A primer about movie economics

When Skyfall, the 23rd James Bond movie comes out this fall (October in the U.K., early November in the U.S.), some fans will check news accounts concerning ticket sales in movie theaters. Last year, the the i09 Web site provided a primer about movie economics that 007 fans may want to consult if they want to determine the financial bottom line for Skyfall.

A few of the pointers:

The final cost of a movie goes beyond its production budget: Michael G. Wilson and Barbara Broccoli, the Skyfall producers, have hinted that the film’s budget is about the same as the $230 million budget for 2008’s Quantum of Solace. They haven’t provided any figures, but they are presumably aware of the reported outlay for Quantum (if they’re not, that raises the question of how well they’re doing their jobs). By not denying Skyfall costs the same as Quantum, they are implying Skyfall’s outlay is about the same.

In April, Skyfall star Daniel Craig said movies generally cost as much to promote a movie as it takes to film it.

The io9 primer takes it a step further:

(T)he Print & Advertising (P&A) costs of a movie can be incredibly high — for a small $20 million film, the promotional budget can be higher than the production budget. That’s because those films are often romantic comedies or kids’ movies, which are cheap to make but still need a lot of promotion. For a film which cost between $35 and $75 million to make, the P&A budget will most likely be at least half the production budget. And the numbers only go up with bigger films.

Studios don’t get as much of a cut of opening weekend ticket sales as they used to: Again, from io9:

Nowadays, with many of the bigger Hollywood blockbusters, the theater chains just get a standard cut of the whole revenue, regardless of which weekend it comes in.

(snip)

So as a ballpark figure, studios generally take in around 50-55 percent of U.S. box office money.

For studios, international ticket sales aren’t as profitable as U.S. ticket sales:

So if a film does incredibly well overseas but flops in the U.S., does that make it a hit? As with everything else to do with box office, the answer is “it depends.” But generally, domestic revenue seems to be be better for studios than overseas revenue, because the studios take a bigger cut of domestic revenue.

According to the book The Hollywood Economist by Edward Jay Epstein, studios take in about 40 percent of the revenue from overseas release — and after expenses, they’re lucky if they take in 15 percent of that number.

So why is all of this significant? For 007 fans, there are a few reasons:

Quantum of Solace cost almost as much as a later Harry Potter movie. The later Potter films cost about $250 million to make, just $20 million more than Quantum’s reported production cost. Potter movies generated worldwide ticket sales of as much as $975 million each. The top-grossing 007 film was 2006’s Casino Royale at $596 million.

Fans often cite how Bond films get the majority of their ticket sales outside the U.S. That’s been true for quite some time. But for Metro-Goldwyn-Mayer and Sony Corp., which actually pay the bills (not Eon Productions), that may not be as reassuring as it sounds. Put another way, despite whatever studio bosses say in public, they’d like to see a higher level of U.S. ticket sales for Bond movies.

007’s overseas box office power is still important: Other studios would like to follow the Bond model and have higher non-U.S. sales. Again from io9:

But still, overseas box office does matter, more and more. And stars who have a huge global following are more likely to open a movie than ones who are only famous in the U.S. — just look at the fact that the world-famous Tom Cruise is still starring in movies, despite his ongoing backlash in North America. Mumpower points out that Cruise’s Knight and Day only made about $76 million in the U.S., against a production budget of $117 million. But since Knight and Day made $262 million overseas, chances are it will end up being profitable once home-video revenues are factored in.

So what’s the bottom line? Skyfall’s ultimate financial success won’t be determined only from its U.S. opening, or even its final worldwide ticket sales.

For example, The Girl With the Dragon Tatoo, another movie starring Daniel Craig, had a reported budget of about $100 million and worldwide ticket sales of almost $300 million. Yet, MGM (which, like with Skyfall, co-financed the film) disclosed in March the movie was a money loser. Skyfall’s bottom line may also be more complicated. In any event, all of this is something to keep in mind when Skyfall hits theaters later this year.

Scrutiny and blockbuster movies

We were fascinated as coverage of the opening weekend of John Carter unfolded. While blockbuster movies have always been scrutinized, the $250 million movie shows how the 24-hour, real-time news cycle are putting more pressure than ever.

When Skyfall opens, 007 may be stalked by a new foe: distinguished representatives of the world press


It’s also a preview of what Skyfall, the 23rd James Bond movie, can expect when it has its U.S. debut in November. Just to be clear, we’re not predicting the same fate for Skyfall. But when the 007 film has its opening weekend in November, the movie’s box office numbers are going to be analyzed repeatedly, with updates each day until final figures are in.

Quick background: Walt Disney Co. made a big gamble to bring John Carter, created by Edgar Rice Burroughs, to the screen. It was the live-action directing debut of Andrew Stanton, who had previously helmed the feature-length cartoons Wall-E and Finding Nemo. John Carter had U.S. and Canada ticket sales of $30.2 million (the final revised figure released on March 12).

To give you an idea how quickly a film’s financial success is judged, CLICK HERE for the coverage by the Deadline Hollywood Web site, run by Nikki Finke. It begins with a short post at 11:30 a.m. New York time on March 9 that began like this after the movie received $500,000 at midnight showings:

It looks like the moviegoing public is going to bury this 3D sci-fi actioner just as everyone thought. So don’t expect any eulogies from me.

Read all the updates, and you’ll see that was just the start. Meanwhile, on the night of March 11, the New York Times, compared John Carter to Ishtar, a notorious 1987 flop. Today, just three days after the movie opened, The Wrap Web site published an analysis of how John Carter reflects deeper problems at Disney.

Now, 007 is an established movie franchise, unlike John Carter. But it’s going to get a similar examination, in part because of its budget.

Quantum of Solace, the previous 007 film, had a reported budget of $230 million, not that much less than John Carter. Michael G. Wilson and Barbara Broccoli, the principals of Eon Productions, denied in November there had been substantial budget reductions for Skyfall compared with Quantum.

Before Skyfall comes out, it’s likely some kind of consensus expectation number will emerge. Actual box office above that figure will be depicted as success, below it a setback. It’s also likely to be established whether Skyfall is the favorite to be the No. 1 movie for the weekend.

The coverage on Nov. 9-11 will also be influenced by the opening of previous Bond movies. Quantum had a U.S. and Canada opening weekend of $67.5 million in 2008. If Skyfall’s opening tally is falls short or exceeds that figure, that will be noted.

The movie may be declared a hit or flop on Nov. 9, the day Skyfall opens. There will be stories about Friday sales, not only the estimated total but whether its audience is skewing young or old. Saturday, Nov. 10, will see stories examining how sales compared with the previous day. Was there positive word of mouth? If not, why not? By early afternoon Sunday, Nov. 11, the preliminary weekend figures will be out, comprised of actual ticket sales for Friday and Saturday and an estimate for Sunday. Before the end of that Sunday, the reasons for Skyfall’s success or failure will be thoroughly hashed over before some fans even make it to the theater.

John Carter is merely an extreme example of how movies are covered on opening weekend. Skyfall will be subject to the same process, even if it doesn’t generate the same headlines. This happened with Quantum of Solace but it will likely be even more intense for Skyfall.

`All the money’s going to go on the screen’

There’s a quote attributed to Eon Productions co-founder Albert R. Broccoli to the effect that with James Bond movies, the money is all up on the screen. In Broccoli’s time at the 007 helm (1961-1996), that explained why the production team often cast unknowns for key roles, especially the female leads. Eon would save money on such roles and use it toward putting spectacle during the film.

Albert R. Broccoli, co-founder of Eon

When the modestly budgeted ($1 million) Dr. No came out 50 years ago, the crew still spent weeks in Jamaica. As budgets increased, Eon increased location shooting. “Kids that watch that watch television and watch films today, they’re very smart,” Broccoli told ABC’s Good Morning America in 1987, a quarter-century after Dr. No, when discussing The Living Daylights. “They know just where you are. They know you’re in Hollywood behind a palm tree and not in Quarzazate or not in Morocco.” (We were reminded about this in a post on the Bond and Beyond message board. You can CLICK HERE to see a 9:20 video on YouTube that has two segments from Good Morning America about The Living Daylights. The Cubby Broccoli quote starts at about the 6:20 mark.)

Sometimes, as in the case with The Living Daylights, Vienna substituted for the then-Czechoslovakia or Thailand for Vietnam (Tomorrow Is Not Enough Tomorrow Never Dies) or Spain for Cuba (Die Another Day) if going to the actual site was too difficult for political or other reasons. Still, Eon emphasized location shoots. Meanwhile, Broccoli and Eon would pass over some actors, such as Faye Dunaway in Octopussy, deeming them too expensive, in favor of spending money elsewhere.

Barbara Broccoli, Eon’s co-boss and Cubby Broccoli’s daughter, cites the “putting the money on the screen” line in places like Quantum of Solace DVD extras and the November Skyfall news conference. At the latter, a reporter asked if the Skyfall’s budget might be reduced compared with 2008’s Quantum of Solace. “Does it look like we’re cutting back?” she asked, gesturing toward director Sam Mendes and star Daniel Craig. “All the money’s going to go on the screen.”

Since then, it has emerged that the first unit isn’t going to Shanghai, with U.K. locations subbing for the Chinese business center (Ascot Racecourse subbing for Shanghai International Airport, for example), while the second unit films in China. The first unit will film in Turkey. By contrast, Quantum of Solace, with a reported $230 million budget, filmed in Chile, Mexico, Italy, Panama, Austria and the U.K.

Javier Bardem, who plays Skyfall's villain


Has the budget been cut? Michael Wilson, the other Eon co-boss, said in November that Skyfall’s budget is in the same range as Quantum. That’s despite the fact the world economy is weaker than 2008, when Quantum was filmed. Also, Quantum’s reported budget was almost as much as some Harry Potter movies without delivering the same level of return.

Still, let’s take Wilson at his word for a moment. Skyfall may be taking on higher costs that its predecessors. The 23rd James Bond film is employing an Oscar-winning director (Sam Mendes), an Oscar-nominated screenwriter (John Logan, who had two nominations when he was signed and just picked up another for Hugo), an Oscar-nominated director of photography (Roger Deakins) and a cast that includes Oscar winner Javier Bardem, whose earning power is at a peak, thanks to 2007’s No Country for Old Men, Oscar nominee Ralph Fiennes and five-time Oscar nominee Albert Finney.

Perhaps “all the money’s going to go on the screen” has a new meaning under Barbara Broccoli and Michael G. Wilson. Examples of all the money going to the screen for Skyfall may be the “Directed by Sam Mendes” credit in the titles or a dialogue scene between Daniel Craig and Javier Bardem, or between Judi Dench, Ralph Fiennes and Albert Finney. That doesn’t mean there won’t be action. (The second unit has been filming driving sequences in China, according to the MI6 fan Web site.) But the increased salaries may mean shifting priorities, even if Skyfall’s budget isn’t one penny less than Quantum’s — and even more so if Skyfall’s budget really is lower than its predecessor.

Skyfall is economizing, the Mirror says

Skyfall is cutting back on filming at actual locations to reduce its budget, according to the U.K. newspaper the Mirror.

In a story YOU CAN READ BY CLICKING HERE, the newspaper says the only actual location for the 23rd James Bond movie is Turkey. Here’s an excerpt:

"What do you mean, I have to fly coach?"

James Bond producers have had to slash their budget and are shooting in Bognor Regis after scrapping plans to head for six different exotic countries to make the next 007 film Skyfall.

Instead of distant locations such as India, China and Bali, they are using various UK beaches. Skyfall will also rely heavily on special effects and advanced sets at Pinewood Studios in Buckinghamshire.

A source said: “To say some of the cast and crew are a bit gutted is an understatement.

“Originally six different countries were selected to film certain scenes but after several technical and financial problems, it was decided to scale back and just use Turkey as the sole foreign location.”

Back in November, the bosses of Eon Productions, Michael G. Wilson and Barbara Broccoli, denied there had been any financial cutbacks during a news conference. Later that month, according to the MI6 James Bond fan Web site, Ascot Racecourse was being used as a location, doubling for the airport in Shanghai. The same fan site had a story saying that sequences of Daniel Craig swimming in a pool were filmed in the U.K. but in the film’s story are supposed to occur in Shanghai as well. If the Mirror is to be believed, that trend will continue.

However, it’s not like Eon hasn’t done this sort of thing before. You Only Live Twice’s first unit went to Japan and did the rest of its work at Pinewood. On Her Majesty’s Secret Service did location work in Switzerland and Portugal. From Russia With Love went to Turkey and Dr. No went to Jamaica. Few fans of those films complain about the lack of location shooting. Eon sent a skeleton crew to the U.S. but the exterior of Fort Knox was built at Pinewood and the interior was, of course, a Ken Adam-designed set.

UPDATE: The Daily Mail HAS A STORY but it seems to mostly repeat what the Mirror reported without adding much, if anything, new. The MI6 Web site summarized the Mirror story while accusing the Mirror of fabricating the main quote.

UPDATE II: The Guardian published an essay ON JAN. 19 essentially saying trimming Skyfall’s budget would be a good thing. But the story does nothing to verify the original Mirror story.