New Study: Bigger Movies Make Bigger Bucks


A new study from SNL Kagan found that the most expensive movies tend to be the most profitable and that animated films are on, average, the most profitable of any genre.

The research group looked at movies that opened on 1,000 or more screens between 2003 and 2007. Nine films in the $90 to $100 million range posted an average net profit of $374.7 million, and 80 films costing more than $100 million showed average profitability of $282.3 million.

But one exception; cheaper horror films performed better than expensive ones, they had better results when they cost less than $10 million.

Here's the thing--the study doesn't seem to take into account advertising and marketing costs, what studios call "P&A" for "prints and advertising." Studios spend much more on their bigger budget films, sometimes even as much as the cost of a film itself; its possible to spend $150 million on billboard ads and TV commercials for a big budget movie like "Spider Man" or "Lord of the Rings."

It could seriously shift the profitability equation if you take note of the fact that you might spend 70 percent of the budget of a film to market an expensive move and just 30 percent to market a lower budget film. The reason for that difference is big budget films target younger audiences who are best reached by TV ads and billboards, while lower budget films often target adult audiences who take note of less expensive newspaper ads.

Another question--how did Kagan get the budget numbers? If the studios are producing them, how can they be sure they're legit? Studios often exclude certain costs from a movie's "budget," writing off certain development costs. And profitable for whom? The studios often split their costs with financing slates from Wall Street or hedge funds, the studios taking an additional fee. So it doesn't answer the question of which investors these films are profitable for.

But here's the good news. The study finds "when the going gets tough, consumers go to the movies." According to SNL Kagan, theaters have been fairly recession proof, this year, no exception.

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Questions? Comments?