Thanks for all the responses guys! Yeah, besides completely forgetting about the foreign market, which almost always surpasses the domestic box office gross for hit movies, I pretty much knew all of this. I see some of you have confirmed that actors and others involved earn bonuses after reaching certain box office plateaus. Also that through merchandising and DVD sales and television premieres, even a theatrical flop will likely turn a profit in the long run.
I guess what I really mean to be asking is what goes into the budget in the first place besides things like studio lot rentals, special effects, location shooting, etc...? If a movie costs $80 million and an actor requests upfront payment instead of a cut of the profits, is his salary included in that $80 million. I assume all production costs I listed above already are, but are the actors and director included? Because they account for a huge chunk of the final costs. Or are their salaries not represented in that $80 million figure, but instead taken out of the movie's gross?
Same with advertising. Once production ends, is all the $80 million used up and then an extra $40 or so necessary for promotion and advertising? Or is this money also included in the $80 million? Lots of you guys have given contradictory responses.
Also, I've often heard that loans are taken out and LLC's are established for each individual picture so they don't have to pay virtually anything until the box office receipts come in. Except for the distributors- I have read that they always require upfront payments. Is this true? Is the entire production in essence made on money that doesn't even exist yet? And if so, how does anyone even know the final budget of a film? How can people say things like, "Man Avatar cost nearly $500 million to make, will it be successful enough to earn it back?" How can they know before receipts come in and people get their bonuses, advertising increases, and companies earn money?
Maybe I'm lacking a fundamental understanding of the business here. Or maybe my thread should have been what's in the budget, not how do they earn it back.
Still thanks to all of you guys who contributed, especially Holden Pike and Yoda.
I guess what I really mean to be asking is what goes into the budget in the first place besides things like studio lot rentals, special effects, location shooting, etc...? If a movie costs $80 million and an actor requests upfront payment instead of a cut of the profits, is his salary included in that $80 million. I assume all production costs I listed above already are, but are the actors and director included? Because they account for a huge chunk of the final costs. Or are their salaries not represented in that $80 million figure, but instead taken out of the movie's gross?
Same with advertising. Once production ends, is all the $80 million used up and then an extra $40 or so necessary for promotion and advertising? Or is this money also included in the $80 million? Lots of you guys have given contradictory responses.
Also, I've often heard that loans are taken out and LLC's are established for each individual picture so they don't have to pay virtually anything until the box office receipts come in. Except for the distributors- I have read that they always require upfront payments. Is this true? Is the entire production in essence made on money that doesn't even exist yet? And if so, how does anyone even know the final budget of a film? How can people say things like, "Man Avatar cost nearly $500 million to make, will it be successful enough to earn it back?" How can they know before receipts come in and people get their bonuses, advertising increases, and companies earn money?
Maybe I'm lacking a fundamental understanding of the business here. Or maybe my thread should have been what's in the budget, not how do they earn it back.
Still thanks to all of you guys who contributed, especially Holden Pike and Yoda.
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"I want a film I watch to express either the joy of making cinema or the anguish of making cinema" -Francois Truffaut
"I want a film I watch to express either the joy of making cinema or the anguish of making cinema" -Francois Truffaut