ELI5: From a movie business standpoint, what exactly are the repercussions when a film “bombs at the box office”?

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By the time a movie appears in theaters, almost all the money has already been spent. Poor performance would lead to cutting future advertising, but that’s a small figure. If it doesn’t make enough, then the investors lose money. The business impact is that future movie decisions will be colored by “{Title} bombed at the box office”. Ideas get pitched, like a DC comics universe parallel to the MCU, and then get shelved when a movie does poorly. Ideas that seemed unlikely, like a Venom movie family, get green-lit when a movie over performs. Both of these effects are business effects, as investors use past performance to gauge future risk. Sayings like “Get woke, go broke” are coined to label patterns in this profit landscape, and directly impact future investment decisions.


From a business standpoint, they write off the losses as a business loss and use that against the taxable revenue from other projects. Also, any payouts to actors or others that are calculated from profits as opposed to gross revenue don’t get paid.


Someone, almost always a large company, loses money. In the case of a movie produced directly by the studio, this is easy to see. Warner Brothers wrote checks to performers, advertisers, CGI studios, best boys, etc. Those checks are cashed, and you can’t claw back the money just because the movie did poorly. Independent movies are a little different because they’re usually financed by smaller companies (or even individuals!) then sold to the big studios at film festivals. The small companies get back their money when they sell the movie. The big studios are hoping to make even more if the movie is a hit. This is generally a good system because it spreads risk out – a big studio doesn’t go bankrupt when one movie flops, it just covers with the profits from a different movie – while simultaneously funding small, creative movies.


The producers, studio, etc who funded it lose money. But it’s sort of like VC funding or stock market investing where your business model assumes a portion of investments will bomb/lose money and you make your profits on the 80% that don’t.


A person (creative team) walks into a bakery and asks the baker (producer) about a cake they want made. They say it’ll need 12 eggs (funding). The baker thinks about the complexity of the cake and says one of three scenarios: 1.) This is simple, but might not taste good so I’ll only do a small one for six 6 eggs which means no errors, we can only do this once. 2.) This looks about right for the recipe, 12 eggs will work in case we have one or two bad ones we can still make a good cake. 3.) This looks like a great idea. Let’s double the size and get 24 eggs just to be on the safe side and make sure this turns out perfect incase anything goes wrong. After the cake is made the Baker puts it in the shop window and gauges it’s success by how many people like it and order one. If it only took six eggs, and people buy a ton, then he makes out way ahead because it was super simple, but if it really wasn’t great and no one likes it, then no big deal, another cake will probably sell better and cover the cost. If the cake took 24 eggs, and does okay but not enough to warrant making more cakes like it, then it’ll just be a creative and fun cake they only make when there’s extra eggs in the shop, and not plan on more of them. Typically the baker makes most of their cakes with 12 eggs as they’re the most liked, get ordered often enough, and make a decent profit. If a recipe turns out bad than it’s no big deal as the money will eventually get made back. In all three scenarios the eggs (money) are gone, baked into a cake (movie), but their taste, look, and presentation will drive word of mouth and get more people to come in and buy more slices of that cake. This turns into more cakes like it, and if the demand exists, a bigger version that takes more eggs and gets more people eating it. That means more people paying for a slice of the cake, more cakes, more eggs. Eggs are cheap, and the slices cost enough to often double the cost of the cake (or better depending on how the baker decides to charge for future slices of that cake). If the cake is terrible, how ever, and only one or two slices are bought, and the cake goes bad and gets thrown out, the bakery looses money on it. Bummer, but since most cakes make twice their money back, the bakery isn’t out a huge loss as it’s easy to get the “eggs” again. They just won’t use the eggs to make that kind of cake again. Now if a baker keeps making bad cakes, eventually people will stop ordering cakes from them, and the shop may get closed down, but that takes quite a few “bombed” cakes to happen. Anecdotal comparison: Occasionally a bakery is so good at making cakes that when people found out their little cakes were so good, the bakery started to make them with more eggs than normal, bigger than normal, and people will pay double the price per-slice to taste the cake, then pay to have a picture of the cake, maybe even pay extra money for mini versions of that cake to have at home to eat alone. Sometimes even to have memorabilia made that looks like the cake so they can show others what it was they ate, and that turns into free advertising for the shop so new people come in and buy a slice of the cake too. (Marvel) But some bakeries struggle to get their recipes right, and make a lot of cakes for a lot of different people, but only some of their cakes turn out okay so they rely on the okay ones to get by until they occasionally do a really good cake and it gives them a boost in funds for a while to experiment on more cakes, and maybe they’ll get some good ones, or maybe they won’t. They do just good enough to stay open and making cakes for a long time, still hoping to find the perfect recipe (Warner). TL;DR Money wise it gets washed away to the success of other films and may result in stopping production of sequential films connected to it. Broad spectrum, when it comes to production studios like Universal, WB, Disney, they have funds from other projects that are used to pay for any given new film. If sequels are an option, the first films success both directly influences and/or pays for that film. However, a lot of movie studios make their money on merchandise for films, and if a movie “bombs” then people most likely aren’t buying merch either, which means they flush a ton of revenue and may have to cancel *other* unrelated projects because of it. So in situations like Dark Phoenix Rises (most recent X-Men movie), where the studio (Fox) massively failed to deliver all-around, Disney lulled the plug on (basically) everything they had in the works to compensate the cost it lost them. As a result there’s now dozens of movies that won’t get made because their funds had to be sacrificed to cover DPR’s bombing. Watch “The Movies That Made Us” on Netflix, it’ll give a real good behind-the-scenes exploration on production and expects for movies, how cost is evaluated, and sort-of where the money ends up.