Many movie buffs do not realize the economics and the efforts behind Hollywood movies. With the advent of technology, TV, and streaming platforms, the moviegoers are now moving towards them. Society has a shorter attention span and prefers short-series. Hollywood has to adapt and focus on new avenues for being profitable. The article provides the economic timeline of Hollywood movies. The major steps in the economic timeline of a movie are provided below:
Finalizing the Budget
Hollywood movies have big budget. The budget can exceed $40 million for the big studio movies. These studios also have to pay for the print and advertising costs and the movie must earn enough to meet these expenses and be profitable. Finalizing the budget of a movie can be tricky as it is difficult to predict the consumer taste and behavior and the revenue in advance. Print and advertising cost can significantly increase the movie budget, like the print and advertising cost for the movie Transformers: Age of Extinction was over $100 million in North America only.
Movie making is a long gestation project. Making a movie can take up to 36 months. The opening weekend is decided for any movie well in advance. It should generally coincide with the bank holidays, Christmas, summer weekends, and other vacations. The movie cannot miss its production and release deadline as missing the ideal opening weekend may mean large losses for the movie and the production studio.
The production studios work out deals with the movie theatres and multiplexes. Generally, a studio expects to make 50% of the revenue generated from ticket sales. They can influence the theatres to show their movies in more screens to boost up revenue collections. The movie has to perform exceptionally well to make profits, as only a part of the ticket sales revenue goes to the production studio. Ideally, the ticket pricing should be attractive to lure more people into watching the movie, especially during weekends and holidays.
Foreign sales are emerging as an important source of revenue for Hollywood. Due to globalization and growing awareness and changing tastes of the global consumers, there is great demand for Hollywood movie and stars in many countries. Stars like Tom Cruise are hugely popular in Asia and their movies do well in Asian countries.
Product placement is emerging as a new revenue stream for Hollywood. Companies sponsor movies and expect to create more awareness and boost sales of their products among moviegoers. BMW signed a three-movie deal to feature their Z3 in the James Bond movie GoldenEye. Similarly, Heineken paid $45 million to feature their beer instead of the popular vodka martini in the movie Skyfall.
Hollywood is exploring merchandising to garner revenue. Movie franchisee like Star Wars, Troy, and other superhero movies can bring considerable revenue from selling merchandise like toys, clothes, and other accessories. Star Wars got revenues worth $12 billion from toy licensing while it made only $4 billion from ticket sales.
DVD and Streaming Rights
Movies can generate revenues from investing in DVD rights. Hunger Games sold about 3.8 million copies in the first week of release.
Contrary to popular belief, making money in Hollywood is not easy. Only about 5% of the movies made will be profitable. Hollywood is exploring new avenues for revenue generation and cost rationalization to keep itself profitable and relevant in the current times.