People who are used to seeing Hollywood as a dream factory find it hard to imagine the movie business as a huge machine that makes a lot of money from people’s hunger for spectacle and bread.
Every Hollywood motion picture is a separate company, bound by obligations, debts, and contracts.
The vast majority of films are unprofitable on paper. All profits are immediately divided among contractors, who are often located in different countries. This cleverly allows for tax evasion and avoids paying profit shares to those involved in the shooting. For example, Jerry Bruckheimer’s blockbuster, “Hijacking in 60 Seconds” at half a billion dollars in revenues (according to documents) has brought its creators a $120 million loss. But that didn’t stop all parties involved from making a profit.
THE BOX OFFICE RECEIPTS OF FILMS ARE BEAUTIFUL NUMBERS, BUT NOTHING MORE THAN THAT. Take, for example, the same “Chase in 60 Seconds”. With a budget of $103 million, the film grossed $242 million at the box office, of which 60% were retained by cinema chains. So the film’s profits from the rental was only 97 million – less than the budget, given that the amount has not yet subtracted overhead and marketing costs. In the net balance the distribution brought the film only 11 million dollars.
MAKING A HOLLYWOOD FILM IS A VICIOUS CIRCLE. It takes money to shoot, which is given to a famous actor who demands a lot of money to participate in the filming. Take, for example, Schwarzenegger’s participation in Terminator 3: Rise of the Machines. For his participation in the film, Iron Arnie received $ 29 million and payment for a huge number of additional expenses: from personal security and the plane to the gym in the van. In addition, under the terms of the contract, Schwarzenegger was given the right to choose everyone involved in the process, from the makeup artist to the director.
THE ACTOR’S CONTRACT IS THE BIBLE OF HOLLYWOOD. Contracts consist of dozens of pages and describe every detail of the filming process. They are created by specialized lawyers. Schwarzenegger’s contract was seven months in the making and included 21 drafts.
LEGALLY the actors do not receive the money personally – the sums are transferred to the accounts of affiliated firms that “ensure the actor’s participation in the filming”.
TAX OPTIMIZATION IN HOLLYWOOD HAS REACHED UNBELIEVABLE PROPORTIONS. With its help, movie studios have learned to make money even before the film appears in the form of a script. To do this, they sell the rights to countries that give tax deductions for filming (primarily Germany).
CANADA IS A FAVORITE COUNTRY OF HOLLYWOOD PRODUCERS. It’s all about the wealth of incentives and subsidies that the Maple Leaf Country gives to movie producers. Over the past 10 years, more than 1,500 box-office films have been made in Canada. Pictures starring Canadian actors get special benefits, which is why they’re in high demand right now. A large part of New York movies are made in Toronto.
TODAY, up to 60% of Hollywood’s profits come not from movie tickets, but from marketing actions: product placement, the use of movie characters in games, commercials, souvenir products, and the sale of movie rights to airlines.