RT and Box office predictions (Domestic and WW)

No, the first few resident evil films didn't break even by the general of thumb. I'm betting you those other movies didn't break even at the box office.

Here's a study that goes into great detail on spending and profitts.


Although technically a secret, a film’s total budget often leaks out and they are easy to find online (for example, Googling the phrase “Jurassic World budget” reveals that it reportedly cost $150 million to make).  The information available online is normally a mix of true figures which have leaked and educated guesses by industry experts.  
The studios often try to hide the true cost of a movie, in order to make themselves seem thriftier, smarter or more in control than they actually are.  I performed a quick check for the 29 blockbusters I have inside data on compared with their budgets listed on Wikipedia. 90% of the films cost more than their Wikipedia budget with only three costing less than is declared on Wikipedia. 
So the average $100m+ Hollywood blockbuster actually cost $19 million more than is stated on Wikipedia (i.e. 12.5% more).

For reference, the average budget for the blockbusters in my dataset was $150,567,000.
Other costs of making a movie

Releasing a Hollywood blockbuster involves far more than just creating 90 to 120 minutes of footage.  Some of the other costs involved in making and releasing a film include…
* Marketing – It could be argued that success in the business of Hollywood blockbusters is more dependent on the art of marketing than the art of filmmaking. This is the biggest category of costs for a movie, outside of the budget.  Most Hollywood blockbusters only have one or two weeks when they are ‘The Big Movie’ in cinemas, so studios need to build and channel the awareness / excitement for a movie to ensure that everyone goes to see it during this period.  
* Prints – The physical copies of the films which are given to cinemas.  Historically, they were on 35mm celluloid film but today most countries use a hard drive with a specially encoded digital video file called a Digital Cinema Print (DCP).  This hard drive has a huge copy of the film (10s or 100s of Gigabytes) and a tiny file which controls the permissions to the large video file.  This means that hard drives can be shipped to cinemas in advance, without worry that the film will be viewed ahead of its official release.  Complex permissions can be set, permitting screenings only at certain times or on certain digital projectors.  Also, copies of the film in other formats will need to be created to give to third parties distributors and exhibitors, such as TV stations who broadcast the film.
* Residuals – Unions for the cast and crew have agreed deals with Hollywood studios which ensure that their members receive additional payments from the income the film generates. 
* Financing costs – These can include costs involved with borrowing money to make the film (interests and brokerage fees) and currency conversions (for overseas shoots).
* Overhead – Studios charge their own productions an overhead fee which covers the time studio staff spend on the project, the costs of deals which apply to all films the studios make and the benefit a production is regarded as receiving from operating under the studio brand.  It may seem strange to charge oneself money but these costs come off before “profit” is calculated, meaning that productions which pay an overhead have smaller official profits, meaning that the studio has smaller cheques to cut to people with profit participation deals.  The old joke in Hollywood is that the studios charge overhead on interest and interest on overhead (and if you find that funny you really are down the rabbit hole of Hollywood economics!)
Looking at my dataset we can see the average costs breakdown below…

To give you a little more detail and context, below are some notes on each of the main cost areas…
Marketing costs

Is it often claimed that marketing a Hollywood movie can cost up to twice of the cost of the film’s budget, however from the numbers above we can see that this is untrue. Across my dataset of $100m+ movies, the average budget was $150.6 million and the average combined marketing spend was $121.1 million (i.e. 81% of the budget).  
When expressed as a percentage of the total costs involved with making and selling a movie, marketing accounts for an average of 29% of costs.  Across my dataset, the largest proportion of total costs going towards marketing was 40% and the lowest was 24%.  It seems that the larger a movie’s budget, the smaller a percentage marketing makes of the total cost.  While this may at first seem strange (we normally associate bigger movies with having bigger marketing budgets), consider that even films on the lower end of my dataset have budgets over $100 million and so their marketing efforts will be pulling no punches.  In short, once you make a movie over $100 million you’re already using saturation marketing tactics so if you double a movie’s budget you can’t really double the marketing spend. 
Physical delivery costs

The physical costs of creating and shipping prints to cinemas and of creating and shipping physical media to stores account for an average of $67.8 million. Judging the correct number of prints and units to manufacture is a key part of the planning done by the studios.  If they order too few then cinemas and stores will have to turn away customers in the all-important first few weeks of release.  If they over-order then their costs increase and they are left with annoyed cinema owners and large quantities of unsold units.  Most units are sold on a ‘Sale or Return’ basis meaning that if studios over order then it’s their problem, not the stores.  
In 2005, Dreamworks overestimated the number of Shrek 2 DVDs they would sell in the US by 5 million units.  This caused the studio to missing their quarterly earnings target by 25% and their shares fell as a result.
Profit participation

The average $100m+ Hollywood blockbuster will spend $36.6 million on contingent compensation and profit participation. This typically goes to the key ‘creatives’ involved in making the film – namely the director, producer(s), writer(s) and key cast.  
Giving these people a share of the income is a good way for the studio to hedge against poor box office performance and it also defers the moment they have to pay up.  Key talent often seek ‘participation points’ as a way of increasing their income and to share the spoils if a film performs much better than expected.  
On the flipside, studios have got rather good at using creative accounting techniques to show that they made a loss on paper in order to get out of paying such fees.  In 2010, a leaked profit participation report from the fifth Harry Potter film showed that two years after the film’s release, Warner Brothers was claiming that the picture had lost $167 million. Other movies hit with such claims are the three Lord of the Rings films (which combined grossed almost $3 billion in cinemas worldwide), My Big Fat Greek Wedding, Spider-Man, Return of the Jedi, Coming To America, JFK, Fahrenheit 9/11 and Forest Gump, to name but a few.
The movie in my dataset which gave the largest share of income to participants gave 18%.  It’s worth noting that participation isn’t always dependent on there being profits.  As people get wise to the studios’ game of creative accounting they are asking for more than just “a share of the profits”.  The biggest names will demand ‘First Dollar Gross‘ deals, which give them a share of every dollar earned, calculated before costs are taken off.  On average, the films which lost money in my dataset still paid out 5% of their income to participants (profitable films spent an average of 9% of their income on participants).

How much money do Hollywood blockbusters make?
 Using my dataset of $100 million+ movies, I can share how much each of the sources of income contribute towards the bottom line. 


* Theatrical is the largest income driver for films, although not the most profitable.  The average movie in my dataset grossed $129.9 million domestically (i.e. the US and Canada) and $243.3 million internationally (i.e./ everywhere else), leading to a total box office gross of $373.2 million.   This is the figure you will hear reported on the news (i.e. “$100 million movie grosses $373 million – what a success!”).  However, before the studios can see any of that money, two big costs needs to be deducted – sales taxes and the cinema’s share.  Studios received an average of 53% of the box office gross domestically and 41% of the international gross.  So that $373 million gross has already shrunk down to $169 million.  When we remove the average theatrical marketing costs of $98 million we’re left with a margin of $70 million (i.e. 42% of the income).  Other costs apply (see above) but already we can see how a $373 million gross can dwindle away fast.
* Home Entertainment earns $100m+ Hollywood blockbusters an average of $134.3 million per movie.  The margin is higher that the theatrical window, with an average Home Ent marketing spend of $21.9 million, leaving an 84% margin after marketing.  Obviously, Home Ent has higher manufacturing costs, but these are an average of $30.5 million, making Home Ent a richer vein than theatrical.  Now you can see why the studios are so worried by the fall in DVD sales!
* Television generates an average income of $86.9 million for $100 million+ movies and does so with little to no direct costs.  Studios typically still charge a distribution fee to cover their time and lawyers but this is minute in comparison with the marketing and manufacturing costs of Theatrical and Home Ent.  Within North America, the Pay TV window generates a slightly higher income than Free TV (average of $14.6m versus $13.3 million, respectively).
* Video on Demand performed very poorly for these blockbusters, with almost half of the films earning under 1% of their total income from VOD.  That said, my dataset spans ten years and the studios were slow to build serious VOD operations.  Looking just at the films released since 2011 reveals that 4.1% of their income came from VOD.  

* Merchandising generated an average of $11.5 million per movie in my dataset but this hides some big variations between titles. Only a third of movies earned over $1 million and almost two-thirds of the merchandising money generated from all 29 movies combined came from just two movies.  It seems that the biggest Hollywood blockbusters can get up to half of their budget back in merchandising alone.
* Airline and Music income can be viewed in one of two ways.  It could be regarded as pretty inconsequential (totalling as it does just $2.7 million per movie) or it could be viewed as among the easiest deals with little to no costs associated. 
Do Hollywood movies make money?
Of the 29 Hollywood blockbuster movies I studied, 14 generated a profit and 15 lost money.  It’s impossible to know if these stats hold true for mega-movies in all of Hollywood but I suspect they do, due to the way my dataset was created (see Epilogue).  

Source: https://stephenfollows.com/how-movies-make-money-hollywood-blockbusters/