From the outside looking in, Hollywood and the filmmaking industry seems exceedingly glamorous. From the Grammys and red carpets to the designer clothes and cars, it is easy to assume the business is extremely lucrative; however, with a further look, it becomes apparent that the money associated with Studios, directors, producers, and Hollywood, in general, is more of a mirage. For example, Men In Black 3, Sony’s highest-grossing title, made over $550 million worldwide, yet for a long time, it was thought to be a loss of money. The movie production itself cost almost $250 million, marketing could’ve been at least that much, and then theatres and distributors received a significant portion of the ticket sales. As this example proves, ticket sales cannot be solely relied on for movie profits. Instead, major studios, movie executives, and indie filmmakers spend a portion of their days searching for new sources of revenue.
So how do movie studios still make a profit? Through selling overseas rights, creating associated video games and amusement park rides, and so on. Here’s a more detailed look at ways the film industry increases its revenue.
As mentioned above, theatres and distributors receive a significant portion of ticket sales. Typically, the studio would receive a higher percentage of opening weekend ticket sales, and as the weeks continued, the theatre’s percentage increased. Poorly-performing films send a smaller percentage of revenue to the studio, while “hits” send larger portions back. From ticket prices in general, studios make more from domestic revenue than from overseas sales due to the percentage differences. But as theatre attendance continues to fall, it becomes even harder to profit from ticket sales.
Nowadays when we think of merchandise, things like action figures, magazines, posters, games, and clothing come to mind. However, back in the 1970’s, selling movie merchandise wasn’t considered a big move. That is until Star Wars released. By the 1980s, dozens of little plastic figures lined department stores. Since it’s premiered in 1977, the Star Wars franchise has brought in over $12 billion in revenue from toy licensing alone. Another example, Disney’s “Toy Story” franchise has brought in nearly $2.5 billion in retail sales. While merchandising doesn’t work for all films, it can be a meal-ticket for films that appeal to children and Comic-Con lovers.
Foreign sales can be crucial to bringing in revenue, especially for indie projects. So much so that there are careers focused solely on international sales. A great foreign sales agent can be vital in selling films to overseas markets. Commonly, producers will create a list of casting “hopefuls,” that features famous names that are known to travel. The reason being is that other countries are far more likely to purchase the rights to particular films if its starring well-known actors that are guaranteed to attract viewers. This may not ensure billions of dollars in revenue, but out of all the revenue approaches, this one is about as safe of a bet as you can find in the industry.