The Cost of Making a Hollywood Movie
There is a common misconception that the average Hollywood movie makes a profit if its box office number exceeds its total production budget. Unfortunately, this is a myth and very far from the truth. Another myth is that movie studios turn a profit from box office revenue. This is usually not true as theatrical releases are as a whole an unprofitable business. In this post, I will attempt to shed some light on the cost of making a Hollywood feature film. Below, you will find a breakdown of the total production cost for Spiderman 2.
TABLE 1: SPIDERMAN 2 PRODUCTION COST BREAKDOWN (SOURCE)
| SCRIPT RIGHTS | Marvel | $20 million |
| SCREENPLAY | $10 million | |
| PRODUCERS | Stan Lee, Grant Curtis, Laura Ziskin, Avi Arad, Joseph M. Caracciolo, and Kevin Feige | $15 million |
| DIRECTOR | Sam Raimi | $10 million |
| CAST | ||
| Tobey Maguire | $17 million | |
| Kirsten Dunst | $7 million | |
| Alfred Molina | $3 million | |
| Rest of Cast | $3 million | |
| PRODUCTION SHOOTING COST | $45 million | |
| SPECIAL EFFECTS | $65 million | |
| MUSIC | $5 million | |
| COMPOSER | Danny Elfman | $2 million |
| TOTAL NEGATIVE COST | $200 million |
In this example, the budget was $200 million and most people think that if the total box office amount exceeds that number, the movie would make a profit. However, most people do not know that the studio ended up spending an additional $75 million on marketing and distribution. Simply put, the cost that goes with making a movie are much more than the total production budget than the average people hears or reads about. To understand why, one has to understand one simple formula:
Negative Cost = Development Cost + Pre-Production Cost + Production Cost + Post-Production Cost
The total production cost (aka negative cost) is the price tag that everyone hears about when they say Avatar cost $240 million to make for example. However, the average Hollywood feature film contains 6 stages and the cost of marketing and distribution are not included in the negative cost. Those additional cost can easily dwarf the budget of smaller movies but for your average Hollywood feature movie in the $40-100 million budget range, a good rule of thumb is that marketing and distribution will cost about as much as it took to make the movie:
- Development: Before filming a movie, you need a story. The producer will work on acquiring the script which can be a costly expense. He will also sign a screenwriter to adapt the script into a film and possibly look for a potential director and main cast members so he can get financing on the project (if he isn’t backed by a major studio)
- Pre-production: Once a project gets the green light, this is where the producer will start officially hiring all the cast members, director, cinematographer, set designer, extras and hundreds of technical people needed to actually shoot a movie. All the planning that needs to be done before shooting begins is done here.
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Production: The actual shooting of the film. Expenses includes everyone’s paycheck, the cost of fabricating sets, costumes, stunts and pyrotechnic, traveling, food catering, insurance, equipment, blocking streets off, renting facilities and all other cost related to filming the movie. - Post-production: After shooting is finished, the movie still has to be put together. This is where the editor comes into play. If the movie needs CGI, the visual effect people might start working here. Another significant cost is scoring the movie with a composer and/or by buying rights to whatever songs the director wants in the movie. This can be quite costly as you may have to pay millions to acquire the rights to play one single song in your movie.
- Marketing (A): Think about a movie that you are looking forward to. Most likely, it was due to some type of marketing that made you aware of it. You might have seen a trailer during a prime-time TV commercial slot, a banner at the mall, advertisement in magazines and newspaper, a virtual ad banner on the internet etc… This is called media buying and is usually a very costly process for your average Hollywood feature because you have to buy ad space and slots in every single market (domestic and foreign) you are planning to release the movie in. All of this at a very specific and simultaneous point in time, further driving up the price. Additionally, think of all the thousands of movie posters and memorabilia that have to be created and then shipped all around the world as well as all the marketing related to selling DVDs and Blu Rays discs a few months later. Marketing a movie is an extremely costly enterprise.
- Distribution (P): A print is the physical copy of the movie that is locked in a metallic box and sent to the movie theater. A single print cost up to $2,000. Multiply that by the number of screens and you can see that it adds up pretty fast. Add the cost of the logistics to produce, store, maintain, send and recover those prints from all around the world and this gets very expensive very fast. Other cost here include things such as sending prints to foreign markets, printing DVDs, Blu Rays etc… Finally, one has to understand that the studio doesn’t recover all the money from the sale of tickets at the box office. The movie theaters get to keep a fraction of the revenue and various residual fees are docked off. In the case of foreign box office, the studios recovers even less money since they often have to find local distributors in those markets who will keep a significant portion of profits.
As you can see, shelling out $50 million or more on Prints and Advertising (P&A) is extremely common for your average very-wide release Hollywood feature. Huge blockbuster movies can easily reach $100 million+ in P&A cost. Ever wonder why some movies go directly to DVD? Because of the astronomical cost of marketing and distribution! If a studio realizes that one of their completed film doesn’t have a good chance of recouping its cost in theater, they will pull the plug on it and decide not to spend any more money on P&A trying to bring it into a theater near you! This is where having a big name movie star or director in the film is a big deal, as studios will usually not give the shaft to those guys even if the movie looks primed to be a bust.
The Hurt Locker: One of the few indies that made it
This is a somewhat different case for indie movies. An independent production, by definition, is not backed by a major studio and hence has to look for a distributor after the completed product is finished. The problem is indies are often made with tiny budget ranging from a few thousand to $20 million. Hence the cost of advertising and distributing this kind of movies can completely dwarf its production cost. For that reason, completed indies are often “for sale” or looking for a distributor as you often hear every year around the Sundance independent film festival. For obvious reasons though, only a tiny fraction of those eventually find a distributor (almost always those that are lucky to have a recognizable face or two working at a huge paycut). Also, the distributor usually takes all the profits until a certain threshold (usually the cost of P&A) so you can see how independent movie-makers face an uphill battle to get their movie in theaters, let alone see a dime.
Are you sometime frustrated when a movie only gets a very limited release in a few large cities around the country and then goes to DVD months later? Now you know why! A very wide release (2000+ theaters) is extremely costly and just is not worth it for the very vast majority of independent movies. Unless the indie has a well known actor or actress, solid buzz and broad appeal, it will most likely be unable to secure distribution, let alone a wide release. A way of circumventing this is to secure enough money for both production and P&A cost but obviously, this requires a lot of money, is extremely difficult to do and is extremely risky financially.
So how does Hollywood end up turning a profit year after year? One of the best kept secret in Hollywood is that box office revenue is NOT the main income stream for the six major movie studios. Actually, theatrical releases overall are only a break even business in the best case scenario. DVD sales and TV licensing fees are much more profitable ventures since the marketing and distribution cost are significantly lower and they make for the major portion of studios’ profits. While some people know that DVD sales do make for a significant income stream to the Hollywood studios, few people realize that licensing movies for TV broadcast domestically and abroad is an even more profitable business.
Now, you have a better idea of when the average Hollywood release becomes profitable. Any comments or questions? Leave them below.
26 Comments
The amounts of money that get thrown around and bandied about in Hollywood is enough to make me sick sometimes. It is actually really quite disturbing. It’s large amounts of money that I will probably never see in my lifetime!
Awesome write-up! It’s neat to see the breakdown of what goes into a blockbuster movie. By the way, I like the new green layout.
Great article! Definitely another Monday Corner linkage (if you keep this up I may have to put aside a spot for you all
).
I find Box Office results to be misleading but fun to follow. Another thing that annoys me about the way people look at them is how people only seem to concentrate on domestic take, when worldwide total is a far more telling number. Not all movies were made to succeed in the US.
Here we go again in circle people.
Technology has change. All Cinema around the world by 2014 will have Digital direct Projectors in all Cinema.
No more Cut/Paste printing which cost so much.
Firstly, let’s get this straight Major Project does not have to cost 50 -100 Million plus, Any Independent film makers can release world- wide film and make them for $5 – 10 Million only, if they got a good story/Script. It’s all in the story, not who in it or who is the director etc. We had Tom cruise, or Brad Pit in many films that was not successful at all.
We has well known producer/ directors who make many films that wasn’t successful at all.
Hollywood has lost it’s day since 2000. If you really understand what films are all about most of the films the these so called Studio made was done before in other countries.
They copy and stolen their Ides and transform them into their Dialog etc. There are so many films that were made in France/ Japan/ Germany/ Italy etc that the Major Studio in US as Copy their format and change it around.
Nothing is original anymore in Hollywood or in most parts of the USA.
Films back in the 70s 80s 90s were films, Real stories not like today Copy cats/ Repeating over again and again etc.
There were times that people enjoy going to the movies if they had any Great stories to be told these days.
People from all over the world need to to see how they made films in China/ Italy/ France etc, you will see the different from USA/ England/ Australia etc the western world so to speak.
There is More heart in it even the acting is better because that love what they do, and they do it with heart. Not these days it’s all about images and How Much..!
One more point here, If film makers and writer still doing what they do in the same way there will be very few left in business, as already most of them have left the field and many has closed down.
If we want to keep films alive them let’s get the story right, the passion and heart in it. Story can be from drama, action, Comedy, romance, thrillers etc.
Anyone any age will enjoy them more if they had a great story behind it.
Best Wishes all
Vincent A
Script writer/ Actor
Now I’m depressed. I get the overall price of the movie, but the marketing is ridiculous.
Nice article. When I think of all marketing costs it gives me the chills, and it also pisses me off in a way. Millions of dollars basically wasted into brainwashing masses into seeing your movie (*cough* Avatar *cough*), when they could be spent into financing young promising directors (*cough* me *cough*). Seriously, what a shame.
@ Dreher: Thanks! Going green for the spring
@ Univarn: Ahaha thanks Univarn. Completely agree that some movies are not made for US audiences, and the other way around as well.
@ Ripley: Marketing is expensive but required to reach the crowd. Imagine if there was no marketing and the only way to find out about a movie was to show up at the movie theater and see a movie poster.
@ Kirsten, Magnum: Thanks. It sure is difficult to wrap our mind around the dollar amounts being thrown around in the business.
I knew all this but it’s great you put it out there. Spiderman 2 made it’s money back but it’s not as simple as box office. In fact, most studios are more concerned with DVD and the like.
But this is exactly why it’s so hard to get a movie made. People see a 10 million dollar movie made 30 million but how much did it cost for all the ads you saw constantly… for some movies, a super bowl ad can be 2 million alone. Great article, Castor.
P.S. Are you really a Captain America fan because I just got the whole plot synopsis for the new movie?
PEACE OUT!!!
What was that great saying that goes around Hollywood: the cinema release is only the trailer for the DVD?
Great breakdown! How do we get every person in the Mid-west to read this? I’m tired of explaining to my parents and friends how this works… and this explains it better than I ever have.
Thank you TG. You can always point them to this post
Awesome write up man. This is a great break down which many people don’t fully understand about movies. When I first read up on this, I was surprised to see that writers actually got paid as much as they did, same with the composer. It is still small in comparison to how much Toby McGuire gets paid though.
Could you imagine being like Toby or Orlando Bloom, who aren’t necessarily good at acting, but somehow find the right role for a huge franchise and get paid enough to retire for life?
Thanks Luke. It sure is something to see some movie stars getting paid more for one movie that most people will see in a lifetime
I’m not going to diss on Tobey Maguire though, I just saw Brothers a couple days ago and the dude can act! Reviews has been written and should come out tomorrow.
Castor — such an interesting article. Thanks so much for taking the time to flesh it out. Any idea where I can find more info like this? I’m particularly interested in learning about soundtrack costs for films. I’ve really enjoyed your reviews by the way.
Hello Walter, thank you for the kind comment. If you are interested in learning more about soundtrack costs for films, I can point you out to a thorough and highly informative article by the The American Society of Composers, Authors and Publishers:
http://www.ascap.com/filmtv/movies-part1.html
(Note: There is 4 parts)
Hope to see you back around our site Walter, we really appreciate you taking the time to comment!
Perfect! Thanks so much.
Great article I am glad you tweeted it! I’m gonna read it more thourough when getting back from my meetings.
I hope new film makers will not be deterred.
Yes the numbers are scary, but each of you are driven by the belief the heavens will open and our film will be “the chosen one”
Modern advancers with digital film making and the expanding internet I believe will open up direct sales and even if they amount to 50c each it will add up.
I would encourage all film makers to keep the dream alive even if the odds are against us with the current system. After all the crazy people always make the best parties.
I think most of the money will spend on Hero’s salary. That is why Will Smith, Russell Crowe, Brad Pitt, Jolie are getting huge salary. The fans first see the Celebrity role in that film, then others are second priority. BTW nice article about Budget of a Hollywood film. Cheers
Theatrical release is only the trailer for the DVD sales… Satellite Rights … Direct To Home Rights… and Streaming PPV VOD?
I was just googling on what it costs to make a movie in Hollywood.
WOW! Thats all long way to go for me, I thought it will all be wrapped in 20-30 MM USD!!
V interesting article, but how much do they make % for ancillary sales? and presumably this goes up depending on popularity, so a $100m grossing film would make a smaller %anc sales than a $1b+ harry potter/avatar movie. Any ideas as a v rough estimate ? thnx
I’m a producer/director and now that I read this article, when I want a revenue, I’m going to start to think on marketing and DVD sales
Great recap of how Hollywood actually does its business. They can get away with this model despite blowing away millions on cast and screenplay acquisition. But this wouldn’t work for the indie filmmakers (not Scorsese!). Certainly good to read. Many thanks.
I’m talking about the under line people promakers,fx,labor,paints,greens,construction coordinator,set dec.,,props,craft service ,grips,ect.THE REAL F—–Ing people.
Hello! Do you use Twitter? I’d like to follow you if that would be okay. I’m undoubtedly enjoying
your blog and look forward to new updates.
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