Economics 101

Fodd responded to yesterday’s post with this comment: “They are going to do some serious creative accounting at Warner Brother to make it look like Speed Racer made any money.” But the box office is not the only way it’ll make money.

After all the ancillary markets, it will break even, at least, but there’s more. Toys, games, flame throwers, all that stuff . My wife has a Speed Racer T-shirt. Plus, Warner Brothers owns the original cartoon. The movie is at the center of a marketing blitz to push those DVDs on both nostalgic baby boomers and ironic hipsters alike.

This is what people are missing when they talk about huge indie movies, like My Big Fat Greek Wedding. It cost $5 million, and made nearly $370 million, world wide. That’s a 7400% profit. Compare with Spider-Man, which had a mere 490% profit.

The thing is, you can’t take profit to the bank. Wedding netted $363 million, while Spider-Man netted $682 million. If you were the head of the studio, which would you prefer? (Not withstanding the fact that one stars a screeching harpy, and the other stars freaking Spider-Man.)

And don’t go thinking the Wedding‘s success is scalable. You can’t make twenty-eight romantic comedies about foreigners and their funny accents, and expect them all to produce quadruple digit profits.

People love to point out failures like Speed Racer, but they forget that the reason these films are notable is that they’re rare. Dozens of $5 million movies are released every year, and very few make back their money. Dozens more produced, but never even released. (I know because I’ve worked on most of them.)  Blockbusters are just a safer bet.

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4 Responses

  1. “The thing is, you can’t take profit to the bank.”

    I think you mean, “you can’t take ROI to the bank.” Numbers like “7400% profit” are a measure of Return On Investment. ROI’s a useful figure, but, as any beleaguered marketing executive will tell you, it doesn’t always scale.

  2. “If you were the head of the studio, which would you prefer?”

    If your studio you can risk only $5 million, pick is again simple.

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