Businesses related to art

How do Film Companies Make Money

Jacob Kubik
By Jacob Kubik. Updated: June 3, 2018
How do Film Companies Make Money

Entertainment is a huge part of everyday life everywhere in the world. People hate being bored. They come up with all types of things to entertain themselves from video games, to sports, to books, and movies. Film production is such a big industry that has the attention of just about anyone who is able to see them. Hollywood is a big player here racking in tons of money and paying actors very handsomely as well. Actors become celebrities and gain fortunes, but how exactly do they make money to pay the actors and make a profit?

In the article I'll discuss how do film companies make money.

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  1. Expenses for Making the Film
  2. Money Made on Tickets
  3. Sales From Merchandise
  4. DVD and Streaming Rights

Expenses for Making the Film

The first thing you need to think about is the actual cost of a movie. How much does producing a movie actually cost? Well, as you would probably imagine, a lot! It may even be higher than you imagine because of the costs of advertising for the movie. Top movies can have a budget to film the movie of hundreds of millions of dollars. This will pay for the equipment, the man power, pay the actors, and anything else needed to film the movie. However, on top of this you have all the expenses that sell the brand name. This includes advertising the movie and making sure people know when it's supposed to come to theaters and what it's about. If a movie is not based on a book or doesn't have a well known backing, like a new Disney princess movie, the advertising is greatly needed so that people will come see it and the film company can earn money.

Money Made on Tickets

A lot of the money a movie will make is from ticket sales (also known as the Box Office sales). The company doesn't receive the whole price of the ticket however. If a ticket costs $10 to see a movie, the company who made the movie will only receive a portion of the ticket price. The portion they receive is based upon the contract with the theater. Depending on the theater and the success of the movie, the studio can make more or less money. For less successful movies the theater usually makes more to keep it safe from buying rights to show a movie that tanks. On more popular movies, like a super hero movie, the studio will most likely make a greater percentage of the ticket sale. The box office profit from national sales will be much greater than the rest of the global sales as more people will see it. For example, if a film is made in English in the United States then it will earn the most in the United States and less from global box office sales.

How do Film Companies Make Money - Money Made on Tickets

Sales From Merchandise

The next huge way film companies make money is through selling film merchandise. Star Wars is a very good example of this concept. They sold tons of toys and action figures to make billions on all the products sold based on their films. This brings in a huge amount of cash for studios, but of course the movie has to be successful enough for fans to want to buy the merchandise.

How do Film Companies Make Money - Sales From Merchandise

DVD and Streaming Rights

The final way film companies make money is by selling DVD's and selling the right for companies to stream the movie online. A decent amount of money is made from selling DVD's, but the sales from these have decreased since the popularity of streaming has increased. A good amount of money is also made from selling the rights to stream the movie to companies like Netflix. The amount made depends on the contract with the company.

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How do Film Companies Make Money