by Adam Benjamin | August 23, 2013 11:52 am
Back in June, Steven Spielberg and George Lucas made headlines when they prophesized the implosion of the film industry.
The argument boils down to this: As studios continue pumping more and more money into blockbuster films, it’s likely that we’ll reach a point where several of those films fizzle at the box office, losing lots of money and forcing a radical change in the film industry.
But this summer’s box office numbers tell a different story.
The trend toward bigger budgets is difficult to ignore. Exact numbers are difficult to come by, but according to The Numbers, a total of 31 total movies have been made with budgets of $200 million or more. Of those, 22 were made in the past five years. That means, on average, four films per year have budgets of at least $200 million.
So how did the summer box office stack up? Using numbers from Box Office Mojo, I looked at movies with a budget of more than $115 million and compared those budgets against domestic box office returns. The total return of those 12 movies was actually a loss of $88 million, suggesting that big budgets don’t actually mean big profits.
In fact, the film with second-biggest budget — Disney’s (DIS) The Lone Ranger — had the biggest loss of the season. Made on a $215 million budget (presumably, Johnny Depp demanded a $200 million contract), the film only brought in about $88 million domestically. This seems to suggest Spielberg and Lucas were right; that huge budgets aren’t paying off for studios.
But that’s not the full story. Iron Man 3 (also a Disney property) had the third-biggest budget of the season, and more than doubled that in domestic returns. Man of Steel had the biggest budget — it cost $225 million to make and earned a respectable $289 million. That means the season’s biggest loss and its biggest profit both came from movies with budgets around $200 million.
So big-budget movies can earn a whole bunch of money, and they can lose it just as easily.
But we haven’t even touched the big thing standing in the way of the film industry’s supposedly looming implosion: worldwide box office totals.
For big-budget films like the ones we’ve mentioned, domestic gross can be less than half a film’s total return. (Just look at World War Z, which made more than 60% of its total revenue in foreign markets.)
The kind of implosion that Spielberg and Lucas are talking about would require half a dozen films on the scale of Iron Man and Man of Steel to flop worldwide, without other films to make up the difference. (In Disney’s case, Iron Man 3 will easily clean up the Lone Ranger’s mess — especially with the $800 million the Marvel movie earned in foreign markets.)
For that many films to fail, studios would have to churn out truly awful products. Or maybe something catastrophic would have to happen with the world economy — which could be more likely.
Perhaps Spielberg and Lucas are looking at a much longer time frame — decades instead of years. It’s also possible that I don’t know as much about Hollywood as the guys who made Star Wars and Jurassic Park.
But from my viewpoint, I don’t see any implosions in the near future.
Adam Benjamin is an Assistant Editor of InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.
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