The vast preponderance of news reporting about Hollywood concerns the weekly box-office race. It is offered free to the media every Sunday afternoon by Nielsen EDI at a low point in its news cycle, packaged with punning headlines and quotes by industry sources, so it can be reported as if it were a high-stakes horse race. In fact, it is, to borrow Daniel Boorstin’s concept, a weekly pseudo-event whose sole purpose is to garner media attention.
Once upon a time, six decades ago, such box-office numbers were critical to the fortunes of Hollywood. The major studios then owned most of the large theater chains and made virtually all of their profits from ticket sales at their own theaters. But as of the late 1940s, antitrust rulings forced the Hollywood studios to divest their theaters, and the theater business evolved into multiplex chains that the studios did not control. As television, home video, pay cable, DVDs, and now streaming have become ubiquitous in American homes, the studios have radically changed their business model, moving their profit centers from the large to the small screen, making the box-office race less relevant.
Even the numbers themselves are misleading. The reported “grosses” are not those of the studios but the projected sales of tickets at the movie houses in the US and Canada (which is counted by Hollywood as part of the US). Whatever the amount actually is, movie houses remit about 50 percent to the movie distributor, which then deducts, off the top, its out-of-pocket costs, which includes advertising, prints, insurance, local taxes, and other logistical expenses. For an average big-studio movie, these costs now amount to about $40 million—so, just to stay in the black, a movie needs $74 million in ticket sales. Many films don’t make that much, and even those that do may not be profitable. For example, Disney, which hailed as a great success the nearly quarter-billion-dollar “gross” of its movie Gone In 60 Seconds (released in 2000), wound up with only $11.6 million from theaters, and since the movie cost $103.3 million to make, its theatrical run ended up in the red. This is not uncommon. Most Hollywood movies nowadays actually lose money at the American box office and make it from ancillary markets.
Meanwhile, the outcome of the box-office race has little importance to theater owners these days, because each of the major multiplex chains books all of the studios’ wide-release movies. Their only concern is the total number of people who show up and how much popcorn, candy, and soda they buy, since that’s where their real profit comes from. In numerical terms, the movie-going audience has been shrinking since 1948.
The studios focus on the cumulative revenue their movies take in over many platforms, including both domestic and foreign movie houses, DVD stores, pay-TV output deals, and TV licensing. Even though its ancillary benchmarks can be higher when a movie is No. 1 at the box office, the film can still fare very badly in its cumulative results. Consider Paramount’s 2005 adventure film Sahara (and here I should disclose that I served as an expert witness in a lawsuit involving its finances). Although it was No. 1 at the opening-weekend box office, it is one of the biggest money-losers in history. Based on a Clive Cussler best seller, the film cost $160 million to produce and $81 million to distribute, and wound up losing $78.3 million. On the other hand, some movies that finish at the bottom of the weekly pile, such as Woody Allen’s Midnight in Paris, Wes Anderson’s Moonrise Kingdom, and Darren Aronofsky’s Black Swan, can ultimately take in more money than movies that finish ahead of them.
It certainly helps to be first on a weekend, but not all weekends are equally valuable. There are holiday weekends that can produce as much as 10 times the revenue as those in the slack season (when teenagers return to school). A Fourth of July second- or third-place movie can take in far more than a first-place finisher in October, since the total pie is so much larger. And films that open in the summer, no matter where they finish, will also earn more than fall films from Christmas DVD sales—due to the usual four-to-five-month embargo on the release of movies on DVD, summer films become fresh product on the market at holiday time.
Even in the era of global marketing campaigns, the US box office does not necessarily affect foreign revenues, which now are more important than the domestic take. For major movies, such as Avatar, more than 70 percent of the theatrical revenue is now earned overseas.