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Editorial: A Bloated Write-up on Hollywood’s Increasingly Out of Control Budgets

Alternate Full Title:

“Accounting Tricks, Budgetary Concerns, and Flops: How Hollywood’s increasingly ballooning budgets since the early 00s led to disaster, absurdly high prices of admission, and new heights in foreign receipt relevance”

The accounting process in Hollywood seems to me to be riddled with voodoo, black magic, and downright ENRON levels of corporate trickery. I simply cannot fathom how the big studios are able to turn a profit with such enormous budgets these days. As big budget filmmaking has ballooned over the past decade or so, film-going audiences have fractured, DVD sales have sputtered, and Hollywood has placed increasing importance on foreign revenue streams and increased ticket pricing structures. Indeed, some domestically released pictures would never turn a profit at all were it not for the vast foreign audiences of the UK, Japan, Russia, and China. Additionally, some films benefit greatly from gimmicks like 3D and IMAX, among others. Since about 1999, Hollywood budgets have been increasingly bloated and out of control – at what point does filmmaking reach critical mass as a result of this? At what point does Hollywood say no more?

A gigantic gamble that paid off for Fox and Paramount in 1997.

A gigantic gamble that paid off for Fox and Paramount in 1997.

Even though I have always found box office receipts fascinating, the first time I began to take note of film budgets was in 1997, when tent-pole film releases like Men in Black, Starship Troopers, and Titanic (which had at that point the largest budget of any Hollywood film) were released into theaters. Of those three, only Troopers faltered, though it grossed enough worldwide to not be a total disaster (I guess we can call this the Battleship effect). Men in Black went on to become a successful film series and Titanic became the highest grossing film in history at that time, with a staggering two billion dollar gross worldwide (a number that, for its time, still seems impossible to me). Within the next few years after Titanic, ultra-budgeted productions became the norm – after all, in order to make money, you gotta spend money. Hollywood has always liked to spend, but the new level for budgets seemed unprecedented. Even 1993’s Jurassic Park (not long released at this point in history), often cited as one of the greatest summer blockbusters of all time, cost a relatively paltry 63 million dollars to produce. The thrifty filmmaking of yesteryear, however, was about to be thrown out the window.

Peter Jackson's LOTR trilogy, another gamble, also paid off handsomely.

Peter Jackson’s LOTR trilogy, another gamble, also paid off handsomely.

In 1999, little-known New Zealand-based filmmaker Peter Jackson began making what would become one of the highest grossing, most acclaimed trilogies of all time. That trilogy, The Lord of the Rings film adaptation, cost a combined 270 million dollars to produce for three films, each released a year apart. This was seen as an anomaly at the time – no one had ever taken on such an ambitious and incredibly risky project. Even films that had shot back to back in the past, such as the two Back to the Future sequels, had a large brand name and following behind them. Had Jackson faltered, New Line and parent company Warner Bros. may have eaten one of the biggest money write-offs in Hollywood history. As it turned out, however, the first film in the series, The Fellowship of the Ring, would have been enough to make the series profitable on its own. Each installment in the franchised out-grossed its predecessor, with the final film, The Return of the King, grossing a staggering billion dollars worldwide. But is The Lord of the Rings trilogy partially to blame for massive, over-stuffed budgets? The success of the film series just might have contributed to Hollywood’s continued rush to spend in the 00s.

The biggest indicator of this seems to be the financially successful Pirates of the Caribbean series of films. Like Rings, Pirates also filmed back-to-back (for its second and third installments). The second Pirates movie, Dead Man’s Chest also became the highest grossing movie of 2006. The third sequel, At World’s End, was a critical disappointment, but grossed nearly a billion dollars worldwide. 2011’s On Stranger Tides, also a critical disappointment, grossed over a billion dollars as well, largely on the back of international receipts. A further installment in the series is obviously planned. The combined cost of the four Pirates movies: estimated as high as 915 million dollars.

This movie would have had to gross over three hundred million dollars just to break even.

This movie would have had to gross over three hundred million dollars just to break even.

A few years earlier, in 2005, Mathew McConaughey starred in Sahara, another adventure film from Disney, and one of the biggest flops of all time. Directed by Breck Eisner (son of Disney’s head at the time, Michael Eisner), Sahara is an adaptation of a Clive Cussler adventure novel. It grossed an extremely quiet 68 million dollars domestically, and around the same total in foreign revenue, against a ballooned budget of 160 million dollars. Sahara also fell victim to a legal battle between Cussler, who demanded strict control over the film, and Philip Anschutz, a producer on the project. Many articles have been written on Sahara’s failure, and how its mammoth budget spiraled out of control. McConaughey’s career continued on its shirtless path just fine, but Eisner’s has arguably never recovered. He directed The Crazies, a low budget action/horror film in 2010, and is slated to direct a film adaptation of an action figure, Stretch Armstrong, sometime in 2014, a project that may never get off the ground. So where increasingly high budgets worked for the Pirates film series (an established brand) a massive budget failed to help Sahara, which lost more money than I’ll make in a lifetime.

Superman Returns was a misfire for Warner Bros. in the summer of 2006.

Superman Returns was a misfire for Warner Bros. in the summer of 2006.

Films with bigger budgets flopped in the years after Sahara as well, including Bryan Singer’s comic book adaptation Superman Returns, a film which cost a reported 200 million+ to produce and which failed to perform up to expectations for Warner Bros. Returns grossed a sub-par 200 million in the U.S. in the summer of 2006, and a little bit less than that worldwide. Warner Bros. expressed disappointment, claiming the film should have grossed at least 500 million. Singer hasn’t directed a hit movie since (though he has largely been in demand as a writer, and is slated to direct the upcoming X-Men: First Class sequel), and star Brandon Routh has arguably had a worse career than Lindsey Lohan since Superman Returns. In 2010, it was announced that a proposed sequel to Returns had been scrapped entirely, with Warner going in a new direction with filmmaker Zack Snyder for a new entry in the Superman filmography (2013’s Man of Steel). A year after Superman Returns, Sam Raimi’s Spider-Man 3 disappointed audiences, but grossed about 900 million dollars worldwide. The pricey project cost about 300 million to produce however, and the bosses at Sony decided to take the film franchise in a new direction (2012’s The Amazing Spider-Man, budgeted at an apparently more palatable 230 million, was a moderate hit last summer).

Sony spent less on The Amazing Spider-Man than they did to make Spider-Man 3.

Sony spent less on The Amazing Spider-Man than they did to make Spider-Man 3.

Beginning in about 2009, however, big budget filmmaking saw a savior in both 3D and IMAX price gouging. The average 3D ticket is about three dollars more expensive than a regular ticket, and IMAX is even pricier than that. Releasing a film on a large number of 3D and IMAX screens can add significant grosses to a movie’s box office numbers. 2009’s Avatar, was the first movie to really take advantage of this, becoming the highest-grossing film since 1997’s Titanic, with 3D surcharges accounting for a staggeringly high percentage of tickets. Waves and waves of 3D movies followed, with films like Tim Burton’s little-loved Alice in Wonderland grossing a mind-blowing billion dollars worldwide and sub-par, critically reviled films like Clash of the Titans (2010) and The Last Airbender (2010) also grossing substantial amounts thanks to 3D surcharges. Pixar, Dreamworks, and Marvel Studios began post-converting their properties to 3D to take in the extra bucks. Even IMAX exhausted itself (I like Cloud Atlas a lot, but did anyone really need to see it on IMAX? – same for I am Legend and Happy Feet). The format works well in small doses (especially so when a film is actually shot with IMAX cameras), but not every tent-pole release requires an IMAX theater showing.

Why anyone would pay $15 to see this in IMAX 3D is beyond me.

Why anyone would pay $15 to see this in IMAX 3D is beyond me.

As noted, even 3D and IMAX began to tire audiences, with post-conversion being a huge problem and audiences largely rejecting it (post-converted 3D films sell significantly fewer tickets now than they did in 2010). Film studios, such as Warner Bros., found new ways to tinker with ticket pricing structures, however. Enter, Peter Jackson’s latest project, Lord of the Rings prequel series The Hobbit. About a year and a half ago, Forbe’s broke a story that the first adaptation of a proposed two-part Hobbit film series (now a three part series) cost an astonishing 500 million dollars to produce. These initial reports proved false, however, as the final budget came in at around 250 million. Still, 250 million dollars is a LOT for one film, considering the three films that preceded it cost 270 million together. One of the big selling points for The Hobbit was that it was shot in a 48 frames-per-second (FPS) format, giving it an entirely different look from the traditional 24 FPS format. Dubbed HFR, for high frame rate, the format brought mixed reviews – I read critiques from people who both loved and hated it – but it undoubtedly created buzz for Jackson’s film.  Additionally, The Hobbit was released in 3D and IMAX 3D, where it broke an IMAX record for December. If audiences crave a product, they will pay higher prices – this seems to be a lesson Hollywood has learned.

Peter Jackson's Hobbit movies cost an outrageous amount of money to produce -- at least they employed an entire country.

Peter Jackson’s Hobbit movies cost an outrageous amount of money to produce — at least they employed an entire country.

Hollywood additionally relies more on foreign receipts than ever. Exploding markets like Russia (which has seen an exponential growth in its number of theaters in the past few years) and China (which is craving American releases more than ever … the Titanic 3D re-released grossed over a hundred million dollars there alone last year) have contributed significantly to the box office grosses of mega-budgeted releases. For example, Ang Lee’s film Life of Pi has grossed over 300 million dollars worldwide, and it opened with 15 million dollars in Russia alone, almost unheard of for the territory. The Dark Knight Rises, one of the biggest hits of 2012, grossed over 50 million in China alone. Two other big 2012 hits, Skyfall and the aforementioned The Hobbit, have not even opened in China yet, but are expected to push the gross totals for those movies significantly higher. As budgets continually balloon, Hollywood is going to do some series marketing in Russia and China, and the competition for film releases in those markets is only going to get more and more fierce (especially so for China, which only admits a set number of American productions each year).

I imagine that the bulk of the 215 million dollar budget for The Lone Ranger largely went to pay for various birdhats for Johnny Depp.

I imagine that the bulk of the 215 million dollar budget for The Lone Ranger largely went to pay for various birdhats for Johnny Depp.

As this write-up becomes just as bloated as the budget of the latest Gore Verbinski abomination (The Lone Ranger, budgeted at a rumored 215 million dollars), I begin to wonder what my original point was. Hollywood has spent far too much on these films, I find. The days of thrifty filmmaking are largely extinct. Projects that even gross several hundred million dollars (John Carter, Battleship, and Dark Shadows are just three examples of 2012 films that grossed a ton but remain virtually unprofitable) aren’t guaranteed to make money. I have a significant problem with this. To me it is absolutely ridiculous that a film could potentially gross 300 million dollars and not make any money. It’s just far too risky and careless for my tastes. It is also indicative of an out of control system. I don’t know which is worse, that Warner Bros. would green-light The Hobbit for a total price tag of 250 million, or that Peter Jackson would need that much for one film when he made three movies for essentially the same price-tag. It’s a chicken or the egg scenario, and I can’t help but feel that the situation is going to get worse before it gets better. I noted in my recent article on 3D that I feel it could potentially become no longer a gimmick. It’s just unfortunate that this might happen out of necessity for budget reasons rather than as a means for continued creativity.

-Z-

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4 responses to “Editorial: A Bloated Write-up on Hollywood’s Increasingly Out of Control Budgets

  1. Nick! January 9, 2013 at 10:23 pm

    Nice write-up, Zack!

    As you know, I am a “Superman Returns” defender, but even I have to admit that that movie would never have been the hit Warners was looking for all due to the budget. It is funny how people look at the movie now and claim it was a critical and financial bomb, when that really wasn’t the case at all (76% on Rotten Tomatoes, and it grossed more that “Batman Begins” – generally considered a hit).

    However, the budget was so crazy, I don’t know what Warners expected. Some reports I have read was that the $200 million it cost to make also included all the failed starts for a Superman movie (in essence, Nic Cage got a paycheck from Superman Returns). Since 2006 was a time where billion-dollar returns were not common place, SR was going to be a losing battle.

    • CultureCast-Z January 9, 2013 at 10:31 pm

      Yeah the Batman Begins thing really blows my mind. I’m guessing most people don’t even know/realize that. I guess it just goes to show what a good reputation (which I’d argue BB has over SR) can do for a franchise. It’s almost amazing The Dark Knight even got the budget and reception it did in hindsight.

      You’re not the only SR defender, though they are few and far between. Tarantino apparently loves the movie and is writing up a 20 page defense on why he thinks Singer did a good job with it. I’d almost certainly have to watch it again to foment an opinion on the film — though I remember being pretty disappointed with the movie, primarily the script.

      I think it’s awesome that Nic Cage probably got around ten million dollars for not playing Superman by the way.

      • Nick! January 9, 2013 at 10:37 pm

        What was in BB’s favor was that the film has a much smaller budget than SR and this a better budget-to-profit ratio. I’m not surprised that TDK got the budget it did. The first film was very warmly received, so the studio had faith that a sequel would build on that (though, I doubt Warners knew just how well it was going to be).

        I fully realize that SR is a problematic film, but I love it anyway. And I do not disagree that BB is the stronger film.

        Tarantino writing something that is drawn out and overlong? That doesn’t sound like him…

  2. Pingback: What Went Wrong?: Vol 30 – Superman Returns | The Culture Cast with Zack and Nick

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