If a movie’s production budget was, say 18 Million and it made 24 Million, does Hollywood consider that to be a success? That is a 33% margin and in almost any business that would be considered darn good. Of course, that doesn’t include the cost of promoting it. (I took those numbers from a random movie at Boxoffice Mojo.)
There are a gazillion variables. Most important I suppose would be
-Does the $18 million include marketing
-Who all has points in the movie?
-Who financed the movie and on what terms (i.e. what will the interest be when repaid)?
Chicago, Coming to America were two films that took in several times their budget and yet lost money on paper when people with profit points tried to collect; the most amazing is My Big Fat Greek Wedding, which cost $5 million to make, took in over $400 million in box-office and video, and managed to lose $20 million (4 times its production cost) according to papers filed when Tom Hanks & his wife (who produced and financed it) and star/writer Nia Vardalos sued for their share of the profits.
Per the article linked above, film distribution companies usually take 30% of the box office, sometimes more or less depending on many variables. In the above example, the film distribution company would receive just over $7 million, which subtracted from the $24 million is $1 million less than the budget.
No movie ever makes money; ask anyone who’s promised a percentage of the net.
Hollywood uses all sorts of tricks to keep movies from ever making a profit. My favorite is interest costs. You’ll see this in any film budget. What this means is how much money the production company could have earned if they had invested the money instead of making the film.
Thus, if a movie costs $100 million to make, they’ll assume they could earn $10 million by investing the money at 10% (yes, I know, but guess who’s determining that figure) and charge $10 million to the cost of making the film. And because this “cost” increases over time (the longer you invest the more income you make), it creates what’s known as the “rolling breakpoint,” where the amount of money to break even increases as time goes by.
Getting away from the accounting, the cost of the film is inflated by charges like this, so you could easily make money on a film whose box office receipts are lower than the published budget.
The old rule of thumb was that a movie had to gross 2.5 times the production budget to break even. That’s because studios only get a fraction of the gross, marketing costs for a major movie average $35 million, and movies are made on borrowed movie with high interest payments. And star actors and directors started taking pieces of the gross, earning them tens of millions on blockbusters.
In today’s world of extended sales to pay-per-view, cable, DVDs, streaming video, etc., not to mention much larger foreign sales, there’s probably a much higher backend payoff. And since stars don’t drive movies the way they used to even a few years ago, the ego packages are being cut drastically.
An $18 million dollar picture is a tiny independent film in today’s world. Most star actors make more than that per picture, so a movie can only be made for that little if everybody cuts their prices and are promised more of the profits. A $24 million gross at the box office probably means a good life for the picture. It most certainly does not mean a 33% return. It may mean a large loss. Grosses are not nets.
The gross figures are mostly publicity numbers. They’re real dollars coming in, but they get distributed all over the place and have little to do with the reality of who gets paid what. Probably 90% of movies lose money in the short run. It takes years for all the profits to dribble in. That’s why all studios have that blockbuster mentality.
Hence Billy Crystal’s joke some years ago when he was hosting the Oscars: Hollywood, maker of some 30,000 movies, each of which lost money.
I’ve always thought that given the accounting schemes, people should contract for a percentage of the box office take rather than the net profit. Not that it would be easy to get the studios to agree to it.
I’ve also thought that given inflation and other factors, the large focus on box office take to determine the success of a movie would be better served by reporting the number of tickets sold instead.
Lysa Dean (a character in a Travis McGee novel) claimed that, “in Hollywood, the real creative geniuses are the accountants”.
So no matter how you slice it, the above-mentioned film was probably a failure. This was a WB film BTW and heavily marketed, not an indie.
That’s percentage of the gross. It’s granted to big names (actors, directors, etc.), but you have to have a lot of clout to get it. Studios, however, are happy to grant anyone a percentage of the net, because they’re giving them nothing.