Today I would like to introduce a new, hopefully, weekly segment I like to call Inner thoughts. Here we will discuss questions that may not get answered a lot or quick, brief, tinges of the brain that inherently ask: ‘what does it do?’
I watch movies. I think it is safe to say a lot of people do. Sometimes while I’m watching, even in amidst of being drawn into the television, a simple question will pop into my head. ‘Damn, how much did it cost to do that?’ We see, exploding buildings, high end action scenes through busy streets, in between high end spectacular stunts done through CGI and choreography. But how much does it really cost to do this? I hope to at least scratch the surface of this question by delving into the internet.
Suffice to say we have talked a bit about movies this week. So I felt it fitting to hit on finical gain and loss from the Hollywood perspective. I knew ahead of time that one sum would not equal another for a different title. A movie like the Dark Knight will most definitely cost more to make than say, an independent film you would see in a Sundance Festival. But I at least hope to pick away at what really drives in profitability and see if it warrants millions thrown into a single project in hopes to bring in the green.
So in my search I first stumbled upon a term I have heard but never really understood called Parkinson’s Law. I came across a few detailed descriptions of Parkinson’s Law, but the most simplest descriptive version I could find was here. http://curiosity.discovery.com/question/what-is-parkinsons-law
So what is Parkinson’s Law? In the short: It is a long term investment that a film, song, anything with long term profitability will expand to meet any capital. This does not mean that actual gain has to be earned through their own pocket. Expenditure does not have to come from the movie production itself to make a gain, but can possibly come from revenue of third party corporations. For example, Hasbro makes and pays for costs of Star Wars action figures but Lucas Arts makes a profit from licensing and a percentage from sales.
I often see that a movie ‘flopped’ because it didn’t meet sales in theaters compared to price of creation. This is usually associated with a movie a few weeks into premiere; which granted is the busiest time for most films as hype can still be there. I see this a lot actually, but with the cost of production increasing to make films so does the turn over rate and with less people going to theaters to see these films the scales to be a switching tide.
An interesting article I stumbled upon which can be found here: http://www.reuters.com/article/2009/03/02/hollywood-finance-idUSLNE52103R20090302 states that funding through Wallstreet banks and hedge funds have overloaded the market. The decrease in big budget films has hit a decline from 2008 to 2012. (the dates mentioned in the article) There are numerous mentions of loss of profit, selling of titles, and just trying to reach even which leads me to believe profitability is not as sound as one might think.
So, what can really drive home profit? Last year marked two animated juggernauts vying for the hearts of little kids and the inner kids of grown ups. I’m sure you know which two I am talking about. Yes, Despicable Me 2 and Frozen. According to a few sites I have browsed both titles reached over a billion dollars in sales, taking out the cost of creation, numbering the 100 million to 160 million range. That is a lot of extra dough lining someones pockets. This is just from ticket sales, current sales on DVD’s merchandise and albums. This number will only grow as Universial Studios completes work on the Minions attractions at their parks and keep pushing the craze for the yellow guys.
Toys, cups, books, whatever you can market for your target audience, is free game for revenue. I have never met a kid who didn’t like cartoons making animated movies and television a very profitable venture with lower costs as often times you don’t need high class talent to fill your roles when kids usually can’t tell the difference between Tom Hanks Woody, and any country bumpkin that could fill his place. As an Adult you may lose a viewer but we all know if your kid loves it you either got to suffer through it or learn to love it too.
Going back on a previous article I wrote about Nicolas Cage; merchandising can be a more limited form of green. The niche gain from sales outside of Dvds and shirts is low. I mean, yeah, I’m not gonna lie, if they had a ‘Not the bees!’ Nicolas Cage action figure, with detachable bee hat and a little funnel to tunnel yellow black fuzz balls in, I would jump on that in a heart beat; I’m in a minority though. It will not sell as quickly as a Lightening Mcqueen RC car, that is for sure. Which, fun fact, you can buy a Joe Enders action figure from Windtalkers or a Nicolas Cage bust on Amazon. Neat.
So maybe movies are just not as profitable unless you appeal to a wide audience? Why is it that movies cost so much to begin with? Lets take a closer look at the price of creativity.
http://latimesblogs.latimes.com/the_big_picture/2009/01/why-everyone-li.html, states that budgets are often fishy. It is safe to assume that they are low balling costs to appear as if more profit is being made, but in the grand scheme of things it just a headache to account for. So we have assume all numbers thrown around are estimates. So with that said lets nail down in turn what costs the most for a movie:
Marketing makes up a huge chunk of cost. References state that the most profitable moment in a films life is during the first week in theaters. Accountants for Spider Man 3 stated that 45 percent of the difference was from the first week alone when it hit theaters. Advertisements from trailers, ads on TV or websites hone in on potential movie-goers to come see their flick. A rule of thumb is to spend 50 percent of cost in marketing than in the actual production of the film. That seems quite high.
Next would be Actors or Actresses. The appeal of a big name star is often overstated in marketing. How much more likely are you to go see something if you recognize a big name star than a nobody? I am guilty of this. You put Liam Neeson, my favorite actor, in a movie and I’m sure to go see it. Spending a few extra million for a top seller seems like a no-brainer in long term gain.
That said, the net worth of stars is a ever changing thing. It is not a lifelong tag as popularity comes and fades bringing with it the cash gain to boot. Neve Campbell, lead star in Scream 2 and voice of Nala in the Lion King 2, quickly faded out of the spotlight, even though at that point she was predicted to be a huge star. Unfortunately it is the nature of the beast.
Let me be clear, you don’t need Tom Cruise in your movie or Liam Neeson (Just do it for me at least: I won’t deny I have a man crush on the latter) to make riches. The newest Star Trek Movies and The Hangover are good examples of average actors who have made a name from these pieces of art. The Spock of the new generation was just a power stealing douche for a con-fuddled series called Heroes and Zach Galifianakis didn’t break into the big leagues of comedic proportions till he became a one man wolf pack.
So with the two big ones out of the way, your budget is now set for everything else. Cameras, crew, lunch buffets, costumes, set pieces, locations, traveling, all these odds and ends that add up and up. I hate doing my own bills, let alone tally in all these extra expenditures. Yep, add an accountant or two to hire to deal with these headaches.
Yep, today I learned that movies are not a sound source for the Benjamins. Not unless you are already a big name producer or Disney. No, with the fluctuating tide of what aims to be a hit, it’s hard to pin point on what marks the gainable and what is deemed as potential flops. There are too many uncertainties that plague the screen, making me glad I am on the other side viewing from the outside in. I only hope my ten dollars for a ticket and a possible DVD added to my collection will help these producers to keep giving me what I want: quality productions.
So what does my Inner Thoughts say now? Yeah, I am never going to see a slither of the budgets being thrown around in my lifetime.
So what are your thoughts on my thoughts? Please leave a comment!
–Tyler S.
Links:
http://latimesblogs.latimes.com/the_big_picture/2009/01/why-everyone-li.html
http://www.reuters.com/article/2009/03/02/hollywood-finance-idUSLNE52103R20090302
http://curiosity.discovery.com/question/what-is-parkinsons-law
http://www.boxofficeguru.com/open50+.htm
http://www.deadline.com/2014/03/despicable-me-2-frozen-most-profitable-movie-2013/
http://online.wsj.com/news/articles/SB10001424052702303949704579461813982237426
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