16 different ways that films make money

I know you’ll have noticed this by now, but it’s definitely called show business for a reason. It’s not show show art, show entertainment or even show exhibitionist impulse. Unless movies make money, the money to make movies would dry up pretty quickly. But where does this money come from?

Actually, that’s an easy one. It comes, almost entirely, from you and me and people like us. The real question should be how does this money get from our back pockets and into the coffers of the big movie studios.

Some of the pathways are incredibly obvious, some perhaps a little less so. Let’s take a look at 16 of the ways that movies make money.

1. Ticket sales

I had just started working in a cinema when Jurassic Park was released. The night of those first public screenings, a local news crew came down and poked their cameras into everybody’s faces. I was glad of the poking, though if I remember correctly, my excited babble about Phil Tippet didn’t make the final cut. But our manager did, excitedly chirruping that he hadn’t seen the crowds packed in like this since Grease.

Grease.

It’s certainly true that there were a lot of hot, sweaty bodies fighting for seats that night. We had over 900 comfy chairs in that cinema, and there was still a scramble for the best ones. It almost makes me feel nostalgic to think of the fuss and fluster. The last time I went to the opening night of a new film and my screening was packed full was Casino Royale, I think, and that was in one of those little box-rooms that make up multiplexes now.

But there’s a twist to this tale of blockbusting thunder lizards. Later, when the news team had snuck into the screen to check out Jurassic Park’s infamous CG FX for themselves, the manager confided that we were actually going to lose money on every single ticket sold.

The deal that our cinema chain had made with Universal, or rather Universal and Paramount’s joint distributor UIP as it was then, meant that we were paying them over 100% of every ticket price. Neither UIP or ABC cinemas exist any longer for me to check, but I think it was 105% of every ticket’s value that had to come out of the cinema’s safe and pay for the privilege to screen Jurassic Park. Every adult ticket sold was costing the cinema something like 25p. It was the story of Blue Monday’s floppy disc sleeve all over again.

But this, thankfully, was an extreme example.

A movie’s distributor will typically still keep over half of the ticket price these days, but I doubt they’d get away with asking for the full amount, let alone an overage. The exhibition chains now have enough scale, and the power that footprint brings, and the rise of smaller-screen viewing has been so dramatic, that there’s a limit to how far a distributor might dare to push things.

Films don’t just play cinemas on first run, of course, they can linger for a few weeks or months, and often come back around again in repertory houses. I spent some time booking films for rep, and got quite used to the system. The cinema would pledge a “minimum guarantee,” a base fee that would cover at least the cost of shipping the print to and from the venue, and the distributor’s admin cost. Then there’d be a percentage price, sometimes as low as 30%, sometimes higher, and depending on the particular film, how old it was and who was distributing it. The cinema would then pay whichever was higher, the guarantee or the percentage. Minimum guarantees as low as £100 gave ‘second run’ cinemas – like London’s Prince Charles, back in the day – a relatively low-risk model, and enabled them to weather some proper flops just as long as the overheads of rent, rates, electricity, staff and so on, could be kept low enough.

2. The concession stand

In a multiplex, where the overheads will tend to be quite steep and the number of flops can actually be surprisingly high, ticket prices alone just wouldn’t be enough to keep the fat cats at the top of the chain as well-fed as they’d like. Selling films just isn’t enough to make big business out of selling films.

Various cinemas have tried all sorts of bad ideas to cut overheads, from underpaying the staff and keeping them on booby-trapped zero-hour contracts, to letting more or less anybody run the projection booth. I’m sure these have all had some effect, and kept the cats’ cream pouring, but there’s a limit to how much you can cut away before the body dies.

So the concession stand becomes incredibly important to the cinema. Those overpriced popcorns, sodas and fat, fattening bags of delicious, deferred arterial congestion are stacked high with price mark-ups, the better to make a cinema into a money-making enterprise.

Incidentally, if you want to bring in your own, more realistically priced food from the outside, it’s unlikely your cinema will even try to stop you these days. Cineworld prohibit only hot food and drink that they didn’t sell, making cold wares fair game; Vue ban just hot food, so you don’t even have to worry about your coffee; Odeon prohibit outside food and drink in just their ‘Lounge’ screens.

3. Four-walling

Sometimes, the distributor doesn’t want to share the ticket price with the exhibitor, or the exhibitor will refuse to book a film for reasons of their own. The Veronica Mars movie is a good, recent example. It was being issued on VOD at the same time as its big-screen release, with many ‘free’ digital copies being distributed to its Kickstarter bookers, and so cinemas didn’t have any interest in taking a standard booking for the film.

In these cases, the distributor will buy out the screens where the film would play, paying the cinema a flat fee for the run. The distributor would then get to keep 100% of the ticket price – still a far better deal for the cinemas than that old JP scam.

There are two kinds of films that typically get four-walled. One is the smaller, fans-only picture like Darren Lynn Bousman’s  The Devil’s Carnival. Bousman took the film on a tour of the US, shouldering the risk by buying out cinemas and selling tickets directly. But he also got to reap the rewards, and the very existence of The Devil’s Carnival 2 speaks volumes.

The other is the loss-leader. Arguably, Veronica Mars was one of those. It was never intended, or at least never expected, to make a great pile of cash at the box office, but the four-walled engagements gave the film a theatrical release and all of the benefits to its profile that would bring.

4. DVD, Blu-ray or download sales and rental

As noted, some films are being offered via VOD at the same time as their cinema releases. This is very much the norm with ‘smaller films’ now, the kind of picture that will play the Curzon or Picturehouse chains. Even those that aren’t released ‘day and date’ on multiple formats will hop from big screen to small very quickly.

The current UK ‘theatrical window’ is 17 weeks, with the exhibitors expecting wide releases to remain exclusive to cinemas for at least that long. Not because they intend to screen films for the duration, of course, but because they want some perceived distance to the imminent home entertainment release.

17 weeks seems like no time at all, but I still elect to see films in the cinema. Not because I’m impatient, but because they deserve the respect, and because I want the best effect. I’d still go if the window vanished completely, but I understand that many wouldn’t. Family films in particular would seem prone to this, and I can’t imagine many parents would elect to spend a week’s wages on a trip to the cinema if the same film was hanging out on Amazon for £15.

The ill health of bricks and mortar DVD and Blu-ray retail is all relative, of course, and what stores remain might have far less reach than they used to, but they don’t seem to be on the cusp of withering up entirely.

If you’ve still got a HMV in your area, and I do not, they’ll no doubt be running one of their X-number-of-discs for X-pounds promotions right at this very moment. It’s something I have taken advantage of many times, but arguably played a large role in eroding the perceived value of a DVD or Blu-ray disc. Ask yourself now what the reasonable price for a film on disc is. Now think about what you get for that money.

Amazon have recently been arguing with a number of their suppliers about unit prices, and this saw several Disney films, from Muppets Most Wanted to Captain America: The Winter Soldier, unavailable for pre-booking on Amazon’s US site. Come day of release, the titles were there, but Amazon had shut down any pre-sales. If they get their way, they’ll be able to squeeze down the amount of money they pay for each copy and reduce the value of home entertainment sales to the distributors and movie studios even further. Of course, the savings will be passed on to us – that’s Amazon’s model, they want to shovel huge amounts of turnover at the cheapest prices they can – but it’s not really a good thing for the movie industry’s overall cashflow situation.

5. TV and streaming services

After a film has had its time on the aisle ends and been shuffled into the back catalogue shelves, and after Amazon stop pimping it to you and you’ll have to go searching for it specifically, that movie will soon arrive on television or, increasingly, on an Amazon Prime or Netflix-style subscription streaming service.

The various Sky Movies channels make for an interesting study here. They have their high-profile, premiere splashes, with new and big-name films advertised and given good slots on the schedule. Then they fill up their schedule with… other films. Of all kinds. When licensing films to screen, they’ll tend to buy them in packages.

Say, for example, they’re making a deal to screen Guardians Of The Galaxy. Okay, say Disney, we’ll license that to you in a package of 20 films, each of which you can screen X times in the next 12 months. You’ll get Guardians, you’ll get Iron Man and Iron Man 2, and then you’ll get these other 17 gems, running the gamut from That Darned Cat! to Herbie Fully Loaded. It’s a way that Disney can continue to generate revenue off of their less attractive library stock.

I cooked those numbers and skewed the titles, but I think you’ll get the idea. Even crummy old films are pushed on TV stations, and charged for. A similar thing will happen with Netflix, who’ll also license many films in blocks. It’s all a way to keep squeezing the Giglis and John Carters of this world until they finally drip black ink onto the ledger and not red.

6. Airplanes

Another small screen outlet will be up in the air. Movies are also licensed for those smudgy little panes on the back of airplane seats. It’s slightly less obvious than television, I guess, and the films tend to be rather newer. I’ve even seen some films on planes that had never played anywhere else, though even Susan Seidelman’s Gaudi Afternoon creeped out on DVD eventually.

Airplane movies will tend to have been altered somewhat, though I’ve seen a lot of bare boobs, bloodshed and even plane crashes during my more recent long haul pentuple-bills, so perhaps things are changing.

7. Venture capital

Have you seen Mel Brooks’ The Producers? You should. It’s very funny. Uwe Boll certainly has.

8. Tax incentives

Australia has recently agreed to welcome the next Pirates Of The Caribbean movie to its shores. That giant production will roll into town, and spend enough mountains of money that the Antipodean economy should feel some kind of effect, even if it’s only a light nudge. It’s good for the country for the filmmakers to go there, and spend money there.

And the Australian government know it, so they made sure it was going to happen by offering a tax incentive. From their press release:

The federal government has agreed to offer the Walt Disney Studios a $21.6 million incentive to shoot Pirates of the Caribbean: Dead Men Tell No Tales in Australia.

That package had been offered to Disney by the previous Labor government to film the 20,000 Leagues Under the Sea remake in Oz but that project was shelved after director David Fincher departed.

Again, this isn’t money made by the movie after release, but it does help offset the costs and therefor increases the likelihood, or at least the pace, of profitability.

9. Merchandise

Movie merchandising started in earnest with Walt Disney and his licensing of Mickey Mouse and, interestingly, The Three Little Pigs. Have you seen the sheer volume of Pigs merchandise they produced?

Things then stayed rather discreet until the 1970s.

And then Star Wars. And then the wall of figures, dozens upon dozens in the range, taking over the toy shop and the department store. Upstairs in my local Co-Op circa 1980 looked like a kingdom of six-inch freaks this close to actually calling out, “Hey, you. Yeah, you. The fat one. Buy me. Buy me. Buuuuuuuuuy meeeeeee.”

Action figures have always been a big part of merchandising, and it doesn’t seem to be such a stretch to suggest that the success of the articulated figure as an ancillary money-maker has driven Hollywood’s hellbent determination towards blockbusters and franchise films. Nobody is ever going to sell any Deconstructing Harry or The Squid And The Whale toys, so those depend on a sense of prestige and low scale of risk to convince their financiers.

Do note that even a no-budget, lo-fi character comedy like Clerks has spawned an action figure line, so culture has certainly embraced the little plastic people and, really, even as I was typing Deconstructing Harry and The Squid And The Whale in the last paragraph, I did think to myself ‘It’s probably only a matter of time.’ You could probably convince me that somebody is planning a line of Grizzly Man action figures if you tried just a little.

T-shirts, lunchboxes, calendars and bedspreads are amongst the other, obvious mainstays of merchandising. The shirt is open to a much wider range of tie-ins, though there’s a lot of ‘homage shirts’ arriving through online marketplaces that aren’t officially licensed at all and while they’re generating revenue for someone, it’s not a film studio or production company. Still, there’s something ‘cool’ about movie shirts that a lunchbox or duvet cover is never, ever going to compete with.

Meanwhile, and it’s probably going to remain a one off, at least for the next ten years or so, but Buds and Roses in LA are supplying a tie-in strain of sativa with branding based on Kevin Smith’s new horror film, Tusk.

10. Novelisations, books and video games

Novelisations and video games are a specific kind of merchandise that become new media works in their own right. Not since GoldenEye have I been convinced that a movie-to-game translation was really worth my while but I do still, I think that if somebody really nails an adaptation, and it succeeds as a game as well as just being a tie-in, there’s going to be so much money to be made here that the original film itself could be pushed into the margin.

Novelisations are so desired that I even see a lot of novels adapted from films that were themselves originally adapted from books. Just the other day I saw that there’s a Boxtrolls novelisation ready to go on the shelves alongside Alan Snow’s original Here Be Monsters. Maybe readers are disappointed when the book isn’t quite the same as the film; it certainly seems to cut the other way.

Talking of Boxtrolls, it’s bound to have a lovely Art Of book, like Paranorman and Coraline before it. That’s probably my personal favourite kind of movie tie-in of all.

Marvel Comics are an interesting sidebar here, I think. Their movies have made their brand really quite attractive and well-known, and it surely must have driven a lot of sales of their comics.

11. Product placement

It’s actually that product placement is used to offset expenditure rather than make money from a film, and sometimes the payment is ‘in kind’ with marketing for the film being provided instead of cash.

Consider a well-known car manufacturer, for example, and a race of little linguistically-spiteful blue creatures, three apples high. Instead of the studio making money from the prominent appearance of certain vehicles in their movie, that car manufacturer instead agrees to provide an equivalent amount of marketing in their dealerships and TV commercials.

Even when money does change hands, it will likely be fed into the ledger before the film opens, even before the costs are tallied, so there’s some argument to be made here that product placement doesn’t make films more profitable, it just makes them less costly.

Which might, of course, make them more profitable.

12. Product development

Cast your mind back to Jurassic Park once again. During the making of that film, money was spent on developing the CG technology to render its special, animated dinosaurs. Once this technology existed, its proprietors – in this case, ILM – would be able to offer its services for hire elsewhere.

It’s more common that CG techniques were developed during work-for-hire on commercials and corporate films, but it’s certainly true that breakthroughs have been made during production on movies, and the fruits of these breakthroughs are then worth money.

Once more, this isn’t quite money being made for a studio, but it’s cashflow as a result of a movie existing, and so it counts.

13. Tourism

If I were ever to get on a theme park ride again in my life, and I won’t, it would take something very special to lure me in. Maybe

Both Disney and Universal have their own parks, with plentiful movie tie-ins, and other movies have spawned rides and attractions everywhere from Alton Towers to Six Flags.

The Halloween Horror Nights would be a subset of this, with their ridiculous, heart-rate battering spectacles more often than not based (loosely) on some existing horror movie franchise or another.

I don’t think we’ll ever see a Squid And The Whale roller coaster, by the way.

14. Movie culture

Money springs up around cinema because cineastes will indulge in their passion even when it costs them.

That bar upstairs in your local pseudo-art house cinema could argue that some of its money comes from it being a bar in a cinema. This would be particularly true on quiz night, I’d suppose. You can’t have a Movie Quiz without movies.

And then there are magazines like Sight And Sound, Empire, SFX, turning reporting, criticism, PR and advertising into moolah. There are websites and blogs about films – you might have seen one or two, a couple of them are even worth looking at (not this one, mind) – that also raise revenue, if they’re lucky. Some of this money then goes to the people who create this content, the lucky ones who get to write about film, who get to call going to a press screening ‘a job’, who get to pore over old Rambo annuals professionally, who take over the airwaves for a bit of a rant of a Friday afternoon.

Oh, and I’d put Faber & Faber’s books under this heading too, most of them relating to more than any one movie, engaging more with a general interest in the cinematic arts.

15. Education

Licensing films to play in the classroom isn’t cheap and can cost well over £100 per title. The law does allow the playing of excerpts, and nobody can stop a teacher from instructing the class to go home and watch a film on their own time – it’s the ideal kind of homework – so I have always found a workaround for my students.

16. Piracy

Talking of my students, here’s an exercise I’ve used to bore them all. I’d cover the whiteboard with a whole scatter of words, ‘nodes’ of the film industry’s cashflow. I’d write up “Cinema” and “DVD shop”, “Film Studio” and “Actors” and a whole bunch more besides. The students are then tasked with drawing in arrows indicating the flow of money between these nodes, illustrating the flow of money in the movie biz.

So, if they did it right, they’d get an arrow going from ‘customer’ to ‘cinema,’ then another from ‘cinema’ to ‘distributor.’ We’d end up with a good dozen arrows, snaking around all over the board.

There were two ‘nodes’ on that board of particular interest. One would be ‘customer,’ which had arrows coming out but none going in. The opposite would be ‘pirates’ with arrows going in, but none coming out.

Somebody is making money off of that £1 bootleg sold off a blanket down by the football stadium, and somebody is making money off of the ads on the torrent site. It’s not anybody who deserves to make the money, of course, and this money is going somewhere altogether different than your cinema ticket, but piracy does make money. For someone. It was easier to track pre-internet, when the IRA funded their operations by running VHS copiers, but I promise you, there’s money in piracy.

And no, that’s not career advice.

Now, I’d have been happier with show art or show entertainment, though probably not show exhibitionist impulse. Show business is what we have, though, and it can work. Money might make the wheels turn round, but it’s not always in control of the handlebars.

If it couldn’t work sometimes, then there wouldn’t be any films worth loving, this website wouldn’t exist, and I would have had to spend the last six hours doing a proper job instead.

Show business isn’t so bad, I suppose. It certainly puts a lot of bread onto a lot of tables, and that alone is a very good thing indeed.

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