The Incredibly Fascinating Way Movies Make Money

by Mandi Harrison


I really started noticing how show biz worked when I was in high school.  I waited each Sunday night to see the box office reports on the 10 pm news.  My mind was blown when I discovered Entertainment Weekly. It was like this magazine was written for me.  It was the perfect combination of nerdy and in the know.  I immediately got a subscription.  My little heart thought it knew everything.  Granted, it was misinformed on a lot of things, but I had discovered a new love: numbers.  

AKA MONEY

Cut to 4 years ago when I was reading anything I could get my hands on regard the film industry. My heart skipped a beat when I got to the numbers part; THIS was my language.  I showed Chris and he got just as excited as I did.  Now with every movie that comes out, we play a little game I like call "Do it- do the math!"  and we see where everything goes.  


Recently, Black Panther was released and there were headlines like:

"$200 million opening weekend!" 

"Number one for 5 weeks straight!"

"$1 Billion made worldwide!"

I know you are thinking that this movie made a ton of money.  Well, yes and no.  There are some little secrets as to how money is made and spent.  It actually can take years if at all for a movie to remake the money they have spent.  Here is a easy guide to how the money is made!   


So the first thing we are going to look at is...

GROSS vs. NET

  • The amounts that are listed on the news and IMDb and Wikipedia are the GROSS returns; that means all the money made before anything is taken out- like your paycheck.  
  • The number that actually counts, again like your paycheck, is the NET returns.  That is the amount after all payments are taken out.  

Our next thing to look at is:

BOX OFFICE RECEIPTS or RENTALS 


What Theatres Roughly Taken Out From Opening Weekend to Week 6

Chart shows the amount taken out by theatres. Numbers vary from studio to studio and then again from successful ones (Black Panther) to bombs (Valerian) on how much is taken out by the theatre.

This is the money that the movie theater keeps. The movie studio is paying the theater to play the movie.  The fee is set up on a sliding scale, meaning the longer the movie plays there, the more money the theater gets to keep.  Generally speaking, the starting amount starts at 40% to the gross going to the theater for the first 2 weeks, and then it goes up from there.  

Another thing to consider is that when the studio is trying make back its money.

The foreign box office numbers don't count right away! 

We'll get into that in a bit, so they are just looking at the domestic numbers, which the United States and Canada.  

Let's play "Do it- do the math!" with a movie and I'll show you how everything is done.  I'm going to take a movie that is out of the theaters and we can break that down.  Let's do..


Beauty and the Beast 

It was produced (paid for) and distributed (put in theaters for viewing) by Buena Vista AKA Disney

  • Estimated budget of $160 million
  • Worldwide (Foreign) box office gross was $1.26 billion
  • Domestic (US/Canada) gross of $504 million

=

$160 million budget against a $504 million domestic box office


Box Office Gross by Major Territory


It seems it made money.  But here are a few factors.....

A way for studios to attach big name actors is to give them a percentage of the profits.  There are two types of back end deal:

  • The net deal (which is difficult because as you can see, the "profit" is dwindling slowly.) 
  • The gross deal means the money is taking off the top sum, before anything is taken out.  This is the ideal back end deal.

Let's just assume that the main actors got paid off the gross.  Let's say 8% of the gross. That money is still going to come from the Studio's portion of the money.


Where Does the Money Go?!


We have our box office receipts and back end deals taken out.  Now with the $262,080,000 left, what do we do with the money?  Well, we need to pay our bills.  

  • First off is repaying what was spent on distribution and production.  Because this was a Disney film, it was done through by the same studio.  We are going to subtract that $160 million budget.  
  • Then we have marketing and advertising costs.  This is where it can get tricky.  For a big studio picture like this or something that is a contender for award season, the marketing costs can be over double the production budget.  Do you remember all the ads for Beauty and the Beast?  They were everywhere.  Studios usually don't release their marketing expenses, but I would be willing to bet money that Disney spent at least $200 million on advertising. Maybe even $300 million, but let's stick with $200 million to be safe.   
  • After production and marketing costs, there are other fees such as giving bonuses and making copies for each screen that will be showing the movie.  That's another $65 million. 


So, you're probably thinking, there's no money.  We are actually in debt. A LOT. Yes, but... now we can look at that foreign box office money.  

Each country is considered a separate territory, so there will be distribution deals for each one. The distribution and theater fees are little higher overseas, but once those fees and the back end deals are taken care of, everything goes back to recovering costs.  We've already recovered the production fees so that's a huge chunk taken out.  

Another way to make back money and attempt a profit is called ancillary rights.  

  1. DVD
  2. Blu Ray
  3. Video on Demand
  4. RedBox
  5. And of course the merchandise.  

Being that it is a Disney movie, there is merchandise as far as the eye can see.  

Everything that is a licensed Disney-Beauty and the Beast product helps make the profit.    

It seems like a lot of work and a little misleading at first.  Why say it made X amount of money when it really made Y amount?  Technically, it did make X amount.  It's a way to sell more tickets.  It's the peer pressure factor-you want to see what people are talking about. The studios and theaters work together to get the seats filled.  

The more seats are filled, the more successful the movie will be and that will lead to similar movies being made.

Once the movie has gone to streaming or DVD/Blu Ray, then the studio can work to recoup their investment.  Another question might be, why not just skip the theater all together?  Distribution at a theater helps to create an experience that people want to recreate at their own home. It's also easier to make money off of something that already has a fan base. Think of theatrical distribution as marketing for ancillary and merchandise as advertising and PR do for the film's theatrical release. 

To simply put it, run the final box office of any of your favorite films from sites like wikipedia.org or boxofficemojo.com -- pull both total domestic and budget and DO THE MATH.


Here's how Chris simply does it (because math isn't his strong suit):

EXAMPLE:

$15 MILLION DOLLAR BUDGET + MARKETING (GUESS-TIMATING $30-$35 MILLION) = $45-$50 MILLION FILM

PRETEND OUR MOVIE MADE $70 MILLION DOMESTICALLY AT THE END OF ITS 2-3 MONTH RUN

$70 MILLION DIVDED BY 40% (IDEAL WITHDRAWAL OF GREEDY LITTLE BASTARDS LIKE RECEIPTS AND SUCH) = $28 MILLION

$70 MILLION BUDGET - $28 MILLION = $42 MILLION

$42 MILLION (WHAT'S LEFT OVER) - $50 MILLION BUDGET =

-$8 MILLION

TA-DA! YOU MATHED AND THEY DIDN'T MAKE MONEY! HOORAY! 

Now this isn't 100% accurate but at least you know if a movie was profitable or not.


So that is how it works for a major studio produced and distributed movie.  There are a few more steps and a lot less money for movies that are independently produced.  Just something for you to think about as the summer blockbuster season grows closer!