The Economics of It All

It’s always good to put statistics out for the consumers to contemplate and indulge. A recent study done by SNL Kagan reports that big budget movies bring in higher proceeds. That sounds like a “durrrr” statement but we are talking about net profits here. The study, “Economics of Motion Pictures” as it is called, analyzed 764 films and net profits were based on a typical distribution fee scenario at major studios. The study showed that riskiest films to make were films budgeted in the mid millions range on a 0-100 million scale.

What does that mean for us? The motion picture industry will continue on it’s path of big budget push outs despite the new technological advancements that make filmmaking nearly facile. The achievements of Paranormal Activity could make an honest provocation towards lower budget, independent films if it had not been a horror film to accomplish such deeds. The study proves that horror films performed the least profitable as genres are concerned. For us filmmakers that started foaming at the mouth when the industry began shifting to digital and low budget comedies tore holes in consumer pockets, Hollywood isn’t going anywhere soon.

Films boasting production pricetags of more than $100 million actually generate higher returns than mid-range pics, averaging $247 million in net profits per release, according to the study by SNL Kagan, which analyzed all films released on 1,000 or more screens from 2004-08.

Pics that cost $90 million-$100 million earned an average of $118 million.

When it comes to specific genres, animated films performed most strongly, averaging $221 million in net profits per toon. Sci-fi and fantasy films follow at $125 million.

The least profitable of the 10 genres listed in the study were horror pics, with an average domestic gross of $33 million and an average net profit of $17.9 million, and thrillers, with an average domestic gross of $40 million and an average net profit of $13.7 million.

by Marc Graser for Variety Magazine

Now there is some sense to these numbers also. The article pointed out that major studios are more cautious on choosing material when it comes to spring boarding major coinage for certain projects. They also find it safer to go with well known stories and/or characters for the bigger budgets. Everything happens for a reason, me loves.

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