What Makes a Hit Movie? Part 3 of 3: Bottom lines
This posting is the third part of a series focusing on 2008′s top 100 movies.The first posting presented the movies, as ranked by their total U.S. box office gross. The second posting investigated the link between their box office performance and critical reviews. This third posting will take a look at their production budgets and their ‘margins,’ as best can be estimated with the information that is available.
Unfortunately, out of the 100 movies I’ve been following, the production budgets were available for only 78 of them, so this posting will therefore be limited to this group. Plotting their production budgets against their respective total U.S. Box Office rendered the following scatter chart.
The slight upward curve of the grouping illustrates a relatively high correlation of 0.688, much higher than the correlation I got when comparing Rotten Tomatoes Scores to U.S. box office returns.
Plotting the production budgets against a total of the U.S. and foreign box office, as shown in the next chart, yielded an even higher correlation of 0.751.
I found these high correlation scores to be somewhat comforting, indicating that Hollwood was managing to rake in revenues that corresponded with the size of their production investments.
Given these results, I then decided to look to compare profitability between the movies. Given limitations of what information was available, I could only utilize production costs and total box office revenues. Other costs like overhead, marketing and distribution were ignored, as were ancillary revenues like home video. I believe that these omissions were acceptable since the purpose of the exercise was to compare performance rather than estimate true profits. I devised to following formula for ‘rough margin’ to compare profit performance:
‘Rough Margin’ = ((U.S. box office gross+ foreign box office gross) – production budget) / production budget
The group’s average ‘rough margin’ is 56.8%, and is delineated above by a dotted line. The average production budget of $64.9 million is also indicated by a dotted line. Note the light-green quadrant, created by these averages, in the upper left-hand corner. Over a third of the titles, whose low budgets facilitated high margins, fell into this small area. Exemplifying this group is the ‘rough margin’ leader, Fireproof, a production that cost only half a million dollars but made over $33 million- a 98.5% margin. The entire top 20 list follows.
Top 20 Movies per ‘Rough Margin’
- Fireproof: 98.5%
- High School Musical 3: Senior Year: 95.5%
- Mamma Mia!: 90.9%
- Saw V: 89.6%
- Twilight: 89.1%
- The Strangers: 88.6%
- Cloverfield: 85.3%
- Sex and the City: 84.3%
- What Happens in Vegas: 84.0%
- Slumdog Millionaire: 82.8%
- The Dark Knight: 81.4%
- 27 Dresses: 81.3%
- Kung-Fu Panda: 79.4%
- Journey to the Center of the Earth: 79.4%
- Wanted: 78.0%
- 21: 77.8%
- Indiana Jones and the Kingdom of the Crystal Skull: 76.5%
- Hancock: 76.0%
- Iron Man: 75.9%
- Pineapple Express: 75.1%
Out of these twenty movies, only five had production budgets above $100 million, and only two in the top ten have budgets above $50 million.
Looking at the underperformers, only three movies out of the entire group made a negative ‘rough margin’: The Love Guru (-51.8%), Leatherheads (-40.9%) and Speed Racer (-28.5%). It is possible that these movies made substantially more money after their theatrical releases; Speed Racer made over $14 million in DVD sales for example.
Despite not having complete access to all the costs and revenues needed to assess the true profitability of these movies, I believe that based on these figure it can be ascertained that Hollywood does manage to allocate money into projects that provide comparable returns.