Hollywood's Box Office Problems Are Its Own Fault

Hollywood's just had the worst summer in years. Everyone's getting the blame, except the real culprits - the studios themselves.

Warner Bros and Pennywise

You've got to spend money to make money. That's the rule, right? Well, no. And if the movie industry doesn't learn that soon they're going to be in serious trouble.

This has been one of the worst Summers for Hollywood in recent memory. Box office attendance was down, more major tentpoles than ever bombed and it was capped off with the worst Labor Day weekend since 1999. Within that there have been successes - Get Out, Wonder Woman and IT all bucked the trend - but they're taken as outliers.

The industry has not taken this sitting down and has aggressively lashed out at all sides. Rotten Tomatoes is apparently the studio's choice blame for allowing audiences to know if the movie they're about to drop $15+ on is actually terrible, and MoviePass has become a key debate for starting a rolling ball that will chokehold the theaters.

Related: Rotten Tomatoes, Metacritic, IMDb & CinemaScore Explained

But, if we're being frank, there's no one Hollywood can blame but itself. The ideas behind a lad-style King Arthur, a non-horror reboot of The Mummy with Tom Cruise or a movie called Monster Trucks are weak sauce at best, but they were each gifted with ridiculous budgets ($175M, a reported but totally more $125M and $125M respectively) that meant to break even would be a hard task. Hollywood has problems with what it's green lighting, but this discussion about profitability could be avoided - or at least lessened - if they just stopped betting nations' GDP on dreck like Valerian and the City of a Thousand Planets.

We're not just making baseless claims here. Now summer's over, we crunched some numbers and tried to see what really was successful this year. And it's very revealing.

The Numbers (This Page)

For reference, we're going to start mainly looking at domestic totals and just the raw numbers (via Box Office Mojo, accurate at the time of writing).

Top 10 Highest Grossing Movies of 2017 (So Far)

Beauty and the Beast poster

Here's the Top 10 domestically as it looks now:

1. Beauty and the Beast - $504.0M

2. Wonder Woman - $411.7M

3. Guardians of the Galaxy Vol. 2 - $389.8M

4. Spider-Man: Homecoming - $331.9M

5. IT - $266.3M

6. Despicable Me 3 - $261.8M

7. Logan - $226.3M

8. The Fate of the Furious - $225.8M

9. Dunkirk - $186.3M

10. The LEGO Batman Movie - $175.8M

The lessons to learn from that list are rather simple: superheroes and franchises rule the roost - even the two animated slots this year were taken over by superheroic pastiches. The only real exceptions are Dunkirk, which is an outlier care of Christopher Nolan, and IT, which has strong branding besides. The only other major point to be made is that good sells: all but one of these movies (Despicable Me 3) are Fresh on Rotten Tomatoes, and a staggering six aren't only Certified Fresh but score well over 90% with critics and comparably with audiences. Basically, this Top 10 eight-and-a-half months in doesn't offer much beyond what we all already know.

However, we're assuming all these films (and the hundreds they've beaten out) come from the same baseline. They don't. The most expensive movie on that list was The Fate of the Furious on $250M, while the cheapest was IT a whopping seven times cheaper on $35M. This means while F. Gary Gray's film grossed comparable numbers to Andy Muschietti's, it actually lost money while IT made a hefty sum. We need another measurement.

Top 10 Highest Netting Movies

Get Out Party Scene

Let's shift things and instead of looking at gross profit, look at net profit - the actual take home money from a release.

That's hard to calculate from available numbers, so here's your disclaimer. Everything further is rough estimates - the math is far more complicated accounting than we have time for here (and studios keep real numbers close to their chest). And, while conventional Hollywood wisdom is that a movie's marketing cost essentially doubles the production budget, due to the wide range of films we're dealing with that's not a perfect comparison. Instead, we're going to simply subtract budget from these domestic totals for a scalable sense of net profit.

Adjusting that Top 10 for gross minus budget, we get a somewhat different looking list:

1. Beauty and the Beast - $344.0M ($160M budget)

2. Wonder Woman - $262.7M ($149M budget)

3. IT - $231.3M ($35M budget)

4. Guardians of the Galaxy Vol. 2 - $189.9M ($200M budget)

5. Despicable Me 3 - $181.8M ($80M budget)

6. Get Out - $171.0M ($4.5M budget)

7. Spider-Man: Homecoming - $156.9M ($175M budget)

8. Logan - $129.3M ($97M budget)

9. Split - $129.1M ($9M budget)

10. Girl's Trip - $95.8M ($19M budget)

Seven of the original Top 10 still remain, but you can see a clear delineation between mega-smashes and modest budgets. The others are either mid-range films that hit a niche market, or low-budget horrors that hit massively. IT deserves specific praise considering that these numbers come from its first three weeks alone - if it continues on this track it could close in on the top spot.

Related: Why IT Succeeded Where The Dark Tower Failed

The most striking thing here, though, is that Hollywood really is in trouble. Only nine movies have a profit margin greater than $100M (and, out of the Top 50 movies, only 32 made a profit domestically).

Top 10 Most Profitable Movies

Pennywise in IT

But this still isn't total level ground. While Warners made double the net on Wonder Woman to Universal with Split, that pretends the former didn't initially set them back $140M more. It's more profit, but on a much bigger initial investment.

If we take these numbers and divide by budget, we get their approximate profitability:

1. Get Out - 3800%

2. Split - 1534%

3. The Big Sick - 754%

4. 47 Meters Deep - 705%

5. IT - 661%

6. Annabelle: Creation - 574%

7. Girls Trip - 504%

8. Despicable Me 3 - 227%

9. Baby Driver - 216%

10. Beauty and the Beast - 215%

So the $4.5M Universal put on Get Out yielded them a whopping 3800% profit of $166.5M, whereas Beast's $160 led to a 215% profit of $344.0M. Both of these are good - that 215% for Beast is pure profit - but one is obviously better and lower risk.

Suddenly the message of what works changes. Now only three of the original Top 10 remain, and only one makes the Top 5; you have the biggest hit of the expensive films, and then Despicable Me 3 and IT succeeding mostly off their more modest costs. The rest are all cheap films that struck a chord. There's a host of reasons why, but clearly cost is key.

Top 10 Least Profitable Movies

Valerian and the City of a Thousand Planets Header

To really see how important budget is, though, we need to look at the flipside of this. Here's the bottom 10 in terms of profitability from the Top 50 biggest films.

1. King Arthur: Legend of the Sword -77.6% ($175M budget)

2. Valerian and the City of a Thousand Planets -77.2% ($177.2M budget)

3. Monster Trucks -73.3% ($125M budget)

4. The Great Wall -70.0% ($150M budget)

5. Ghost in the Shell -63.1% ($110M budget)

6. xXx: The Return of Xander Cage -47.1% ($85M budget)

7. Transformers: The Last Knight -40.0% ($217M budget)

8. The Mummy -36.0% ($125M budget)

9. Pirates of the Caribbean: Dead Men Tell No Tales -25.0% ($230M budget)

10. Smurfs: The Lost Village -25.9% ($60M budget)

NOTE: Kingsman: The Golden Circle would at present place 6th, but has been removed due to only being on its first week of release.

For every dollar spent, King Arthur lost WB $1.78. There's a lot here to dissect - many of these movies became profitable thanks to international audiences (specifically China), and their failure against the traditional Top 10 comes from their old-fashioned approach to movie green lighting - but there's one big thing linking all of them (except maybe Smurfs) in direct contrast to our previous lists: they cost way too much. These are a lot of the studios' big bets - four of the ten most expensive films of the year are here - that will actually offset many of the previous successes.

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