have you ever wondered how a movie is deemed a success or loss at the box office why do journalist and influencers say a movie needs to make 2 and a half times its production budget at the box office to break even how is all this calculated well in this video we'll explore how box office returns are calculated and divvied up to understand if a movie will be [Music] profitable a lot of pressure is placed on Studios directors producers and actors to ensure a movie makes money particularly if a movie has a large production budget in the hundreds of millions of dollars as a case study let's look at the numbers for a fake movie we'll call it Edge of Tomorrow 2 since it looks like that's never going to get made let's give it a production budget of $100 million since that's a nice easy round number to work with to break even on making the mov mov ticket sales would obviously need to equal $100 million right well no when you purchase a movie ticket about 50% of the ticket sales actually goes to the theater company you're watching it at sometimes more sometimes less but 50% seems to be the agreed upon average split between Distributors and Studios at least for the first few weeks of a major Motion Picture release so if you bought a movie ticket for $10 on opening weekend then only five $5 of that is going to Warner Brothers Pictures typically theater companies will get a lower percentage of the ticket sales the longer a movie is in theaters this is one of the reasons why you pay big bucks for drinks and snacks movie theaters need to make money somehow not factoring in the complicated math for months of a theatrical run due to decreasing adjustment splits of the ticket sale percentages that would mean Edge of Tomorrow 2 would need to make 200 million at the box office to be profitable right since it cost 100 million to make the movie and movie theaters would receive 100 million due to 50% Sal splits well still know that $200 million doesn't take into account the marketing budget that was spent on Advertising for those who are not aware the marketing budget is separate from the production budget there are no set guidelines but a rule of thumb in the industry is that whatever the production budget is you divide that number by two and that equals the marketing budget in the case of Edge of Tomorrow 2 that would be $50 million additional dollars to Market to recap the amount of money spent on Edge of Tomorrow 2 so far 100 million to make it 100 million going to movie theaters after ticket sale splits 50 million to advertise it that brings the total to $250 million needed in box office sales just to break even breaking even meaning to cover the cost just to make the movie and show it in theaters the production company still hasn't made money yet just remember this is a clear-cut example done for this this video to give you a generalized idea like everything else in life there are always exceptions that complicate everything for instance some actors have been known to negotiate a percentage of the box office revenue as income this is known as the first dollar gross according to a June 2022 article by Forbes Tom Cruz received 125 million in upfront pay for top gun Maverick and got over 10% of the first dollar gross that means crew lose eight into the box office returns for Paramount when actors or producers or directors do this it eats it profits which means a movie must pull in even more money to account for the split in ticket sales since top gun Maverick made nearly a billion and a half at the worldwide box office and Paramount got half of that and Cruz got 10% of Paramount's cut he did quite well for himself negotiating this deal the practice of paying salaries on contingency from box office returns happens less frequently now due to the rise of streaming but it still happens now don't get confused with money spent on marketing and earned marketing the marketing budget is money spent by the studio to advertise a movie earned marketing is Buzz that's being created by social media influencers the news and Word of Mouth earned marketing exposure isn't paid for but if you get enough of it the buzz can help sell movie tickets on its own this was the case with Star Wars the Force awakens Disney famously spent little money to advertise the movie when compared to other big summer movies instead just letting influencers and journalists talk about the return of Star Wars generated massive amounts of earned marketing The Word of Mouth from friends family and co-workers can make it seem like the advertising on a movie was a lot more than it really was movies with low budgets but have proportionally large success often get media Buzz for instance in 2023 the movies sound of freedom and Five Nights at Freddy were widely successful for their Studios sound of Freedom was made on a production budget of $14.5 million and made 245 million worldwide Five Nights at Freddy was made for 20 million and has grossed over 225 million worldwide at the time of script writing while 200 is a lot of money you might not think it's a lot when it comes to the box office results these days when you compare that to the massive box office Halls some movies have been bringing in but it's the cost to income ratio that is impressive for these two movies contrast those numbers to big budget movies like the eternals which had a production budget of 236 million but only made 402 million worldwide or Indiana Jones and the dial of Destiny which cost 294 million to make but only brought in 381 million worldwide so while you might be seeing returns in the hundreds of millions take a look at a movie's production budget and make a decision for yourself if a movie is profitable let me know your thoughts about movie budgets in the comment section below this is movie University education in cinema