Dr. P.V. Viswanath

pviswanath@pace.edu

Hollywood's Most Expensive Movies

Lacey Rose, 12.18.06, Forbes

Twentieth Century Fox spent about $75 million to produce the first X-Men movie in 2000. But X-Men: The Last Stand, released this year, cost $210 million to make, according to online box office tracker Box Office Mojo.

Hollywood will always spend more for a sequel to a successful movie--stars of the original have more leverage to demand bigger paydays, and studios heads feel, with some justification, that a sequel is a safer box office bet. But as the escalating X-Men price tags show, blockbuster budgets are growing ever bigger.

In 2005, the average Hollywood film cost $60 million to make, according to the Motion Picture Association of America. That's nearly double the average from 10 years earlier. But megafilms routinely cost more than $200 million. The 25 movies we feature on our list of Hollywood's Most Expensive Films averaged $197.1 million (2006 dollars) in production costs, and most of them were made in recent years.
In Pictures: Hollywood's Most Expensive Films

Those sums, which don't include marketing costs that can routinely add another $20 million or more to the total, do give Hollywood studios pause. That's why many of them are trying to offset the risk by co-financing films with other studios, or with other investors, like Wall Street funds.

But former Fox studio head Bill Mechanic, who now runs his own production company, Pandemonium Films, doesn't approve of this approach. "I always felt that in a lot of ways that was a cop out," he says. "If you're going to reduce your cost to make the business try to make more sense, you've got to lower the cost of the picture."

The most obvious way to do that is to cut actor salaries, but that's easier to say than to do--studios always say they're going to hold the line on $20 million-plus paydays for actors, then routinely dole them out. The exception that proves the rule: Used Guys, a high-concept comedy that was to star Ben Stiller and Jim Carey, which Fox pulled earlier this year. The studio reportedly got cold feet when the film's budget threatened to exceed $110 million.

An alternate strategy is to not employee A-list actors at all, but spend money on concepts audiences already know. "That's why these days the money generally goes to established brands--franchises--where [studios] believe there will be a guaranteed audience," notes Brandon Grey, president of Box Office Mojo.

That's why Warner Brothers was willing to spend $269 million on this year's Superman Returns--it didn't matter if audiences had never heard of Brandon Routh, who played the new Man of Steel, the logic argued, because everyone knows the character he played. Yet the movie made a disappointing $400 million worldwide.

That's why some Hollywood veterans who have tried the blockbuster game in the past are increasingly interested in smaller films. "[Blockbusters are] not a business to live in at that price," says Mechanic. "You're hoping everything completely works, and you're in a business that's inconsistent, even with the best of people."

Questions:

1. Why are some films cofinanced and others not?