Film gross questions for you guys

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  • Film gross questions for you guys

    a friend said this:

    When we see that a movie has gross like $200 million that's very misleading. People use that to impress others. That number is the ticket gross, the amount the theaters took in. The number that is important to studios, distribution companies and investors is the gross film rental, what was actually taken in by the distribution company from the theaters. Distribution companies get between 10-50% of the net profits. Investors have to get their money back plus interest (10-15%), production companies get small percentage, because the distribution company has to recoup for marketing expenses. Producer gets his share, Director gets what's leftover or if they were paid before the move was made, then they get nothing.
    true or false?

  • #2
    Re: Film gross questions for you guys

    This is one of my pet hates - film reviewers who make claims like 'the film made back its investment' simply because gross ticket prices = Budget.

    The other thing not mentioned in the quote is the time delay - or the famous Hollywood accounting.

    Cinemas collect money for tickets. They take their cut, and .. after a delay ... sends SOME of the money to the distributors.
    Distributes collate the information and take their cut, then ... after a delay ... sends SOME of the money to the production company.
    Production company pay their bills and take their cut, then ... after a delay ... sends SOME of the money back to investors - if there is any left!

    Those delays add up.

    Another minor point is that a 'studio' has a lot more influence than a normal 'production company' - so they can make deals and sometimes act as their own distributors, which increases their profit margin.

    Given the fact that a distributor can make the same (or better) $ per ticket sale as the production company (but risk almost nothing) then it is surprising why anyone actually bothers to make movies - the money seems to be made by everyone else on the chain!

    See this article for an example of how things can work in the real world: http://www.variety.com/article/VR111...goryid=22&cs=1

    Film budget: $0.96 million
    Gross video sales: $2.8 million
    Oz Box Office: $1.3 million
    US Box Office: >$2.6 million

    Amount returned to distributor: $0.75 million
    Amount returned to investors : $0.13 million (About 2%-3% of gross)
    (Figures from 3 years after the movie was released)

    It's interesting because the brand itself was a sound investment - the brand's income now exceeds Nicole Kidman & AC/DC combined and they were snapped up by Disney. But it was a terrible investment for the people putting the money in .. who don't get to share in the benefits to the brand.

    It also means that when you hear phrases like "The independant film cost US$14 million to make and grossed nearly $175 million worldwide" it is still impossible to know for sure if the investors will make their money - or if they would have been better leaving it in the bank. (Assuming that investors end up with 10% of box office, they can expect 25% return on their money after about 3 years. If they had invested it at 10% instead they would make 33% after 3 years. Thus, even if it was a guaranteed multi-Oscar winner - it may not make financial sense to invest).

    Mac
    Last edited by Mac H.; 08-18-2007, 11:58 PM.
    New blogposts:
    *Followup - Seeking Investors in all the wrong places
    *Preselling your film - Learning from the Experts
    *Getting your indie film onto iTunes
    *Case Study - Estimating Film profits

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