F_StarWars Economics

Star Wars Episode 2: It’s time to talk about the Money


So now that we talked about who we would cast today, lets talk about how much money we would spend and how much money we have a goal to make.

 

Did you know it only cost Fox $11 million dollars in 1977 to make this film? That is impressive, which would mean a $40 million budget today. Compare that to Avatar’s $280 million production budget and you will see a stark difference. The interesting financials don’t stop there.

Comparison

Star Wars ranks 2nd all time in adjusted Domestic gross right behind Gone with the Wind. Though even with out adjusting the number for inflation, we are still looking at about $460 million gross. That is absurd, especially for a movie that came out in 1977. Whats even more absurd is looking at the domestic gross while accounting for inflation: a whopping $1.45 billion. Crazy! Take a look of the top five domestic of all time:

Rank Title Studio Adjusted Gross Unadjusted Gross Year
1 Gone with the Wind MGM $1,648,684,100 $198,676,459 1939
2 Star Wars IV: A New Hope Fox $1,453,455,900 $460,998,007 1977
3 The Sound of Music Fox $1,162,109,500 $158,671,368 1965
4 E.T.: The Extra-Terrestrial Uni. $1,157,531,400 $435,110,554 1982
5 Titanic Par. $1,105,471,700 $658,672,302 1997

 

 

ROI

Domestic is only part of it though.¬†Star Wars IV: A New Hope was one of the most successful movies of all time in terms of profit. But what does close to $8,000,000 mean today in dollars? ¬†well according to Geek.com “[W]hen adjusting the $775,398,007 A New Hope made in both domestic and international releases for inflation, the film has raked in $3,082,922,515 in revenue. Subtracting the $40 million in adjusted production costs, this leaves a tidy profit of $3,042,922,515.” What is that ROI?

Remember ROI= (Gain from Investment – Cost of Investment)/Cost of Investment

So in this case: ROI=(3082922515-40000000)/40000000=76.07

That is outstanding! No business professional would turn that ROI down. Now, this is not taking into account Marketing costs and distributor costs, but still is quite the number.

Adjusted Numbers

Now, I could go on and on, using the time value of money to show you step by step calculations of why this movie is one of the most profitable ones ever, but that’s no fun. So instead we created a info-graphic to show you some of the highlights that we found when looking into this movie.
Starwars

So it would be very hard to stick with their budget and make what they made in 1977. Is it possible if we released this movie today?

Well, we will delve into that with the results of our casting in the final post of this series.

Leave a Comment

Your email address will not be published. Required fields are marked *