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How do movies make no profit?

by Ratan Srivastava

I’m moving to profitability for the third instalment of my series on the business side of the film industry, and asking, “How do movies make no profit?” When it comes to financial transparency and openness, Hollywood has a poor image. Every month seems to bring another news storey about a Hollywood flop losing millions of dollars, or another lawsuit accusing studios of falsifying numbers to avoid paying profit sharing. So, let’s take a closer look at the profitability of movies. I’ll be working with three different datasets, each with its own distinct viewpoint on the subject.

The ‘Insider’ dataset is a collection of data from insiders. A compilation of 279 films for which I have inside financial data exposing the real expenses and revenues over the course of the movie’ lifetime. I discussed the origins of this data in a previous piece, but for now, just know that it’s real-world, trustworthy data from individuals who work on the finance side of Hollywood movies.

The ‘Nash’ dataset is a collection of data. Nash Information Services, LLC is the top provider of ‘Comp Reports’ for movie business plans in the film industry, and they have generously shared their internal profit and loss forecasts for 2,819 films with me. They gather data from a number of sources to determine how much money movies have made at each stage of the film value chain. Producers, investors, and organisations utilise this information to discover successful films that are similar to their own in order to make production and financial decisions.

The dataset that is referred to be ‘Complete.’ This covers every film with a budget number available that was released in the United States between 1990 and 2015. I created profit rules of thumb using the first two datasets, then applied those rules to the entire dataset to obtain a sense of profitability throughout the industry.

Also read: Do actors still get paid for old movies?

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