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When a movie has a budget of $10 Million, what does that mean, exactly?
Does it mean that $10 Million has been put togther by investors, and that money is used to make the film and pay everyone involved with it, based on what everyone agrees to take for their services?
Does it include marketing/advertsing costs, or is that something that the Distribution Company takes care of?
Bottom line...if a movie with a $10 Million budget makes $15 Million domestically, does that mean it made a $5 Million profit? And if so, where does that $5 Million in profit go? To the Production Company? To the Producers/Investors? Backend agreements to above the line talent?
It's a good question, but I think very hard to answer. It depends on what contracts people have too, I think. Mainly, accountants get paid huge amounts of money to keep everyone confused about this.
I'm not sure how it works with features, but I would imagine most "entertainment" budgets are at least similar. I have spent months and months working on the budget for a reality show and it is a nightmare and involves a LOT of people all getting different amounts and percentages. I honestly still don't understand it. It's a very tricky think to figure out what the exact profit is.
I know we read that such and such movie cost this much to make and took in this much at the box office. That's simple math everyone can do that, but in reality I have a feeling it's much more complex than that. I could be totally wrong of course and just dense.
I remember reading an article about the writer of Forrest Gump trying to get paid. The accountants massaged the figures so much that it appeared, on paper at least, as if the movie made no net profit, so they didn't owe him a cent.
Rendevous...that's some wild shit there. Where's that from? What year was it written in?
It's unreal, if that's even remotely true...it was a film from 15 years ago, though also.
The math isn't right there either, though. It said that Hanks and Zemekis each had a guarrantee of roughly 8% of the gross receipts, which wuold be over $50 Million each, and that's not what it said the actually received.
I read about that a long time ago, maybe a decade or so. I think it was a magazine called Sight & Sound, a real film 'head' serious type doodah. Of course it could have been Empire. I was only a mere toddler at the time.
The math(s) is way off. They ripped those guys good and proper. Fact is, they got away with it. I do remember the story about how Hanks got paid too. He got his cut off gross profit. Wise man, but that's a doddle when you're big enough to have fellas sort this stuff out for you.
You see what Me means regarding this budget business? It's as big as they say it is... The reality is probably nowhere near.
I would be of the belief that the production company/studio would get the majority of the profits since they foot the bill for the cost of the film in the first place.
In some cases varying contractual obligations like an actor demanding percentages of the gross profit would account for some but I reckon it's the studios that take the biggest slice. Of course I could be totally wrong.
I'm hardly an expert on the business, but I'll post what I've learned about the money aspects of filmmaking. If I've made any errors, please correct me.
The film budget refers to the costs of producing the film only, which includes the above-the-line cost (money spent on the source materials and the creative talent) and the below-the-line cost (money spent on the physical production, such as sets or special effects). This is sometimes referred to as the negative cost, as it includes all money spent to produce the finished negative of the film. The film budget does not include the prints and advertising cost (money spent on physically producing copies of the film stock and on all marketing efforts).
To determine a film's profit or loss can be tricky as there are a lot of revenue streams and expenses to account for. Film studios generally only keep about half of the box office take (studios can often negotiate better deals when they are distributing surefire hits, such as the Harry Potter films; a savvy executive can secure as much as 90% of the opening weekend box office take for these productions). Plus, we have to account for ancillary revenues such as Bluray/DVD sales and rentals, broadcast and cable rights, marketing tie-ins, and so on.
A rough guide to determine a film's profitability would be:
Box Office Receipts x 50% + Ancillary Revenue - Negative Cost - Prints and Advertising = Net Profit/Loss.
We'll never be sure about those last three figures, so most people who follow the business from the outside use a different rule of thumb. A film is considered to have broken even when its box office take is twice its budget, and is considered a hit when its box office revenue is three times its budget. In other words, a $30 million film must make $60 million to break even and $90 million to be considered a hit.
The reason films such as Forrest Gump can make hundreds of millions of dollars only for the studio to claim it loses money comes down to what is referred to as Hollywood accounting. Basically, the studio takes the profits from a successful film and reallocates the revenue to other corporate entities under its umbrella. The studio keeps the money but, for accounting purposes, records a loss on this specific project. This is very important if, like Forrest Gump author Winston Groom, you have signed a deal to earn a share of the net revenue instead of the gross revenue. This is why those in the business always prefer to sign a deal for a little gross revenue instead of a larger share of the net revenue. One percent of something is better than twenty percent of nothing.
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