Have you ever seen a trailer for a movie and thought "this is going to be terrible," only to hear later on that it earned millions at the box office? It can be a little baffling. Last year, despite being panned across the board by critics and earning itself every negative award, including Worst Picture, at the Razzies, Adam Sandler's "Jack And Jill" earned roughly $74 million at the North American box office. It had a worldwide gross of over $149 million. To put this in perspective, Microsoft earned $192 million dollars in operating income in its last earnings report. Why, despite the perceived loathing of movie goers, do movies of this caliber see such large numbers at the box office? More importantly, why do they continue to do so with impunity?

Studios Know How to Pander
Tens of thousands of scripts come across the desks of producers every year, many of which cater to certain audiences at particular times of the year. While a writer may generate a strong screenplay complete with fantastic dialog and a compelling story arc, film executives need to focus on the bottom line. Praise and accolades are nice things to have, but so is financial sustainability. While film, in its purest form, is an art, the film industry is a multi-billion dollar enterprise employing millions of people. Studios need to ensure that they produce a product with a high ROI. The best way to do that is to understand who watches your product, and capitalize on it.

Take for example Lions Gate Entertainment, a publicly traded entertainment company that owns multiple subsidiaries responsible for releasing many popular films. In 2007, Lions Gate Entertainment distributed "3:10 To Yuma," a modern adaptation of the book by Elmore Leonard. While critically a great production in the western genre, it failed to perform at the box office, earning about $53 million in its domestic run. This was around $2 million shy of its budget. The following year, Summit Pictures, a subsidiary of Lions Gate, released the first film in the "Twilight" series. In North America, "Twilight" earned a staggering $192 million from tweens and mothers. So, while a studio can produce a fantastic genre film and cater to its fanbase, if it wants to cast its net wider it's best to do so in shallower waters.

Guaranteed Revenues
Speaking of book adaptations, it has become an increasingly common practice for studios to create movies based on older films, books, comics and even Hasbro toys. According to Nextmovie.com, we should expect to see up to 50 remakes in the next two years. Why aren't studios coming up with new narratives? Simply put, brand recognition. Why gamble on an original script that audiences may or may not buy into when you can simply rewrite a new story about familiar characters that have historically seen success at the box office? Take for example 2009's remake of "Friday The 13th." While largely panned by critics with a Rotten Tomatoes rating of 25%, it grossed about $65 million at the domestic box office off of a $19 million budget. Another horror film from that year, Sam Raimi's original "Drag Me To Hell," earned $42 million domestically from a $30 million budget despite overwhelming critical praise. When in doubt, take a classic and add some gloss to it. The script may not be Oscar material, but it's guaranteed to draw audiences on its nostalgia value alone.

The Bottom Line
In the movie business, there is a balancing act between creating art and creating income. If no one is going to see your movie, no one is going to pay you. This might mean you will have to sacrifice depth and originality for safer bets. At the end of the day, a film is a studio's investment. Studios need to make sure their investment promises solid returns. Prestige and critical praise are just perks.

Related Articles
  1. Investing

    The Hunger Games Economy: 5 Unanswered Questions About Panem

    The Hunger Games's fictitious nation of Panem has technology, black markets, and government. But, we know precious little about Panem's economy and the reasons for its rampant inequality.
  2. Economics

    Management Strategies From A Top CEO

    Jack Welch is a legend in the business world: during the two decades he was CEO of General Electric, the company’s value rose by 4000%.
  3. Investing

    Oprah Winfrey Closes Iconic Harpo Studios

    A look at the history of Harpo, and what the future holds for the queen of entertainment ventures.
  4. Investing

    From Supermodel to Entrepreneur: Gisele Bündchen's Sejaa Pure Skincare

    As one of the highest-paid models in history, Bündchen has turned her name and image into a worldwide brand, and Sejaa is part of her massive empire.
  5. Investing News

    How Disney (DIS) Continues to Deliver

    The Walt Disney Co. is only an animation studio in the same way that Johnson & Johnson is only a baby powder manufacturer.
  6. Investing

    Oprah Takes a Big Bet With Weight Watchers

    Does "The Oprah Effect" still work, and can Winfrey reinvigorate a brand that's been struggling for years?
  7. Investing

    11 Top Celebrity Restaurants

    These 11 celebrities may come from a variety of industries but they have all seen the allure of the restaurant business, both high-end and low-end.
  8. Investing News

    Celebrities Who Opened Their Own Businesses

    From Gwyneth Paltrow's Goop to Jessica Alba's "Honest" products, a look at celebrities who have become entrepreneurs.
  9. Investing

    How Gordon Ramsay Built His Restaurant Empire

    Gordon Ramsay is already well-known as a successful media personality. But he is also a hardened businessman, who has turned failure into success.
  10. Economics

    Is the Cinema Industry Set For A Clear Downfall?

    The game is evolving, and the cinema industry will need to adapt to survive in our streaming, television-obsessed world.

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center