IT TAKES MONEY TO MAKE MONEY: STUDY FINDS BIG-BUDGET PICS FARE BEST AT B.O. (VAR, THR)

By Nancy Tartaglione

A study conducted by SNL Kagan may provide comfort to studio heads worried about runaway budgets. The trades report that the study has found films with production price tags of more than $100 million actually generate higher returns than mid-range pics. The films average $247 million in net profits per release, the study said, after analyzing all films released on 1,000 or more screens from 2004-08.

Films that cost $90 million-$100 million earned an average of $118 million.

Animated films performed most strongly, averaging $221 million in net profits. Sci-fi and fantasy films follow at $125 million.

The least profitable of the 10 genres listed in the study were horror films, with an average domestic gross of $33 million and an average net profit of $17.9 million. Thrillers had an average domestic gross of $40 million and an average net profit of $13.7 million.

The study, "Economics of Motion Pictures," analyzed 764 films.

The results support what many in Hollywood have long believed: That mid-range pics, with budgets of around $50 million, are riskier bets, says Variety.

Choosiness on the part of the studios has also fed the success of pricier pics.

The study also warned that the DVD business is taking a hit, with sales down 6.8% last year to $14.8 billion.

"Consumers are increasingly turning to Redbox's $1 kiosk rentals and Netflix's all-you-can-watch DVD and streaming services," said SNL Kagan analyst Wade Holden. "Going forward, we expect the sell-through industry will continue to decline despite growth in high definition. We estimate video sell-through revenue will drop 13% to $12.86 billion in 2009 as VOD technologies begin to erode market share."