How are Hollywood blockbusters financed?
Colossal explosions split the sky, tsunamis crash over major metropolises, meteorites plough through mountain ranges, life-size dinosaurs stomp around primordial forests — and let’s not even get into all the creative ways the White House has been cinematically smashed up over the years.
These sorts of spectacular special effects can boggle the mind, both in terms of how extraordinary they are visually, as well as how much they reportedly cost to produce. Hollywood blockbusters like the “Pirates of the Caribbean” and “Spider-Man” trilogies are packed with shocking special effects that push their budgets way up into the hundreds of millions, and somebody out there has to be footing the bill.
There are lots of readily apparent ways that blockbusters make money. When people go see a movie in theaters, rent it when it’s available for home viewing, buy the DVD or purchase the soundtrack, the studio responsible gets a percentage of the proceeds. It also collects from television distribution contracts on various domestic and foreign TV outlets, from pay-per-view to basic cable and free networks to satellite stations. But keep in mind the percentage aspect — box-office numbers and the rest of these revenues are split up among different vested parties — like the star, for instance — and don’t reflect a complete payback to a studio’s blockbuster budget. Plus, post-theater success often hinges at least in part on box-office turnout, adding another complication to the equation.
Depending on the film, money can also sometimes be made through means like merchandising and licensing contracts. Studios typically get a guaranteed dollar amount, plus royalties. Paying for a Hollywood blockbuster means more than covering the cost of actually producing the movie, though. Marketing is another big slice of the budget, for example, and since box office sales alone usually aren’t enough to cover even the cost of advertising, it’s another reason why additional funding vehicles are so important.
But apart from these obvious, and primarily post-production, methods for making sure blockbuster movies turn a profit, behind-the-scenes systems can help get much of the funding necessary for covering the bottom line in place ahead of time. We’ll uncover some of those more mysterious methods on the next page.
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