Some Box Office Math

There's a debate currently going on about the likelihood of "Pacific Rim" turning a profit. If you've just tuned in, the movie was dismissed as a flop two weeks ago when it opened in third place at the box office with $37 million. It dropped 57% to sixth place and $16 milion in its second weekend, signaling that it's a failure domestically. It's current domestic total is slightly north of $70 million, and it's probably not going to make $100 million in the final tally. But wait! "Pacific Rim" is doing much better internationally, having pulled in $110 million so far, good enough for first place in the international box office for this past weekend. It hasn't opened in some pretty big markets like China and Japan either, places that may more readily embrace the giant monster vs. giant robot subject matter. "Pacific Rim" has a current worldwide total box office of $183 million and growing.

But what does that mean? How do we calculate whether "Pacific Rim" can be counted as a success worthy of further sequels or not? What amount at the box office does it have to reach ultimately? Well, there doesn't seem to be a clear answer. There are several different ways of measuring whether of not a film is profitable, and the studios have the habit of spinning numbers in all sorts of funny ways. The most common will-it-make-a-profit rule that I've seen is that a movie needs to double its costs in order to turn a profit, because only half the revenue from domestic ticket sales goes back to the studio, as explained in this io9 article, How Much Money Does a Movie Need to Make to Be Profitable? which provided me with a lot good hard numbers to start playing with. Foreign theaters keep more of the revenue, and the studio gets around 40% before costs. We know from Hollywood Reporter that "Pacific Rim" cost $190 million to make, and $175 million to distribute and market globally. That puts the total cost at $335 million. Using io9's theater percentages, "Pacific Rim" has made back $35 million from domestic sales and $44 million from international, adding up to a decidedly unspectacular $79 million in revenues to be applied towards costs. Assuming that the domestic box office for "Pacific Rim" does top out at around $90 million, you'd need $725 million from the international box office to make up the difference, or $815 million worldwide.

However, that $815 million number is assuming the movie needs to turn a profit from box office alone, which is never the case. A large chunk of a film's revenue comes from pay-per-view, cable rights, broadcast rights, home media (DVD/Blu-ray and streaming), rentals, and more. When you see analysts predicting that a film is going to be profitable based on what's happening at the box office, they're factoring the revenue that's going to come later down the road. The general rule of thumb I've seen most box office analysts use is if a movie makes back its production budget domestically, it's safe to assume that it will eventually turn a profit after everything else is factored in. The problem is that "Pacific Rim" didn't make anywhere close to $190 million domestically, and most of the other numbers used in the calculations are pegged to domestic, rather than international or worldwide numbers. So again, the question comes down to how much do you need to make internationally to make up for that domestic shortfall?

I found an old Usenet post that says this rule generally assumes that domestic box office, international box office and all the other revenue streams combined, are treated as three sources of equal size, so that means if "Pacific Rim" only made $90 million domestically where it would need to make $190 million to be profitable, (resulting in $45 rather than $95 million in revenue going towards costs), the international box office would have to compensate by making in the neighborhood of $363 million ($95 + $50 million in revenue towards costs). Or it may be better to take the total cost of "Pacific Rim," $335 million, and divide it in three, so the movie would need $224 million in net revenue from the global box office ($112 domestic and $112 international), or $179 million internationally if it only got $45 million domestically. That would take an international box office of $447 million, and a global total of $537 million.

That's a big number, but not out of the question. I'm leaving a lot of things out of the math here, including the shrinking home media market, the unusually large marketing budget, gross profit participation, and a whole bunch of other costs, but I think this is a reasonable estimate of where "Pacific Rim" is financially at the moment, or at least my best guess as to how other people are calculating how it's doing.

So don't celebrate yet, but don't count the movie out yet either.
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