Barely Breaking Even — Hollywood is more Flop than Smash
That’s the proportion of movies from a list of 5193 Hollywood Films to actually broke even in the past 100 years. So out of 5193 films, only 1190 make a profit.
You can see that recent decades have been increasingly brutal, with the proportion of break even films falling to 20% in the 90s and staying around that level to the present day.
But what is driving this high failure rate? Are larger budget studio films sucking the dollars away from smaller independent cinema? Is it a budgeting arms race that are concentrating film profits into fewer movies?
If this were the case, we could assume that the return on investment(ROI) of movies should be changing so that a few films make huge returns, and the majority of films make little or no money.
Actually, we can’t see the data too clearly (that blue line is the 373% ROI line that I’ve adopted as a break even metric) because one film absolutely destroys all others when it comes to returns.
Deep Throat(1972) and is the best returning investment in movie history. The combination of taboo-breaking sexual depictions combined with the cultural landscape of 1972 America resulted in a viral success, that, combined with it’s (comparatively) minuscule budget resulted in the greatest financial success in movie history.
Unfortunately, it’s success proved disastrous for almost all the actors involved, and the director, who received mob financing to make the movie, was cut out at the peak of the films success, making Deep Throat the most profitable instance of entertainment industry money laundering as well. See the documentary Inside Deep Throat (2005) for the full story.
The highest ROI films are not necessarily what you would think. Super Size Me was an independent documentary. The Gallows is a found footage low budget horror film, as is The Blair Witch Project. On the earlier side of the spectrum we have Bambi, which by virtue of being released 77 years ago has had a much longer run to make a return.
The actual reason for these surprisingly high ROIs has more to do with the nature of the studio financial model. Since studios only collect around 55% of Box Office take (they have to cut in the theater chains and distributors) ROI is highly dependent on Production Budget as it shows up in both the numerator and denominator of the equation.
TLDR; If you want a smashing ROI, INVEST LESS MONEY!
It’s strangely intuitive, but as you invest more money in a movie, you’re actually reducing the potential return as your film must now recoup a higher cost before becoming profitable.
So what about the biggest production budgets in film history? Avatar? Titanic? How do they return on their investment?
Well it looks like the biggest budget films in Hollywood history are doing pretty well, they cost millions and take in billions. That’s a good investment, right?
Well actually, maybe it’s not such a great investment, because there’s no clear relationship between Production Budget and a high return on investment. It might be that the returns of blockbuster movies are more predictable, but we can’t conclude that from this data.
Hollywood studio budgets and box office numbers are not clean data sets and are likely unreliable. In particular, I think that Box Office take is often exaggerated for marketing purposes and without access to proprietary data, some of my conclusions may be incorrect.
The data in this article was scraped from The Numbers, and the process I used to do that is described here. There were some other interesting issues dealing with incorrectly encoded dates, etc, that I explore here.
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