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Do Movies Make Money?

Even though Hollywood's box office numbers have been steadily breaking records almost every weekend of the new millennium (Box Office Mojo), Variety reported yesterday that the Hollywood studios will make a loss of $1.9 billion on the movies they released in 2006 (according to the first report from Global Media Intelligence, a new division of media research firm Screen Digest).

From Variety:Spiderman_3

The report, titled “Do Movies Make Money?,” says that production costs for mid- to big-budget movies have risen much faster than revenues over the past few years, leaving the studios’ business model deep in the red.

DVD sales have been taking over a lion's share of the profits for the past decade or so, but  the GMI report "suggests that DVD revenues, which rose by 75% between 1999 and 2004, have fallen for the past three years. In the first half of 2007, this decline accelerated further with a 12.5% drop in U.S. DVD sales, mirrored by a similar fall in international sales."


The studios might have to begin a serious attempt to cut costs, or else this downward trend could continue indefinitely.

Rotten Tomatoes also points out a link to the current WGA strike. From the report:

While the studios are currently in negotiations with writers, actors and directors over fees, these salaries are not the main issue; the current cost of producing, casting and advertising in the present environment simply exceeds the likely returns.

-- Daniel Lehman

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