Instead of math, how about statistics?

[Aspiring Mogul]

The subject "statistics" includes probability, as in what are the chances of getting two 6's if you roll the dice a few times.

OK, let's say we cannot find an algorithm that can predict the success of movies, so let's try probability theory instead.

If we cannot predict the success of any movie, then probability theory as I understand it would say that each movie has equal chance of being a blockbuster, whether that movie cost a million or a hundred million. So, instead of a movie that can cost $100 million, why not have 100 movies that cost $1 million? That would increase your chances of a hit movie by 100-fold. Or better yet, get 200 movies for half a mil each, which would double your chances yet again.

This is not hypothetical, by the way, because statistics have revolutionized the way we look at the world, from arms control to stock markets to factory production. And I also want to brainstorm, so I know. Rik, your thoughts?

 

[that1guyy]

There is a lurking variable. I don't think the masses want to see many $1 million movies. And they can't afford to spend the same admission price for a "lesser" movie.

 

[rayw]

OK, let's say we cannot find an algorithm that can predict the success of movies, so let's try probability theory instead.

If we cannot predict the success of any movie, then probability theory as I understand it would say that each movie has equal chance of being a blockbuster, whether that movie cost a million or a hundred million.

As an armchair statistician myself, this cocktail conversation approach is so rudimentary as to be useless.

People tried to invent flying machines for a thousand years before anyone did it successfully.
Did a solution to the problem exist all along or did the solution magically appear one day that didn't exist from the beginning of time beforehand?
Yes, the solution existed all along.
No, the solution didn't spontaneously manifest itself on some random day or at some moment.

Just a moment of common sense tells us that humanity is not equally interested in all stories, thus making each movie having an equal chance of being a blockbuster a corrupting assumption into any model equation that relies on that tenet.

How many films have been made based upon the fundamental story of Snow White?
Why have they not all shown similar returns on investments?
Well... because the algorithm for a film's financial success is considerably more complex than anything that can be scribbled out on the back of the proverbial envelope.



Does an alogorithmic answer exist? Likely.
Does a probability theory answer exist? Also likely.
While the former looks for a single outcome the latter looks for a range of answers best represented as an understanding involving caveats and contextual understandings.

Furthermore, aspiring just to make a break even return on investment in film is challenging enough.
Attempting to determine a definite "blockbuster" is considerably beyond reasonable.

 

[Sweetie]

While in theory it's possible, the probability of what you're saying is unlikely

Most of that assumes that the success of a movie is boiled down to luck, then yeah sure. Why not. I'd, however, would like to take some comfort that the whole of a blockbuster is greater than the sum of its parts.

 

[Alcove Audio]

"There are three kinds of lies: lies, damned lies and statistics." - Samuel Clemens/Mark Twain

 

[ItDonnedOnMe]

You can't talk about the success of any film in isolation from it's marketing - which is both a significant chunk of it's real total budget and a significant factor in the success of the film. Spending a lot of money on marketing & promotion doesn't guarantee a hit - but not spending money on marketing is a pretty sure way to not sell a single ticket.

It doesn't cost any less to successfully to promote a $1 million movie than it does to promote a $100 million one - at least not if you're trying to make the same return from each one. So does it really make sense to multiply your marketing expenses by 100x? Not to mention that you're now dividing your time and non-monetary resources between 100 films instead of focusing them on one, which is likely to directly hurt your ability to successfully market them all.

And then there's the most limited resource of all - your audience's attention. It's hard enough to get them to notice one film you're trying to promote - now you're hoping to get them to notice a hundred films? That's the real problem - attention is finite. There is a relatively stable population of theater-goers, they each only have 24 hours a day to do anything, and there's more and more stuff competing for that time every day - so why would you make that situation worse by throwing even more into the mix?

 

[kova.lee]

I think your premise is a bit flawed. What you're essentially suggesting is that the success of a movie is like roulette or slots - completely random. However, the fact is that the success of a movie is more like blackjack; there are variables you can extrapolate and control to bring the house edge down to almost nothing. I commonly hear that if you follow basic blackjack strategy, then the house edge is only 1%. There's still an element of randomness but it's not 50-50 like a coin toss.

This reminds me of a story I read about Will Smith (well, it was an article about the story so it's a second-secondhand account) about the start of his rise to fame. He and his manager perused the top-10 box office for months and came up with the idea that the movies that make money all have a slew of common factors. I forgot the exact factors but they were something like special effects, aliens, love story, and stuff like that. Thus, he began picking movies that involved those elements and made a ton of money doing so.

And there are other factors as well - star power, director, based on books, etc. These are all variables that can be controlled to a certain extent to minimize risk and the "house edge," so to speak. Take a random script from a nobody and shoot it with a no name director with some no name actors from a local community theater. Sure, it'll cost you well under $1 million probably but it's a 50-50 chance at best that it'll make any significant amount of money. Say that same script was written by William Goldman and that James Cameron is directing with Robert Downey, Jr starring and all of a sudden, you've narrowed the house edge down to 1%. Yes, hiring James Cameron, Robert Downey, and William Goldman costs globs of money but the reason they can command those prices and studios pay is b/c the expected returns are enormous and worth the price. Yes, it's a risk but it's a calculated, controlled risk, not the 50-50 that you're hypothesizing.

 

[directorik]

So, instead of a movie that can cost $100 million, why not have 100 movies that cost $1 million? That would increase your chances of a hit movie by 100-fold. Or better yet, get 200 movies for half a mil each, which would double your chances yet again.

This is a business model that has been tried many times. All of the big studios
"speciality" divisions like Vantage, Focus Features, Illumination Entertainment
were started with this in mind. That was Robert Shay's model. That's what
Corman did.

If a prodCo has $100,000,000 in production funds they may see a hit or two
if they make 100 movies over a five year period. The may have 20 hits. They
may have none. I know I keep quoting William Goldman and you don't like that,
but he was correct. Making a movie is a gamble. Yes, a producer can (and should)
do their best to put together the very best project they can. But once it's out in
the world "nobody knows" what will happen. Over and over and over producers,
directors, writers, actors, studios are surprised.

I think you as a Mogul should focus on that business model. Raise $10,000,000
and make six films over a four year period. I think the odds of one of the six
being a success is better than if you make one $500,000 movie.

 

[Aspiring Mogul]

This is a business model that has been tried many times. All of the big studios
"speciality" divisions like Vantage, Focus Features, Illumination Entertainment
were started with this in mind. That was Robert Shay's model. That's what
Corman did.

So what happened?

I think you as a Mogul should focus on that business model. Raise $10,000,000
and make six films over a four year period. I think the odds of one of the six
being a success is better than if you make one $500,000 movie.

Obviously, all things equal, one in six is better than one in one. But the question is, if I have $10 million, wouldn't it be better to make 20 $500,000 movies as opposed to one $20 million movie? Probability theory would advise that.

 

[Sweetie]

Obviously, all things equal, one in six is better than one in one. But the question is, if I have $10 million, wouldn't it be better to make 20 $500,000 movies as opposed to one $20 million movie? Probability theory would advise that.

The cost of what a movie costs to make doesn't have a direct link to their success. However, there is often a direct link between cost of a movie and its production value. A great story, well executed and marketed will have a better chance of being a success than those movies that don't.

The answer to your question of whether it'd be better to make 1 $20mil movie instead of 20 500k movies depends on your distribution plan. If you can keep production value high, have each movie with a great story and you're willing to distribute most (if not all) straight to video/cod, then sure, you may be better off going that route. You may come up with the next Paranormal Activity blockbuster. The chances aren't on your side. Paranormal Activity is a 1 in 10000 lucky story, but then again, the original production budget was only $15k before the studio got their hands on it.

Your theory might be closer to right when you're talking the difference between making $5-10mil movies versus making the $250 tentpole movies.

What you're talking about isn't really probability, its more like Chaos Theory, a branch of mathematics about decision making without knowing all the variables, usually applied in business and gamboling.

 

[Aspiring Mogul]

Your theory might be closer to right when you're talking the difference between making $5-10mil movies versus making the $250 tentpole movies.

All right, would it be better to making 25 $10 million movies as opposed to one $250 million tentpole?

What you're talking about isn't really probability, its more like Chaos Theory, a branch of mathematics about decision making without knowing all the variables, usually applied in business and gamboling.

I know OF Chaos Theory, but I don't know what it's all about.

 

[ItDonnedOnMe]

All right, would it be better to making 25 $10 million movies as opposed to one $250 million tentpole?

Again though - how much are you planning to spend on marketing for each of those movies? It's not uncommon for hollywood to spend 50% of the production budget just on marketing - so if you start with $250 million you really only have about $160 million to spend on your $10 million movies. So now you've got 16 movies made, with marketing budgets of $8 million each - how well do you expect those will compete with a couple of $100 million tentpole films that each have $40-50 million marketing budgets?

 

[arrodiii]

Chi-square

 

[Sweetie]

All right, would it be better to making 25 $10 million movies as opposed to one $250 million tentpole?

The answer is yes and no. There are a lot of movies that in the past have gone to be wildly successful movies that have had a smaller budget in the range of $10 million. A lot of those were a while ago and the movie business has changed somewhat since then.

With movies, a large part of it comes down to star power and distribution. People have a tendency of going to watch movies where there is a star they know. That's why so many tentpole movies get big names to star in them.

The next part kind of needs you to understand how distribution works, especially cinema and home market release. If you're an independent filmmaker and you're lucky enough to sell your movie to a distributor, it's unlikely that you're going to see any money returned to you.

Why?

Take your $10mil movie. Most of them fail. Out of the 20x10 mil movies, you get 1 that's destined to be a hit. You're lucky enough to create a movie that's destined to be a hit. In the week before your movie comes out, the distributor spends $35mil (about the average amount that's spent on advertising per movie) advertising your movie. Your movie comes out and is a big hit. It takes $70mil in the first week. The distributor continues to spend another $20mil in advertising money since they have a hit and they want to give it legs. It takes an additional $50mil. 3rd week 10mil advertising and it takes an another $35mil.

Now we look at the money side of things:
Takings:
Box office tickets: $155mil

Costs:
Cinema cut: $77.5mil
Advertising costs: $65mil
Distribution Fee (30% on 77.5mil): $23.25mil

You've already come up with a $10.75mil loss. On top of that there are a lot of miscellaneous expenses.

Then comes the video sales. The usual deal is 20% of wholesale sales (about 60% of retail) and there's usually about the same amount in home video sales as box office, so about $155mil. Assuming you're going to make about the same amount of sales from home video (did, VOD etc). You'll see about $18.6mil from it, take away the $10.75 mil loss carried from above, you'll get approx $7.85mil.

Then you have cable, tv sales and the other associated sales to go along with it. That's usually about half of the box office which the distributor takes 40%. That leaves you with $46.5mil. Carry over the $7.85mil and you've made $54.35, less your $10mil investment in the movie, that leaves you with a $44.35mil profit. The distributor will also charge a plethora of other fee's, like interest, administration fees, currency exchange fee etc. etc. but for neatness we'll leave those out.

Now take into consideration that you've earned a 15:1 ratio at the box office, which is rare, very rare. So from your $200mil, you've managed to turn that into $44.35.

Lets say you're good at what you do and you manage to get 2 hits, at the same numbers, you end up with $88.70 for your $200mil. To break even, you'll need to get a 1 in 4 hit ratio which would make you about $17mil profit from your $200 mil.

So while making 20 movies for $10mil each can work, movies in this range fail more than they succeed. The movie studios worked this out a long time back, so these days they tend to concentrate on their tentpole movies and use the independents for the smaller movies to fill in the gaps. The distributors manage to make most of the profits.

This make some sort of sense?

I know OF Chaos Theory, but I don't know what it's all about.

Probability is used when you know all the variables, so you can work out a mathematical formula to determine the odds. When dealing in business, you don't know all the variables, thus Chaos Theory was designed to help with decision making where you don't have all the information and still need to make the best decision (not necessarily the right decision given foresight).

Why movies suit chaos theory more than probability is due to you don't know how well a movie will go. There are a lot of variables when making a movie: Eg. How many people you able to let know about your movie within your target audience, quality of film, star power, whether a cinema will accept your movie to play etc. etc.