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Movie Budgets & Grosses: It’s Definitely Hollywood Creative …

So, the question is what is a movie-film budget and how much does it cost to make a film.

There is NEVER a real answer because:

SOMEONE/SOME CORPORATION wants to hide the truth.

It’s kind of like asking how much did you spend on your kid to get them to college age. In theory, there is an answer but really, how do you calculate? Do you count the tens of thousands you saved on not leaving the house for YEARS on end? 🙂

First, there is no real beginning.

Let’s pick something obvious like the first Harry Potter movie.

Obviously the accounting ledger starts when they obtain the rights from JK Rowling? Right? Well, except for the expenses assigned to acquiring the rights. That $400 a night London hotel room is not going to pay for itself. So, from the moment someone hands them the book, the clock gets wound back to that day … 20% added to everything – and I mean EVERYTHING. That’s why they do not care if they send a jet to pick you up, it’s deducted from the final budget. Since there is a giant gap between the time the project is signed and when they begin “principal photography,” not only is there 20% added to every expense to that point but another 20% is added for “loaning” the production the money. BTW, some movies have taken as long as TWENTY YEARS from acquiring the rights to actually beginning production. So, no only is there no hole to climb out, there’s a hole in that hole.

Then there are the actual expenses associated with the production – salaries, sets, decoration, props, craft services, locations, etc, etc … some places might kick back a tax break – the studios will keep that, thank you very much. Again, what ever the studio lists as an “expense,” you can tack on another 40% (20% plus loaning the money).

So, unless you have a GROSS REVENUE deal, there’s NO REASON not to live it up, ask for the biggest trailer, charge a $300 pairs of socks to the shoot because unless you are powerful enough to get a GROSS DEAL, you will see nothing extra anyway so you might as well drink champagne like there’s no tomorrow.

Or if you go to a meeting at Pixar, the coffee is free but it’s really $18 a cup on the ledger (factoring in the cost of the chair, delivery of said chair, etc, etc …)

The powerful (Spielberg, Wil Smith and a handful of others) have gross deals/first dollar deals which is literally as it sounds. If the film makes $500 million at the box office, they get paid 10-30% right away. Nice deal if you can get it. There are probably about 10 actors-directors-producers who can ask for this deal right now in the right projects.

Now the film is complete, the next costs are post production costs (editing. SFX, etc, etc …) same deal – 40% plus – and costs of “making prints.” Used to be real film reels, now mostly digital but they still charge about the same – plus 3D glasses if applicable.

The MARKETING-ADVERTISING which runs the entire gamut from the obvious of trailers, TV ads, and posters but also costs like PR, red carpet opening, film critic screening expenses, press parties, etc, etc … down to screeners if its Oscar worthy 7 months later … for summer popcorn blockbusters, this can be as much as $150 million dollars but again, there are the “said” costs and the actual costs which no one can really pin down. Some films use the marketing expense as a selling point – if we’re spending $150 million marketing it, you know WE LOVE IT! But this $150 million includes monies kicked in by promotional partners where they get rights to use your footage or partner up on product tie-ins and agree to spend X on advertising. This money is counted as ad expenses but the studio doesn’t actually pay anything for it AND they add 20% … So, for a family friendly movie like CARS 2, how much did Disney actually shell out for advertising – hard to actually say. Oh BTW, if the studio happens to own an advertising outlet like Disney does with ESPN, ABC, ABC Family, magazines and retail stores – whatever “discount” they get is NOT passed to the overall revenue/budget sheet. You are charged full dollar plus 20% … now on an internal project such as CARS 2 in the Disney family, it’s really just an accounting shell game – since no one gets gross dollars, it’s just monies moved around to the best tax advantage … remember ad dollars are expenses and deductible. This is also one reason why film studios function much better as a pawn in a corporate cog …

So, there is probably one accountant in a dark room who can give you THE REAL NUMBERS but everything else is like a Dairy Queen Blizzard … whipped together so it’s just a delicious 8,000 calorie shake … just suck it down and shut up.

So, now it actually plays in the theaters. In the US, the studios get about 50-65% of the numbers reported, the theaters keep the rest. BTW, theaters make more money on concessions than on the films but you could probably guess that. Theaters used to make more when films played longer but now, not so much.

Most people pretty much stop counting the till after the box office and some even ignore international boxffice which can sometimes be triple the US take … so again, the gross number might not actually mean anything.

For instance, John Carter opened weakly in the US – only making about $30 million but has already made $100 million overseas so while it will be perceived as a non-hit or even a bomb, at this rate, it’ll probably break even and make $500 million but Disney’s expectation was probably $1 BILLION so … it’s all how you look at it.

Just as CARS 2. $550 MILLION US-Int’l gross, probably did $250 million in DVD/Blu Ray sales … I don’t know about you but $800 MILLION dollars in revenue still seems like the sweet smell of success. And while Disney “spent” $250 million making it, keep in mind, there are also cable TV sales, regular TV sales and merchandising license fees … so maybe CARS 2 brings in $1.3 BILLION in revenue in the first 2 years – uh, who’s gonna turn that down?

So, there are COSTS and there are costs. It’s all just for CPA’s to move around for the best tax advantage and the lowest pay out.

For instance, here is a film with 3 kid actors that made about $600 million dollars … but according to accounting – is about $162 million in the red AND of course, can NEVER hope to catch up since the project gets charged 20% on the $162 million EVERY YEAR.

(NOTE: The 20% is just a general number, they don’t actually make it that easy to figure out as they expense items differently but it’s a safe general number).

This is why you don’t really want to go in the film business as the studios make all the money … by hook or by CPA …

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13 March 2012 Film 3 Comments


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