Summer Box Office Fallout: Studios' New Fear of the $200 Million Tentpole

Summer Blockbuster Greenlight Illustration - H 2013
Illustration by: David Gallety

Summer Blockbuster Greenlight Illustration - H 2013

"The Lone Ranger" and "R.I.P.D." create a new reluctance to bet big on franchises; says producer Joe Roth: "Everyone is trying to get [budgets] down about 20 percent."

This story first appeared in the Sept. 13 issue of The Hollywood Reporter magazine.

Call it the summer of the redwood forest -- too many giants planted closely together. The result? Very little sunlight in between. Now, after a season of major would-be franchises falling short -- including Disney's The Lone Ranger, Universal's R.I.P.D. and Sony's After Earth and White House Down -- several industry players say the studios are debating whether to alter their summer strategies.

A source at Warner Bros., for example, says a topic at the studio's annual review meetings is "a sense of budgets creeping up." And producer Joe Roth says in his dealings with the studios, he is encountering new attempts to tighten coffers. "A year ago it was, 'You can do it for $150 million, right?' Today it's, 'You can do it for $125 million, right?' [Everyone is] trying to get it down about 20 percent," he says.

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Although the full impact of the summer is not yet clear, a leading talent representative says a trend has emerged: When it comes to launching franchises, studios will pull back on spending.

"There's an Iron Man template," he says. "That initial budget [for the first film] was not crazy-crazy." (The 2008 original was made for about $140 million.) As for sequels, he adds, studios will sharpen their focus on movies that merit big spends and look to save on those that don't.

For example, though Thomas Tull's Legendary Entertainment is committed to tentpoles, the company might have taken a hard lesson from Guillermo del Toro's Pacific Rim. Legendary, which covered 75 percent of the film's $200 million budget, struggled to crack $100 million domestic without major stars or recognizable branding. In the future, lacking such elements, says a knowledgeable source, Legendary likely would cap the budget at $175 million. Still, the film recovered enough from its poor bow July 12 to cross $400 million worldwide, including $110 million in China. A sequel is not out of the question, albeit at a downsized budget.

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Similarly, Paramount is developing a sequel to the Brad Pitt zombie pic World War Z but hopes to hold costs to about $160 million. The original has grossed more than $532 million worldwide, but given its price tag of $250 million or more, it is hardly a profit engine.

Paramount also will look to save money on another Star Trek -- a franchise, but not quite in the top tier. This summer's $190 million production Star Trek Into Darkness has earned over $462 million worldwide; its international haul has exceeded expectations at $234 million, but domestically, its $228.5 million hasn't matched the first film. Whereas the first two were shot in L.A., the next will be filmed in a more tax-friendly location. "We're making it for what it should have been shot for last time if we had made it outside of L.A., which we would have done except that [director J.J. Abrams] didn't want to," says a studio source. "That was a $20 million issue." (Abrams, busy with Star Wars, is unavailable for the third Trek.)

Also looking to save money, Warners will shoot its Superman/Batman pic in Michigan and reap $35 million in incentives. Man of Steel shot in Chicago, California and Vancouver and did not score comparable rebates. The movie has grossed about $657 million worldwide, but like other ventures this summer, its $225 million cost has hampered profitability.

Walt Disney Studios chairman Alan Horn acknowledges that the industry's hard summer has led to "introspection and postpartum discussion." But he says his company won't make policy changes despite a potential $190 million loss imposed by Gore Verbinski's $250 million Lone Ranger.

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"We always look at everything," says Horn, whose tenure began after Lone Ranger was greenlighted. "It's ongoing and not particularly affected by whatever succeeds or fails in the marketplace. We do our best to do everything efficiently, [but] we're not saying because of these failures, we're taking $15 million out of the next three pictures or anything like that. I would say we are looking, as we always look, at every film from beginning to end."

Horn declines to address Disney's Pirates of the Caribbean 5, which has not yet been greenlighted. The studio took steps before this summer to control costs by hiring directors Joachim Ronning and Espen Sandberg, who made the adventure film Kon-Tiki on the water for only $15 million. And certainly Disney will look for major deal concessions from star Johnny Depp and producer Jerry Bruckheimer.

But even though negotiations with Bruckheimer will be fierce given friction over Lone Ranger, the all-but-certain outcome is that a deal will be reached -- probably with more generous terms than Disney would like. If franchises are split into two groups -- the greater and lesser -- then Pirates is in the first tier, with the most recent installment grossing more than $1 billion worldwide in 2011. (A report that Bruckheimer will lose final cut is false. He long has had that power on his Disney films but never has exercised it. On Lone Ranger, he and Verbinski lost final cut because of budget overruns, but Disney did not impose its will despite wanting to trim the film.)

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Tightening budgets might help studios hedge their bets, but given an already full pipeline, another problem this summer -- overcrowding -- won't be addressed for some time. "The summer season now starts in early May, and I think we have seen audience fatigue set in come July and August," says Sony's Doug Belgrad, whose late-summer Elysium has underperformed. (This Is the EndGrown Ups 2 and Smurfs 2 have turned a profit.) "It requires us to be thoughtful about when we release our films."

Budgets and competition are major challenges, but observers say the biggest issue is quality.

"This summer proved that scale and spectacle alone won't suffice," says Fox film chief Jim Gianopulos, who has committed to spending $150 million on next summer's biblical epic Exodus, from Ridley Scott, and nearly $200 million on X-Men: Days of Future Past. "Movies need originality and compelling stories and characters. Pure tonnage of effects is not going to cut it."

Twitter: @TatianaSiegel27