Despite the development of network and cable television, video-on-demand, DVDs,
and Internet downloads and streaming, the movie business has continued to thrive. In
fact, since 1963, Americans have purchased roughly 1 billion movie tickets each
year; in 2017, 1.24 billion tickets were sold in the United States and Canada. (Dave
McNary, “U.S. Movie Ticket Sales Plunged 6% in 2017, Thanks to Lousy Summer,
Variety, January 17, 2018) With first-run movie tickets in some areas rising to $15
(and 3-D movies costing even more), gross revenues from North American box-
office sales have climbed above the $11 billion mark, up from $9.2 billion annually
in 2006. The bigger news for Hollywood studios is that global box-office revenues
have grown at a much faster rate, especially in China (though it returns less money to
studios), Russia, and Mexico. (Chris Dodd, “CinemaCon 2014—Remarks as
Prepared for Delivery,” March 25, 2014)
The growing global market for Hollywood films has helped cushion the industry as
the home video market undergoes a significant transformation, with the demise of the
video rental business and the rise of video streaming. In order to flourish, the movie
industry has had to continually revamp its production, distribution, and exhibition
system and consolidate its ownership.
With 80 to 90 percent of newly released movies failing to make money at the
domestic box office, studios need a couple of major hits each year to offset losses on
other films. The potential losses are great: Over the past decade, a major studio film,
on average, cost about $66 million to produce and about $37 million for domestic
marketing, advertising, and print costs. (Dave McNary, “U.S. Movie Ticket Sales
Plunged 6% in 2017, Thanks to Lousy Summer,” Variety, January 17, 2018)
With climbing film costs, creating revenue from a movie is a formidable task.
Studios make money on movies from six major sources: