You hear this all the time: “The movie cost $20 million and made $30 million at the box office, so it made a $10 million profit.”
Not even close.
Understanding box office profit is a little more complicated than taking the box office gross and subtracting the movie’s budget. There are other costs involved, and there’s a big piece of the box office that never goes back to the studio or filmmakers.
So let’s break down the math.
Box Office Profit Starts With More Than the Movie Budget
Let’s use a $20 million movie as our example. That’s the production budget. It cost $20 million to make the movie.
But now you have to release it.
You’ve probably heard the term P&A, which stands for “prints and advertising.” The “prints” part is a little dated because we’re not shipping physical prints of movies around the country like we used to. Today, movies are generally delivered to theaters digitally using DCPs, or Digital Cinema Packages.
The big number is the “A”: advertising.
You have to get people to know your movie exists. You have to get butts in seats. So for our example, let’s say the studio spends another $10 million advertising the movie.
Now our $20 million movie has $30 million invested in it.
The Movie Theater Gets a Cut
Okay, so our movie costs $20 million, we spend another $10 million advertising it, and then it makes $30 million at the box office.
We broke even, right?
No.
For this simple example, let’s say the exhibitors—the movie theaters—take roughly half of the box office.
That $30 million theatrical gross now sends only about $15 million back toward the movie.
But we spent $30 million between making and marketing the film.
So instead of being $10 million in profit, we’re still about $15 million in the hole.
That’s a huge difference.
Why a Movie May Need to Make Much More Than Its Budget
This is why you’ll sometimes hear people say that a movie needs to make two or three times its production budget at the box office before it becomes profitable.
In our simplified example, the $20 million movie has $30 million invested after advertising. If roughly half the theatrical gross goes to the theaters, the movie would need to gross north of $60 million just to get around that $30 million mark coming back.
And remember, these are simple numbers to make the concept easy to understand.
A studio could spend far more than $10 million marketing a $20 million movie. Maybe the advertising campaign is $20 million or $30 million. Suddenly, the math changes again.
Don’t Confuse Box Office Gross With Movie Profit
This is the mistake I see people make when talking about successful movies.
They’ll say, “That movie only cost $1 million and made $100 million!”
Okay, that sounds incredible—and it probably was an incredible success—but you still have to understand what those numbers actually mean.
How much was spent advertising the movie? How much of the theatrical gross went to the theaters? What were the other costs involved in getting that movie into the marketplace?
The headline box office number is not the amount of money that lands in the filmmaker’s bank account.
Understand the Business Behind the Movie
If you want to make movies, you need to understand this stuff.
It’s great to understand cameras, scripts, actors, directing, and production. But if you want to build a career producing and financing movies, you also need to understand where the money goes.
So the next time you see a headline saying a $20 million movie made $30 million at the box office, don’t immediately think, “Wow, they made $10 million!”
Look at the bigger picture.
Because box office gross and box office profit are two very different things.
