Since the George Lucas sci-fi saga began back in , the franchise has made billions in revenue from toys alone, not to mention licensing income from other third-party companies. This strategy obviously doesn't work for every film. You don't see a lot of action figures for romantic comedies. However, merchandising is a cash cow for big-budget films that appeal to kids and Comic-Con fans alike.
On the other hand, some analysts suggest remaining on the lookout for movie fatigue. Kids are increasingly attracted to newer types of entertainment, such as video games and YouTube.
When a producer cobbles together the budget for an independent film, selling the distribution rights in foreign territories is crucial. Independent filmmakers can actually make money if they have a great foreign sales agent who can sell their movies in key overseas markets.
Once upon a time, it was all about DVD sales. Films have to leave the theater at some point, but they can remain evergreen on TV. As for VOD, revenue from these deals should add hundreds of millions to a studio's bottom line.
Many films that don't have the special effects and big-name stars to lure people to the theater often profit from this model. Streaming video is a new source of revenue for Hollywood movies. VOD revenues tend to dry up after a few years, but movie studios can still make money from older films by licensing them to Netflix or Amazon Prime.
However, the success of original content on the streaming services also draws audiences away from traditional movies. As the saying goes, nobody knows anything in Hollywood.
The film industry is in flux, and ticket sales alone don't drive revenue. So who knows, the little indie that you invest in could just be the next "Little Miss Sunshine. In Hollywood, there are no guarantees. Motion Picture Association of America. Accessed Aug. The Numbers. Smithsonian National Air and Space Museum. NDP Group. Alternative Investments. I will be working with three datasets, each providing a unique perspective on the matter….
I have frequently struggled to explain Hollywood economics to smart business types as they are often unwilling to be as flexible on certain terminology. For example, it can be completely legitimate for a number of stakeholders in the same movie to have different contractual definitions of profit. In a recent article , I went through at length all of the types of costs and income connected to making and releasing a Hollywood movie.
These include…. This pattern of seems to be the common understanding of movie economics among the insiders I spoke to. When the final profit or loss is expressed as a percentage of the original production budget we can see how the majority of films make or lose a figure close to their original budget.
While it is helpful to know the percentage return, another important factor is the scale of the production. Now that we have some understanding of how films make a profit, I thought it would be fun to apply this learning to all movies released to make a good guess at overall movie industry profitability.
There will always be some outliers such as those movies which made unexpectedly high amounts on VOD or those which gross well but have very high costs to recoup but overall these will be lost in the crowd of movies following the expected patterns. All of these movies have been studied on the request of producers or investors who are investigating movies comparable to a project they are considering getting involved with.
Therefore, we would expect there to be a higher-than-average number of profitable films no one is going to pay for a report showing how a movie similar to theirs lost money! As the selection of films is not random, we cannot draw any lesson from the overall figures, but we can use the data to look for patterns which would allow us to infer profitability in Hollywood en masse. I decided to focus on the two figures which are most easily available for movies — the production budget and domestic theatrical box office i.
They tested this rule for their own films and with the help of independent private film financiers and they said it was robust. Thanks to the Nash and Insider datasets, we can test this rule against the actual outcome. There are a handful of films which grossed a high multiple of their budget but still lost money. This may strike you as strange because one would assume that a movie which grossed, say, four times its budget at the box office would be guaranteed to make at least some money as profit.
Not so, due to the convoluted way that money makes its way back to the filmmakers. In truth, filmmakers will most likely have promised a share of these profits to investors, members of the cast and crew, etc. Let me take you through the stages money passes on its journey from the movie-goers to the filmmakers.
Because there are some silver linings in this fictional example…. It rather depends on who is doing the accounting! John Davis managing-director of the Rank Organisation from the late s through to the s was always able to produce accounts showing that no film ever made a profit — at least for the producers! Very interesting read Stephen, well done for all your number crunching efforts! Yes, you are right Stephen.
I just tried to figure out VAT from vat-calc. Stephen is the rate of profitability decreasing or increasing over time? I am curious about the trends. I need to to thank you for ones time for this particularly fantastic read!! I definitely appreciated every part of it and i also have you saved to fav to check out new information in your web site.
Hey Stephen, trying to do a stats project. As a return on investment ROI , looking at the initial outlay alone, that beats Blair Witch — unless you also factor in the marketing costs, in which case Blair is in pole position. Dollar for dollar, Blair Witch and Paranormal have to be considered two of the best movie investments in history.
But does that also make them the most profitable films in hard cash? Not quite. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. These days, it seems like it is all about the small screen.
More and more people are gathering around to binge-watch shows, while fewer and fewer people are heading out to movie theaters to plunk down a hefty fee for two hours of entertainment. So which entertainment sector is more profitable: movies or TV?
Hollywood studios have been churning out more big-budget tentpole films films whose earnings are expected to bolster the company financially , 3D movies, and action-adventure tales since audiences are more likely to splurge on a flashy, explosion-heavy movie than they are on a small, intimate drama.
Filmmaking is also a very risky investment, since most movies, even those small, intimate dramas, take several million dollars to make. When the theatrical run for a film ends, studios earn money from home video, streaming, and video on demand VOD. So which medium is more profitable, movies or TV? Then along came Game of Thrones.
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