The Hidden and Not So Hidden Costs of Filmmaking
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Dec 22, 2011

The Hidden and Not So Hidden Costs of Filmmaking

So, what does it take to make a billion dollar movie like Titanic or Avatar? Well, a lot! As the viewing public, we only get to see the total amount of money a certain film rakes in, but what is equally fascinating is what goes on behind the scenes.

In this day and age, making a movie can cost millions of dollars, depending on the actors cast and production costs involved. For some, however, it’s possible to produce a movie with only a few thousand dollars. In fact, the 1992 movie El Mariachi, which grossed $2 million, only cost $7,000 to make. You are probably thinking that the movie earned a lot, right? Well, not really, because when Columbia Pictures bought the rights to release the film, they had to spend an additional $200,000 for post-production work. When it was re-made in 1995 as Desperado, the production outfit had to shell out $7 million to finish the film, but it grossed roughly $25 million at the box office. Now that is what filmmakers call a good investment.

The Motion Picture Association of America reveals that in 2000, the cost of producing a Hollywood film averages about $55 million per film. There are several elements that come into play which can affect this cost. The factors that are involved in making a movie are often hard to quantify, as there are a lot of different variables involved. We’ve compiled a list of common ones in an effort to understand just how much money is spent on our favorite flicks.

1.    Production Costs – Perhaps the largest expense for any film, what are referred to as production costs are further divided into above the line and below the line expenses. Above the line expenses are those that cover the fees for the talent, including actors, directors, writers and producers, while below the line expenses are allocated for the crew, sets, costumes, transportation, and fees associated with post production costs such as editing, and cinematic effects. Traditionally, below the line production expenses account for about two-thirds of the entire movie budget. But given the escalating fees of A-list celebrities and directors, above the line expenses can easily tip the scale, especially if you’re hiring the likes of Tom Cruise, Brad Pitt, or Cameron Diaz to star on your film.

2.    Financing Expenses – As with any business, making a film also involves a number of financing expenses. On top of the total production costs, you will also have to add an additional 1.5% to cover the fees for general insurance, as well as set aside an additional 10% of the production budget for unforeseen contingency expenses.

3.    Secondary Expenses - Once the film is making money, the theaters themselves need to get a cut, and based on reports from 2000, movie houses in the US took in roughly $7.7 billion. On top of that, portions of the film’s proceeds also go to the talent as bonuses, licensing costs, and other auxiliary expenses.

With the risks that big budget film producers take, and the growing costs of A-level talent, movie making is not for the weak at heart. Following the money trail and production process can be just as exciting as watching the movie itself.
If you want to understand where all the money goes (and maybe even join the film industry…err, not as an actor), consider getting your accounting degree online. You can schedule your accounting master's degree around your life, and be ready to make a huge step in your career.