'Avatar' Budget Reportedly Runs About $500 Million

It's a worthwile question, direct from The New York Times: "Can a movie studio make money on a film based on an original and unfamiliar story, with no Hollywood superstars, a vanishing DVD market and a price tag approaching $500 million?" The movie is Avatar, and the budget number is a little misleading, but then again, not exactly. The Times is rolling marketing costs into that equation - estimated to be around $150 million from the coffers of Rupert Murdoch, which The Old Gray Lady says is "slightly lower than expected." But even for a $200 million movie like Transformers, the marketing is well over $100 million worldwide, so the half a billion for Avatar needs to be put on balance with everything else. However, even without the advertising, that still means we're looking at a $350 million movie. So how in the hell did they pay for it? According to the article, Fox knew it would be a tremendously risky proposition, so backers from all over the globe were brought in to pony up a little bit of dough here and there. IMAX and Panasonic have contributed to the overall marketing scheme, and two private equity companies, Dune Entertainment and Equity Media, have reportedly shaved around 60% of the film's production cost off the overall budget. Combine that with what James Cameron has personally invested, and Fox isn't risking all that much. It's true that the bigger the budget the more money you have to take in. Up until about two weeks ago, my shining example of a film that surprisingly disappointed a studio was Get Smart nearly tripling its budget (without marketing) last summer. That has since been replaced by Monsters vs. Aliens, which is one of this year's top ten earners. However, DreamWorks announced it wouldn't pursue a sequel, and the obvious if unspoken reason is that the profit margin just wasn't good enough the first time around, even though the film probably made $50 - $100 million after advertising. Of course, you might think the only way you arrive at a half-billion-dollar movie is by being reckless, but that actually appears not to be the case here. The Times piece details how everyone - including Cameron - is minimizing their own risk, even if it means encroaching on possible profits.

"In a further hedge, Mr. Cameron would give up part of his own participation in the film’s returns if production costs exceed a specified level, according to those who were briefed on the film. If final production costs exceeded $300 million, for instance, Mr. Cameron would effectively defer much of his payout until the studio and others were compensated, despite his years of labor on the movie."

It does not follow that because James Cameron made Titanic over a decade ago that Avatar will also make well over a billion dollars. In fact, I highly doubt that will happen. Can it be more populist than The Dark Knight while also producing thousands if not millions of repeat viewings? The theatrical release business is radically different than it was in 1997 and 1998, when Titanic stayed in wide release for half a year and remained in theaters for an additional three months. That doesn't happen now. The DVD market, sluggish as it is, still offers more money to the studios than any business a film is likely to accrue after 120 days. Only five of last year's top ten films were in theaters longer than 20 weeks, and only The Dark Knight made it over 30. By contrast, Hancock and Quantum of Solace were only in release for 10 and 11 weeks, respectively. The implication is, once a movie starts tailing off precipitously, it'll be yanked from theaters and pushed for the DVD release. So, nobody's catching Titanic, and even making half as much is not easy, even for The King of the World. Having said that, it sounds like everyone involved is willing to walk away emptyhanded or close to it, just so the movie could be made the right way. Certainly, they'd love to cash in, but you don't greenlight a $500 million movie in this economic climate and expect that to happen. But it does appear that, because the budget was pieced together the way it was, it won't have to necessarily follow the same rules for profit margin to be successful. Of course, Cameron is aiding this process by being paid last, meaning he probably won't make money, or at least not that much.

Comments

[El Doucheo Bago]

I don't think this movie will make over 100 million in the opening weekend, maybe 55-65 million and then going down from there. It won't even come close to The Dark Knight. I am sensing a big flop. Nothing I have seen about this movie has made me care about it at all.

[Asana]

"So how in the hell did they pay for it? "

Lay-a-way... it's the new rage.

[Jonny]

I don't understand how they think this is going to be a huge hit. It seems to me that a movie of this scale should already be on the minds of all movie goers, yet most of my college age friends have never even heard of this movie. The marketing seems smaller than you would imagine for such an event. I predict it will do about as well as king kong did domestically a few years back. good but not record breaking.

[mdamien13]

Everyone I talk to about this movie tells me they think it looks stupid. Reaction on blogs to the commercials during the World Series was really negative as well... I'm personally planning on catching this at the IMAX just 'cause I'm curious to check it out but I think it may be a dud.

[Honz Brix]

U guys r all carzy!! I agree that this movie is not going to be huge financially in its opening weekend and probably through its whole run. I think it will show very good legs though because the word of mouth will be strong from the people that have been waiting for this to come out for years. And the 2nd trailer actually gave me chills just as the 2nd trailer for the Dark Knight did a year and a half ago. This movie is going to epic but will i agree it will not compare to Titanic and The Dark Knight as far as its gross goes. I wouldn't be surprised if it brought in 300 million domestically which is something that hasn't been done for a holiday release since The Lord of the Rings trilogy

[Asana]

The good thing for Avatar is that it opens against little competition. The bad thing is that within a week it will need to contend with Alvin and the Chipmunks: The Squeakuel, Sherlock Holmes and The Imaginarium of Doctor Parnassus which should cut down its earnings. I haven't seen anywhere near the level of moviegoer anticipation over this like there was for the first Twilight film. The comparison there is roughly equivalent given how low both films were on most peoples' radar.

I suppose one could argue that Twilight had advanced book buzz going for it but I'd never heard of it until the movie came up. By that token, or more to the lack of one, Avatar has simply existed as an unknown to Cameron fans. It's truly a testament to Cameron to keep people rapt over something they essentially know nothing about. How many people that actually turns out to be remains to be seen but if this film is going to do anything it will have to pull much, much more than the faithful. I doubt Avatar breaks even on its production costs in domestic sales, which will be the marker of its success.

It's a pretty hefty gamble any way you look at it but it's no less awesome a feat to get something so massive completed. Something that has no built-in audience. In an age where everything is a remake, re-envision, popular book/videogame/cartoon/tv show... to have a film as big as and original as Avatar is just unheard of. It's got to be a certain marketing nightmare I'd think with it being such an unknown quantity. Sure, there's a videogame for it but if the movie bombs guess the likely fate of the game. Can this film be Happy Meal'd? Lego'd? Where are the viable tie-ins? Not that all movies need or benefit from such but it can make the difference between a one and done vs. sequels to come in terms of engendering greater following.

No matter what the outcome, Cameron has made good on bringing a dream idea of his to life... not many people accomplish that.

[Hawaii Luxury Homes]

While most people had doubts about financial success of Avatar James Cameron has proven once again that he can spend $300+ Million and bring over $1.8 Billion. The film is simply amazing and mind blowing!