Avatar Will Cost 500 Million After All Is Said And Done
When James Cameron makes a movie he goes big. "Titanic" is a great example. But he definitely makes his money back in the end and then some.
Mr. Cameron’s “Titanic,” which took in more than $1.8 billion at the worldwide box office after its release in 1997, was a major corporate event for the News Corporation, then about a third the size of the current conglomerate, which has roughly $30 billion in annual sales. Less than a year after the release, the News Corporation raised nearly $3 billion in a public offering of shares in its filmed entertainment group, partly on the strength of “Titanic.” (It bought those shares back four years ago.)
Will Avatar do the same? Movies looks great and I am looking forward to seeing the film when it comes out this year.
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?
That question looms large for 20th Century Fox and its 3-D science-fiction film “Avatar,” among the most expensive movies ever. Despite many skeptics, the studio thinks it can turn a profit, in part because the film’s creator, James Cameron, was the driving force behind the studio’s immense hit “Titanic.”
But just in case box-office receipts for “Avatar” fall short, Fox has worked hard to hedge its large bet on the movie.
Despite the estimated half-billion dollars spent on its production and marketing, “Avatar” may carry surprisingly little financial risk for Fox’s parent company, the News Corporation, even if it disappoints. That is because of shifting industry economics, reliance on outside investors and help from a network of allied companies and in-house business units.
The final cost of the film has not been tallied, as Mr. Cameron, who has worked on the film for 15 years, and his collaborators, as far-flung as Weta Digital in New Zealand, continue to complete their work. Published reports have put the production budget at more than $230 million.
But the price tag would be higher if the financial contribution of Mr. Cameron and others were included. When global marketing expenses are added, “Avatar” may cost its various backers $500 million.
Tom Rothman and Jim Gianopulos, the co-chairmen of Fox Filmed Entertainment, declined through a spokesman to be interviewed. Jon Landau, Mr. Cameron’s partner in their Lightstorm Entertainment production company, also declined to be interviewed.
But “Avatar” did get a mention in a conference call on Wednesday during which Rupert Murdoch, the News Corporation’s chairman, discussed a surprise 11 percent earnings jump in the company’s fiscal first quarter, which ended Sept. 30.
“I’m confident we will lead the Christmas season,” Mr. Murdoch said. He added that he was “excited and moved” by “Avatar.”
At what point the various partners in “Avatar” would see profit from the film depends on what share of revenue each receives as the movie reaches theaters, then home video and other media around the world. If domestic ticket sales reach $250 million — a level broken in the last year by five films, including “Star Trek” and “The Hangover” — Fox and its allies would appear to be headed into the black.
With “Titanic,” the News Corporation was at risk for at least half of a production budget that would approach $300 million in today’s dollars, and was borne partly by Paramount Pictures.
The News Corporation is carrying a much smaller share of “Avatar’s” production cost, as a pair of private equity partners — Dune Entertainment and Ingenious Media — pick up 60 percent of the budget, according to people who were briefed on the economics of the film but spoke on the condition of anonymity to avoid conflict with the studio or filmmakers.
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.
Mr. Cameron, along with Vince Pace, a Hollywood technology master, also developed much of the elaborate camera system and digital technology for the film themselves, at cost of about $14 million. According to Mr. Pace, the systems are owned by a company that expects to recoup the investment by selling to other filmmakers with help from the Creative Artists Agency.
Fox’s biggest investment in “Avatar” may be on the marketing side, where the company is planning to spend about $150 million around the world — a number that is somewhat lower than might be expected, because of recession-induced concessions on advertising prices and reliance on in-house resources. The News Corporation recently showed a new trailer for the film on Fox’s “NFL Sunday” pregame show, and has been using MySpace to build awareness of the movie.
But here, too, the studio has looked for partners to bear some of the load. One ally, Imax, worked with theater owners to set up a special 15-minute preview last summer without significant cost to the studio. “A lot of people are lending this sort of in-kind support,” said Greg Foster, chairman and president of Imax Filmed Entertainment.
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Source-NYTimes
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