Piss-ups and breweries?! Film economics

The MPAA home page is full of interesting reading.....

"The average motion picture cost the MPAA member companies $96.2 million to make and market in 2005. Six out of ten movies never recoup their original investment."

That's an average of $60M 'negative cost' (I assume that's production) and $36M in marketing. (That's a lot of marketing!). Six out of ten is p*** poor.

There were 1,4billion theatre attendances in 2008 in the US - with over 500 new productions that's a little under 5 attendances per person -maybe a bit more if you exclude babes and the infirm.

"The US Motion Picture Industry employs over 750,000 people" or... "2,5million people"
...if you include 1,5 million handling things like dry cleaning and car rentals.

The average wage in the core production industry is 76% above the national average wage. Broadening this to include TV and film distribution the average is still 26% above the national average (telling us amongst other things that these latter groups earn less than the average wage).

The US industry is made up of 115 000 businesses. Over 80% employ less than 10 people. ... which means lot's of overhead cost on dealmaking, contracting, administration etc, etc, etc

So... to conclude...

• The majority of films run at a loss. Studios can't tell a good film from a bad one, or have no idea how to manage production costs to a budget.
• Core production teams get paid richly paid for delivering loss making films.
• Lots of other underpaid people rely on their loss making 'genius'.
• Over ten new films a week says there's lot's of competition
• Individual viewers only see around 1-2% of the films released.
• The industry is inefficiently structured - lot's of small firms happily paying each other over the odds to deliver the latest creative masterpiece...

And that's all without asking how much the stars took as their cut of proceedings???

Of course film makers do make money... Box office takings continue to rise, and a good film can takes between $100M and $500M - before it goes to DVD. But even so - with over 500 films in production in any year that's over 300 films a year that just don't cut the mustard - that's $18Bn in working capital tied up in projects that won't deliver a profit - even without looking at marketing costs (another $10Bn).

So here's some tips...

• Big budget films don't necessarily make good cinema - plan for a lower break even cost... it's creativity not money that makes good films.
• Scale makes for more efficient businesses - consolidate and amalgamate.
• There are lot's of suppliers to choose from... get them to compete on price (duh!)
• ...or outsource to Bollywood
• There are too many films in production... make fewer films and get better returns on those you do make...
• Get a better deal on scripts, music and other copyrights and IPRs
• Pay realistic wages.. fewer films means you can pick and choose.
• And give a fair deal for the lower paid!