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Financial success is one of the primary reasons that studios make movies. However not all films are guaranteed to be successful. A good indication of the success of a film is to look at the budget of the movie and then see what the gross income of that film was. Studios expect that a film's "domestic" (which the film industry defines as the United States and Canada) box office gross will exceed production costs.
If it recoups this cost, then it can be considered a success; otherwise, it is often referred to as a box office bomb. It should be noted that different genres of film are subject to different standards of success. For example, action movies typically have higher production and promotion costs than romance movies.
In the most dramatic cases, a single film's poor performance can push a studio into bankruptcy or equivalent financial ruin, as happened with United Artists (Heaven's Gate), Carolco Pictures (Cutthroat Island), and Squaresoft's Square Pictures (Final Fantasy: The Spirits Within).
Typically, the most notorious flops are summer blockbusters, which often entail huge costs to produce and face a highly competitive market, circumstances that can lead to enormous success or disastrous failure. Additionally, advertising costs are not included in a movie's production cost, and frequently make a bomb's failure all the more crushing for the studio.
An important consideration: many U.S. films make most of their profits through international distribution (as well years afterward as home video releases and sales to TV syndication). Because of this, many films considered flops in North America eventually make a profit for their studios when these factors are included.
Also the costs of marketing are excluded as well, and are generally range between $10,000,000 and $40,000,000 themselves, and should be remembered as well.