The term blockbuster was originally defined by a large audience response. After a while the term came to mean a high-budget production aimed at mass markets, with associated merchandising, on which the financial fortunes of a film studio or a distributor depended. It was defined by its production budget and marketing effort rather than its success and popularity, and was essentially a tag which a film's marketing gave itself.
The term began to appear in the American press in the early 1940s, referring to aerial bombs capable of destroying a whole block of streets. Later, the term began to be used to refer to successful theater plays, hit movies, best selling novels, and computer games.
In film, a number of terms were used to describe a hit. In the 1970s these included: "spectacular" (The Wall Street Journal), "super-grosser" (New York Times), and "super-blockbuster" (Variety). In 1975 the usage of "blockbuster" for films coalesced around Steven Spielberg's Jaws and became perceived as something new: a cultural phenomenon, a fast-paced exciting entertainment, almost a genre. Audiences interacted with such films, talked about them afterwards, and went back to see them again just for the thrill.
Before Jaws set box office records in the summer of 1975, successful films, such as Quo Vadis, The Ten Commandments, Gone with the Wind, and Ben-Hur, were called blockbusters based purely on the amount of money earned at the box office. Jaws is regarded as the first film of New Hollywood's "blockbuster era" with its current meaning, implying a film genre. It also consolidated the "summer blockbuster" trend, through which major film studios and distributors planned their entire annual marketing strategy around a big release by July 4.
Jaws exceeded $100,000,000 in ticket sales and for a time this was the point at which a film could be designated a blockbuster in North America. However earlier films such as Gone with the Wind (1939) and The Sound of Music (1965) easily passed this threshold.
After the success of Jaws, many Hollywood producers attempted to create similar "event films" with wide commercial appeal. Film companies began green lighting increasingly high budgeted films and relying extensively on massive advertising blitzes leading up to their theatrical release.
Although the term "blockbuster" was originally defined by audience response, after a while the term came to mean a high-budget production aimed at mass markets, with associated merchandising, on which the financial fortunes of film studio or distributor depended. It was defined by its production budget and marketing effort rather than its success and popularity, and was essentially a tag which a film's marketing gave itself. In this way it became possible to refer to films such as Hollywood's Godzilla (1998) or Last Action Hero (1993) as both a blockbuster and a box-office disaster.
Eventually, the focus on creating blockbusters grew so intense that a backlash occurred, with critics and some film-makers decrying the prevalence of a "blockbuster mentality" and lamenting the death of the author-driven, "more artistic" small-scale films of the New Hollywood era. This view is taken, for example, by film journalist Peter Biskind, who wrote that all studios wanted was another Jaws, and as production costs rose, they were less willing to take risks and therefore based blockbusters on the "lowest common denominators" of the mass market.
In a book written by Chris Anderson titled The Long Tail, he mentions the many different possibilities the blockbuster film brought to Hollywood and the many ancillary markets that followed. He even states that a society that is hit-driven, and makes way and room for only those films that are expected to be a hit, is in fact a limited society. Anderson notes in The Long Tail the example of a world that thrives on that is a world of scarcity. As the transition of online distribution made way, what was seen evidently was that we are now entering a world of abundance, and not of limited possibilities. As time went on, and people became more comfortable with it, the changes were astounding. He also speaks on the society and how the voice of society is listened to. If a movie was a blockbuster hit, it may have only seemed that way to the people who traveled to spend their money on it. For the individuals who did not, their voices were somewhat silent. And when directors would sit down to make a blueprint of another blockbuster film, they would keep in mind only the reviews of the people who watched the film, instead of a collective whole.
When a film made on a low budget is particularly successful or exceeds the expectations of the films in its genre, then that film is a blockbuster as well, in the original meaning of the word. Such films may not receive the title "blockbuster" in the current meaning of the word but are labeled "hits" or "sleepers".
The financial demands of widely marketing and distributing a blockbuster film are such that it must earn considerably more than its production budget in order to generate a profit. This has led to a phenomenon whereby blockbuster films such as Superman Returns (2006), The Last Airbender (2010), Battleship (2012), Edge of Tomorrow (2014), and The Legend of Tarzan (2016) have been perceived as failures despite grossing more than $300 million worldwide. As a consequence some film producers have turned to distributing small but promising, low-budget films with the hopes of capitalizing on the modern market's film consumption. The term "sleeper hit" may not always apply to films that take in large gross sales, but films that yield extreme profits based on investment. A number of films have been produced at extremely low budgets that have had proportionately high ticket sales, producing a very high return on investment to their respective studios.
An example of this is the 2004 documentary film Tarnation, whose budget weighed in at $218 and whose ticket sales totaled $1.16 million, a profit margin of 266,416.97%. A more famous example is the 2007 thriller Paranormal Activity, which operated on a budget of $15,000 and took in over $193 million in worldwide ticket sales. Other low-budget-high-gross films include The Blair Witch Project, Halloween, Pulp Fiction, American Graffiti, Napoleon Dynamite, Get Out and Deadpool.