Hollywood’s Trying To Adapt To A Changing Market By Throwing Money At It

All those numbers go to show that profitability and return on investment in modern moviemaking is pretty much dependent on budget. It’s a complex problem that goes beyond what we can cover here, but at its core is a result of the changing industry. It used to be that studios would produce a wide range of movies and use the profits of all to offset their bigger, potentially risky projects. Now, though, the top end is getting so dominant that a whole type of mid-range films are scarce and movies that should have been at that pricing amount now go past $100 million for posterity despite there being no comparable box office shift.

As these expensive movies become more lone, the risk is increased so they become more homogenized and generic, and the payments more linear. The logic should be that if you spend $X million on a project, you need to make back $2X million to break even. The problem is that in many cases it seems studios view that breaking even as the success; if a property theoretically can make $2X million, then why not give an $X million budget? There’s no hedging of bets or risk management for a potential bomb.

There is also the factor of understanding the audience. The Top 5 least profitable movies wouldn’t have made a profit domestically with half their reported cost, a staggering fact that means the problem may be less spending $175M on King Arthur and more in approving a lad-hued King Arthur movie in the first place. But that comes from the same confusion of expectation and allowance.

You need to know how much to spend and when to stop. Logan perhaps best shows this. It was comfortably Top 10 for net profit, bringing back $129.3M domestically (and a lot more internationally), but that status hinges on it keeping on the low-end of tentpoles. The movie wound up costing Fox $97M, which was the right amount for a gritty, adult Wolverine movie. Had that been gifted a $150M budget, it would have been considerably less viable. Blade Runner 2049 will be an interesting case study in this regard; the film reportedly cost $185M, meaning a $370M global total is needed, a big ask from the cerebral legacy property (Alien: Covenant would have been a disaster if it hadn’t had a modest budget identical to Logan).

Low Budget Movies Don’t Only Work – They Float

get out movie 2017 Hollywoods Box Office Problems Are Its Own Fault

But what the numbers really show is that true profitability lies away from the mega-bucks and franchises. The low-budget model is proven and leads to profits comparable to what you get from the year’s biggest and most expensive hits.

The best example of this is Blumhouse. Jason Blum was a protegee of Harvey Weinstein, who found a crack in the firmament and started producing crowd-pleasing cult hits and Oscar bait. After learning from Mr. W, Blum went out and started acquiring and producing super low-budget horror movies he could either sell on the home video circuit or, in the case of a real winner, push them into cinemas to make a massive buck. This has led to such successes as Paranormal Activity, Insidious, The Gift, The Purge and 2017’s two most profitable films, Get Out and Split. He was also behind Whiplash and is now moving into bigger things with the likes of Glass and Spawn. The model – low-risk, high-concept films with a targeted audience – is strong. And it’s replicable.

Related: Why Blumhouse is the Perfect Studio For A New Spawn Movie

So why isn’t there more like this? Warner Bros. are following this with The Conjuring Universe (and to a degree IT) and comedies by their nature hit the mark, but otherwise there’s no shift in the studio system yet. Of course, it’s not totally scalable. You can’t just have every $100M tentpole turned into ten smaller productions; there’s a limit to the number of movies that can be released and will make an impact, and Blumhouse’s model hinges on quality and nurtured talent. But you can diversify and offset failures with these.

International Box Office Helps – But Isn’t The Easy Fix

Mark Wahlberg in Transformers The Last Knight Hollywoods Box Office Problems Are Its Own Fault

Before we conclude, a clarification: our maths is based on domestic numbers, which is conventional yet in 2017 not the full picture. For the biggest movies, worldwide take makes up a considerably larger percentage than domestic – especially now China is the powerhouse it is. The Fate of the Furious made 81.8% of its $1.2 billion haul outside of the US and even for domestic runners like Beauty and the Beast it was 60.1%. This is how Spider-Man: Homecoming can make more than Wonder Woman: Diana was a bigger hit in the west than elsewhere.

And it must be said that of those films in the Bottom 10 of profitability, many were clearly angling for an international lease of life. The Mummy, and by extension the Dark Universe, was pretty much saved by Cruise’s global cache. But even this argument doesn’t quite hold up. Applying similar math to the worldwide box office, we still have King Arthur, Valerian, Power Rangers, Ghost in the Shell, Life and The Dark Tower losing money, and most of the others aren’t really flying either. They’re breaking even, but that’s damage control, not success.

Conclusion: Over-Spending Isn’t Cool Any More

Kevin Costner as The Mariner in Waterworld Hollywoods Box Office Problems Are Its Own Fault

It used to be that being the most expensive movie ever made was a sense of artistic achievement. For Ben-Hur, Superman, Terminator 2: Judgment Day, Titanic et al, costing so much was a key reason to get people to the cinema; the budget was the signal an audacious filmmaker was pushing the boundaries of the medium.

Now, when numbers that were once eyewatering as passe, it’s more like Cleopatra or Waterworld, two of the most infamous cases of uncontrolled spending; if you pay a lot, it’s down to bad management. And this is where it gets scary: even those notorious bombs (both were more successful than reputation suggests but failed to turn a profit on initial release) weren’t as severe as what we’ve seen for Valerian and King Arthur. We’re literally at a point where the go-to examples of out-of-control budgets are considerably safer bets than the majority of what Hollywood’s financing today. Something needs to change.

Next: Horror Movies Are Killing It At The Box Office This Year

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