As a regular writer of topics about movies, I find that many people ask the question, “How do movies make money?” I have also found that many people have many misconceptions of how movies actually make money. I hope to clear up many of those misconceptions here so that you know the true ways that movies make money.
How Movies Make Money – Ticket Sales
The primary way that movies make money is through theater ticket sales. While there are exceptions (such as movies that blow up on DVD sales after flopping), the average movie is going to make the majority of money through the tickets that we buy at our local movie complex.
A common misconception is that only a small portion of movie ticket sales actually go to the movie studios. This is not true. Actually, only a small amount of the ticket sale goes to the theater. Movie theater make most of their money off of concessions.
How Movies make Money – DVD Sales
The next highest grosser for movie studios would come in the form of DVD sales. While a movie studio might only make a handful of dollars from each DVD sale, the number quickly add up since some movies are purchased in the millions.
How Movies Make Money – Merchandising
We can all thank George Lucas as he is the father of movie merchandising. There were three little movies that he made in the 1970s and 1980s that gave us character like Luke Skywalker and Darth Vader that paved the way for movie merchandising.
When talking about blockbuster movies and children’s movies, chances are good that more money will be made off of merchandising than off of DVD sales, or any other medium other than the original ticket take. Movie merchandising has become a multi-billion dollar industry that has many movie studios laughing all the way to the bank.
How Movies Make Money – TV
When a movie is shown on TV, chances are good that the movie studio either sold the rights to the movie, is being paid a flat fee for the showing of the movie, or is being paid a percentage of the commercials. Many consider this the best kind of residual payout for a movie.
How Movies Make Money – On Demand
When you order a movie through On Demand, the movie studio will either make a percentage of the sale, or has already been paid a flat fee for the opportunity to be shown by On Demand.
How Movies Do Not Make Money – Investors
There has been a misconception for many years that some movie producers make money off of the private investors of a movie. In fact, the truth is the other way around. Private investors pay the movie studio a certain amount of money for the movie to be made. Before the studio makes money, the investors have to be paid back their original investment plus interest, or a percentage of the movie’s overall take.
How Movies Do Not Make Money – In Movie Advertising
When you see a movie character wearing a Nike shirt, or driving around in a Ford truck, the movie studio is not making any profit off of that advertising. The money is reinvested into the movie to either limit some costs, or to increase the special effects or marketing.
The next time that you hear people talking about how movies make money, keep these points in mind. You might be surprised on how few people really know where the money goes that is made off of their favorite medium of entertainment.
