Yes, it can.
OK, that may be a bit on the flippant side. There’s been a lot in the media recently about how much the sequel to Avatar has cost to make and, by all accounts, it is likely a massive amount. Some reports are suggesting as much as $350m -> $400m! Whilst I personally find that hard to believe, it should be taken in context. There are three other sequels in production and a whole new realm of technology needed to be developed to allow effective motion capture to be performed whilst under water. My guess, therefore, is that the cost base for the sequel movies is very front-loaded and I am assuming that the remaining three movies will be cheaper to produce.
So again, the question then becomes can it turn a profit?
The original Avatar movie grossed $2.9B worldwide and is the highest grossing movie ever. That movie was, however, a trailblazer in terms of 3D technology and many people flocked to the cinemas to experience the spectacle, maybe moreso than the actual movie itself. Will the sequel hit those dizzying heights? I doubt it will but let’s take a look at what it needs at a minimum to break even.
The maths for that is relatively simple. You take the production budget, add on the marketing budget and then add on approx 30% to cover the other costs.
Equally, you also have to factor in that the studio does not get 100% of the box office gross. It gets approx 60% of the domestic (US) box office and 20%-40% of the worldwide box office.
So if we take the latest reports at face value and put the production budget at an eye-watering $400m and then assume the global marketing budget to be around $200m. The overall budget then becomes:
400m + 200m + 30% (200m) = $800m (!)
That’s likely worst-case but OK. Now, the highest grossing domestic (US) movies in history are:
- Star Wars: The Force Awakens – $937m
- Avengers: Endgame – $858m
- Spiderman: No Way Home – $814m
- Avatar – $785m
- Top Gun: Maverick – $717m
(Figures taken from BoxOfficeMojo.com)
So let’s say that Avatar 2 beats the original and makes around $800m. They have broken even, right? Wrong. Remember what I said before. The studio gets around 60% of the domestic box office. So that’s around $480m – still not too shabby.
Then it really comes down to the international success of the movie. Here are the international takes for those same movies:
- Star Wars: The Force Awakens – $1.133B
- Avengers: Endgame – $1.939B
- Spiderman: No Way Home – $1.157B
- Avatar – $2.137B
- Top Gun: Maverick – $770M
You can see from this that the reason Avatar is the top grossing movie of all time is that it has pretty much destroyed all competition internationally. However, the studio only gets 20%-40% of that revenue. It is also highly unlikely that Avatar 2 will match the international success of the first movie, although anything is possible!
If we err on the side of caution, let’s assume that Avatar 2 pulls in more like the normal overall revenue for a movie at around 65% of the total. This would make the international tally of $1.485B and a worldwide total of around $2.3B which would be stunning.
If the mid-figure for studio take on international box office is taken for this at 30%, then the studio would get roughly $450m from the international box office. This would then mean the studio would get in total around $930m in revenue. However, look at the costs again. That totalled $800m. So the bottom line is that, even if Avatar did become a member of the $2B movie club – a truly rare event in itself, there are only five movies in history that have done that – then the studio is looking at a profit of around $130m!!!
Of course, all of this could be skewed by the movie being more successful at the US box office than these figures use whereby Disney would get a bigger share of the overall take, but also maybe the movie may not take as much internationally.
The only real conclusion here is that every studio out there needs to be extremely careful with its budgets. Even if Avatar 2 ends up losing Disney money, Avatar 3, 4 & 5 will most likely be way more profitable since they will benefit from lower production costs.
Never bet against Disney and never bet against James Cameron! They’re like casinos and will always win in the end!
