Speaker 1: Summer movie budgets are on a totally different planet. 200 million dollars. 295 million dollars. 340 million dollars. 350 million dollars. The cost to pay for talent, production, post-production, insurance, marketing, unexpected costs, lodging, feeding, transportation, and reshoots are just some of the items that go into the accounting spreadsheet for a movie. With major motion picture companies pumping massive amounts of money into projects, we'll try and shed some light on how this money is spent. A couple of housekeeping notes real quick. 1. In this video, when the term movie studios is used, it will reference the big six. This is because the majority of popular films released in the West are connected in some shape, form, or fashion to them. This is not to say other smaller companies don't have similar practices to pay for movies, but for the ease of understanding for everyone, we'll be using the big six alongside some bigger name recognized movie franchises. 2. The information contained within this video is not the way budgeting and accounting occurs for all movies, but rather a generalized way of how things work. 3. And finally, movie budgets are typically shrouded in secrecy. A lot of the budget numbers you see online are estimates from journalists. Unless there's a leak from within, usually the production budget you see online is just an estimation from an industry expert or journalist, not from the studio. The development stage is the first step in film production. This phase of the production process includes fleshing out the story, writing a draft of the script, and figuring out the baseline finances and logistics of a project. Depending on the type of film being made, the popularity of the names involved, and interest from a studio, development can last anywhere from a few months to a few years. Like any job, the more senior you are, the more you can ask or demand of an employer. Your big name directors such as Steven Spielberg or Christopher Nolan don't usually have to worry about a studio greenlighting their expensive projects. Other factors can help sway a studio such as name recognition of cast members or tax write-offs, and merchandise tie-ins which will help offset the cost of a movie in the long run. Parties involved may request, offer, and counter-offer numbers for budgets and items on their wish list. Studios can become frugal if they are footing the bill on a project entirely. However, if another studio jumps on board to assist in the production, then they might be enticed to pony up a few more dollars since someone else is helping to foot the bill and sharing the risk. After getting the thumbs up, producers and directors get to work delegating their staffs for location scouting, building of sets, costume creation, equipment rentals, lodging reservations, and the list goes on. The problem for modern-day movie making by big studios is there are so many intricacies and fackers that not everything can be easily accounted for 100% upfront and which is why most movies are given a discretionary fund in some way to help account for unforeseen circumstances. And speaking of equipment, let's pause real quick to talk about Audioengine. Audioengine is a speaker company specializing in premium, high-quality speakers that don't break the bank. They're highly rated on every platform and are made in the U.S. If you're in the market for new desktop speakers, consider getting a pair from Audioengine and be sure to check out my review on their A5 Plus model. Studios will usually create a fake production company and set up a production office. This part is done for the previous mentioned tax incentives. A lot of big-name movies have been made under fake movie companies around the world for their tax write-off saving abilities and to allow secrecy during production from pesky journalists and fans. A great example of this was for Jurassic World Dominion in which Universal Studios created the fake studio under them called Arcadia Pictures Ltd. which was based in the U.K. where a lot of principal production and photography took place. Studios tend to absorb the cost of individual pictures and their overall expenses during their annual accounting procedures and don't itemize them in public filings as can be seen in this Universal Studios SEC filing. However, the cost of movies can be found out sometimes through these fake studios depending on where they're made. Companies like Arcadia are able to benefit from the U.K. government's Film Tax Relief Scheme which allows them to receive a reimbursement of their costs in the U.K. provided that at least 10% of the total production budget is spent there. The reimbursement is funded by taxpayers and can only be paid to U.K. companies which handle all aspects of the movie making process which is why Arcadia was made in the first place. Since Arcadia is a company of Universal Studios, Universal will reap the benefits in the long run. Check out this interactive map from Media Services about how each U.S. state racks and stacks when it comes to the filmmaking tax incentive market. Creative accounting is why studios can claim movies lose them money on balance sheets all the while turning massive profits down the road. A famous case of this was Harry Potter and the Order of the Phoenix back in 2007 when Universal Studios claimed a loss on the movie despite it making almost $1 billion just at the box office by the end of its theatrical run. Not adjusted for inflation. You can find out more detail about this story by following a link in the description. Getting back to pre-production though, the process involves finalizing the script hammering out a more definitive budget acquiring the necessary sound stages or obtaining permits for onsite shooting locations and auditioning actors. Additionally, key parts of the director's staff will be finalized such as the director of photography maybe certain members of the production team unit production managers costume designers and others. You think that's a lot? Well, also during pre-production, insurance is purchased to cover the liabilities equipment and other potential risks during production. While all this is happening, each department is working with producers managers and supervisors to break down what each section needs to complete in order to properly meet the director's vision. Additionally, secondary compensation is paid out to certain individuals who may have their businesses impacted by filming. Do you think that pre-production costs have been finalized? Well, they haven't. Script development such as acquiring rights are worked into the budget legal fees are considered storyboarding and or pre-visualization for the entire movie or maybe just some key parts concept art and design for particular characters or costumes and let's not forget actors and crews still need to be paid minus a few smaller items here and there all of that is just what goes into pre-production and as you can imagine, it costs a lot of money. Next comes the actual production of the movie. Principal photography costs a pretty penny rental fees for shooting in various locations set construction and design to include props and costumes transportation costs for all the cast, crew and equipment stunts and special effects and of course, catering meals for everyone involved. An honorable mention goes to the port-a-johns on sets. Depending on several factors, filming during production can last anywhere from a couple of weeks to months. The final part of making a movie? Post-production. This is where the audio and visual materials are cut together to create the movie. An editor or a small team of editors assembles the footage shot by shot adds in music, sound and visual effects. While that sounds simple post-production can have a plethora of steps that can rack up the cost of a movie. For instance, automated dialogue replacement known as ADR can require an actor to come into a sound studio and re-voice lines from a movie due to the audio on set not being captured at the desired quality. Foley sound artists watch a cut of the movie to create sound effects for scenes. Depending on the project a small army of visual effects artists work behind the scenes to create all of the computer generated images. A music conductor will also receive a cut of the movie and begin scoring the music soundtrack. The ultimate worst part of post-production is if a studio requires a movie to conduct reshoots. Sometimes these aren't too bad requiring only a shot or two but it seems more often with major motion pictures that substantial reshoots are happening which can delay the release of a movie and can cost a lot of money. Not to mention the pain of having to coordinate actors and directors to come back. Reshoots can also occur if test screenings of a movie don't go quite the way the studio had hoped. If test screenings are so bad studios have been known to scrap movies or bring in new creative management to course correct. As you can imagine that costs even more money. With hundreds upon hundreds of people involved in major motion pictures numerous filming locations worldwide big name actors attached practical and special effects involved it's no wonder that some movies cost a fortune to make. And this is just to make a movie. Once the movie is made marketing and distribution of the movie still has to occur. While the marketing budget is separate from the production budget it's worth mentioning because marketing and distributing a movie can cost a sizable amount. Box office returns factor into whether a movie is profitable and in turn will affect budget sizes for sequels down the road if sequels happen at all. Marketing goes toward printing and displaying billboards posters, cardboard cutouts ads on TV radio and the internet publicity tours of the main cast and crew negotiations between the studio and theater chains for release windows release windows for international markets merchandise tie-ins just to name the big things. What are your thoughts on movie budgets? Have they ballooned way out of proportion over the last few years? Or are they about what you expect? What are some good and bad examples of blockbuster movie budgets? Let me know in the comments below and please don't forget to subscribe if you haven't already. This is Movie University education in cinema. Movie University www.movieuniversity.edu