by Ray Keating
Analysis
DisneyBizJournal.com
December 2, 2022
My mouth fell open when I first read it. In a GQ interview, director James Cameron said that he told the studio that his forthcoming film (which opens on December 16), Avatar: The Way of Water, represented “the worst business case in movie history.”
Excuse me?
But when you look at the numbers, The Way of Water could turn out to be exactly that. The full point from the GQ piece is as follows:
The Way of Water was expensive to make—How expensive? “Very fucking,” according to Cameron, who told me he’d informed the studio that the film represented “the worst business case in movie history.” In order to be profitable, he’d said, “you have to be the third or fourth highest-grossing film in history. That’s your threshold. That’s your break even.”
The Hollywood Reporter has noted: “The Way of Water's production budget is one of the priciest in Hollywood’s history, and is in the $350 million to $400 million range, according to sources.” And that excludes marketing dollars, which could run double the production costs.
And Bloomberg has reported: “But the economics of The Way of Water are tougher. With a production budget that analysts say could be as high as $400 million, it’s one of the most expensive movies ever made. Add in marketing expenses that can reach hundreds of millions of dollars for A-list films, and it’s not hard to imagine Disney needing ticket sales approaching $1 billion before it earns a penny of profit.”
Cameron is notorious for running up big production budgets. But he’s also known for bringing in the dollars so that those expensive films turn out to be profitable. Can he do that again with The Way of Water? Disney certainly hopes so, as Cameron’s Avatar was part of their $71 billion purchase of 21st Century Fox in 2019. But there’s a lot working against Cameron this time, including box office uncertainty post-pandemic and the fact that most people can’t recall any characters or much of the story from the first Avatar film.
After the Lightyear and Strange World flops, Chapek getting fired, and Wall Street having lots of questions, Disney needs a profitable hit. Weirdly, though, Disney might wind up with The Way of Water being a hit, and yet a money loser. Economics can be such a bitch.
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Ray Keating is the editor, publisher and economist for DisneyBizJournal.com; and author of the Pastor Stephen Grant thrillers and mysteries, and the Alliance of Saint Michael novels; and assorted nonfiction books. Have Ray Keating speak your group, business, school, church, or organization. Email him at raykeating@keatingreports.com.
The views expressed here are his own – after all, no one else should be held responsible for this stuff, right? Also, Keating is a Disney shareholder.
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