New SNL Kagan Study on Motion Pictures Reaffirms that the Larger the Budget, the Bigger the Profit

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Movie box office revenue remains strong despite recession, but declining DVD sales could spell future trouble for studios.

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Consumers are increasingly turning to Redbox's $1 kiosk rentals and Netflix's all-you-can-watch DVD and streaming services

According to SNL Kagan's recent study, "Economics of Motion Pictures," films that cost more than $90 million to make generally produce the greatest profit.

"Economics of Motion Pictures" analyzes all films released on 1,000 or more screens from 2004 to 2008, providing 12-year financial models based on genre and budget range, with varying distribution structures. Included are detailed costs for action, animation, comedy, drama, family, horror, romance, sci-fi/fantasy and thriller films.

SNL Kagan found that the 83 films with budgets greater than $100 million averaged $247.3 million in net profit under a major-studio distribution fee structure, followed by the $90 million-to-$100 million range with a $117.9 million average net profit. The 764 films in the study averaged $50.5 million in net profit.

In terms of genre, animated films performed the best. The 50 animated films averaged $220.5 million in net profit under a major-studio deal scenario. Sci-fi/fantasy films were the runners-up at a $125.4 million average net profit.

Overall, SNL Kagan revealed that the recession has been a boon for the box office. Through August 9 of this year, admissions were up 5.1% to 938.0 million and total domestic gross rose 7.3% to $6.88 billion. However, declining DVD sales could put the studios' largest revenue source in jeopardy. Sell-through revenue fell 6.8% in 2008 to $14.84 billion.

"Consumers are increasingly turning to Redbox's $1 kiosk rentals and Netflix's all-you-can-watch DVD and streaming services," said SNL Kagan analyst Wade Holden. "Going forward, we expect the sell-through industry will continue to decline despite growth in high-definition. We estimate video sell-through revenue will drop 13% to $12.86 billion in 2009 as VOD technologies begin to erode market share."

SNL Kagan's "Economics of Motion Pictures" helps film investors reduce their risk by providing economic benchmarks and proprietary financial models. The study is available exclusively as part of the SNL Kagan information service. For more information on this report and other data from SNL Kagan, call 866.296.3743 or email SNLKaganSales (at) snl (dot) com

About SNL Kagan
SNL Kagan, a division of SNL Financial LC, is a comprehensive resource for financial intelligence in the media and communications sector, including the broadcasting, cable, entertainment, motion picture, telecom, wireless, satellite, publishing and new media industries. The SNL Kagan suite of products integrates breaking news, comprehensive data and expert analysis into an electronic database available online and updated around the clock. For more information, visit

About Kagan Media Appraisals
Kagan Media Appraisals, the consulting arm of SNL Kagan, offers custom studies, white papers, briefings, business plans, research reports and appraisals from SNL Kagan's team of expert analysts. KMA is recognized industry-wide for actionable advisories, expert opinions, best practices, regulatory assessments and market data. Contact or 831.624.1536 for more information.

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