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.