UPDATED: So ‘Avatar’ is Approaching a $500 Million Budget? Sorta, Probably…


UPDATE: As I briefly mention in my comments on Michael Cieply’s “New York Times” piece concerning Avatar‘s budget, his numbers are a bit interesting to say the least. Dave Poland has taken an even closer look and while Cieply’s math leaves a lot of holes in his analysis saying Avatar will be a $500 million film, it does have some interesting tidbits to go along with it. Just know the actual cost of Avatar is likely never going to be realized and let’s just hope it lives up to its billing. Again, here’s a link to Poland’s analysis.

Okay, so remember back in March when TIME’s Josh Quittner published in a feature article headlined “3-D: The Future of Movies” and said James Cameron’s Avatar was working on a $300 million budget and how Fox came out and even Quittner commented on my article saying “the $300 million number in his article is an error and it should have read $200 million.” Well, perhaps it should have read $500 million as a new article at The New York Times begins with the following paragraph when talking about Avatar:

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?

The article, written by Michael Cieply refers to Avatar as “among the most expensive movies ever” and does refer to his listed budget as an “estimated half-billion dollars” all while saying it carries “little financial risk for Fox’s parent company, the News Corporation, even if it disappoints.”

The lack of risk is apparently due to the reliance on outside investors and help from a network of allied companies and in-house business units. Cieply refers to this as “shifting industry economics.”

Next Cieply begins to dig into just how the film could potentially be seen as profitable, referencing “published reports” citing a budget of $230 million and then adding, “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.”

Cieply says 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. He seems to believe that should the film hit $250 million “Fox and its allies would appear to be headed into the black.” Of course, I am entirely confused as to how a film is considered profitable. Don’t the theaters earn at least a little bit of that money? It has to be more than $20 million even if we are going to work with the smallest of budgetary numbers doesn’t it?

Moving beyond such matters, it is interesting to learn Dune Entertainment and Ingenious Media picked up 60-percent of the budget for Avatar according to anonymous sources. And even more interesting is the report that if final production costs exceeded $300 million Cameron would effectively defer much of his payout until the studio and others were compensated, despite upwards of 15 years of his labor on the movie.

Fox’s biggest investment is said to be in an estimated $150 million worldwide marketing plan. Many may have recently seen the preview of the Avatar trailer prior to the Cowboys-Seahawks game a week ago, that was paid for by Fox, but apparently partners are stepping in elsewhere such as the highly touted “Avatar Day” this past summer where IMAX stepped in and supported the screenings of 15-minutes of footage from the film without significant cost to the studio.

When Avatar hits theaters on December 18 it “may play in as many as 2,500 3-D theaters, while occupying almost as many conventional theaters over the holiday season. Theaters using 3-D bolster the overall box-office by commanding ticket prices perhaps 30 percent higher than those of conventional theaters.”

In response to online skepticism to the first look trailer and “Avatar Day” Fox is apparently counting on what a studio exec referred to as a “secret weapon.” That weapon would be Alvin and the Chipmunks: The Squeakuel opening a week later and a sequel to a $217 million earning first film and one that was made for a cost of about $60 million. It already has the support of USA Today for its marketing so perhaps things will be just fine. Right?

For the complete “New York Times” article, click here, it’s rather interesting. For more on Avatar click here.