Frugal Future for Film Financing?

With the economic damage of the COVID-19 pandemic, expect studios to tighten their purse strings on funding theatrical releases. Before the shutdown of movie theaters in the United States and across the globe, the major studios took out loans to finance their tent-pole features.

Blockbusters bring home the bacon for the major studios. Even though Disney’s Marvel Studios films average one billion dollars globally. After joining the ‘Billion Dollar Club,’ the Warner Bros. and DC Films Joker profited $500 million without the Chinese box office.

Once the initial tent-pole slate clears, expect leaner budgets for genre films. If or until the industry recovers, the purse strings will be tighter overall. Marketing budgets may increase as production budgets decrease in the realm of comparative scale. According to Box Office Mojo, Joker cost $55 million to produce but reportedly spent $100 million to market.

Executives will need to reconsider their green-lighting practices in this new economy. There are plenty of seven-figure budget films produced every year, but very few of them put the balance sheet in the black. The horror and comedy genres provide the desired profit margins from theaters.

The expectation is that exhibitor auditoriums will initially be at half capacity with fewer Americans with disposable income. The speculation of a second wave of this novel coronavirus may cause another freeze of movie slates. Theaters still compete with Netflix, Amazon Prime, and other streaming services. With the public now on high alert about public indoor spaces, streamers have the eyeballs. In August 2019, USA Today reported that the average U.S. movie ticket costs $9.11 while Netflix’s lowest high-definition is $12.99 per month.

Amortization through streaming distribution allows production companies to limit their exposure on certain projects if a theatrical release is not plausible. However, this method will only buffer the spreadsheets for so long.

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