total costs (Budget, Marketing, and Theater/Distribution): $808,892,231

2.5 x it’s Production Budget: $645 million

Total Box Office Profit (guesstimation): $82 million

So Spider-Man 3 actually had total costs that were about 3.1 times the original production budget.

So why do they make these films then?

- Promotions
- Toys
- Merchandise
- DVDs

Sometimes movies are expected to lose at the box office and gain all their profit from DVD sales. For example, Harold and Kumar was pitched as a movie that would break even in the box office and then make strong profits on DVD (that system worked so well that the sequel just came out; they wanted to do it again). Austin Powers made $67 million in the box office, and then after a strong DVD performance, the sequel made $312 million in the box office (with a low $33 million production budget).

- The Emperor

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