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How much money does a movie need to make to be profitable? (article)

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Ya I remember doing a double take when reading George Lucas' Blockbusting and seeing that Order of the Phoenix lost money. Although it was still a win in both maintaining and advancing the popularity of the series, it was still shocking to see that the actual theatrical release still lost money despite grossing over $900m.

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Ya I remember doing a double take when reading George Lucas' Blockbusting and seeing that Order of the Phoenix lost money. Although it was still a win in both maintaining and advancing the popularity of the series, it was still shocking to see that the actual theatrical release still lost money despite grossing over $900m.

That's because it didn't. The accountants will find all kinds of ways to say films lost money....better for taxes purposes and also better to screw over your cast members that have bonuses based on profitability.
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There are a lot of factors that need to be taken into account of course, but I read somewhere that a general rule of thumb is 2.5 * the production budget (not including marketing that is). So a movie with a $200m budget would need to make $500m before it starts to turn profit.

Edited by Don Calavera The Stingray
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The part about Harry Potter and The Order of the phoenix losing money seems BS to me.If that lost money with a budget of 150M, what about Half Blood Prince which had a budget of 250M and grossed less than OOTP.If that was true, Warner Bros. would be bankrupt by now...

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It's like that scene in ID4 when Goldblum's dad tells the president that there's a reason hammers cost $60.00.WB losing money on OOTP is the biggest accounting fix of the century.

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It's like that scene in ID4 when Goldblum's dad tells the president that there's a reason hammers cost $60.00.WB losing money on OOTP is the biggest accounting fix of the century.

It isn't a fix at all.It's important to understand what that statement means. This article uses that example, but the author clearly doesn't understand what it means, or what those numbers are in their proper context. Fortunately he doesn't dwell on it.Now what that isn't...it's not a studio P&L. It isn't saying Harry Potter lost money, and the person who received it should know that...or at least his manager should, if they understood the contract they signed. Nonetheless real Hollywood accounting is not that creative, and that statement you see is not actual accounting that has any relation to what gets reported to the street. What you are looking at is a statement to someone who worked on the film, maybe the writer. It is the execution of a contract stating how a player gets paid on the back end, based on very specific definitions of how this person should get paid, which is most definitely not them sharing a percentage of the straight gross profits. You better have paid for half the movie before you're going to get a deal like that. Now you can certainly argue the person who was getting that was getting screwed...but...they got screwed when they signed the contract then. And they had every ability to know they were getting screwed if they had decent management (and honestly, it's a pretty big judgment call if they are getting screwed...not everybody really deserves a percentage of the profits now).If you know the general type of deals that float around Hollywood, you can read that statement and infer that Harry Potter made lots of money. While that sheet doesn't show some costs which adds lots of variability, based on the numbers on that sheet...I would say HP had made somewhere in the neighborhood of $200M-$300M by the time that statement was issued, and given the long tail on additional revenue streams...a couple hundred million more to come. Real Hollywood accounting is not that creative, it is subject to the SEC and standard accounting principles. I won't pretend that some interesting things happen...but that statement has absolutely nothing to do with that.That being said, regarding the rest of the article...on the high level he gets the right idea.
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It's like that scene in ID4 when Goldblum's dad tells the president that there's a reason hammers cost $60.00.WB losing money on OOTP is the biggest accounting fix of the century.

You're correct, they didn't lose money. Nikke had a article calling out their BS. The reason for the "so called" loss was, they charged crazy interest rate for their own budget.
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The OOTP case is really interesting.

Posted Image

Despite the "funny" 211m distribution fee which was actually WB paying themselves, the biggest question is what the hell was the 315m "Negative Cost and/for advance" and what was the 57m "interest."

This is interesting to think about. Now, Disney can use ILM and say that they paid the ILM fee for their special effects, but that money comes right back to them.
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The OOTP case is really interesting.

Posted Image

Despite the "funny" 211m distribution fee which was actually WB paying themselves, the biggest question is what the hell was the 315m "Negative Cost and/for advance" and what was the 57m "interest."

What happens(at least what I think happens) is that WB sometimes creates shell corporations who make these films, and in doing so they advance themselves money at high costs, and then charge outrageous interest on those loans/advances.
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What happens(at least what I think happens) is that WB sometimes creates shell corporations who make these films, and in doing so they advance themselves money at high costs, and then charge outrageous interest on those loans/advances.

Actually, when it says advances...it's probably talking about advances to talent as part of their backend contract (or even frontend...those can be called advances too). The negative cost is the production cost for the movie...it's not so hard to believe a Harry Potter movie costs a coupe hundred million, or that advances to talent on these movies are huge. Since there's no breakdown of production cost versus how much is talent backend though, it's really impossible to say how much applies to each category.And when it comes to these types of deals, they are all based a concept of first sale. The participant gets paid on revenue, and expenses, which represent the first sale. That they might be paying a segment within the corporation is moot, since it's about that first sale that the participant gets paid on. Now if you want to argue that a participant should be paid on the ultimate profit of a company as a whole, and should ignore the concept of first sale...I suppose you can. Granted, this isn't really the contract these people signed but it's an argument you can make, and it some cases succeed at making. Here's sort of an example...http://www.rapidtvnews.com/index.php/25295/disney-loses-320m-who-wants-to-be-a-millionaire-lawsuit.htmlGranted, in that case it wasn't really about them being paid on the first sale...but instead about the company in question selling to a partner company within the same corporation at below market values, thereby undercutting the amount associated with the first sale and in turn, screwing over the participant. Nonetheless that HP statement is just meaningless if you want to have a conversation about how a movie makes profit.

Despite the "funny" 211m distribution fee which was actually WB paying themselves, the biggest question is what the hell was the 315m "Negative Cost and/for advance" and what was the 57m "interest."

The interest is simply the contractually stipualated interest based on the formula stipulated by the agreement made between the studio and the talent. If you want to argue it's a crap deal, feel free, but it's not funny math. It's a proper interest calculation based upon the revenues and expenses outlined by the deal with a pretty standard interest rate (probably BofA Prime +1).As for the distribution fee...no, it's not WB paying itself. That is not a real value, it does not exist in WB's financials. It is simply, once again, the contractually stipulated fees that WB can charge this participant. And it's not even trying to pretend to be actual fees paid by the studio...there are many participants who will receive multiple deals with varying levels of fees. And certainly if WB is sending the same person, two different statements, with two different fee levels...it should be pretty obvious that number doesn't represent a real world fee, but instead a contractually stipulated one that's merely a calculation made specifically for that deal.Really, if this thread is about how a movie makes a profit...that HP example has no place in the conversation. Edited by kowhite
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