#1: The Box- Office Fixation

       Ritualistically every Monday, the New York Times, Wall Street Journal, Variety and other newspapers publish the weekly box-office grosses in an authoritative-looking table.  Unlike the bygone era when Hollywood studios owned their own theaters, nowadays these dazzling box-office grosses have little if any, relation to the profits of Hollywood studios. For one thing, these “grosses” are not that of the studios but that of the independently-owned movie houses. The movie houses eventually remit–after deducting their share and the so-called “house allowance”– between 40 and 50 percent of the gross in America. Overseas, the studios get even less.

    Furthermore, studios have to pay the entire bill for the advertising and other inducements required to lure the ticket-buyers for the theaters. Last year, studios spent an average of $39 million per film on advertising and prints in America but only recovered $20.6 million per film from the theaters. So, on average, they paid more to get people to buy tickets than they got back from the theaters. (And this dismal calculation did not include the cost of making the film.) This year advertising bills are even higher: According to the New York Times, Warner Bros committed $60 million to marketing Alexander The Great in the U.S. If so, Warner Bros share of even a $100 million “box-office gross” will not pay the advertising bill.

  How do studios make money? See Demystification #3.

 What Else Should Be Demystified?

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