What Makes a Successful Investment? I’m going to present my point of view on investment on example of movies production. Let’s say the movie will be produced for $ 50 million, and several dozen millions more will be spent on its advertising. Then this movie is shown in 3000 cinemas in the United States, so let’s assume that in one movie theater it’s watched by 500 people a day, and tickets cost $10. So the film can make several million dollars a day in the United States alone, so the investment pays for itself. The film will be also shown in other countries, and will be released on BluRay and DVD or rented as video on demand as well. So the movie will not be earning only a few months when it’s shown in cinemas, but also in the coming months or even years. Of course, the highest cash injection the film producers are raking in the early days of screening of the movie in theaters. If the movie appeals to people that will recommend it to their friends then more people will choose to go to cinemas. If the movie is weak, then earnings will be significantly lower because the audience will inform others that watching this film is a waste of time and money.
At the boxofficemojo.com you can check what amounts of money were earned by well-known Hollywood feature films. Let me give you a few examples of films that have grossed the most and those who have brought loss:
Green Lantern (not a very good fantasy movie with PG 13) has been produced for about $ 200 millions, and grossed over the world less than $ 220 million, which is a really small profit.
Another similar example is the movie The Lone Ranger with Johnny Depp that was made for $ 275 million, and which grossed barely over 303 million including sales of DVD and Blu-Ray versions. Other sources give lower figures which shows that the film has proved to be an even greater flop, because it was stated that grossed $ 173,000,000, and the production expenditure was higher than $ 300 millions which gives a loss of $ 128 millions.
Rambo (action movie from 2008, for adult audiences only) has been produced for approximately $ 50 millions and grossed in theaters around the globe 113,000,000 U.S. dollars. Well, the profit is relatively small, which could be due to the brutality of this film. Probably for this reason more and more producers tend to make PG 13 movies, mainly because minors are broadest target audience here.
Avatar (fantasy movie, with PG 13) holds the record when it comes to earnings, because it was made for about $ 500 million, and earned $2,787,965,087 (two billion and 700 million U.S. dollars), so it was a good return on investment that brought more than 500% profit.
In turn, the cult comedy Clerks budget was only $ 27,000, and it earned nearly 3,900,000 dollars, which means a profit of more than 14,000%.
However, record-breaking movie in terms of return on investment is Paranormal Activity produced for $ 450.000, which brought more than 89,000,000 dollars, or 19,800% profit.
These last two films can be described as exorbitantly successful investment, although gains of 200 – 500% are also enviable. If you look at what kind of profits for investors are proposed by investment funds (approximately 10% per year) it is immediately apparent why the United States produces so many films each year. It just pays even though there is a risk of the flap and that the investment won’t bring any profits. And that’s what makes a successful investment in my opinion.