Daniel Craig’s 007 economics 101

By this point, most James Bond fans are tired about reading about the Heineken product-placement deal with Skyfall and, based on recent remarks, it appears Daniel Craig is, too. But the Skyfall star may have provided a small lesson on the economics of James Bond movies.

Daniel Craig: teacher of 007 movie economics for a day

Craig, as part of a publicity blitz, spoke to the U.K. edition of the Huffington Post and the U.S. Moviefone Web site (both are part of AOL and carried the same story). In THAT INTERVIEW the Skyfall star said the following:

“We have relationships with a number of companies so that we can make this movie. The simple fact is that, without them, we couldn’t do it. It’s unfortunate but that’s how it is…This movie costs a lot of money to make, it costs as nearly as much again if not more to promote, so we go where we can. (emphasis added)

That’s not a lot of detail and others in the movie business have said similar things for a long time. However, it’s more detail than the makers of 007 movies get into. Usually they say it costs a lot and let it go at that.

So let’s take a look at how this rough calculation applied to the most recent Bond film, 2008’s Quantum of Solace. That movie had a reported budget of $230 million. To keep the math easy, let’s double that figure to add in the promotional costs. That gets you to $460 million.

Quantum’s woroldwide box office was just shy of $592 million, the second-best ever gross for the 50-year series. Now, that’s in unadjusted dollars. Then again, studios don’t deal in adjusted dollars; they deal with box office in the hear and now. Anyway, sounds like Sony Corp.’s Columbia Pictures and Metro-Goldwyn-Mayer must have done OK, after all that’s more than $130 million than the combined production-promotional cost.

Except, the studios didn’t keep all that $592 million. Theaters got a cut; typically, that’s tiny at the start and becomes more the longer a movie plays. Also, while the details aren’t public, the studios had to split whatever profits there were with Eon Productions, which controls half the 007 franchise and actually produces the films.

We don’t pretend to know the final figures, but the profit, if any, may have been relatively small for Sony and MGM. Last month, MGM disclosed it lost money on The Girl With the Dragon Tatoo, also starring Craig, which had a $100 million production budget (and presumably similar sized outlay for promtion) with a worldwide box office of $231 million. Like both Quantum of Skyfall, that was a joint Sony/MGM deal.

Looking ahead to Skyfall, Eon co-bosses Michael G. Wilson and Barbara Broccoli said in November there had been no budget cuts for Skyfall. If Skyfall’s budget matches the reported $230 million budget of Skyfall, that would also be a combined $460 million production and promotional cost. Skyfall would need to at least match Quantum’s box office for it not to be viewed as a disappointment.

Thus, product-placement deals — and the Bond series is hardly a stranger to them — are a way to hedge bets. That’s especially true for Skyfall, where Sony is having financial troubles and MGM emerged from bankruptcy not that long ago.

Fans may think James Bond will go on forever and that product-placement deals are a nuisance. And yes, there are other sources of revenue (though falling prices for DVDs are eating into that). Still, Daniel Craig lifted the veil just a tiny bit on a more complicated financial picture.