If
a Hollywood studio has spent a lot of money on a movie, say $200m, then you
will probably find out about it. Talk of vast budgets is good for business.
From the audience's point of view, it might be worth the price of the ticket
just to see what justified that expense. But finding out exactly how the money
is spent is more difficult. On rare occasions production budgets have leaked
out, but up-to-date information is hard to come by. And that's hardly
surprising, as there is a lot at stake. Exposing a movie's financial details
could upset a lot of powerful people. A film's director, actors and producers
will be some of the most significant costs in the budget, and they will not be
happy to have their pay open to public scrutiny. But it is possible to get an
idea of where the money goes. So, if you have always wanted to direct a
blockbuster movie, here's a rough-and-ready guide to how much it is going to
cost you. And, lower down, find out how you might get some of that money back.
Budget
So
what qualifies these days at a big budget? According to Nikki Finke, founder
and Editor-in-Chief at the respected Hollywood news website Deadline.com, $200m
is the starting price. "$200m is when they (studio executives) really
start thinking hard about it." Approving (or green-lighting) a project of
that size might be beyond the remit of even a studio chairman. It might have to
go to top executives at the parent company.
Story Rights
You
are going to need a story for your movie. More often than not that will come
from a book, a play, or in some cases a video game. The rights to a
best-selling book can cost anything between $500,000 and $2m.
Screenplay
So
you have permission to use the story, now it needs to be converted into a
script. Top scriptwriters will command hefty fees and you could spend as much
as $2m. That's the elite end of the market; most Hollywood writers toil away
for much, much less.
Director
This
varies wildly form director to director. Some like Steven Spielberg may take a
producer role, which means extra payment. The most successful directors will
ask for as much as $10m for a movie, and may also want a cut of the film's
profits.
Producers
The
title "producer" can mean a lot of different things in Hollywood.
Typically it is the person who will shepherd the movie from the script page to
the premiere.
A
producer can be thought of as the chief executive of the film. They are the
financial controllers and will make hiring-and-firing decisions. They will also
bring investors into the project and negotiate deals with distributors. At the
high end of the industry they will receive millions of dollars. While rarely
getting paid more than the lead actor, they can make up to $5m for a film.
Cast
A
big name actor can expect an up-front payment, $10-$20m would not be unusual.
The biggest names can demand a percentage of a movie's box office return.
While
studios are generally reluctant to offer such deals it can be a way of managing
financial risk. If the film is more successful than expected, everyone is
happy. But if it fails, at least the payments to actors will be limited.
For
the Hollywood elite, vast sums can be made. It is reported that Johnny Depp has
made hundreds of millions of dollars out of the Pirates of the Caribbean
movies.
Production Costs
Again,
this can vary wildly. If you want to film in Manhattan, you will have to pay
for filming permits, insurance, security - the list goes on. And if you want to
film at night, elaborate lighting will be needed. You can save money by filming
in cheaper locations. Many countries will offer tax breaks. The Lord of the
Rings trilogy received substantial tax breaks from New Zealand. Producers will
have day-by-day breakdowns of how much filming will cost. Something relatively
straightforward like a courtroom drama could cost $500,000 a day. For a 40-day
shoot, that is $20m. But if you want car chases or pyrotechnics, then you can
expect to pay a lot more.
Visual Effects
Keep
plenty of money in reserve for this. Computer generated imagery (CGI) is
expensive, and big-name directors like long movies. For some films that rely on
visual effects, it will almost double the cost of the movie. You could end up
spending $100m.
Music
A
relative bargain. For an original song, a well-known pop star may charge up to
$1m.
Marketing
So
you have made the movie, the director is happy and you have kept to the budget.
Surely the worst is over. Wrong. "Actual filming, unless the director goes
off the rails, that is often the easiest part of it all. These days it is
extremely rare that a production will be a month or two late. In this business,
one or two days is a big deal," says Nikki Finke at Deadline.com. You are
now entering the world of marketing, which is very expensive. Big films will
need a global advertising campaign. This can often amount to 50% or more of the
original budget. Reports say that Disney's flop movie, John Carter, cost $250m
to make and another $100m to market.
Revenue
So
the film has been made and the advertising campaign has been rolling for
months, now it is time to make some money.
Box Office
The
rule of thumb is that a movie studio can expect to receive about half of the
box office sales. But in reality, the deals struck will be complicated. Studios
often negotiate a high percentage for the opening week, which will then tail
off, so the cinema chain gets a greater share as the film gets older.
DVD Sales
In
the US, home entertainment spending, which includes DVDs and film rentals, has
been falling since hitting a peak in 2004. Nevertheless it remains an important
part of a film's revenue. Bruce Nash, the founder and president of Nash
information services, which provides movie industry research and support, says:
"The death of that market is somewhat overblown. "The DVD market
peaked much earlier than studios would have liked, but the overall viewing of
video at home continues at the same rate as ever. It's a much more mixed market
between DVD, Blu-ray, video streaming and rental services like Red Box."
A
studio will typically take 40% of DVD and rental sales, and that can generate
some healthy sums. DVD sales of the movie Avatar totalled $600m in the US
alone. Another $57m was spent on renting the movie.
Merchandising
In
the business this is known as ancillary revenue. It includes licensing for
toys, games, posters and other items. This area is particularly important for
animated family films like Pixar's Toy Story series. In-flight entertainment is
also included in this bracket. Ancillary revenue can amount to about 10% of box
office take.
TV Releases
Generally
a film will be offered on some kind of video-on-demand service first, then a
premium cable package, and finally it will make its way on to regular
television.
The
fees will be based on the film's box office performance. A studio can expect to
make about 11% of its box office total from TV releases.
*Ben
Morris, Business Reporter writes on 7 May, 2012 in BBC News Business
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