“How many movies recoup their investment?”

You hear me and others quote the Broadway recoupment stats all the time:  4 out of 5 shows never make their money back (it sounds like a Trident commercial, doesn’t it?  “4 out of 5 dentists surveyed . . . “).

An inquisitive reader whom I’ll call Joseph, because that’s his name, wrote in over the weekend and asked, “How much better off are movie investors than Broadway investors?”
A good question that I was disappointed that I didn’t have the answer to . . . so I got on my google and did some research.
I found this interesting Freakonomics blog, written not too long ago, that featured a Q&A with the President of the Motion Picture Association of America, Dan Glickman.  In it, he talks about the increasing price of movie tickets (sound familiar?) as well as why he thinks movies do well in times like these (buzz word alert:  “staycation”).
He also says this about recoupment stats in the film industry:

Movie making is inherently a risky business.  Last year, the average cost to make and market a studio film was over $100 million.  Contrary to the perception you might get if you just read the headlines about the big summer blockbusters, 6 out of 10 movies never recoup their original investments in their domestic runs.

Well there you have it, curious Joe who’s not from Hannibal, Mo.   Movies have a 60% failure to recoup rate in their domestic runs.  
(It must be stated, however, that looking at a movie’s domestic run is a bit like looking solely at a show’s Broadway’s run (like our “Will It Recoup” rules), and not accounting for any subsidiary income, etc.  The rub is that a movie’s post-domestic run can be much more rewarding than a show’s life post-Broadway, thanks to the number of places available for distribution and the cost of that distribution compared to the potential income.)
While I’m glad Joe got me digging for this stat, the most important bit of info I learned from his question was not how many movies fail to recoup.  No, no . . . the most interesting thing to me was that both Broadway and Hollywood constantly refer to their recoupment rates in failing terms!  

“4 out of 5 shows never make their money back . . .”

“6 out of 10 movies never recoup . . . “

Depressing, right?
Well, I’m changing my semantic tune, and accentuating the positive from now on.  A 20% success rate may not be much to shout about, but it’s better than the 10% success rate associated with drilling for oil, and that hasn’t stopped people from digging . . . and 20% won’t stop us from producing, will it?  I didn’t think so.
So from now on, you have permission to e-slap me if you catch me using any of the above negative phrases in the future.  And I promise to do the same to you. Deal?
From now on it’s 1 out of 5 shows recoup their investment, or 2 out of 10 pay profit!
Unless, of course, you’re involved with one of my shows . . . and then the ratio is a lot higher. 😉
  • Aaron Diehl says:

    well which one will allow you to invest more easily? I tried to invest 5k in a show once, but they said I had to invest a minimum of 20K (I didn’t have it). what are the limits like for movie investments?

  • This is very interesting. A few thoughts . . .
    While 6 out of 10 movies never recoup domestically, internationally is a huge piece of the pie. It’s almost like taking a Broadway show’s grosses without the matinees.
    Plus, there’s always the DVD and television rights. I figure all those Red Box machines can push the worst movie into the red.
    But a great play will always live. In 20 years, people won’t even remember DUDE, WHERE’S MY CAR?, but they’ll still be buying 13 and CAROLINE, OR CHANGE OBCRs.
    On top of it all, there’s time. PINOCCHIO lost money, a lot of money, on its initial release. Sixty-eight years later, how much did Disney make off its DVD release in the past two weeks? Probably more than most hit modern-day DVD releases.

  • RLewis says:

    That 6 out of 10 is for “studio movies” – the ones which have the best chances and structures for recouping. A small sliver of all films made, but maybe that does make it more analogous to Broadway.
    I’m sure if you considered all films which receive Feature Distribution that number will drop significantly, and if you add the Indie Market, I’ll guess that the recoupers will drop to a fraction number (not to mention all the films that get made, but never see the inside of a theater).
    With film having so many more distribution advantages over theater (i.e. doesn’t require live actors post production), it’s not encouraging.

  • Also, be careful whether you are talking about motion picture producers, motion picture financiers, and motion picture distributors.
    The “studios” (whatever that means anymore, since none of them are primarily in the business of running production studioes) are financier-distributors. They don’t even use their own money to finance–they used to use bank money (primarily Bank of America); now they often use off-balance-sheet third-party financing, such as limited partnerships and the like.
    But their primary business is as distributors, which means they’re always making money even if they’re not making a “profit” (which is a defined and artifical term). Distributors stand second in line for the money after the exhibitors, and therefore always get some percentage of the adjusted gross–anywhere from 15 to 45% — even BEFORE recovery of expenses.
    Imagine if there were two sets of investors–one set who could take fees BEFORE recoupment, and one who had to wait for the expenses to be recovered. And imagine that off-the-top money included, not the kind of modest office charges and management fees that producers take today, but 35% of the ticket for the producing partners.
    On paper anyway, theater would be more “profitable” than it is.

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