How to make money in film when nobody can predict a hit

This article is part of my ‘Big Ideas’ series, in which I help readers understand complex issues within the world of film. Today’s article includes a bonus report for paying subscribers, titled “Predicting Movie Hits” (download link at the end of the article).In the past couple of months, two films made silly amounts of money. Obsession was made for about $750,000 and has already grossed $297 million worldwide, and Backrooms earned $257 million worldwide on a $10 million budget. This is the dream every film investor has when funding a movie - a relatively small bet pays off hugely.Despite seeming similar on the surface, these two movies took a very different approach to financial risk. Obsession was sold to Focus Features for around $15 million at last year’s Toronto Film Festival, eight months before release. Conversely, A24 financed Backrooms itself (with Chernin Entertainment) and kept both the risk and the upside.Taken together, these films reveal a lot about how the film industry…