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$175 million? $200 million? $225 million? $250 million? $300 million? Which number will wind up being the real final pricetag for "Pirates of the Caribbean: Dead Man's Chest" ?

$175 million? $200 million? $225 million? $250 million? $300 million? Which number will wind up being the real final pricetag for "Pirates of the Caribbean: Dead Man's Chest" ?

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Let's start with the good news: "Pirates of the Caribbean: Dead Man's Chest" is obviously a huge hit. To date, this Gore Verbinksi film has earned $379.6 million during its domestic run as well as an additional $392.2 million overseas. For a combined total of well over three quarters of a billion dollars.

Then when you consider that this Jerry Bruckheimer production has yet to open in several incredibly lucrative international territories (I.E. Germany & Spain), it's now looking quite likely that this "Pirates" sequel will eventually knock "Finding Nemo" off its perch as Disney's all-time top earner (Once the final domestic & international earnings for "Dead Man's Chest" are tallied, of course).

Which you'd think would be the cause of great celebration at the Mouse House. But instead ... Well, what I've been hearing is that the mood inside the Team Disney Burbank building is actually quite somber. That -- thanks to the high cost of producing two sequels to "Pirates of the Caribbean: Curse of the Black Pearl" back-to-back as well as the somewhat lackluster response to "Dead Man's Chest" merchandise -- it's now looking like it might be a couple of years before the Black Pearl finally sails into the black.

Which I know must sound rather bizarre. Given that -- for the past 30+ days -- that's all that the media seems to have been talking about. The obscene amount of money that this "Pirates of the Caribbean" sequel has earned to date, the various box office records that this movie has broken.

But you have to understand that -- out in Hollywood -- the general rule of thumb is that a motion picture must earn at least three times its production costs before it can then officially begin to turn a profit. And when it comes to "Dead Man's Chest" ... Well, Mickey hasn't exactly been forthcoming about how much it actually cost the studio to produce this Gore Verbinski film.

Why For? According to studio insiders that I've spoken with, Disney has deliberately downplayed and/or been downright deceptive when it comes to discussing "Dead Man's Chest" 's actual production costs because ... Well, they're reportedly very concerned about the effect that this sort of information might then have on the company's stock price.


Copyright 2006 Walt Disney Enterprises

Mind you -- were you to actually go looking for detailed information on "Dead Man's Chest" production costs -- you'd find a surprising array of numbers out there. These include:

  • $175 million: According to Merissa Marr's June 30th report for the Wall Street Journal, the Walt Disney Company had originally set aside $350 million to cover the combined production costs of its two "Pirates" sequels. Which (in theory) would have placed "Dead Man's Chest" & "At World's End" production costs at $175 million apiece.
  • $200 million: Over on Terry Rossio's MySpace page, the "Pirates" screenwriter's on-set diary talks about the difficulty of shooting " ... two 200 million dollar back-to-back films."
  • $225+ million: Again in her WSJ article, Marr detailed how hurricane-related problems eventually pushed "Dead Man's Chest" & "At World's End" combined production costs to over $450 million.
  • $250 million. In his new book, "Boffo: How I Learned to Love the Blockbuster and Fear the Bomb" (Miramax, June 2006), Peter Bart (editor-in-chief of Variety) relates how " ...Disney's newly appointed President, Bob Iger, was nervous about the soaring production costs of the two sequels to 'Pirates of the Caribbean,' which were shooting back-to-back. The decision to make these films represented a $500 million bet."

Of course, those are just the numbers that have actually made it into print. Off-the-record, studio insiders who have actually worked on the "Pirates" sequels are saying that -- thanks to all of the elaborate FX sequences in "Dead Man's Chest" and "At World's End" -- the combined production costs of these two films is now well north of $600 million.

And let's keep in mind that we're just talking about production costs here, folks. Not the additional $100 million that a studio typically has to spend in order to properly launch a summer blockbuster. That $600 million was supposedly spent on just producing those two motion pictures, not on their promotion & marketing.

And let's not forget that Gore Verbinksi hasn't actually finished shooting the third "Pirates" sequel yet. Sets are being build on the Burbank lot right now for the "At World's End" scenes that are set on Shipwreck Island. Where the pirate Brethren will meet to discuss what they should do about the East India Tea Company (FYI: This is the sequence in the film where Keith Richards is expected to make his long-talked-about cameo appearance as Jack Sparrow's dad). 


Copyright 2006 Walt Disney Enterprises

According to studio staffers that I've spoken with, it's going to take Gore at least six more weeks of shooting before he gets everything that he needs to complete "At World's End." Which means -- in essence -- that the meter's still running on this incredibly expensive project. That the final combined production costs of these back-to-back "Pirates" sequels could eventually reach as high as $650-$700 million.

So -- given this situation -- is it any wonder why Disney PR types prefer to talk about how much "Dead Man's Chest" has earned to date? Rather than discuss how much it will eventually cost the company to complete these two hugely expensive motion pictures.

Oh, I know. Further on down the line, there'll be all of that DVD money. Plus the revenues that will eventually be generated once "Dead Man's Chest" turns up on pay-per-view, premium cable as well as network & cable TV. So no one's saying that this "Pirates" sequel won't ever turn a profit. It's just that -- given the high production costs of the two "Pirates" sequels -- it may take the crew of the Black Pearl quite a while to get out of the red.

This perhaps explains why Disney Company officials are already sweating what Wall Street's response might be to tomorrow's third quarter earnings announcement. Given that the investment community seems to have lost a lot of its enthusiasm for the Mouse House ever since "Cars" missed its initial financial projections ... Well, it's certainly not going to help the situation that -- as wildly popular as "Dead Man's Chest" might be right now -- that it's still going to take this high priced Jerry Bruckheimer production a couple of years to finally recover all of its production costs.

And -- yes -- I know. I'll be making a certain segment of the JHM readership absolutely crazy by once again daring to suggest that "Cars" is not a total success. There are folks out there who absolutely refuse to believe that there could be anyone (Whether it be on Wall Street and/or the Burbank lot) that could possibly be disappointed with how this John Lasseter film has performed at the box office over the past eight weeks.


Copyright 2006 Walt Disney Enterprises

Well, whether JHM readers want to believe me or not, there are a number of prominent people in the entertainment industry who have been openly expressing disappointment with the way "Cars" performed this summer. Take -- for example -- Variety columnist Ben Fritz. Who -- this past Sunday in his "Is the toon business over-drawn?" piece -- wrote that:

"Cars" purred to an animated $235 million in domestic B.O. But pic is Pixar's lowest grosser since "A Bug's Life" in 1998. Disney had pushed back the original November release date to summer, emulating the release pattern of its top pic, "Finding Nemo," which had a domestic cume of $339 million. But "Cars" ended up doing worse than "The Incredibles" and "Monsters, Inc.," the animation studio's last two November openers.

Talk about damning with faint praise.

Then -- when you factor in "Cars" lackluster international performance to date (racking up only $128.1 million in overseas ticket sales so far) ... Well, while this John Lasseter film is far from being a flop, it's certainly not the box office bonanza that the Walt Disney Company had been hoping it would be.

And given that "Cars" cost a reported $120 million to produce (With an additional $100 million supposedly spent on P & M) ... If it weren't for the fact that merchandise sales for this Pixar production have gone straight through the roof, this John Lasseter film would have also struggled to turn a profit.

So in case you were wondering why the studio that has the summer's top two grossing pictures would be announcing a production cut-back ... Wonder no more. While Disney officials may talk about how -- by cutting back the number of films that the studio produces annually from 18-20 to just 8-10 each year -- that this move is really just about quality ... The fact of the matter is that cost was a key role in this decision as well.

I mean, when a company like Disney can have two motion pictures that -- when you combine their total worldwide box office to date -- have earned over $1.1 billion ... And yet studio officials are still fretting about whether these films will actually have a large enough return-on-investment to please Wall Street ...  There's something seriously wrong with that equation.

But what you folks think? Should Disney execs really be concerned with how much it ultimately costs to make these "Pirates" sequels? Or will "Dead Man's Chest" and "At World's End" eventually make enough money that it won't really matter how much the Mouse originally spent in order to produce these two motion pictures?

Your thoughts?

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  • Jim, Disney has always been tight-lipped about their film budgets.

    But, with that said, the POTC movies have made Walt Disney Pictures relevant once again, it's no longer a brand for the family and the preschoolers, they can also release some action/adventure stuff that most of the family can see.

    Yes they're expensive to produce, but the film-going public expects that in its summer blockbusters, and at least it didn't tank like Superman did. Ouch for Warner Bros.
  • The problem lies in expectations. These Disney execs who try to tease Wall Street into thinking Cars was going to out-earn Nemo shot themselves in the foot. You can't predict how the public is going to accept things. That's been proven by the public for years now. Guess small and look like a hero when it comes in higher. But,  the TV/Film business is so entrenched in it's own ego that they have to blow their stacks about an upcoming project to boost sales and buzz, and then when it doesn't hit their overinflated mark, they start pointing fingers.

    Pirates and Cars gave Disney two huge hits, got the company name on everyone's lips, further enhamced the Pirates franchise, and judging by the Cars merchandise flying off the shelves, introduced more lovable characters to the fold. Long term, these two films are huge for the company. As usual, the modern executive and stock trader can only see the immediate return, and here we are trying to decide if the two biggest movies of the summer are "big enough" hits.

    There will never be anything "big enough" for some people in that business.  
  • Jim Hill says:
    "But you have to understand that -- out in Hollywood -- the general rule of thumb is that a motion picture must earn at least three times its original production costs before it can then officially begin to turn a profit."

    Where does it say that?  I've heard that it's 2X.  

    Even if it's 2.5X, we're still talking about a huge variance.
    A good chunk of your argument is based on this one assumption of 3X.

    I'm not saying I'm right.  I really don't know.  But I'd like to know what the Hollywood standard is.  Does anyone have a source as to what this proper figure is?
  • While the initial estimates may indicate that the two films didn't warrant their high production costs, has anyone taken a serious look at how the "buzz" around these films has affected the overall company bottom line? I have to believe that the overwhelming popularity of the "Pirates" franchise as well as the contribution of "Cars" has led to larger attendance this summer in both Florida and Anaheim and thus is adding money to the coffers, even if there is little evidence for this except for higher rider numbers on the "Pirate" rides.
  • It kind of balances out.  Cars did not do too well in the theaters but good luck finding a toy anywhere other than EBay or Disneyland.  I have been searching the entire Dallas Fort Worth Metroplex and have found all of three cars.
    On the flip side, Pirates was number 1 for a good chunk of the summer but the merchandise is not all that great.  (With the exception fo the t-shirts and the prop replicas.)    
  • Clearly the WD Co needs to stop making films all together. If they can't make money with the #1 and #2 films of the year - it's time to pack it in.

    ILM can make the same film on a computer for under $200 mill, so whoever approved a budget over that needs to be looking for a new job - if that ever happened. As Art Buchwald's "Coming to America" lawsuit demonstrated, it is almost impossible to figure out how much a studio film actually cost to make.

    It sounds like some people's contracts call for getting bonuses based on the film's profits instead of the film's gross - so we have to do some quick bookwork to show the film isn't really profitable yet.

    All this money spent, and Disney Co still doesn't own the rights to put the Black Pearl in the theme park ride - something smells fishy.
  • Im interested to know how much of the money Disney will keep and how much the likes of Depp & Bruckheimer will end up getting.As to agree to come back and shoot another two Pirate movies you can be sure both would of been garanteed in there contracts certain profit percentives.

  • As NubtheSquirrel says, even if these movies only end up making LOTS of money instead of TONS of money due to the high production costs, they still improve the image of the company and make people more willing to see more Disney movies, attend Disney parks, and buy Disney merchandise.

    The performance of Cars is such an interesting topic. While it will be the 3rd lowest grossing (domestically) film of Pixar's movies, it is still the second highest grossing movie this year behind Pirates. The year still has 5 months left, but it beat Superman and X-Men in direct competition.
  • While "Cars" has finally made a respectable amount at the domestic b.o., to date it still lags at the international b.o. ($128.1M) behind such other films as the poorly received "Ice Age 2" ($449.7M).  Certainly there are still some markets for "Cars" to open in, but it probably won't make up that much.

    Part of the problem is intrinsic in the subject matter.  Cars, Route 66, bypass towns, and all of the other Americana in the film just don't translate to other cultures as well as the universal subject material in "Finding Nemo," and the name of the game these days is *global* box office, not just U.S.

    It will be interesting to see if the more internationally-themed "Ratatouille" performs better overseas.  Then again, "Ratatouille" may not be as strong domestically.
  • Jim Hill says:
    "But you have to understand that -- out in Hollywood -- the general rule of thumb is that a motion picture must earn at least three times its original production costs before it can then officially begin to turn a profit."

    jkensington1 says:
    Where does it say that?  I've heard that it's 2X.  

    I say:
    It's about 50%-60% for the DOMESTIC gross, depending on the film's contract and when in its release it made the moment.

    It's significantly less than that for FOREIGN distribution because of the companies a studio needs to partner with for foreign distribution.

    If you factor in marketing costs into the equation, I'd say that 3X PRODUCTION COSTS is a pretty good rule of thumb overall.  


  • The problem with hollywood this year is budget and expectation.  Wall Street simply isn't happy unless every movie outdoes the last.  Therefore EVERYTHING this summer has been a dissapointment.  Now that they are upset over $400million in sales I don't see how anything can please them.
  • I think a possible problem is that contigency costs were retroactively applied. It's the little bits of stretching like the "projected earnings" thing.
  • I can tell you why merchandise sales may have failed. The toy company handling the "Dead Man's Chest" license has a long way to go before playing with the big boys.  Who the heck is "Zizzle"? I have never heard of them until I saw the poorly detailed figures and toys on store shelves. It seemed to me some start-up that under bid every other license for the rights to produce the toys. NECA had done a better job than this company did. Although I have to say that NECA's "Will Turner" figure made Orlando Bloom appear constipated.  I also visited the Disneyland Resort this past summer after the Pirates enhancement had just opened and even though this is just one location with spend happy tourists, you could have had a bag of dog dirt with the pirates logo on it and it would have been snatched up.  
  • So, when the first POTC movie became a huge hit, Disney didn't have enough merchandise out there for the public.  With the second movie, Disney went too far, and has flooded the market with junk nobody wants.  Maybe they'll get it right next year.  

    And Jim, nothing about Robert Zemeckis/ImageMovers possibly signing on with Disney?
  • I'm not sure what anyone means about Pirates merchandise not selling, around my area (central Kentucky) the stuff is selling very, very well for a non-Star Wars releated movie.  Yes, Cars stuff is still flying off the shelves, but it seems more like the retailers underestimated the product and under ordered.  Pirates merchandise seems to have been ordered in the just the right numbers to sell and keep the shelves re-stocked...  I, for one, can't wait for Zizzle's next assortment to hit the pegs.
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