George Lucas Predicts Death of Big Budget Movies

H_Fisher writes "Before the red carpet had cooled at last night's Academy Awards, George Lucas told the New York Daily News that big-budget movies will soon be history. From the article: "'The market forces that exist today make it unrealistic to spend $200 million on a movie,' said Lucas, a near-billionaire from his feverishly franchised outer-space epics. 'Those movies can't make their money back anymore. Look at what happened with King Kong.'" Lucas' prediction: "In the future, almost everything that gets shown in theaters will be indie movies ... I predict that by 2025 the average movie will cost only $15 million.""

Comments

King Kong was a failure?

[illuin]

Color me confused: according to IMDB, King Kong had an estimated budget of $207 million, but had already brought in $520 million worldwide by the 26th of January. How is that a failure?

Is my point of confusion that the amount brought in was the Gross profit figure, and the taxes and other overhead eat up more than $300 million of that?

No even need to buy, just borrow

[drgonzo59]

The local library and the university library where I live has some good classics and they are free.

Re:George Lucas is wrong

[Mr. Underbridge]

For those who are familiar with my typical rants and raves on Slashdot, this post isn't much different. I'm the sole anti-copyright activist in most threads,

Wait - what? I'd say 75% of slashdot is anti-copyright, 50% of it anti-patent, and 90% anti-software-patent. Your threads must be small.

Yes, look at King Kong

[Bogtha]

"King Kong" box office record

Big budget epic "King Kong" has generated 100.3 million yuan (about 12.5 million U.S. dollars) on the Chinese mainland, becoming the box office king among imported films in the past five years.

"King Kong," with a 207 million U.S. dollars budget and 540 million U.S. dollars in global box office revenues, has received four 2006 Oscar's nominees -- Art Direction, Sound Mixing, Sound Editing and Visual Effects.

So a 200% return on investment in the first year alone, not counting merchanidising, not counting DVD sales, DVD rentals, TV licensing and Hollywood accounting practices, isn't enough?

There's another thing as well - lower budget doesn't mean lower quality. I don't mean that you can get by with spending less on equipment, hiring unknown actors, etc, I mean that if tomorrow's average budget for films is a tenth of what it is now, you wouldn't notice from watching the films.

Drop the salaries across the board, and you won't get lesser performances. Brad Pitt and Angelina Jolie aren't going to stop trying so hard because they get paid $1 million per film instead of $20 million per film. Hell, you might get big name actors to work a bit longer before retiring.

Drop the advertising budget across the board, and you won't get less demand. You won't get any more competition from the low budget films because whatever Hollywood spends on advertising would still far outstrip people with limited budgets, even after massive reductions.

The only reason so much money gets spent on advertising and actors is because there's always somebody in Hollywood willing to spend more. It's a tragedy of the commons. If people weren't so eager to get the #1 name or the most airtime, the same films could be produced for a fraction of what they are at the moment.

Re:Yes, look at King Kong

[Deep Fried Geekboy]

You need to educate yourself about how movie accounting works.

You pay $10 to watch a movie. This is the GROSS.

The exhibitor (eg Cineplex Odeon) take 50% $5 and pass the rest up the chain.

The distributor (eg Lions Gate, Miramax, Gold Circle) take 50% ($2.50) and pass the rest up the chain.

The remaining $2.50 is the PRODUCER'S GROSS.

The A-list actors who have a % of gross take their cut. Say 20%. That leaves $2.

Now that $2 is used to pay off the cost of production ('negative cost') and give the investors a return on their capital. This includes things that have already been paid like producer's fees, actors' fees, writing fees, all the crew costs, etc. The studios usually get a big cut of this because the movie uses their facilities, which they charge out at exhorbitant fees.

Once the negative cost has been recouped (if ever), what's left is PRODUCER'S NET, which is what most people in the movies mean by profit.

As a writer, I usually get 5% of this, sometimes known as 'five monkey points' because only monkeys think they mean anything.

But anyway, the logic of all this is that a movie must make AT LEAST 4x it's negative cost to go into profit. So a $200m movie must gross $800m+ to go into profit.

Re:If so, only because he killed them.

[Peteee]

King Kong was hardly a disaster.

Domestic: $216,905,000 39.9%
+ Overseas: $326,899,029 60.1%
= Worldwide: $543,804,029

Good movie too imo

Re:If so, only because he killed them.

[hal2814]

"I'm not sure what qualifies as a success."

A movie that doesn't take six weeks to recover its costs. "Disaster" may have been a bit harsh, but calling I'm pretty sure studios aren't going to be touting it as a Hollywood success story. It did eventually double its return so it can at least be viewed as marginal by Hollywood standards.

Re:2025 is a long way off...

[Lumpy]

Here are some facts.

Hollywood uses a very strange accounting system. No movie in history ever made a profit. No matter how much a movie will Gross it will never exceed the expenses for that film. I know. Several friends had been promised "Net points" on a hollywood film they worked on. They never made a dime (Look at Stan Lee they tried that crap on him as well!) while the few like the director were given "Gross Points" and made their millions. After everyone is paid the rest of the money goes into paying the Gross points and other incidentals so that no movie ever makes a net profit.

This has been this way forever in Hollywood.

Secondly most hit movies lately have been indie films bought and then re-made These are the ones that people actually talk about, buy the DVD, and reccomend others to see. Most of the big budget films do not get the re-viewings or reccomendations from people to their friends.

Probably, because...

[Rocketship Underpant]

"King Kong had an estimated budget of $207 million, but had already brought in $520 million worldwide by the 26th of January."

Well, for starters, only half of the box office take will go to the studio, the rest being kept by theatres and distributors. Less than half, maybe, when you consider the overseas portion. And then there's at least $50 million or so spent on marketing and advertising that's not included in the production budget.

In the end, with DVD sales and what-not, they might scrape over the line into the black; and a percentage of that might belong to Jackson and some of the actors. But when you spend more money than the gross national product of Portugal, managing to get your money back is hardly a resounding success. They could have made more buying bonds or something. The only reason you risk $200 million is because you expect to make a huge percentage of that in profit. That risk isn't paying off so often lately.

King Kong made $543M worldwide

[Deslock]

"The market forces that exist today make it unrealistic to spend $200 million on a movie," said Lucas, a near-billionaire from his feverishly franchised outer-space epics. "Those movies can't make their money back anymore. Look at what happened with 'King Kong.'"

Huh? It cost $207 million and earned $543M to make. Unless marketing and distribution cost them more than $336M, Kong was profitable.

Source: http://boxofficemojo.com/movies/?id=kingkong05.htm

Re:Actor compensation

[Red Flayer]

"Don't forget the insane fees paid (not salary or pay either, so they pay no income taxes)."

Not so. They aren't issued a W2, and no taxes are deducted from their payment -- but they still pay taxes on it. They are issued a 1099-MISC, and the payments is reported to the IRS as non-employee compensation. Some actors file taxes as being self-employed; they still pay income tax on it, often more than regular wage-earners pay.

The typical way that actors pay taxes on their earnings is through a corporation. If it's an S-Corp, then the corporation pays no taxes, but the owner pays income taxes on the distributions they receive, and employees of the Corp pay taxes on their salaries (like the personal assistants, etc). If it's not an S-Corp, the corporation pays taxes on their profits, and the actor also pays on their salary from the Corp, as do the employees.

At any rate, saying they don't pay taxes on their fees is misinformed at best.

Besides, do you really think the IRS ignores actors, musicians, etc? It didn't work that way for Willie Nelson and many, many others.

Re:Note that he said "the average movie"

[Vejadu]

The budget for The Chronicles of Narnia was really close, at $180 million.

Re:George Lucas is wrong

[Fordiman]

Fact: since 1980, the dollar has lost 61% its value (representing 154% inflation over 100%)
Fact: since 1980, the average salary of a US citizen has risen from 15,757 to 41,400 (162% increase over 100%)
Conclusion: in the last 26 years, the average buying power of an American citizen has increased by roughly 3.1%

Doing good, folks. Lets see if we can't make it 6% in another quarter-century.

Re:Star Wars rules... but Lucas is a moron

[Blakey Rat]

I don't get his example. What's wrong with King Kong? According to the IMDB business page, it's made $519 million on a budget of $207 million. Uh, I dunno about George Lucas, but I'd sure as hell take that investment! (And this is before the bulk of the DVD sales, and not counting the various merchandising deals.)

Lucas needs to realize that the original Star Wars trilogy were flukes... never before, and never since, have such cheaply-made movies (no offense to fans, but the budgets were relatively low) had such huge returns at the box office.

Re:Peanut Gallery

[evilviper]

I just decided since that this was /. and not a moderated publication that I wasn't going to run around looking for the exact reference.

In other words, you have no source for that incredibly unbelivable claim... That sure lends credibility to your argument.

All the critical acclaim this year's movies kind of nullifies your argument.

Not at all. Critics are no measure of anything, except themselves. Critical opinions have never been in-line with popular opinions.

So where are all those box office dollars coming from?

What a highly intelligent argument... No, I didn't even suggest that EVERYONE, EVERYWHERE had stopped going to movies. There has been a VAST decline in theatre profits over the past couple years, and you can't even pretend it doesn't exist.

Way to read into my post something that isn't there. I never said that the "horrible sequels, remakes, spin-offs, and comic-book movies" aren't why people are going to the movies.

Sure you did, in fact, you almost specifically said that's what they WANT:

there is little evidence that the movie-going masses would have preference for "more imaginative" movies.

Basically they want special effects. And not just any special effects, modern special effects.

they expect repetition. Repetition in effects, in plot, in characters. This is why sequels have been and are so popular.

Audiences no longer go to movies to see something different every time. They want comfort food.

Yes, "people aren't going to movies nearly as much" but when they do, they go see "horrible sequels, remakes, spin-offs, and comic-book movies" and as long as they do, Hollywood will keep putting them out.

Not true at all. There have been a few very successfull "horrible sequels, remakes, spin-offs, and comic-book movies", but most have actually been gigantic bombs.