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Johnny Wiseau

breaking even rule of thumb/ancillary market revenue etc

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my questions are pretty much clear..

1-double the production budget rule of thumb..how correct this statement is?

2-on average..how much does the ancillary market contribute in the profitability of a movie?

 

couldn't really find a good source when it comes to these informations..and I consider it really important as there is not much point in tracking BO without knowing if the movie is successful or not..

 

personally I've always assumed that if the BO doubles the production budget..the ancillary market revenue will cover the costs of P&A..

 

just general ranting..and any information could be useful..

 

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The production cost rule of thumb is that a movie needs to make about double it's budget to be profitable.  But that's without marketing.  Marketing budgets are hard to come by unless you actually know someone in the business. But it's not uncommon for studios to spend 70-100 mill on tentpoles WW.  The 50% rule is not a hard and fast rule though.  Sometimes films sell their foreign rights to distributors, meaning the studio sells the film for a fee, and that distributor keeps all the money it makes in said country.  First Blood did this in 1981 when it was being made and it became profitable even before it was released.  

 

As for other forms of revenue, studios get a 12% fee from TV.  So whatever the film makes in North America theatrically, this is what television pays to the studio for the rights to broadcast.  So if a movie makes 100 mill at the NA box office, the cost for the network is 12 million.  

 

I don't know the split for HV.  I would assume it's higher than theatrical though.  Then of course if you are lucky there is merchandise.  Disney gets 10% of whatever merchandise sales they get from brands like Pixar and this is one of the reasons Cars was so profitable.  That film sold 10 billion dollars worth of revenue over a 5 year period netting Disney a cool billion dollars, so you can understand why they paid 7 billion dollars for the Pixar brand.

 

I'm not the most knowledgeable guy on this site when it comes to this, but I have scratched the surface for you.

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The production cost rule of thumb is that a movie needs to make about double it's budget to be profitable.  But that's without marketing.  Marketing budgets are hard to come by unless you actually know someone in the business. But it's not uncommon for studios to spend 70-100 mill on tentpoles WW.  The 50% rule is not a hard and fast rule though.  Sometimes films sell their foreign rights to distributors, meaning the studio sells the film for a fee, and that distributor keeps all the money it makes in said country.  First Blood did this in 1981 when it was being made and it became profitable even before it was released.  

 

As for other forms of revenue, studios get a 12% fee from TV.  So whatever the film makes in North America theatrically, this is what television pays to the studio for the rights to broadcast.  So if a movie makes 100 mill at the NA box office, the cost for the network is 12 million.  

 

I don't know the split for HV.  I would assume it's higher than theatrical though.  Then of course if you are lucky there is merchandise.  Disney gets 10% of whatever merchandise sales they get from brands like Pixar and this is one of the reasons Cars was so profitable.  That film sold 10 billion dollars worth of revenue over a 5 year period netting Disney a cool billion dollars, so you can understand why they paid 7 billion dollars for the Pixar brand.

 

I'm not the most knowledgeable guy on this site when it comes to this, but I have scratched the surface for you.

thanks man..so I guess relying on this rule of thumb is somehow safe

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The production cost rule of thumb is that a movie needs to make about double it's budget to be profitable.  But that's without marketing.  Marketing budgets are hard to come by unless you actually know someone in the business. But it's not uncommon for studios to spend 70-100 mill on tentpoles WW.  The 50% rule is not a hard and fast rule though.  Sometimes films sell their foreign rights to distributors, meaning the studio sells the film for a fee, and that distributor keeps all the money it makes in said country.  First Blood did this in 1981 when it was being made and it became profitable even before it was released.  

 

As for other forms of revenue, studios get a 12% fee from TV.  So whatever the film makes in North America theatrically, this is what television pays to the studio for the rights to broadcast.  So if a movie makes 100 mill at the NA box office, the cost for the network is 12 million.  

 

I don't know the split for HV.  I would assume it's higher than theatrical though.  Then of course if you are lucky there is merchandise.  Disney gets 10% of whatever merchandise sales they get from brands like Pixar and this is one of the reasons Cars was so profitable.  That film sold 10 billion dollars worth of revenue over a 5 year period netting Disney a cool billion dollars, so you can understand why they paid 7 billion dollars for the Pixar brand.

 

I'm not the most knowledgeable guy on this site when it comes to this, but I have scratched the surface for you.

 

We should remember that some tv networks and studios sometimes are from the same media conglomerate. If a WB movie is showed on HBO, it's still money flowing among Time Warner companies, so we sometimes only pay attention to the small profit for the studio when the movie is actually making a larger profit for the whole corporate group.... I guess. I didn't say any bullshit here, did I? 

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Deadline published some numbers from 16 movies last year in a special series they called their "Blockbuster Bracket" (mimicking NCAA March Madness). I'm sure their numbers aren't 100% accurate, but they should be in the ballpark.

 

Here's the link:

http://deadline.com/2014/03/iron-man-3-despicable-me-2-profit-most-profitable-movies-2013-705199/

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Deadline published some numbers from 16 movies last year in a special series they called their "Blockbuster Bracket" (mimicking NCAA March Madness). I'm sure their numbers aren't 100% accurate, but they should be in the ballpark.

 

Here's the link:

http://deadline.com/2014/03/iron-man-3-despicable-me-2-profit-most-profitable-movies-2013-705199/

 

While pretty decent, I don't think they accounted for brand tie-ins and ancillary revenue. For example, IM3s tie-up with FIOS and so on. Those are much tougher to quantify but pretty sure they helped offset production budgets and marketing budgets a lot.

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The bottom line is none of us really know the amount of money the studios are making.  IMO, it has to be a hell of a lot more than we know.  For example, Expendables has a budget of 100 million.  The second one made 300 mill worldwide and yet LG opted for a third and put up the same budget.  Take marketing into account and these movies are not breaking even for LG.  So why are the budgets still that high?  They are making money somewhere and somehow, but I have no idea where.

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Also, some movies make a ton of money no matter what like animated films and superhero films that have a lot of merchandising tie-in. I would argue that a Batman film for instance is a 2-hour commercial for Batman merchandise and any money made from the BO is just icing on the cake.

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I've often said that the theatrical release is basically a trailer for the HV and everything else that comes from it , post theater.

 

Spiderman 3 was rumoured to cost 550 million dollars.  They wouldn't agree to that if they were just making money from the theatrical release.

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Generally, I use 2-2.5x production budget in order to determine breaking even because depending on which markets it does really well in since studios get a higher % of the gross in some more than others.  So the lowest a 100m budget movie could make to break even is about 200m and the maximum is about 250m.  I don't include marketing costs because BR/DVD sales + TV contracts usually cover that unless the marketing budget is bloated and/or goes completely off the chain like with TASM2.

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The bottom line is none of us really know the amount of money the studios are making.  IMO, it has to be a hell of a lot more than we know.  For example, Expendables has a budget of 100 million.  The second one made 300 mill worldwide and yet LG opted for a third and put up the same budget.  Take marketing into account and these movies are not breaking even for LG.  So why are the budgets still that high?  They are making money somewhere and somehow, but I have no idea where.

but the Expendables 2 made 300m WW..and I'm certain that the expendables marketing is at most half of Iron Man 3 for example..

they covered the production budget+most of the marketing with the theatrical income..and the ancillary market revenue will be pure gravy..no wonder part 3 was made..and probably part 4..

Edited by Johnny Wiseau
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my questions are pretty much clear..

1-double the production budget rule of thumb..how correct this statement is?

2-on average..how much does the ancillary market contribute in the profitability of a movie?

 

couldn't really find a good source when it comes to these informations..and I consider it really important as there is not much point in tracking BO without knowing if the movie is successful or not..

 

personally I've always assumed that if the BO doubles the production budget..the ancillary market revenue will cover the costs of P&A..

 

just general ranting..and any information could be useful..

 

 

I interviewed a professional box-office tracker back in April 2012.  Here's what he/she said (identity will remain anonymous)

 

--------------------------------

Thanks for writing.  As a rule of thumb you can say that  studios take about half of the gross. It can vary with different movies, and different territories.  You can also use 15% as a rule of thumb figure for distribution. As for other movie costs, they really vary widely – which is what makes it so difficult to  estimate film profits from the outside. As far as revenues sources go, worldwide it breaks down:  broadcast networks 35%, home video 27%, theatrical 16%, basic cable 8%, pay TV 7%, PPV/VOD 4%, merchandise licensing 2%, and digital 1%.  The breakdown for domestic is a lot different:  Home video 40%, theatrical 25%, basic cable 12%, pay  TV 8%, PPV/VOD 5%, merchandise 5%, digital 3%, and broadcast TV 2%.

 

For licensing revenues by film, the best sources are License! Global, and The Licensing Letter – but they don’t always report by film title. Sometimes studios will disclose, but not always. Disney was proud of its Cars 2 effort, so it’s possible. As far as the $9B merchandise figure for Cars goes, if it’s correct –and I don’t know whether it is – then it refers to retail price. In other words, most of the cash would go to the retailer and manufacturer. It can still be meaningful for a studio, but not $9B meaningful.

----------------------------------

 

These guys are right...  Entire production budget (production PLUS prints/advertisements) x 2 = roughly a breakeven point

Edited by lilmac
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I interviewed a professional box-office tracker back in April 2012.  Here's what he/she said (identity will remain anonymous)

 

--------------------------------

Thanks for writing.  As a rule of thumb you can say that  studios take about half of the gross. It can vary with different movies, and different territories.  You can also use 15% as a rule of thumb figure for distribution. As for other movie costs, they really vary widely – which is what makes it so difficult to  estimate film profits from the outside. As far as revenues sources go, worldwide it breaks down:  broadcast networks 35%, home video 27%, theatrical 16%, basic cable 8%, pay TV 7%, PPV/VOD 4%, merchandise licensing 2%, and digital 1%.  The breakdown for domestic is a lot different:  Home video 40%, theatrical 25%, basic cable 12%, pay  TV 8%, PPV/VOD 5%, merchandise 5%, digital 3%, and broadcast TV 2%.

 

For licensing revenues by film, the best sources are License! Global, and The Licensing Letter – but they don’t always report by film title. Sometimes studios will disclose, but not always. Disney was proud of its Cars 2 effort, so it’s possible. As far as the $9B merchandise figure for Cars goes, if it’s correct –and I don’t know whether it is – then it refers to retail price. In other words, most of the cash would go to the retailer and manufacturer. It can still be meaningful for a studio, but not $9B meaningful.

----------------------------------

 

These guys are right...  Entire production budget (production PLUS prints/advertisements) x 2 = roughly a breakeven point

lol that's not that the acticle said..BO revenue only represents 25% of total revenue of a movie..

this guy is trying to tell us that almost no movie ever loses money..I believe in the double the production (only) rule

 

this guy is basically saying if a movie made 40mil ww on a 40mil production budget it'll make 20mil from theatres..which means eventually it'll make up to 80mil from ancillary market revenue! that's not really accurate is it?

Edited by Johnny Wiseau
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Yes, it is accurate.  Box-office grosses (outside of distribution fees)  is sometimes a small fraction of what a movie makes.  Alot depends on the film.  See the previous posters' example of Cars.

Cars is an exception though, not the rule, not every blockbuster becomes a merchandising monster.
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wait a second..so Transcendence and Pompeii and the Lone Ranger and John Carter and and and....never really bombed and made their money back? or on track to one day at least?

 

Not necessarily. If you look at John Carter for example, the movie cost something like $250+ million and marketing would've probably cost 150 million. It'll still be difficult, considering how badly it did at the box office to break even.

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Not necessarily. If you look at John Carter for example, the movie cost something like $250+ million and marketing would've probably cost 150 million. It'll still be difficult, considering how badly it did at the box office to break even.

well it made 280mil WW..the studio made half of that=140mil

 

140*4=560

 

560-400(total costs)=160 mil profit

 

lol that's just fucking impossible..John Carter DID NOT and WILL NOT make 160 mil profit..

Edited by Johnny Wiseau
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