From a movie business standpoint, what exactly are the repercussions when a film “bombs at the box office”?

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Whether it’s due to bad reviews, people not just showing up to watch, or other factors, what happens afterwards behind the scenes when a film tanks?

In: Economics

From a business standpoint, they write off the losses as a business loss and use that against the taxable revenue from other projects. Also, any payouts to actors or others that are calculated from profits as opposed to gross revenue don’t get paid.

By the time a movie appears in theaters, almost all the money has already been spent. Poor performance would lead to cutting future advertising, but that’s a small figure. If it doesn’t make enough, then the investors lose money.

The business impact is that future movie decisions will be colored by “{Title} bombed at the box office”. Ideas get pitched, like a DC comics universe parallel to the MCU, and then get shelved when a movie does poorly. Ideas that seemed unlikely, like a Venom movie family, get green-lit when a movie over performs. Both of these effects are business effects, as investors use past performance to gauge future risk.

Sayings like “Get woke, go broke” are coined to label patterns in this profit landscape, and directly impact future investment decisions.

Someone, almost always a large company, loses money.

In the case of a movie produced directly by the studio, this is easy to see. Warner Brothers wrote checks to performers, advertisers, CGI studios, best boys, etc. Those checks are cashed, and you can’t claw back the money just because the movie did poorly. Independent movies are a little different because they’re usually financed by smaller companies (or even individuals!) then sold to the big studios at film festivals. The small companies get back their money when they sell the movie. The big studios are hoping to make even more if the movie is a hit. This is generally a good system because it spreads risk out – a big studio doesn’t go bankrupt when one movie flops, it just covers with the profits from a different movie – while simultaneously funding small, creative movies.

The producers, studio, etc who funded it lose money. But it’s sort of like VC funding or stock market investing where your business model assumes a portion of investments will bomb/lose money and you make your profits on the 80% that don’t.

It is mostly a matter of reputation, something fails, people are less likely to want to try it again. The director, the actors, the writers, the production company, even the genre, everyone and everything will take a hit, and investors will be a little (or a lot) less likely to back them in the future. Who gets the most blame depends on who people perceive as the cause of the failure.

A person (creative team) walks into a bakery and asks the baker (producer) about a cake they want made. They say it’ll need 12 eggs (funding). The baker thinks about the complexity of the cake and says one of three scenarios:

1.) This is simple, but might not taste good so I’ll only do a small one for six 6 eggs which means no errors, we can only do this once.

2.) This looks about right for the recipe, 12 eggs will work in case we have one or two bad ones we can still make a good cake.

3.) This looks like a great idea. Let’s double the size and get 24 eggs just to be on the safe side and make sure this turns out perfect incase anything goes wrong.

After the cake is made the Baker puts it in the shop window and gauges it’s success by how many people like it and order one. If it only took six eggs, and people buy a ton, then he makes out way ahead because it was super simple, but if it really wasn’t great and no one likes it, then no big deal, another cake will probably sell better and cover the cost.

If the cake took 24 eggs, and does okay but not enough to warrant making more cakes like it, then it’ll just be a creative and fun cake they only make when there’s extra eggs in the shop, and not plan on more of them.

Typically the baker makes most of their cakes with 12 eggs as they’re the most liked, get ordered often enough, and make a decent profit. If a recipe turns out bad than it’s no big deal as the money will eventually get made back.

In all three scenarios the eggs (money) are gone, baked into a cake (movie), but their taste, look, and presentation will drive word of mouth and get more people to come in and buy more slices of that cake. This turns into more cakes like it, and if the demand exists, a bigger version that takes more eggs and gets more people eating it. That means more people paying for a slice of the cake, more cakes, more eggs.

Eggs are cheap, and the slices cost enough to often double the cost of the cake (or better depending on how the baker decides to charge for future slices of that cake). If the cake is terrible, how ever, and only one or two slices are bought, and the cake goes bad and gets thrown out, the bakery looses money on it. Bummer, but since most cakes make twice their money back, the bakery isn’t out a huge loss as it’s easy to get the “eggs” again. They just won’t use the eggs to make that kind of cake again.

Now if a baker keeps making bad cakes, eventually people will stop ordering cakes from them, and the shop may get closed down, but that takes quite a few “bombed” cakes to happen.

Anecdotal comparison:

Occasionally a bakery is so good at making cakes that when people found out their little cakes were so good, the bakery started to make them with more eggs than normal, bigger than normal, and people will pay double the price per-slice to taste the cake, then pay to have a picture of the cake, maybe even pay extra money for mini versions of that cake to have at home to eat alone. Sometimes even to have memorabilia made that looks like the cake so they can show others what it was they ate, and that turns into free advertising for the shop so new people come in and buy a slice of the cake too. (Marvel)

But some bakeries struggle to get their recipes right, and make a lot of cakes for a lot of different people, but only some of their cakes turn out okay so they rely on the okay ones to get by until they occasionally do a really good cake and it gives them a boost in funds for a while to experiment on more cakes, and maybe they’ll get some good ones, or maybe they won’t. They do just good enough to stay open and making cakes for a long time, still hoping to find the perfect recipe (Warner).

TL;DR Money wise it gets washed away to the success of other films and may result in stopping production of sequential films connected to it. Broad spectrum, when it comes to production studios like Universal, WB, Disney, they have funds from other projects that are used to pay for any given new film. If sequels are an option, the first films success both directly influences and/or pays for that film. However, a lot of movie studios make their money on merchandise for films, and if a movie “bombs” then people most likely aren’t buying merch either, which means they flush a ton of revenue and may have to cancel *other* unrelated projects because of it. So in situations like Dark Phoenix Rises (most recent X-Men movie), where the studio (Fox) massively failed to deliver all-around, Disney lulled the plug on (basically) everything they had in the works to compensate the cost it lost them. As a result there’s now dozens of movies that won’t get made because their funds had to be sacrificed to cover DPR’s bombing.

Watch “The Movies That Made Us” on Netflix, it’ll give a real good behind-the-scenes exploration on production and expects for movies, how cost is evaluated, and sort-of where the money ends up.

I am not sure about the details about the US film industry, but films are in many ways similar to a start up. Films have a lot more initial cost than a start up, though. But this get funded by financiers and investors. So like any start up, the company makes the product, and investor might buy a stake in the company for future revenues, and or dividends.

Traditionally in the film industry one producer would sell one film to one studio. The studio would cover most of the production cost, the producer would secure the rights, and probably fund the development and a script. In the old days the studios would often own the production company, distribution and the cinemas itself. So naturally this was extremely lucrative.

Today is a lot more complex. Plus there are lot more companies involved, and is a way to spread the risk. This also ensures that most companies won’t go under if a movie tanks. Not sure how common this is in US, but film projects can also get incorporated as special purpose vehicle which protects the parent company. And what is already pointed out is that the studios make enough money to cover their losses on films that bombs. Plus studios of course consider how much money the movie must make in order for it to not be a loss.

Behind the scenes people involved might get fired, or a major setback to their reputation. Directors, writers, producers might not get funding for their next project – or a more difficult time to do so. Studio execs might get fired. Publicly actors might also suffer a blowback to their career if they are regarded as box office flops.

Unrelated; please stop making movies with all female cast just for the sake of having all female cast. Stop shoving women into a part just for the sake of inclusion. I get it, women can do anything, I get it women can do some things better than men. Just because some guy that is an extra has amazing acting experience, doesn’t mean we need to have a main character played by an extra. It’s like sex, drugs, money, guns. Don’t just throw in gunshots just for the sake of having gunshots. Can we move past that and just focus on a good story? Just because a person can sing well doesn’t make them a good songwriter. It doesn’t mean their music will sell, there are many talented people that shouldn’t just be shoved into playing a part for the sake of inclusion, and I’m more concerned about story lines of things we’ve followed for years that seem to now have females where there weren’t for the sake of inclusion. What if Dora the explorer was played by Dwayne Johnson in the next movie? What if the role of Michael Jordan was played by Serena Williams. Just like people want me to already stfu by now, I want this trend to stop. Keep stories interesting and original with some continuity, and I could care less what gender you are. But if you’re Marty Mcfly. You’re a dude.

I’m not sure if this has been addressed already but movie accounting is notoriously opaque and movies that are purported to have lost a ton of money (Water World being an example off the top of my head) have later been said to make money.

There’s a book called the Hollywood Economist that goes into this to a greater detail.

As to talent, Hollywood is a fickle place and rife with stories about actors and directors being in “movie jail” after a flop. Joe Carnahan is a director who made an indie darling called Narc (which you should watch) in the early auguries. He made a few more movies, including the A-Team (which you probably watched and forgot about). The last I heard he had written the remake of Death Wish. Not quite in Hollywood jail but he doesn’t seem to have the same clout as he did before (judging by the Hollywood pecking order)