The Blockbuster Business

Derek Thompson breaks down box office economics:

In The Hollywood Economist, Edward Jay Epstein revealed that the American box office Studio Revenueaccounted for less than 10 percent of the MPAA’s total income (and international box office accounted for just a little more than 10 percent). “The other 80 percent now came from the ubiquitous couch potato who was viewing his movies at home via DVDs, Blu-rays, pay-per-view, a digital recorder, cable channels, or even network television,” he wrote.

What does that mean for summer movies? It explains why $1 spent on a blockbuster is (all things considered) worth more than $1 spent on a non-blockbuster. The potential for each mega-budget movie to go big and create a train of merchandise, licensing and sequels makes it strategically wise to bet a very large sum of money on a very small number of big films.

Meanwhile, Alex Mayyasi wonders why the films aren’t shorter, since all tickets cost the same:

For a summer blockbuster, Spider-Man 2 is not terribly long at 128 minutes (just over 2 hours). But let’s imagine what would happen if a thrifty producer had decided beforehand to decrease the length by half an hour. If we assume that the cost of shooting the film ($100 million) and editing it ($70 million) would decrease in proportion to the decrease in the length of the film, then the trim would reduce the cost by $39.8 million.

That’s a lot of money. It’s over 14% of the film’s cost – enough to fund the production of a film like the recent sci-fi flick Looper or pad the producers’ salaries. But in the world of blockbuster movies, where a few product placements can rope in an extra $10 million, it’s also not enormous.