As Hollywood's major movie studios try to trim costs every way they can — including layoffs, mergers and slashed expense accounts and producer deals — there's one budget item that heads ever upward: the movies themselves.
This year's summer movie season — which kicks off May 4 with the superhero team-up film"The Avengers"and continues with 16 more "event" films through August — is the industry's most expensive ever. Five of the top titles cost more than $200 million each, a once-unthinkable ceiling that's being broken with increasing regularity.
In total, the studios spent more than $2.7 billion to make this summer season's big movies, an increase of 29% from just two years ago. The ever escalating costs show that the only thing Hollywood executives may fear more than spending too much is not spending enough to impress audiences around the world.
That's particularly true during the summer season, when theaters are packed and more than 40% of the year's box-office dollars are spent.
"In the current business climate you want to be as cost-efficient as possible, but there's no avoiding the fact that to produce a summer tent-pole on the scale necessary to succeed globally, you've got to spend to be competitive," said Amy Pascal, co-chairman of Sony Pictures.
The summer's costliest films are all sequels or adaptations packed with special effects — most digital, some physical — and action sequences meant to blow audiences' minds. The five that cost more than $200 million are Warner Bros.' next Batman film, "The Dark Knight Rises"; Sony Pictures' science-fiction sequel "Men in Black 3"; Sony's superhero reboot "The Amazing Spider-Man"; Walt Disney Studios' and Marvel's superhero mash-up "The Avengers"; and Universal Pictures' board-game-meets-alien-invasion film "Battleship."
Studios are traditionally coy about discussing movie budgets. So there is some dispute about which title cost the most. One person familiar with the "Dark Knight" budget but not authorized to speak publicly said the film cost between $250 million and $300 million. Another said it was closer to $225 million. "Men in Black 3," meanwhile, cost about $250 million, people knowledgeable about that picture said.
The tab for those five movies alone is more than $1.1 billion. And that's just to produce them. Television, online and print advertisements, along with the thousands of film reels shipped to theaters worldwide, can add $150 million per picture.
Last summer's five most expensive movies —"Pirates of the Caribbean: On Stranger Tides,""Transformers: Dark of the Moon,""Green Lantern,""Harry Potter and the Deathly Hallows: Part 2"and"Fast Five"— cost closer to $1 billion to produce.
The skyrocketing production budgets come at a time when studios have clamped down hard on all costs, particularly actors' salaries. With few exceptions, including "Men in Black" headliner Will Smith, there are no stars left on Hollywood's A list whose worldwide luster justifies more than $20 million per performance.
The star now is the spectacle. Studios can spend more than $100 million just on the special effects necessary to make Spider-Man swing through New York in 3-D or Iron Man and the Hulk plow through an enemy army.
Although executives say they're trying to control special effects costs by having multiple vendors bid on each project and often outsourcing the work to other countries, the greater pressure is to give audiences something they've never seen before. During a crowded summer season, when big-budget, high-stakes films open nearly every Friday, it's crucial to stand out from the crowd.
And with many movies completed mere weeks before they are scheduled to hit theaters, studios are often more concerned with hitting their promised release date than saving a few million dollars.
"The biggest part of the budget for tent-pole movies is the special effects and it's very difficult to bring down those costs, particularly when you are continually trying to raise the bar and often working on a tight schedule," said Warner Bros. film group President Jeff Robinov.
The pressure to produce fantastic special effects has been driven in part by the fact that Hollywood's revenue growth is coming not in dollars but in pesos, rubles and yuan. International box-office receipts grew 35% between 2007 and 2011, while domestic grosses were up only 6%. Total international box office in 2011 was $22.4 billion, compared with $10.2 billion in the U.S. and Canada.
Given the ongoing decline in DVD revenue, that means studios must try to predict what audiences in Moscow, Shanghai and Rio de Janeiro want to see. The safest bet is often over-the-top action and effects that don't need any translation. Even the effects-laden digital dud"John Carter,"which grossed a measly $69 million in the U.S. and Canada, took in $200 million internationally.
"Since most of the growth in the movie business right now is coming from the international marketplace," Universal Co-Chairman Donna Langley said, "it makes sense that we in Hollywood are collectively gravitating toward these films with scope and spectacle that have universal appeal."
In other words, Hollywood will keep spending more because that's what audiences around the world most reliably want. And that's not changing anytime soon. Next year's slate, packed with costly films such as "Iron Man 3," an untitled "Star Trek"sequel, "The Lone Ranger" and the new Superman movie "Man of Steel," could easily make for the first $3-billion summer.
"Everybody's trying to look at what they're spending, but it's one thing to look and another to actually curb," said producer Joe Roth, whose upcoming big-budget productions include"Snow White and the Huntsman" and "Oz: The Great and Powerful." "There's no question you can lose more money on movies than ever before. But you can also make more."