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Box Office Multiples
Crack! When the stadium hears that solid contact of the bat, tens of thousands of people instantly crane their heads. In that first moment, a home run and a high fly ball looked about the same to me, a kid at the ballpark. But the all-knowing grownups in the crowd just sighed. Not even two seconds in, they already knew the outcome. The crucial make-or-break opening week of a motion picture is no different. It’s true that film exhibition in theaters has taken it on the chin the past 15 years or so, but after 120 years, theater box office is still the gold standard for determining the value of properties whose afterlives may last generations. It’s the aged Godfather of entertainment; no longer all-powerful, but still respected when times are tough.
In 2023, within days of the openings of Mission Impossible 7 and Indiana Jones 5, Hollywood knew that M:I (a good film, BTW) was going to be a muted, break-even disappointment, but Jones was an outright financial disaster. Did they really know, or is this all hype, and woke, and bluster? Strangely enough, they did know. We’ve talked about inside terms, like “the ultimate” and what it means to high finance in media. This time we’re dealing with “the multiples,” the fact that an opening week usually predicts the course of an entire theatrical run.
Studios and theaters are very different businesses that need each other, a wary marriage of convenience. There are times of the year when it’s true mutual love: summer and Christmastime. When the tickets and popcorn are selling, money is pouring into studio vaults, and the billings surge through the talent agencies, it’s a wonderful business and everyone loves each other.
But with mutual dependence sometimes goes mutual resentment, like when Hollywood’s highly touted tentpoles don’t “open,” or a promising new film is brusquely tossed off its screens by theaters. The theaters burn with jealousy over the roving eyes of the studios who were so easily distracted by that scheming, money-hungry young hussy, streaming.
The public’s verdict is quick. Even ninety years ago, movie theater owners claimed they could render a lasting verdict about a picture’s fate in its first couple of days. Movies used to “roll out” much more slowly, opening in a handful of theaters and taking months to expand. Jaws did more than any other film to change that. Now, a film opens “wide,” everywhere at once.
A chart of a film’s weekly box office income used to be hill-shaped, the steeper the better, tapering off slowly over months. Nowadays, it’ll probably start at or near the film’s best week and drop off steeply. How steeply? In our era, the start-to-final multiple is about 3 (Pi, 3.1416, is a good approximation) It’s a rule of thumb that usually works. If a film opens in the US to $25 million, chances are it’ll top out at around $80 million domestic.
Any multiple that’s lower than 3 is bad, and a multiple of 2 is outright terrible. You have to go out on an ideological limb to earn a “distinction” like that.
What about the other end, the happy end of the scale? In charming words sung by Lola Albright in 1958, “How High the Moon?” Pretty high up there. In 1977, Star Wars opened to a million and a half dollars and closed out its 1997 re-release with a cumulative total of $460M domestic. That’s a multiple of 300, justifying a cryptic showbiz proverb, “Nothing’s cheaper than a hit.” However, in those days even the mighty Star Wars was still platformed to a degree, so the accepted standard now is a still-amazing multiple of 18, based on the biggest single week of its release.
Another rule of thumb in the US and Europe is the studio gets about half the box office. (In China, US studios get only 25%; being up against a state monopoly will do that.) Running the numbers on those two films from summer 2023, Mission: Impossible 7 had a worldwide gross of $700 million. Incredibly, in today’s world that was a mild disappointment, bringing $350 million back to Paramount. But Indiana Jones and the Dial of Destiny coming in at only $400 million, bringing $200 mil back to Lucasfilm? That’s in a whole ‘nother category of fail.
Both of these films were top tentpole attractions budgeted at $240 million, and both were shut down in mid-production by pandemic lockdowns in Europe, adding $50 million to their budgets. The lockdowns also affected the release schedule, as nobody wanted to be back in theaters until audiences were ready to come back. This ran up interest on the production loans. All told, after you count the cost of advertising and publicity, Mission Impossible covered its production cost and contributed $55 million towards its marketing expenses. Those costs exceed $100 million, so the picture is in loss, but not badly. It’s worth well more than $45 million in its afterlife, so it’s at least break-even. Indiana Jones, on the other hand, took a loss of more than $200 million.
Recently, some studios (hi, Disney!) have produced whole slates of films that lost $100–$300 million. Tinseltown has sometimes been associated with funny arithmetic, but no, this is not normal, even here, to put it mildly. I doubt that any other creative field is so fast and merciless. If you spend $300 million constructing a complex of buildings, and it doesn’t succeed in the three days after the ribbon-cutting, you can’t immediately give up on it.
Yet it happens in movies all the time. As crazy as that sounds, and in fact is, it’s backed by evidence. If your Oliver Stone biography of Alexander the Great flops, it’s not like an ailing real estate investment that takes a write-off but still has long-term value. You can’t just wait a year, rename Alexander, and repackage it as 5 half-hour TV episodes. The money is flat-out gone.
Are there exceptions? Rarely. There used to be more. Historically, a film can overcome bad reviews and a weak opening—sometimes—and slowly build an audience. Walking Tall and Billy Jack all but went around the system completely, but they were quirky exceptions, as were other cultish theatrical oddballs, like Harold and Maude, Where’s Poppa? or The Rocky Horror Picture Show, but these all happened in an earlier era. Today’s business model for theaters is more impatient than ever.
Studios bombard their movie theater counterparts with pre-release publicity. Ticket buyers are only indirect customers to studios; the toughminded film bookers—buyers for theater chains—are their direct marketing target, Hollywood’s actual customers. The theaters go by their own predictions and research, under the general heading of tracking. This is usually reliable, free of bias, but they can only poll customers for what they already think they want; genuinely novel films are harder to predict.
Sometimes the tracking just fails. Tastes and interests can be fickle. This spring, audiences seemed revved up and ready to welcome in the summer with The Fall Guy, but…eh, on second thought, nah, not feeling it. A year and a half ago, Universal probably sweated through ominous tracking indicating that young summer audiences weren’t necessarily turned on by the idea of seeing a three-hour 1944-’58 talkfest about a scientist that few of them knew anything about. Yet Oppenheimer finished up just a touch under $1 billion. Not bad at all! $500 million goes back to Universal, which paid out a total of $180 million in production and promotion. Nolan made a few bucks, too. Sometimes you don’t mind if the tracking is off.
Published in General
No showbiz “secret” is sacred on Ricochet. Every business tool of modern Hollywood should be out in the open.
Blame the advent of home media. I remember The Sting being in theaters for over a year. Never happen now. It has to go to VHS, or DVD, or BluRay, and nowadays, streaming, at ever shorter intervals. Even the successful movies are hitting streaming in three months. The less successful, 45, or even 30 days.
The multiple of 3 is weird. If a movie is dropping 50% of its audience every week, it should do half it’s business the first week. And yet movies losing more than that still seem to hit three times opening.
Part of why it seems funny, no doubt.
Because (as you already know) it’s not a linear drop. It’s also true that sometimes a film can still stretch out the ending, kicking the can down the road a little longer. So it can drop 60% and level out, until every Uzbek lesbian of color has seen the film. That used to be the nervously repeated mantra of people selling what used to be called “women’s films”, “gay films” and “Black films”, that their people didn’t all show up the first weekend but were slow, steady earners at the box office.
The claim was, those films “legged out”–they had a loyal built-in audience that didn’t make opening week impressive, but stuck around for weeks 4 through 6.
I don’t like that movie theaters have turned the experience into “like watching from home” with big recliner seats. I don’t want want to spend $100 to have the same experience I can get at home for free. I do like the old theater experience with lots of people in stadium seats all reacting together.
I still love the good ol’ in-the-theater experience I grew up with. The problem is this: at $18 per seat, $15 for popcorn, and $10 for a drink (with a box of Raisinets thrown in if you buy the combo…) I’m already $43 into it before the preview trailers even role. That means I don’t gamble on a movie I may not enjoy. The Fall Guy? At one time I’d have risked it. Now: not likely. And for a movie I KNOW I’ll dislike, such as anything made by Disney/Marvel/Lucas Films, there’s no way I’m spending a cent on it.
Heck, I saw Star Wars twenty-five times in the theater, paying full price (okay, well, more likely matinee, but still paying for the ticket…) And if I enjoy the film, I still prefer to see it in the full-screen medium it was designed for, so I’ll go back to the theater multiple times….if it’s worth the price of admission. But if it’s not a sure thing? Nope, not even once.
I can’t get that kind of brain-crushing volume at home. So they have that going for them.
Excellent and informative post, as usual!
Watching at home advantages:
Advantages going to the theater
No, since the years of VHS and Betamax, watching at home has grown to be the superior experience – at least for us . . .
There was a guest on one of the Ricochet hosted podcasts a few years ago who said that it’s now harder to get into the China market. In the beginning, Hollywood sold its soul to get in the market by agreeing to Chinese censorship and character additions. China watched how we made films and then, as they so often do, copied and started making their own films. Now, according to the guest, China is less likely to show US films, preferring domestically produced films. Have you seen this?
You don’t have to recline the seat. I absolutely love the new theaters with their unobstructed views and comfortable seating. I tend to go to movies nowadays that, for me at least, require a big screen to get the best experience such as action movies or great cinematography like Lawrence of Arabia.
I disagree. I absolutely love recliners, a full menu, bar service, and a call button for waiters and seating tiers so spaced and steep that vision is never blocked and fidgeting and small noises do not offend.
It used to be that you had to go to one of the biggest theaters in town to see a big movie like Lawrence of Arabia with visual and audio tech marvels not available in the smaller theaters. That also meant lines at the ticket window, scrambling for seats, long rows with people constantly coming and going….
I watched The Good, The Bad and the Ugly in a large theater in Dublin more than a half-century ago. Before the movie, a friendly fellow turned around to chat and pointed out that he picked this movie because it was “good, clean violence– none of that dirty stuff.” (I would love to see that in a Rotten Tomatoes review someday…). The kids were separated from their parents and kept in the right rear section. They could not leave their seats but had a good number of ushers assigned to bring them candy, popcorn, and sodas to order with whatever cash their parents had imparted. I thought that was a great idea–why not for adults too?
Studio economics has never made sense to me.
There is also the tradition of highly creative accounting. I recall the litigation involving the Rockford Files and Daniel Boone in which defendant studios and production companies told the court with a straight face that each of those longest-running TV shows with an additional span of rerun syndication running nearly every day across the country for years were merely break-even projects. How expenses were assigned was outrageous and the apparent message to those two stars and anyone else who wants a percentage was that you will never see a dime if you seek this form of compensation. Take the upfront one-time payment/salary/per episode flat fee and leave the rest to us and shut up.
On the occasions when I watch the credits, especially with a movie with lots of effects and multiple locations, I am astounded by the sheer number of names. The logistics, finances, and accounting of mobilizing all that, contracting, budgeting, negotiating the inevitable unforeseen changes and overages is a wonder.
Thank you for posting this very interesting piece. I am so tired of politics!
Napoleon Dynamite. Saw it 18 years ago and still get a few laughs from my nerdish friends from recalling a few of the choice bon mot lines. I’m guess it must have cost them in the thousands to film and product it…
That shrinking “window” is the main point of contention between studios and theaters. Three months, the theaters could live with. 30 days drives theaters nuts.
Basically true. The Chinese allowed in very few films, making studios compete for the slots. They didn’t say “trim this”, or “hire her”, but gradually Hollywood figured out what they wanted. Some of the biggest kowtows weren’t even successful; Mulan was supposed to be Disney’s love letter to ancient China, but Chinese audiences were tepid.
To be fair to the Chinese, they’ve been making their own films for a long time. They didn’t learn or copy any filmmaking secrets; they looked at international cinema and decided to get with the program. Now, they don’t need to get spectacles or special effect-laden films from us. The rise in political tension between the countries also takes a toll. We don’t trust Huawei; they don’t trust Warner Bros.
Thanks, Juliana. Even Ricochet needs a breather from politics once in a while.
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I doubt Warner Bros could intercept communications between millions of people including in government, and send the data to Peking.
One of the traditions of the movies is simple capitalism: the winners have to make enough of a profit to pay for the losers. I realize most people will say, sensibly, “Well, then, don’t make the losers”. The answer is you don’t always know. Almost every fledgling filmmaker is being subsidized by that year’s big hits, and that feels fair…until you’re finally big enough to be the hitmaker. Then it all seems terribly unfair. Until you’re on the back slope of your career, and your pictures are diminishing. Suddenly, “Share and share alike” sounds good again.
Rockford Files is about fifty years ago. Hollywood accounting is not that creative anymore. The remaining issue isn’t crooked contracts, it’s perfectly open and fair contracts that people signed when they really needed the money.
For years, I consumed movies through the DVD market. For most of that time, it was a 6 month lag, which always seemed reasonable to me. For people who want home viewing and multiple viewings, it was a fair tradeoff.
I think they should push back towards that, and I think it works as well for the studios as for the theaters. That much of a lag, makes the second release another ‘release event’, at least for all the people who didn’t go to the theater. It will bump up the theater take both of them, as the longer delay moves the needle of people’s decision making on edge cases.
It also gives an impression of something that is more special. If you release a Star Wars movie every three years, it’s a big deal. At every three months, not so much. A little bit of delay could actually work for them.
You’re right, and they know it. It’s tough to walk back a tech-enabled change in people’s habits, but the studios wish they could rewind much of the past dozen years. Cable was very good to Hollywood and so was physical media. But with DVD’s, the industry had to split its money with Walmart, and with cable the industry had to split its money with the telecoms. Studios saw streaming as, “We can own the whole thing”. But what they now own has diminished in value and prestige.
The walk back will be hard, if it can be done at all.
China fears Hollywood influence on their culture. Nothing surreptitious about it. Conservatives on sites like ours read Hollywood as anti-American. That’s not the way the rest of the world sees things.
You have to start with a must-see movie. Barbenheimer would have been the perfect opportunity. When it hits theaters, announce it won’t be on streaming for six months. Advertise it. Put it on the posters if you have to.
Given that Warner Bros was the promulgator of the ACME corporation would you trust them either?
Ditto
Christopher Nolan is one of the only filmmakers strong enough to muscle a studio into things they are reluctant to do for anyone else. He did get Universal to hold off streaming for a month longer than their usual window, but Nolan’s biggest push was physical media. At a time when Hollywood has all but given up on DVD/Bluray, Uni paid for a big ad campaign for Oppenheimer, “Yours to Own!”, as if they were introducing customers to the idea of buying a movie.
It is humiliating to this country that Hollywood has made Woke the face of Americanism. We have so much to atone for.
To be fair, I know quite a few people, and not all of them children, to whom “owning a movie” had been a mysterious concept.
Top Gun: Maverick and the Avatar movies are the face of America to most of the world. Conservative overseas markets (China, Russia, Turkey, Africa, the Middle East) seldom see the worst of our stuff, because they don’t let it in. Brokeback Mountain, Call Me by Your Name, Moonlight–they’ve never seen them.
Whew, that’s a relief.
Western Europe (and surprisingly, Latin America) are as liberal about sex as we are.
Given all of the variations I have noticed between my VCR, my DVD, and Blu-Ray editions of the Star Wars initial trilogy, there is something to be said about not letting the masters of the universe rewrite their history by having a uneditable record.