King of the World

The Hollywood director James Cameron has set the benchmark of most expensive movie ever made three times. When he made Terminator II: Judgment Day, it was the first movie ever made with production costs exceeding $100 million. Questioned about the high costs of making the movie, Cameron answered his critics by stating “It’s all up there on the screen.”

He was right. The special effects of Terminator IIwere ground breaking and spectacular. It was the first movie to use the technology of digital morphing, having a character change shape seamlessly on screen. Married to pulse pounding story and memorable characters, Terminator II went on to become a monster hit, spawning two additional sequels, and cementing Arnold Schwarzenegger as the #1 movie star in the world at that time.

Later, Cameron helmed the movie Titanic. The cost overruns on this $150 million movie were so extreme that Cameron had to forfeit his normal director’s fees before the studio would release additional funds to allow him to finish the movie his way. Before the movie was released, an executive of a rival studio sneered “Everybody knows what happened. The boat sinks. Everybody dies.”

The story of star-crossed lovers, combined with special effects and elaborate sets that created total realism, convinced audiences to see this movie over and over again. Titanic became the most successful movie in the history of cinema, pulling in over $1.8 billion in global box office.

This month James Cameron released his first movie in twelve years. Avatar took four years to produce, and cost estimates are ranging from $250 to $300 million. New motion capture technologies had to be invented to allow the screenplay Cameron wrote to be presented with the verisimilitude to allow the suspension of disbelief. At the upper end of that cost range, the movie would have to reach $750 million in global box office just to break even. Since the American movie going public typically supplies half the sales dollars for a film of this type, that means that the domestic gross on Avatar would have to be over $350 million to have a prayer of paying back the investors.

The early reports from this weekend’s box office are in. After just under three weeks, Avatar has pulled in $352 million in domestic sales. Globally, the news is even more spectacular. Avatar has just crossed over the $1 billion mark in global box office.

To put this into perspective, only four other movies have cracked past the billion dollar mark. The Dark Knight ($1.001B), Pirates of the Caribbean: Dead Man's Chest ($1.07B), Lord of the Rings: Return of the King ($1.1B), and Titanic ($1.8B). At this rate, by next week James Cameron will have directed the top two grossing movies of all time. He will be the only director to direct a billion dollar movie that wasn’t a sequel.

The movie business is one where you have to lay down large bets, and nobody really knows what is going to work. Even making a low budget film requires an upfront investment of $10 to $20 million, with no guarantee that anybody is going to want to pony up eight bucks for a ticket. For every My Big Fat Greek Wedding, which grossed $368 million worldwide on a $5 million production budget, you get a Speed Racer, which cost $120 million to make and earned $94 million in worldwide ticket sales.

Basically, making movies is a gigantic crapshoot, and nobody places bigger bets than James Cameron. But I wouldn’t bet against him.