"Highest" Grossing Films

Hold on to your butts, people...its official!!  The Avengers is the third highest grossing movie EVER!!


THAT'S RIGHT!!!  THIRD HIGHEST OF ALL TIME!??!?!?  Think of how many movies have been made, EVER!   The competition for that slot must be FIERCE!

Beating out giants like Gone with the Wind, The Wizard of Oz, that must make the theatrical release of The Avengers a GINORMOUS cultural event, right?  The type of stuff we'd be telling out grand-babies about, right?  Right!??!?

Wrong.

The Trend

Have you been noticing that just about every summer, the new hot blockbuster suddenly gets some press about being one of the top grossing films of "all time"?  Pirates of the Caribbean, Harry Potter, Iron Man...

You've been hearing it because its true.  Every year, films have been shattering world records for ticket sales.

So what does that mean?  Are we becoming a world of film buffs?  Are films just getting bigger and better all the time!?  What kind of cultural, economic and historic insights can be gleaned from these exploding revenues at the box office?

Honestly: NONE.

"Highest Grossing" is ABSOLUTELY meaningless

Whenever I see a headline toting a new film's high ranking in the "prestigious" list of all time top-grossers, I swear a blood vessel in my brain pops.  Like, I get UNREASONABLY upset.

The claim ticks me off because it is an absolutely, MEANINGLESS accolade.  Yes, ENTIRELY with out meaning!!   That MTV headline above might as well read "Ha;hjeioa;hf;nbrewq".  For real.

Movie ticket sales are growing every year because the gross sales of virtually every good that exists is growing.

There are two forces behind that phenomenon, and neither have to do with the power of cinema.

No, the real reason The Avengers is the 3rd highest grossing film of all time is because 1) inflation, and 2) growth in film distribution - and human population!

Inflation

Hop over to BoxOfficeMojo.com, and you'll find this list of top 10 highest grossing films of all time:

(source)

Now, its not a coincidence that most of these behemoths came to the silver screen in the last decade.  Monetary inflation has driven the face value price of a movie ticket up and up, creating the illusion of higher "value."  The more recent the date, the higher the inflation, therefore the higher the price of a ticket - unfair advantage to the contemporary blockbusters!!

Monetary inflation, we're all familiar with it, is that odd phenomenon by which over time, the price of things go up.  ("Back in my day, dinner only cost a nickel!" quoth every Grandpa ever.)

Economists see inflation in the reverse.  An economist would tell you that in reality, prices are largely staying steady year to year, but money itself is becoming less and less valuable.

To illustrate: let's say there is a country out there with only $100 in circulation.  Further, we'll say in this hypothetical economy, a loaf of bread costs $1 this year.  

Now, lets imagine that by the next year, $200 are in circulation.  Further, let's say the price of bread jumps to $2. 

On the ground, it will look like price of bread has doubled.  But in reality, it stayed the same (1% of the total wealth in exchange for one loaf).  Its just the power of a dollar halved.  The higher the supply dollars, the lower their value!

[Side not on the topic of inflation - People seem to think that the only way for more cash to go into circulation in an economy is when the "govt prints more money."  

While that certainly contributes to it, its not the whole story.  In fact, the idea that the govt alone is responsible for all inflation is kinda bonkers coo-coo bananas crazy pants.  

Yes, it causes inflation when the govt "just prints money out of thin air." However you and me print money out of thin air all the time as well.  

Any time you buy or sell something on credit, you're printing money out of thin air, and injecting it into the economy. 

Or lets say you own a house appraised for $100k, and all of a sudden, the city appraiser revises his report, and says your home is actually worth $150k!  The city appraiser just "created" $50k of new funds, which you could make into real folding cash with a home equity loan.  

Even when govts stop the printing presses, inflation WILL continue to happen.  Get over it Ron Paul.]

Anyway, the point is in 2013, it now requires exponentially more cash to get a movie ticket in 2013 than it did in 1933.  But its because the cash itself is has less value, not because the tickets are more valued.  Ben Bernanke had more to do with The Avenger's ranking than Joss Whedon (although, don't get me wrong, the movie did kick a ton of ass...).

Wikipedia offers this much more meaningful "inflation adjusted" list of top 10 highest grossers.  I can't attest to its reliability (very weak source sited), but it looks "truthy".  (If you want to verify it yourself see my post on how to adjust dollar amounts for inflation and tell us how it checks out).

 

(source)

Population growth and industry expansion

Today, Earth is inhabited by 7.13 billion humans.  In 1990, we were 5.31 billion, and as recently as 1940, the world only had 2.26 billion folks living on it.

I'm having a hard time finding good data on it, but I can confirm that in 2011 there were 4,575 movie theaters in the US, and 42,390 total movie screens.  But you know there was a point in time when there were zero, right?  Films did not gross well at all back then.

More people, more theaters, of course this creates an environment conducive to higher gross.  In the past, the potential number of tickets a film could see were "restricted" by virtue of the world population being smaller.  There were fewer outlets (i.e., fewer theaters), as well as fewer potential consumers (i.e., fewer people).

Complied with this is the fact that film distribution (particularly of the Hollywood style blockbuster) is now a world-wide undertaking.  In the BoxOfficeMojo.com list above about 3/4th of Avatar's gross came from abroad (its 2/3rds for The Avengers).  

Movie theaters were largely a first world industry for much of the first half of the 20th century (note that only half of Gone with the Wind's gross came from outside American).  Additional unfair advantage for the contemporaries - they have a much larger potential audience!

As more people come into the world, and more are able to get to theaters, obviously more and more people have the option of going to see a movie.  Is it surprising then that more do?

(A good counter argument to my last point)

Over a long enough time scale, all industries disappear (apparently, harvesting whale oil was once a THE hot industry), and already it looks like movie theaters have passed their prime.  Heck, between 1997 and 2007, about a thousand theaters closed down in the US alone.

So in a way, what with the "at home viewing" option always progressing, a movie that box-offices big might actually be today is noteworthy.  So maybe I am being unfair.

Is it harder to get box office sales today than it was back then?  A big success in a fading industry takes some oomph - back in the day, movie houses had fewer competitors for people's entertainment dollars, so maybe more and more people were cornered into buying movie tickets.

Possibly, though it feels to me that were not really that far into the industry's decline yet.

And when you consider that the modern studio focuses more on few big pictures a year rather than hundreds of little ones (as was common at the height of the studio system era), the effects might be a wash.  (I mean to say if there just aren't many options at the theater when you go, it funnels more money into a few big titles, rather than diluting it around).

But if anyone wants to do some deeper analysis on this, and prove my intuition wrong, I'd be excited to hear about it!!

Conclusion

So no joke, I emailed the MTV link to the submissions inbox at UselessWeb.com with the following message: 

"Because inflation, and there are more movie theaters and more humans on the planet, for every year from here on out, the top grossing film of the year WILL BE the highest grossing film of all time.  This article might as well just read "fjdioahfiodahg[hjcv'ajtjerwoiqjd'ls"."  I'm not really kidding.

In fact, "third highest" is just about par, if not kind of a disappointment.  We would expect films to be high grossers, just as we'd expect prices and sales volume of all goods to go up every year due to inflation and market growth.

The lesson is: be careful about any economic comparisons across time.  Even in the same nation, same region, same industry, a market and its realities change greatly over the years.  Any inter-temporal comparisons have to be taken with a grain of salt.