Estimating the Commercial Prospects of a Major Film: A Fuller View

Deadline's first "Most Valuable Blockbuster Tournament" in three years, and its addition to and update of the ever-growing mass of data those Tournaments have produced, has had me rethinking my formula for estimating a movie's likely profitability from the more commonly publicized pieces of information (production budgets and box office grosses). Now it seems to me more useful to think less in terms of just the movie's succeeding or failing in its making its money back from the theatrical run than what that run portends more broadly--in what it can suggest about subsequent earnings from home entertainment, streaming, TV; and worthwhile to pay more heed to expenses that come after a movie is "finished" and out, like the "residuals and participations"; precisely because we have enough such data systematically collected to allow one to plausibly make some generalizations about them.

Of course, all that said, one should acknowledge the roughness of any such generalization. Apart from the vagueness of any numbers given us by the media (e.g. "Was that the cost of the production, or the net cost of the production?"), and the frank uncertainty (and even chicanery) associated with the calculations of accountants at the studios as in any other business (the words "There is no net" are a cliché for a reason), movies and their performances differ in all sorts of ways. Low-budget movies, as against high-budget movies, devote relatively less to production than to other expenses. (Saving money on a production does not make the cost of prints and ads any cheaper, especially if the movie is supposed to get a well-publicized wide release. Thus the total expenses on Where the Crawdads Sing ran to $123 million--even though the production itself cost a mere $24 million.) Movies that do less well in theaters tend to derive a higher share of their revenue from home entertainment/streaming/TV. (Crawdads, again, made some $120 million from the latter, as against just $68 million in theatrical rentals, so that they accounted for almost two-thirds of the total revenue in Deadline's analysis.) At a given level of earnings it makes a big difference what kind of deal the "talent" got, and whether the movie "underperformed" or "overperformed". (The fact that Top Gun 2 gave Tom Cruise a very generous contract to play Maverick Mitchell again, and then overperformed as it did, meant that participations alone came to an extraordinary $280 million--as against the $177 million actually spent on making the actual movie! Paramount's profit was still colossal--but this was a big bite out of the possible return on investment.)

All the same, crunching the numbers does afford one some meaningful averages that are at least a basis for good guesses--with this going all the more for the purposes of the kind of calculations I tend to here as my writing focuses on the likelihood that big-budget, blockbuster-type films lost money, broke even or turned in a profit rather than anything more precise. From that standpoint it seems to me reasonable to say that, when we count in the fuller outlay in the Deadline manner, a production budget (which in the absence of any information to the contrary I assume to be all net outlay to be on the safe side) is likely to represent no less than half and more likely a third of the total expense of the movie. At the same time the movie's theatrical rentals (40-50 percent of the gross, if usually closer to the 50 than the 40 mark) are commonly about 50 percent higher than what it will net the backer in home entertainment/streaming/TV (with Avenger vs. Thanos-caliber hits tending to do relatively less well because the box office take is so huge, while smaller earners, again, derive more of their money from the non-theatrical sources).

What does this work out to for, say, a $200 million production (like Ant-Man 3)? Going by the rules of thumb given here the fuller expenses will be upwards of $400 million, and likely in the vicinity of $600 million. With the movie needing to take in around 60 percent of that at the box office merely to let the later home entertainment options close the gap, at even the low end of the spectrum it would need something in the vicinity of $240 million in theatrical rentals simply to let a commonplace performance in home entertainment suffice to cover the remainder. That is to say, nothing less than $450 million at the box office is likely to do, while a half billion dollars or more are more likely to be required. At the high it would need $360 million, implying a gross in the area of $750 million at the least, and maybe even more like $900 million, again, just to break even, with worse quite possible (for instance, if a star's contract claims a significant share of the gross).

In that last "normal" year before the pandemic, 2019, maybe ten movies made $900 million--a fact that should remind us that, even where individual movies make colossal profits, the risks, and frequent losses, are likewise colossal, enough so that I wonder if the viability of this whole way of making and distributing movies is not increasingly in question.