'Lego Movie' Backer Village Roadshow Cut Out of Sequel (Exclusive)

Lego Movie Dropped Sequel - H 2014

Lego Movie Dropped Sequel - H 2014

Insiders say Warner Bros. execs realized they made "a big mistake" allowing its financing partner to cover 50 percent of the box-office hit's costs.

This story first appeared in the April 4 issue of The Hollywood Reporter magazine.

Warner Bros. gave up a whopping chunk of its profits from the blockbuster Lego Movie, but it won't make the same mistake twice. Sources say Village Roadshow Pictures has not been invited back for the sequel that is being developed by animation guru Chris McKay. Insiders say Warners execs realized they made "a big mistake" allowing financing partner Village to cover 50 percent of the first Lego's costs (including production and marketing), with RatPac-Dune Entertainment getting a smaller share. The movie has made nearly $400 million worldwide, with a sequel planned for 2017.

STORY: 'Lego Movie' Sequel Sets Release Date

"Obviously, they didn't have confidence in it," says one source. "If you don't really know animation, you would look at that movie [while in production] and think it's awful. If you do understand animation, it was so clever because it felt different. It was cool. But somebody [at Warners] made the judgment that it wasn't cool. Why else would you sell off almost three-quarters of a $65 million movie?"

Village was spurned by Warners when it first asked to invest in the film, but the studio came back later, offering 25 percent, followed by a further 25 percent. Just why it turned to Village twice isn't clear, but as a result, the company covered half the movie's $100 million total cost (including both production and P&A) and will get back half the profits once the studio has taken its distribution fee.

Still, Warners can thank its lucky stars there are no first-dollar gross participants -- unlike Gravity, for which Sandra Bullock will take home some $70 million.