The Business of Making Movies

All business requires guessing, but future predilections of moviegoers are especially opaque. If a large company wants to introduce a new car, it can at least base its predictions, in part, on factors like where oil prices are headed. Movie executives, on the other hand, come up with a host of new theories each summer about what audiences want — 3-D tent poles, 2-D tent poles, vampires, comics, board games and so on — then, sometimes over the course of a weekend, ricochet toward a new theory. Will the tepid economics of “Men in Black 3″ spell trouble for “The Amazing Spider-Man,” this holiday weekend’s big release? Who knows.

How does a movie like “Men in Black 3″ earn $550 million worldwide, but is now just considered profitable? That’s the question Adam Davidson tackles in his economics column for the Times magazine this week. Studios often rely on a few big hits to make up for all the flops that happen over the course of a year. If I were to guess what the biggest hit of the summer will be, I’d bet on “The Dark Knight Rises,” mostly because it’s the only movie that’s likely to draw me to the theater this summer, because I’ve stopped going to the movies because it’s just so darn expensive.

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13 Comments / Post A Comment

ThatJenn (#916)

Interesting! It’s always seemed really strange to me that these companies make money at all, given the magnitude of some of these flops.

@Jenn@twitter Almost all of the notorious “flops” you can think of made money on foreign release. Even going back to the early 1990s.

In fact, movies are now sometimes released overseas first, and US box office is generally only expected to cover production and marketing costs, if that.

It’s fascinating to me that always hear how all the bad aesthetic influences in Hollywood come from the desire to make more money, and yet they seem to be pretty terrible at business. From planning to budgeting to accounting to marketing, virtually everything about the way Hollywood does business defies all sense.

@stuffisthings And incidentally, I think the economics suggest it would be better to produce more, smaller-budget movies than a few titanic mega-blockbusters that cost more to market than they do to make. Which would be both a good business decision and a win for aesthetics.

ThatJenn (#916)

@stuffisthings It would definitely be more enjoyable for most of the moviegoers I know.

@Jenn@twitter The comparison I like to make is between two well-known films that came out around the same time in 2001, Memento and Pearl Harbor. Memento’s worldwide gross was about $40 million, to Pearl Harbor’s $450 million. Seems like a clear win for the blockbuster.

However, Pear Harbor cost $140 million to make, probably at least $100 million to market. A 187% profit certainly sounds like a good investment, but Memento cost only $9 million to make and next to nothing to market. So it was actually a 444% profit.

I know where I’d put my money…

(Note that I didn’t cherry pick this example, it was just the first time I ever ran these numbers, after seeing that Memento had one of the highest per-screen grosses that year. There are plenty of other examples of breakout indie hits doing even better.)

Mirch (#228)

Does anyone else think the Spider-Man movie is going to be a big flop? The previews look pretty damn bad, especially that reptile monster, what the hell is that? the geico gecko on steroids?

ThatJenn (#916)

@Mirch I agree it doesn’t look so good. But I’m going to see it anyway, because… well, I don’t even know, really.

jfruh (#161)

@Mirch I’m still offended that a three-movie series that debuted during my adulthood has now been done long enough to be rebooted, which would imply that I’m old somehow, which for the record, I am NOT.

selenana (#673)

I’ve already seen Spiderman- it opened here in Japan last weekend. I guess this is one of the big places they hope to make their foreign money? But the 630 showing on a Sunday night was pretty empty. A couple dozen people, tops.

hershmire (#695)

Fewer “reboots” and sequels, fewer movies ripped from ’80s pop culture, more creative and inspiring films that don’t rely soly on CGI, and perhaps lower the cost of tickets. That might get a few more people to the theaters.

meghan@twitter (#1,334)

Any other NPR’s Planet Money (or This American Life) listeners out there? If so, did you hear Adam Davidson’s voice speak the article in your head as you read it? I sure did!

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