Wednesday, January 27, 2010

Avatar not the highest grossing movie ever

News are that Avatar has beaten Titanic to become the highest grossing movie ever. In absolute numbers that may be true, but the price of a movie ticket now isn't exactly what it used to be in the past. I paid $10 to see Avatar 3D; I've seen price tickets as high as $20 (converted from Euros) in some European cinemas. I still remember paying $7 for an adult ticket twelve years ago, and farther in the past the tickets were even cheaper. Yes, I'm referring to inflation.

It turns out that according to Box Office Mojo, Avatar ranks "only" 26th in inflation-adjusted box office in the US. The highest grossing movie is still Gone With the Wind; Cameron's previous movie Titanic is sixth. However, Avatar has the lowest share (29.9%) of revenues from the US, from the top 50 movies ranked by inflation-adjusted earnings. Obviously, calculating the inflation-adjusted earnings on other countries for all the movies would be difficult and slow, so I took a shortcut and assumed a similar rate of inflation worldwide.

Based on this assumption and the share of earnings of top 50 movies in the US, I was able to determine that if inflation is taken into account, Avatar is the fifth-highest grossing movie ever, with nearly $1.9 billion. It is mere $20 million away from surpassing E. T. for the number four spot, but its chances to catch up with the first three movies (Gone with the Wind, Titanic and Star Wars) are slim. Here are the rankings of the current top five movies, adjusted for inflation and world-wide sales:

1. Gone with the Wind - $2.99 billion
2. Titanic - $2.89 billion
3. Star Wars - $2.2 billion
4. E. T. - $1.9 billion
5. Avatar - $1.88 billion

A word about my big assumption: Inflation rates vary from country to country, but are usually tied with changes in currency exchange rates(interest rate parity). As a result, calculating all earnings in US dollars could take care of most fluctuations in inflation between countries.

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