Like I get that it isn't performing as well as the other films but......making back your budget and going at least 12 million over doesn't really sound like a failure to me
It's not that simple. The studio only keeps a percentage of the gross. A good rule of thumb is 60% domestic, 40% International. China is on the low side at 25%. Then you also have to factor in marketing expenses. Figure that those expenses will come in at a quarter to a third of the production budget. Then you have to figure that there are opportunity costs to having your money invested in a movie. If you're spending 200 million on Transformers, you're not putting 200 million in the stock market. Over the last 18 months, we've seen pretty massive gains in that sector. So your target isn't to make back your money, it's to make more money than you would have if you'd gone with a conservative investment.
So your real target is production budget times 1.25 (marketing) times 1.15 (opportunity cost) times maybe 2.2 (to account for how much of the profits you actually keep, and realizing the Transformers weights towards the international.) My rough estimate puts 686 million as the effective Break Even point. Less than that and they really might as well have stayed home. Less than 600 and they probably actually lost money, not just underperformed the market. You could go into greater granularity but those figures should be roughly correct, give or take 20 million.
(Product placement should be already factored into the production budget. This does not take into account other revenue streams from things like merchandising, nor does it include any future revenue streams from home video or streaming or broadcast rights. But because of accounting quirks, movies are expected to make back their own budget without recourse to merchandising and future broadcast rights. Basically the future money goes to a different department.) (Generally speaking. Of course, there are exceptions. With a project like, say, Cars 3, the merchandising is the whole point and anything the movie makes is basically gravy.)
Edited by Jim S, 28 June 2017 - 11:13 AM.