How the Movie Box Office Works

There was a time when the news didn't include weekend box office reports. Movie theater companies would total the numbers from their franchises and send them to the studios in due time rather than real time. The numbers were reported manually and therefore were not always accurate. In the 1970s, the studios eventually realized that by reporting numbers to the Hollywood press, they could generate free publicity for the most popular movies. This motivated theaters to report accurate numbers more quickly [source: Bialik].

Today, box office numbers are widely reported in national media, and ticket sales at the theaters are tracked by media measurement and analysis serviceRentrak. Each ticket sold and dollar collected at theaters around the world is reported directly to Rentrak and put into a database accessible not to the media, but to a small number of studio execs. Rentrak's numbers are generally reported up-to-the-minute, but, as we mentioned earlier, there are some 10 percent of North American theaters (and a greater percentage internationally) that still track box office numbers manually (think: small towns or rural areas without computerized ticketing.)

The Sunday morning of a film's opening weekend, studio executives will tally up the dollars earned up to that point and use those totals to estimate what the grosses will look like Monday morning. These estimates are reported to the media on Sunday and revised on Monday once the actual numbers have been received.

A margin of 10 percent can make a difference in a film's perceived success, especially if it's a blockbuster designed to draw massive audiences and break box office records. Rather than wait, studio executives prefer to estimate instead. And they are usually pretty accurate, but there have been surprises. Clint Eastwood's "American Sniper" took in twice as much as predicted over its opening weekend in January 2015, breaking a January box office record by earning $90.2 million during its three-day opening period and $105.2 million for the extended Martin Luther King Jr. Day holiday weekend [source: McClintock]. When Transformers estimates were reported the Sunday after its release, they already seemed too high to reporters. Come Monday, the studio stuck with its story, reporting that the movie had brought in $100.38 million.

After opening weekend, a film's box office success will continue to be tracked on the basis of daily, weekly, weekend, monthly, quarterly, seasonal, yearly and total ticket sales. The Motion Picture Association of America (MPAA) records box office numbers for all of the year's movies. A film's actual revenue will be determined over time and will include factors like merchandising, product placement fees, television rights and DVD sales.

Box office sales from outside North America will also be included in a film's total gross. While not typically included in opening weekend estimates or reports, these days, foreign box office numbers play a larger role in a movie's overall profits.

There was a time when other countries had to wait to see a Hollywood movie; films would be open domestically for several weeks or more before they hit international markets. As international audiences have grown and the release of new movies in foreign markets has become more lucrative, it's now more typical for a movie to enjoy a wide release across the globe in a single weekend. It's becoming increasingly popular for Hollywood blockbusters to open in international markets first and come to the U.S. a couple of weeks later [source: Susman].

Foreign sales now represent about 70 percent of total revenue for Hollywood movie studios, with most of the market growth coming from Russia and China. It's predicted that China's total box office revenues will outpace those in the U.S. domestic market by 2020 [source: Brook].

Not all numbers are equal, however. Even if a movie brings in the same box office totals in each country, the amount of revenue studios earn varies from country to country, with some far more lucrative than others. On top of box office revenue, total revenue can include things like DVD sales, TV and digital distribution rights, and other post-theatrical revenue, much of which doesn't exist in markets like China. In the U.S., $100 million in box office revenue can ultimately generate around $175 million in total revenue. That same $100 million in box office revenue generates about $27 million in revenue in China, $65 million in Russia, $83 million in Japan and $130 million in the United Kingdom. That's why domestic sales are still the most lucrative, although some expenses involved in moviemaking, such as marketing, may not be as costly overseas [source: Fritz].

Still, the growing international audience cannot be denied. It's the reason studio heads are more willing to take chances on big movies with broad themes (and, often, superhero costumes) than small films that may not translate across the map. Paramount, the studio that made "Transformers: Age of Extinction," targeted the film for success in China because earlier movies in the series had played so well there. One promotion let Chinese fans compete to be extras in the film, and Chinese movie star Li Bingbing played a more significant role.

Even movies that underperform domestically can make up for it in foreign markets. The 2013 monster movie "Pacific Rim" made more than $400 million worldwide while just eking past the $100 million mark domestically [source: Mendelson]. That same year, director Ron Howard's story-driven car-racing picture, "Rush," brought in a lackluster $26.9 million domestically but more than $90 million when you take foreign ticket sales into account [source: Box Office Mojo].

Rentrak reports box office numbers in 35 countries, including Russia and China; however, China has been working on its own system as part of an effort to clamp down on box-office fraud. It's estimated that as much as 10 percent of gross box office profits are skimmed by corrupt theater owners fabricating box office receipts and viewership records [source: Coonan]. A new national ticketing system will upload data from every ticket sale to a social media news service [source: Coonan].

Critics say there must be a better measure of box office success than total dollars earned. The average price for a movie ticket was $8.17 in 2014, but that takes into account both low-cost matinees and high-priced 3-D movies [source: Lang]. In New York City, tickets can cost nearly double the national average. If one ticket is clearly more valuable than another, wouldn't individual ticket sales be a better measure of success? What about including worldwide box office figures in the opening weekend numbers? Would that provide a more accurate view?

It's tricky in Hollywood, where perception is everything. With ticket sales on the decline in the U.S., reporting just those numbers could imply a negative trend — even in years that break revenue records. Including worldwide sales in opening weekend figures might inflate blockbusters' success, potentially leading to even fewer gambles taken on smaller, more thoughtful productions. Plus, because theaters in international markets are less likely to be equipped with box office software, it's more difficult for Rentrak to produce up-to-the-minute international figures [source: Bialik].

Another option would be to measure success based on the amount it cost the studio to make the movie, or cost per ticket sold. This can make smaller-budget successes look even more profitable than costly adventure fare.

There are no signs of Hollywood changing anytime soon. During years like 2013, Hollywood's highest grossing year ever, the status quo works just fine. Then again, ticket sales hit a 19-year low in 2014. Moviegoers bought 1.26 billion tickets, which brought in a total of $10.35 billion — down more than 5 percent from 2013 [source: Lang]. As box office systems become more efficient and success increasingly depends on global transparency, the industry may not be in a position to insist on an outdated reporting style.