That Box Office hit didn’t make any money, and why it’s not getting better.

So your $1 million dollar movie made $2 million at the box office, and no one is writing you any checks yet. This is the quick and dirty story about the complicated world of hollywood book keeping, and why it’s so hard to make money with your movie, even when it’s a box office success.

For the past two years I have helped market and distribute some local and indie films, and learned how much people have to learn about the difficult process of making money from a film. Since I am used to marketing smaller films, I am going to use small numbers. Let’s start with a movie that costs $1 million dollars to make, you can scale that up to $10 M, $100 M or $1 billion if you are a Star War but it’s the percentages that count. I am going to use some rough percentages here, as they are often negotiable, but I want to make it as simple as possible. Okay, so let’s say you made your movie for $1 million dollars, you might think I need to do $2 M at the box office to make money. This is why you are wrong.

Of your $2 million dollar box office, how much of that is going back to you? Let’s take a look. The first bite of the apple goes to the theaters, the ones that show your film, they collect the money after all. They take the biggest bite off of the top and will leave you anywhere from 40% to 50%”. Okay, so now you are down to $1 million dollars (if you are lucky, or are in Utah*), and that ain’t pretty. You have half of the box-office, which are your films costs, except you don’t have it, The distributor has it. Your distributor believed in your film, just like you wanted, and they threw the full weight of their marketing machine behind your little labor of love. They have pay back P & A before they can pay you anything.

What is P & A ? Simply put is the print fee and advertising fee. These are the hard costs of taking your film to the world. Prints used to be incredibly expensive and they would pass from theater to theater to save on costs. Now with digital you don’t have to make an individual print for each theater, but you DO have to pay for DCP’s and the associated licenses. This can be complicated, but to keep it simple, let’s say it costs about $1,000 per DCP/license (It can be a lot lower, and it can be higher). If you wanted to play in 100 theaters, you are out $100,000 of your P & A and nobody even knows your film exists. (Traditional wisdom says to spend match 50% of the films budget with P & A, though honestly, I believe the trend is to try to equal the budget with P & A even with a big budget Star War). Let’s go with 50% for our example. So from your $ 500K P & A budget, only $400 K is used to get the word out, and if you have a good distribution company**, they will wring every impression they can out of those dollars and let everybody know about your film. But you still have to pay that back before anybody sees profit.

So from your $2M box office, The theater takes $1M, the distributor takes $500K just to pay back print and advertising fees. But we are not done yet. The distributor get’s a percentage of profit. They are in this to make money too, and if you have a good distributor, they haven’t made any money off of your P & A spend. Let’s say they are taking 30% which is a pretty fair deal (I have seen a lot worse and a few better, but keep in mind they invested the P&A and this is their shot at making some back). So from the remaining $500K, they take $300K (they take 30% of your box office take), and you are left with $200K. only 20% of your original budget, and 10% of your original box office.

Most of the time, you need to do a little over 3x what your movie cost to make, just to break even at the box office. This is why most films don’t make money at the Box Office. And when you hear of a Box Office flop, they are in a much bigger hole that you thought. But have no fear, the box office is not the only place to make money, however, the afterlife of a film offers less room to make money than ever before.

More and more you need to look at a distributor that has an eye past theatrical to make money. The theatrical release is mostly a tool to defray the costs of your film and be the most expensive advertising campaign imaginable. The largest profit margins for filmmakers are still in disc sales, which is why a recommend you look for a distributor which has a finger in both, they are going to be more willing to invest in P & A if they have a greater chance to recoup on disc sales, and are also going to be more invested in your title overall as they follow it through a 3–5 year cycle to make both you and them as much money as possible. We could also talk about little bit more about video on demand and streaming, and why it’s still worth it to keep your film from hitting Netflix too soon, but that is a discussion for another day.

Unfortunately, disc sales have shown a steady decline for the past 10 years, and there is no reason to believe that this will ever recover. Electronic distribution may be the future, but viewers are less and less likely to want to pay for content. The number 1 comment we often receive on fan pages (and even from filmmakers themselves) is “When is this going to be on Netflix?”. Which is another way of saying “When can I see this using the stuff I have already paid for.” Netflix (and Hulu, and Amazon) are amazing platforms with incredible content, but there is a reason why they have more and more original content, and are letting the contracts lapse on much of their past catalogues. Filmmakers now know that a streaming contract is often a death knell for all other sales, and most digital streaming services only take new content through aggregators who don’t offer very competitive rates for filmmakers. But like I said, that is a discussion for another day.

*In the small state where I have been working, and which has a very active movie going public, and a niche audience, the theaters can be very kind to local films and can often negotiate a more favorable percentage, even paying up to 50% of Box Office, but I understand that it’s pretty rare elsewhere, though I imagine the studios have more negotiating power on a Star War or a Jurassic Park.

**Some unscrupulous distributors might “spend a film to success”, doubling their Box Office by tripling their P & A spend.