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Why Are Hollywood Movies So Expensive?

Adam Scott

Hollywood is an entertainment industry. It’s where you get to see all the leading men and women in all the best clothes and in front of some really pretty scenery.

It’s a place where you can experience characters that you will spend time with in the city or even the country side. It’s a place where you can be challenged, entertained and learn something along the way.

Hollywood is a well-oiled machine that produces blockbuster movies.

Hollywood movies are huge financially. Many Hollywood movies are among the top of box office revenue on the entire planet.

They even beat box office behemoths like The Force Awakens and Rogue One. Despite these massive budgets, movies are not cheap to make.

In fact, they cost a lot of money. And, that’s not a bad thing.

A movie is an investment. If you make a movie and don’t recoup your investment, then it’s not really worth making.

So, the reason why a movie is so expensive is to make sure that you get the best return on your investment. So, when you take a look at how much it costs to make a movie, it’s important to know where it all goes.

How does the budget for a Hollywood movie break down?

It’s a little more complicated than that, but the budget breakdown for a Hollywood movie is usually pretty easy to understand.

The production budgetGordon Cowie films and Revi Video on set of a TV pilot.

This includes all of the expenses that are involved in making the movie, including salary and administrative costs. The production budget covers everything that happens before you begin to edit your movie.

This can also include things like travel costs, sets and costumes, etc.

The post-production budget

This is usually where the money actually starts to be recouped. The post production budget takes care of everything that has to do with editing your movie, sound mixing, music scoring and sound editing.

The marketing budget

This money is usually set aside specifically for marketing the movie. This is where things like ads, print advertisements, film festivals, reviews and much more can come in.

The merchandising budget

This is the amount that you need to bring in to sell movie merchandise. These can include action figures, posters, T-shirts and much more.

The release budget

This is the most important one. This is where the real money is made.

It is where the budget for marketing your movie and releasing it in theaters comes in. If your movie is not released at this time, then that will most likely result in a loss on your budget.

Obviously, there are many other budget elements for a movie, but these are the ones that you can see when you look at the list of movies that have grossed $300 million or more. This list contains many of the highest grossing movies in recent years.

Of course, there are other considerations aside from this.

Producers

Let’s discuss the people in the film industry who actually make the movies. These are the producers who decide which films get made and how the production process goes down.

Producers work with studios to create development budgets for movies. The development budget determines the total budget for the production of the film.

The development budget is usually split between marketing and rights fees. The marketing budget is usually set at an agreed upon rate based on the concept of the film and the marketing plan.

The rights fees, however, are set by the studios at whatever rate they like, which means that the development budget can vary significantly between productions.

Marketing and rights feestwo man holding pistol and one man holding clipper board

Marketing and rights fees (M&R) are the biggest factor in the production process. They determine how much the studios are going to take of the gross box office after production and before marketing.

After the M&R process, the studio’s cut is around 40%. The rest is split between the director, actor, and writer.

The cast can also negotiate their contracts themselves, but, since movies like The Avengers were cast by the studios, this won’t happen for most films.

The reason for this huge profit split is that most movies have a very small audience and can only earn about $20 million dollars at the box office. Studios want to take all that they can get while they can, since most movies don’t go on to be box office hits.

If a film does, the producer will be paid up to 75% of the net profits. This means that, if a film grosses $100 million dollars, a studio would get around $30 million.

This is why, for example, most studios will release an action film in the summer and a family film in the winter. Since they have the opportunity to take all the profits from both types of films, they make the choice based on which they think will have a larger profit.

Finally, for new films, the major distributors will take a cut, depending on how much the film is distributed on DVD. This reduces the overall profit to $20–30 million, with another $10–20 million in marketing.

The movie industry is very profit-oriented. In order to make money, the studios try to make as many movies as possible and in as many markets as possible.

They do this to maximize profits, since theaters have a finite number of seats that can be filled. They also make money from special releases, which can sell for a higher price.

Distributors

As mentioned before, distributors usually receive a smaller portion of the profits than the studio does. The reason for this is because the theaters and distributors both get a cut of the gross box office, which includes ticket sales.

While the distributors also share some of the ticket sales with the studio, the distribution fee they take (the distributor’s cut) is much smaller than the studio’s cut. This keeps the profits from the distributor relatively stable and even.

Major distributors include Lionsgate, Miramax, Walt Disney Studios, Paramount Pictures, 20th Century Fox, Universal Studios, Dreamworks, and Warner Brothers. Some distributors offer special distribution to indie film distributors.

Lionsgate Films

Lionsgate is a New York City-based studio that was founded in 1992. The company has been doing very well, grossing a total of $6.6 billion in revenue for 2015.

The company focuses on low-budget movies, like the Divergent series, Step Up, and The Hunger Games. These are the types of movies that movies stars want to appear in.

Lionsgate also puts the movies in theaters, like Disney and Warner Brothers.

Miramax FilmsOn the set of Gordon Cowie films shooting a music video.

Miramax was founded by Harvey and Bob Weinstein in the 1970s. Their first movie was the sexually-charged but critically-acclaimed film, Pulp Fiction, starring Quentin Tarantino, Samuel L.

Jackson, and Uma Thurman.

They later made Pulp Fiction and The English Patient, which is still their most successful movie.

Fox Searchlight Pictures

Fox Searchlight Pictures was founded by Tom Rothman, Peter Rice, and Steve Gilula in 1994. Since then, the studio has become one of the most prestigious distributors of independent films.

They have worked with directors such as Quentin Tarantino, George Miller, and Todd Haynes, among others.

New Line Cinema

New Line Cinema was founded in 1986. Since then, the studio has become one of the most successful in the business.

The company specializes in small-budgeted horror films like The Conjuring, Insidious, and Sinister. The studio also handles the distribution of comic book movies such as Man of Steel and Thor.

New Line is one of the few companies that offers different versions of the same movie in theaters and home video.

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