The economics of awful blockbuster movies

July 11, 2013
July 11, 2013

The Lone Ranger‘s historic flop this weekend was either entirely shocking (it really was historic) or entirely predictable (westerns often disappoint at the box office). But behind every $225 million bet, you can bet there are reasons. Indeed, the economics of betting a lot of money of a few loud movies a year are tantalizingly clear.

So here, with a little dose of data, is why studios feel encouraged to fill your summer with loud, dumb, sequels and reboots.

The globalization of cinema means less explosive dialogue and more explosive everything else.
The future of the movie industry is overseas. Full stop. Between 2009 and 2012, the US and Canadian box office grew by slightly less than 2%. The international box office grew by 27% in that time, and it now accounts for more than two-thirds of total sales, according to the MPAA.

Screen Shot 2013-07-10 at 12.00.18 PM.png

What does this have to do with bad summer blockbusters? Well, the conventional wisdom in Hollywood is that clever jokes don’t translate well for an international audience, whose biggest and fastest growing presence is in Asia. But familiar characters and/or explosions? They translate just fine.

Without 3-D, the domestic box office might be shrinking.  
The domestic box office might not be growing at all if it weren’t for producers re-discovering an extra dimension. Here and in Canada, practically all the growth in box office revenue has come from the 3D box office, a data point that is not lost on Hollywood producers desperately seeking hits.

Screen Shot 2013-07-10 at 12.02.00 PM.png

There’s a good reason that Hollywood is obsessed with sequels. So are you.
Movie-making has always been a risky business of hits and flops. But the globalization of profits makes the hits even more precious. It’s no surprise (or secret) that Hollywood has responded to the pressures of creating lucrative decade-lasting franchises by turning their budget over to sequels, reboots, and adaptations to lift their annual earnings. Just look at the 25 top films in the US and Canada last year. I’ve highlighted the ones I consider to obviously be sequels, prequels, or adaptations of already-popular products and stories*. Also consider that almost half were in 3D.

Screen Shot 2013-07-10 at 3.25.47 PM.png

A dollar spent on a blockbuster goes further.
In The Hollywood Economist, Edward Jay Epstein revealed that the American box office accounted for less than 10% of the MPAA’s total income (and international box office accounted for just a little more than 10%). “The other 80% now came from the ubiquitous couch potato who was viewing his movies at home via DVDs, Blu-rays, pay-per-view, a digital recorder, cable channels, or even network television,” he wrote.

movie biz.png

What does that mean for summer movies? It explains why $1 spent on a blockbuster is (all things considered) worth more than $1 spent on a non-blockbuster. The potential for each mega-budget movie to go big and create a train of merchandise, licensing and sequels makes it strategically wise to bet a very large sum of money on a very small number of big films.

Fewer typical moviegoers means fewer chances to get your money. 
Another data point that strengthens the case for studios to sink hundreds of millions into just a few films a year is that, increasingly, Americans are only going to a few films a year. In the 1940s, nearly 80% of households went to the movies each week. Today, scarcely 5% do. Studios have to build a new audience each weekend for their releases with ad campaigns that can cost as much as $100 million. You can’t do that more than a handful of times a year.

Screen Shot 2013-07-10 at 3.16.23 PM.png

Films are for kids. 
Finally, if you’re wondering why the biggest movies are so childish, just remember that the population of moviegoers is more childish than you’d think. Moviegoers as a percentage of population by age peaks in the teens and declines considerably after that.

Screen Shot 2013-07-10 at 12.05.55 PM.png

___________

*Prometheus, a sort-of-Aliens-prequel, and Hotel Transylvania are on the cusp.

This originally appeared at The Atlantic. More from our sister site:

The rise and fall of China’s great railway boss

Egypt’s real problem is its economy

The lesson of soaring college prices

Top News

Powered by WordPress.com VIP
Follow

Get every new post delivered to your Inbox.

Join 23,917 other followers