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How Do Movies Make Money?

The film industry is quite a complex business. Contrary to popular belief, there’s much more behind a movie that just filming and playing it on theaters. In fact, the process of filming, preparing, distributing and selling a movie is quite a complex subject. In this article we’ll take you behind the movies to find out what is it that makes them profitable (or not).

Budget

First off, every movie has a reported budget. This budget represents the production costs; the actors’ payment, edition department, filming equipment, scenography, the special FX and so on. This reported budget is later compared to the box-office income to determine the profit (or loss) of the film. However, this production budget does not include some very important factors that can actually determine whether a film results in profit or loss.

These factors consist of advertisement, marketing, and prints. Regular audiences would just overlook the costs of these processes, thinking they’re not really relevant to the final cost of the film. However, directors and studios are pretty aware of the importance and costs behind advertisement and marketing. A film with a $100 million production budget is likely to spend around $40 million in additional advertising and marketing on average.

The costs of prints should not be underestimated, as we said before; it can mark the difference between a profitable movie and one that generates loss. This applies specially to new films, those that didn’t have a book or a past related film must do an additional effort to take people into the theatre to watch their movie.

These new films must coordinate their advertisement campaigns carefully, as over-advertising might generate too many expenses and hence making the film unprofitable. However, under-advertising might not make the film draw enough attention to make it profitable.

Known films with previous books, trilogies, and sequels must also play their advertisement and marketing wisely. Despite have previous reputation, a properly placed ad and a smart marketing technique can lead a film to enhance their income considerably. Not only does it draw attention from those audiences that aren’t related to the film’s past reputation; these techniques can generate loads of discussion through social media and through the audiences, hence enhancing the attention towards its merchandise (DVDs, Clothing, etc.).

Cinema

Studios get a fixed cut from the cinema ticket sales. Usually, they receive about half of the price from each ticket bought to their movie (in their country). When screened in other countries, they generally receive a lesser amount per ticket. The cinema movie tickets used to be the main income for films; however, audiences present at cinemas have been constantly decreasing due to home theatres, internet streaming movies services, DVDs, and the many other ways to watch a film without going to the movies.

Generally, studios and cinemas make an agreement where the studio receives a larger percentage of the ticket sales during the premiere of the film and the following few days. After the accorded period of time (usually 3 days), the percentage received by cinemas is increased substantially.

The percentage repartition is also affected by the popularity the movie has gained through social media or through sequels/books. A successful film series that releases another sequel is likely to receive a better percentage than a new film that perhaps doesn’t promise such a good outcome. Another important factor is the location of the cinemas you’re dealing with and the genre of your movie.

If I’m looking to sell a superhero movie such as Superman, my main income will definitely come from my local country. After that, foreign sales will depend on your genre. Since Superman is a known super-hero movie that can be easily enjoyed from anywhere around the world, my international income would be higher.
If I’m looking to sell a Malaysian comedy however, audiences outside Malaysia might not be able to understand or enjoy a foreign sense of humor. This factor leads to a reduced income in foreign cinemas.

DVD & Streaming Services

picture of DVD blue ray

With the increasing popularity of home theatres and streaming services, studios are able to obtain a higher income from these sales. Being Megamovies.cc the most popular paid streaming service, the income from their side is considerably important.

DVD sales are often wrongly underestimated, as a successful film is able to sell fairly over the million copies. DVDs are certainly cheap, however, when selling such a massive amount of them the numbers simply add up to a pretty big income.

Video-On-Demand services are an easy way for producers and studios to rake in some extra money. Considering the VOD services are the one responsible for the whole sales process and the advertising/marketing campaign to sell the movie, studios can just set back and receive a cut from every copy of their film that is sold through this method.
But entertainment isn’t limited to the ground-level. Airlines and other transport services have shown their willingness to spend a considerable amount of money for the latest entertainment for their customers.

Merchandise

This is the most underrated sales method by audiences. We often think simple products such as coffee mugs, action figures, decorated clothing and many every day products couldn’t really add much value to a film’s wealth; but we are terribly wrong.

Every-day items, just like that Star-Wars action figure you bought some time ago, or those stickers you bought your kids for their notebooks, have a similar effect to DVDs. Despite being really accessible (some of them for under a dollar), the numbers once again stack up; but this time, they stack up like you’ve no idea.

Customized merchandise has reported to generate over 2 times as much as the box-office income for certain films. The Star-Wars series have reported over $13 billion in merchandise income. This income is often the main source of money for future film sequels or related projects. Audiences have shown their interest towards personalized toys & products, some of them spending significant amounts of money on collectibles and limited-edition merchandise.

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