Why is the break-even point for movies usually twice the budget?

Question

The break-even point is supposed to be where the cost and revenue are roughly equal so as to avoid loss, hence a movie would break even when it has made as about the same money as its production (and advertising) budget. I've came across this numerous times while reading the Reception section of a movie on Wikipedia that the break-even point is estimated as twice the actual budget. For instance on the article for Star Trek Beyond, Wikipedia quotes that the movie (with a budget of 185$ million) should gross around 350$ million to break even. It doesn't really make sense that they spent as much as the production budget on advertising. Could someone clarify?

Answer 1

As The Hollywood Reporter points out, yes, advertising a movie is expensive:

Indeed, with the exception of in China, Hollywood continues to wrestle with rising marketing costs, particularly overseas, which can make up 70 percent of a film's gross thanks to booming markets in Russia, Latin America and Asia. Two years ago, the cost had crept up to $175 million globally. Now, studios say it has hit the $200 million mark per picture -- a 33 percent increase from the $150 million spent in 2007 on the first Transformers.

It has been an upward trend for years, even for smaller movies:

In 1980, the average cost of marketing a studio movie in the U.S. was $4.3 million ($12.4 million in today's dollars). By 2007, it had shot up to nearly $36 million. If the MPAA still tracked spending on P&A, that number would be north of $40 million today for medium-size films like The Fault in Our Stars or Tammy.

The reason is somewhat surprising:

Blame the cost of television, which remains the biggest line item -- except in France, where American movie ads aren't allowed, and in heavily regulated China. TV can make up half of any marketing budget, even as U.S. viewership splinters and few shows command huge audiences. And while studios have increased the use of social media to deliver a more targeted audience, they haven't decreased their dependence on the small screen.

Some examples of how expensive TV-commercials are:

In summer 2013, film studios clamored for a spot on Under the Dome after the series became a hit. "CBS made a fortune because it was broadcasting original programming in the summer. It started at $60,000 and ended up at $300,000 and $400,000 for a 30-second spot," says one top marketing executive. AMC's The Walking Dead, cable's top show in the 18-to-49 demo, charges upward of $300,000 for 30 seconds, nearly as much as CBS' The Big Bang Theory. That's nothing, however, when it comes to football: NBC's Sunday night games can command $600,000 to $700,000 a spot, while weekend day games sell for $400,000 to $600,000 (Argo peppered football in fall 2012).

Answer 2

In addition to advertising as mentioned in the other answer, there is also the fact that sometimes some of the main actors gets a share of the earnings.