Revised and updated 10/18
Determining the ultimate profitability of a feature film is essentially impossible for an outsider. Hollywood is notorious for cooking their books to make sure no movie ever appears profitable. At the same time, no Hollywood studio is really raking in the dough these days. It's a brutal business.
As an outsider it is possible to reasonably guesstimate the numbers for a non-franchise movie (i.e. not a sequel) from a modest director with no A-list stars. This is because the various contract terms and distribution deals are likely to be somewhat standard, as opposed to blockbuster deals like Arnold Schwarzeneggar's terms for T3.
The following formula is offered:
45%(BOd + BOi) - (Int'l Dist) + 67%(DVDd + DVDi) + 40%(Rentals) + 90%(SYNDd + SYNDi) + Misc(VOD, etc) - (Prod Budget + Mktg Budget + Dist Budget)
This requires lots of educated guesswork so don't expect a simple chug-and-plug excercise. But then again, this is a vastly complicated subject, so what did you expect?!
Now each part analyzed and explained:Box Office Profits: 45%(BOd + BOi) - (Int'l Dist)
Movie theaters generally keep at least 50% of the US box office revenues. Ignoring domestic and international marketing and distribution costs, the total studio take from the gross domestic box office (BOd) and international box office (BOi) is guesstimated at a conservative 45%.
International distribution costs will vary by movie and by country, but in general only six to eight foreign markets play major roles (lots of info in Edward Jay Epstein's article on the foriegn box office
). Use Epstein's article as a guide for guesstimating international distribution costs for each of the major markets.
A guesstimate of $1.25mil per major market seems reasonable. Remember to add in an additional amount for all the other non-major markets combined - perhaps 2x your guess for the major markets.Home Video/DVD Sales: 67%(DVDd + DVDi)
For simplicity I'm ignoring VHS sales - DVDs account for the majority of home video sales these days. And DVDs are quite a profitable endeavor. "Studios ...estimate that manufacturing, shipping, and returns costs average 12.4 percent; marketing, advertising, and returns costs average 18.5 percent; and residuals paid to guilds and unions for their members and pension plans come to 2.65 percent. So, about two-thirds of video revenues are gross profits" (source: Edward Jay Epstein
In order to estimate revenues for a particular movie you have to estimate both the number of DVDs sold and the revenue per DVD. Epstein's numbers above do not account for the merchant's take, so we have to guesstimate the cost to the retailer rather than use the cost to the consumer. $15 seems a reasonable guess for domestic DVD sales.
International DVD/home video sales are harder to estimate. According to Epstein they account for 44.5% of the studios' total home video take. Unfortunately, like the international box office, there's wide variation in performance here so we can't just assume numbers similar to domestic DVD/home video sales.
I propose that until more precise figures are known for a particular movie, international sales (DVDi) should be no more than two-thirds domestic sales (DVDd).
Furthermore I assume international home video sales incur higher distribution costs (including foreign marketing, taxes, currency exchange, etc). Rather than using $15/DVD as a revenue-basis, I'm leaning towards a conservative $10/DVD.
Therefore if a DVD sells 1mil copies in the US at $15/DVD, guesstimate:
DVDd = 1mil * $15 = $15mil
DVDi = 67%(1mil) * $10 = $6.7mil
For a total home video/DVD take of:
67%($15mil + $6.7mil) = $14.5milRental Revenue: 40%(Rentals)
This is the most speculative part of the formula. I have not yet found numbers for how studios share rental revenues so your guess is as good as mine. I have no clue if there is an international rentals market. For now I assume it is insignificant.
Rental revenue for the top DVDs can be found here: www.videobusiness.com
A blockbuster rental (no pun intended) can hit the $40-60mil mark (Shrek 2, Hitch). Unknown, unspectacular movies can still muster $3-5mil (The Marksman).Television Syndication: 90%(SYNDd + SYNDi)
TV syndication rights are almost pure profit. The only costs are residuals royalties owed to actors, directors, and producers.
Acquiring actual syndication sales data is difficult. It is occasionally published in Variety and The Hollywood Reporter. More often you'll just have to take a guess based on past syndication deals. Here are some snippets on recent deals to help you make a better guess:
""The 40-Year-Old Virgin" is pocketing about $13 million in license fees from the USA Network in an exclusive four-year deal. ...the parties to the deal said the net paid top dollar because other buyers surfaced to bid on the movie, which has grossed a strapping $104 million in U.S. theaters."
"USA bought two other titles from NBC U: Kate Hudson horror movie "The Skeleton Key," which went for about $5 million, and Joss Whedon's "Serenity," which fetched $3 million or so. USA's sister Sci Fi Channel will get some plays of "Serenity,"... USA gets "Skeleton" and "Serenity" in May 2008 and "Virgin" in July 2008, after all three complete their first-window runs on HBO as part of an exclusive pay TV deal."
"USA ponied up $23 million for the first plays of "Dukes of Hazzard" and for later plays in the network window of "Terminator 3," "Troy" and "Alexander"
Take particular notice to the line "after all three complete their first-window runs on HBO as part of an exclusive pay TV deal." The amount paid by HBO is not disclosed but can be estimated as being larger than the amount paid for the follow-on syndication deal on USA Network. It is assumed that most movies will have an initial pay TV deal on HBO, Showtime, Starz, etc in addition to broader cable or network TV syndication deals.
Also keep in mind that subsequent syndication deals are always possible. Any time a movie or TV show is rebroadcast a new syndication deal is struck - and all at the 90% profitability margin for the studio.
International syndication deals are even more difficult to suss out. Epstein states that international TV revenue is 39.1% of the studios' total worldwide TV take. We could just assume that internation syndication (SYNDi) is 2/3 domestic syndication (SYNDd). But syndication deals depend on how popular the movie was in the particular locale. We can't assume all movies are equally popular in the US and in each locale, so there has to be a discounting factor.
I propose SYNDi = 33%(SYNDd)
If a movie nets $15mil is domestic syndication deals:
SYNDd = $15mil
SYNDi = 33%(15mil) = $5mil
Total TV revenue = 90%($15mil + $5mil) = $18milMisc Revenue: Misc(VOD, etc)
I have not uncovered any numbers for video on demand (VOD) revenues. While this is a growing and important source of revenues, I think it only makes up $3-5mil for a decent performer. Admittedly this is a blind guess.
I'm also sure there are other revenue streams to factor in - marketing tie-ins, licensing deals (action figures, toys, etc), etc. The degree to which this impacts a movie's profitability greatly depends on the property - The Incredibles will reap enormous licensing coin while Rain Man likely netted none. For our purposes I offer a placeholder in the formula for such revenue, but make no effort to offer any real estimates or analysis.Actual Costs: (Prod Budget + Mktg Budget + Dist Budget)
Finally we reach the actual costs incurred by the studios to create a movie.
Production Budget is the easiest number to find. It is reported on IMDb, boxofficemojo.com, and numerous other places. It is not necessarily entirely accurate, but it's the best we're going to get.
Marketing Budget is more difficult to find. It will occasionally be discussed in Variety or The Hollywood Reporter articles and sometimes listed in boxofficemojo's data sheets. A huge marketing blitz will generally be in the $40-50mil range. A more modest push will hit $10-15mil.
Distribution Budget is the most difficult to find, but the easiest to guess. Distribution includes the cost of printing physical copies of the movie for theaters and delivering them across the country. A saturation release (3500 screens) will cost about $12-15mil.
And remember that we've already accounted for the international marketing and distribution costs.Final Profit/Loss Results:
Plug in all of your guesses and add up the numbers to see if the movie will ultimately make a profit or a loss.
This is of course a very rough estimate but it gives you the foundation to make an educated guess.
Up next: applying this formula to "Serenity"