Movie-Making: Anticipating the Perceived Difficulties
for the Management of Pre-Production
The average cost to produce a studio film has risen dramatically in the last forty years. According to the Motion Picture Association of America (MPAA), in 1960 the figure was $1 million. By 1998, the cost was nearly $40 million. Add to that an average of $20 million for marketing costs and the production of a feature film now averages an investment of $60 million per picture. Further, the combined production and marketing costs for major summer releases average well over $100 million per picture (Goodell, 1998, p. 13).
There are several reasons why studio films are so expensive. First, studio contracts with labor unions can add considerably to a film's budget. Teamsters alone can cost over a million dollars (Goodell, 1998, p. 13). Second, a producer usually must use the studio's production facilities, which are provided to the producer at nonnegotiable top-of-the-market prices. Further, the studio will tack on overhead and surcharges for the use of its facilities and equipment; in essence, paying itself (Goodell, 1998, p. 14). This money is referred to in the budget as 'soft dollars. Generally, studios do this because when the film is distributed, all costs of production, including 'soft dollars,' are paid back to the studio before any money is shared among net profit participants. This explains why studios often make money even when their pictures do not. Third, the hefty built-in overhead expenses involved in running a studio can boost production budgets by up to 25 percent. And fourth, because production and distribution costs for most studio films are so inherently high, the studios usually hedge their bets with expensive name stars, name producers, and name directors (Goodell, 1998, p. 14).
Studio executives claim the high cost of making films is the result of the increasing importance of the overseas market, the cost of fr...