Wednesday, April 02, 2014

Do Movies About Women Make A Higher Rate Of Return?

See The Dollar-And-Cents Case Against Hollywood’s Exclusion of Women by Walt Hickey of Excerpts:
 "One of the most enduring tools to measure Hollywood’s gender bias is a test originally promoted by cartoonist Alison Bechdel in a 1985 strip from her “Dykes To Watch Out For” series. Bechdel said that if a movie can satisfy three criteria — there are at least two named women in the picture, they have a conversation with each other at some point, and that conversation isn’t about a male character — then it passes “The Rule,” whereby female characters are allocated a bare minimum of depth. You can see a copy of that strip here."

"The median budget of a film that failed the test was $48.4 million. The median budget of a film that passed was $31.7 million, or 35 percent less."

"The total median gross return on investment for a film that passed the Bechdel test was $2.68 for each dollar spent. The total median gross return on investment for films that failed was only $2.45 for each dollar spent."
 Using the numbers from above, this implies that "male" movies grossed about $118 million on average (2.45*48.4). If we subtract that $48.4 cost from the $118 million, we get about a $70 million profit.

Using the numbers from above, this implies that "female" movies grossed about $85 million on average (2.68*31.7). If we subtract that $31.7 cost from the $85 million, we get about a $53 million profit.

How long does it take to shoot a movie, six months? If you are the head of a studio, would you rather make $70 million over those six months or $53 million?

Now if it takes less time to make "female" movies then things might be different. For example, if takes 75.7% as long to make a "female" movie as it takes to make a "male" movie, then the returns are the same because 53/70 =.757. And maybe it does take less time since the "female" movies cost less to make (the less time everyone works, the less they get paid).

But if they take the same length of time to make, "male" movies make 32% more money (70/53 =1.32).

There is also a marginal/average issue. The Hobbit: The Desolation of Smaug grossed $950 million and cost $250 million to make. So it got $3.8 in revenue for every $1 of cost. If they had spent another $100, would that have generated $380 million in revenue? Probably not. If so, they left alot of money on the table.

Only so many people can see a movie. At some point, the rate of return has to fall off. With "female" movies, maybe the next $1 million spent on making it might only return, say $2.67 million in revenue. Then the next $1 million, only $2.66 million. A similar drop off would occur for "male" movies.

But if alot more money is spent on any given "female" movie, then the average rate of return would be alot lower than 2.68. We just don't know how much it would fall. And making more "female" movies has the same problem. People will be less excited with each new movie of any genre and revenue will tail off.

It is a little like a grocery store that only makes a 1% profit on, say, cans of soup. But soup might have a high turnover rate. So they sell lots of them each day for a given space on the shelves. So they make a big profit.

They might make a 100% profit in caviar but sell very little each day. So it occupies very little shelf space. We don't tell the store to carry more caviar and less soup. The store already knows the right balance of each one to maximize profits. Maybe the studios know something similar about "male" and "female" movies.

Firms want to maximize profits. So they produce a quantity (Q) that makes marginal revenue (MR) = marginal cost (MC). "Male" and "female" movies could have different MR & MC lines, like in the graph below (blue for male, red for female). In this example, more "male" movies get made, they have a higher total profit and a higher profit per movie, yet "female" movies have a higher return on investment or rate of return. And since MR = MC for both types of movies, studios have no reason to produce more "female" movies or fewer "male" movies.

The first thing to notice is that the MC is 9 for "male" movies and 6 for "female" movies. That is about the cost ratio mentioned in the 538 piece.

Male movies: Q = 11, total revenue (TR, the area under the MR curve up to a Q of 11) is 159.5. Total cost is 11*9 = 99. Profit = 159.5 - 99 = 60.5. Profit per movie is 60.5/11 = 5.5. Return on investment is 159.5/99 = 1.61 (that is TR/TC). So $1 spent making a "male" movie, leads to $1.61 in revenue.

Female movies: Q = 8, total revenue (TR, the area under the MR curve up to a Q of 8) is 80. Total cost is 8*6 = 48. Profit = 80 - 48 = 32. Profit per movie is 32/8 = 4. Return on investment is 80/48 = 1.67 (that is TR/TC). So $1 spent making a "female" movie, leads to $1.67 in revenue.


P. Bursik said...

What matters here is the limiting factor. Is it time (and is there a time differential)? Or is there a fixed budget for movie making? Suppose you had (over the span that it takes to make the average movie) about $100 million to spend. You could do about 2 "fail the test" movies or three "pass the test" movies. The pass the test movies give a combined profit of about $150 million vs. $140 million for the fail the test movies. That's probably the more apt comparison. Of course, the real trick is to make good movies since I doubt that most movies are close to these averages!

Cyril Morong said...


Thanks for reading and commenting (sorry about the Badgers). I think you are right. That is why I mentioned the ratio of .757 as the cutoff. If the "female" movies take less than 75.7% of the time it takes to make a "male" movie, then they are a better deal. It seems like in your example it only takes 2/3 as much time, so the female movies make a higher profit.

I wonder if MR = MC for both types of movies. Is it possible that in that case that the "female" movies might still have a higher rate of return? (I was trying to come up with an example of that when I saw your comment) If they did, it would still not necessarily mean that the studios should change anything because if they produced one more "female" movie, their profits would go down.

Do they have the optimal mix of movies like stores have the optimal mix of caviar and soup? My guess is that studios know what they are doing and are pretty close to the optimal mix. It is their business to know. If they are wrong there sure is an opportunity for someone to make more "female" movies and earn some pretty good money.