Hollywood’s budget problem – The unsustainable business model

The cost of producing a blockbuster has become ridiculously expensive over the last few years, with a budget of $100 million now considered as standard.

This budget only covers the actual production of the film, however, and the marketing of the film will cost the same amount. At this point, the studio has spent $200 million on the film, which they can only hope will become a blockbuster.

“Black Widow”, for example, was produced with a budget of $200 million but failed to pass the $400 million mark. It was a huge flop from a financial standpoint, since the movie barely covered its production budget. Of course, the pandemic may have had an impact on this year’s films, but the current business model is simply no longer sustainable. Hollywood has tried to salvage what’s left with shorter theatrical windows, premium VOD and hybrid releases but the root of the problem remains unresolved.

The latest “Suicide Squad” movie cost Warner Bros. $185 million, plus marketing costs. In the U.S., it was released on HBO Max on the same day it hit theaters, and it was a recipe for (financial) disaster. The movie has earned a mere $167 million worldwide.

In Hungary, the tax rebate is 30% of all eligible Hungarian spend. Up to 25% of eligible expenditure can be non-Hungarian expenditure, which is also eligible for the 30% tax refund. To top it off, ORIGO Studios allows you to cover up to 70% of below-the-line expenses.

As an example, the budget of “The Martian” was $216 million, including marketing costs. The movie became a huge success with a $630 million worldwide box office, earning $400 million in total. “A Good Day to Die Hard” is another prime example – the Bruce Willis classic cost $184 million to make but the film’s worldwide box office was $304 million. Ultimately, the ROI was $120 million.

Hungary became a haven for Hollywood productions for a reason; the studios are offering different services and the facilities are complementary of each other.

“Hungary became a film production hub over the past 10 years, and our position in the market is strengthened with every single new development – whether done by private companies or the government itself. We are not real competitors in the country, as the different studios offer various services and facilities,” says Mihály Tóth, Marketing Director of ORIGO Film Studios.

“We want to reach a level where American or British films could be made along a London–Budapest axis,” says Gábor Rajna, ASTRA Studios project manager.

Mafilm and Astra Film Studios are currently in the process of expansion and a new studio is being built in Budakalász. Hungary is set to ride the streaming wave that was created by the pandemic.

“Our aim is to maintain the competitiveness of the Hungarian film industry and its leading role in the international film scene. To this end, the expansion of the studio complex in Fót is one of our top priorities, and the investment under the Hungarian government’s Economic Protection Action Plan has now entered the planning stage,” says Csaba Káel, Government Commissioner for the Development of the Motion Picture Industry and Chairman of the NFI Board of Directors.