Why are movies more expensive than ever when tech makes them easier to make?

Back in 1991, Terminator 2 made headlines for being the first movie to cost $100 million to produce, making it the most expensive film ever by a fairly large margin. Today? T2 doesn’t even crack a list of the top 200 most expensive movies ever made. That’s right. Since T2’s release, more than 200 movies have been made with reported budgets well north of its $100 million dollars. Inflation does play a role in the uptick in budgets, but not a big role. More like a cameo. Even when you account for inflation, 45 of the 50 most expensive movies ever made have all been released in the last 10 years.

At the same time, technology has revolutionized the tools used to make movies. DSLR cameras that can capture cinema-quality images are available at Best Buy. A single desktop computer today can surpass the computing power of all the rooms of computers used to make the T-1000 in T2. Digital workflows have streamlined the process of filmmaking, eliminating costly development and duplication processes.

Many industries have seen costs driven down by new technologies, and we know technology has fundamentally altered how movies are made. So why is the film industry spending more on film production now than ever before?

Here are a few reasons:

New technology is a double-edged sword

The first Star Wars, made in the 70s, used the same 35mm VistaVision cameras as White Christmas, made in the 50s.

In the digital realm, gear does not have such longevity. For filmmakers expected to continually push technology to its limits, the constant upgrade cycle is a curse. Think it’s annoying feeling pressure to upgrade your cell phone every year? Try operating an F/X house pressured to upgrade every piece of equipment and every piece of software, every year.

“It’s people! Soylent Green is People!”

OK, so you’re a filmmaker working on a romantic comedy with no space battles, no dinosaurs, and no talking animals or babies. But your film still costs as much to make as Terminator 2. What the heck?

The answer is people, and I’m not talking about the salaries of the stars. The push towards casting young unknowns to carry franchises (think Jennifer Lawrence, Shailene Woodley, Andrew Garfield, etc.) is actually driving star-related costs down from where they were a decade ago. Nowadays when you hear about a film star making tens of millions of dollars from a single project, it’s likely the result of a revenue-sharing deal, not because they got $20 million upfront, guaranteed, a la Jim Carrey in The Cable Guy.

No, I’m talking about the other couple hundred names you see in the end credits of a film. On a major Hollywood production, those hundreds of people will give many months of their lives to a production, taking care of everything from catering to costumes, and they need to be compensated accordingly. As the costs of living raises, so do the costs of everyone working on any given film, and no amount of technology can make living in Los Angeles (or New York, or Vancouver) any cheaper.

And when Hollywood productions leave North America seeking a less expensive workforce (or a workforce subsidized by foreign tax incentives), the goal isn’t usually to spend less money, but to get more bang for the hundred million bucks they were already planning to spend. (Sadly, for many of these films, you get what you pay for, with the end product reflecting the work of less experienced craftsman).

It’s getting harder and harder to get people off their couches

Movies have gotten bigger because TV has gotten better. So Hollywood film execs are doubling down on “spectacle,” maximizing every inch of the screen at your local multiplex, not to mention releasing more films in 3D and IMAX.

Globalization is also having a similar affect. China, for example, used be a tertiary market for Hollywood films. Now it’s a major market. Low-budget comedies with distinctly American sensibilities don’t translate well in places like China. What does translate well? Robots, wizards, and super-heroes.

Hollywood economics

Over the course of the last decade, the number of films produced by the studio system has been steadily decreasing, while the average budget of each film has been increasing. To the gamblers out there, this might seem counterintuitive. Wouldn’t 10 movies produced at $30 million each have a better chance at succeeding than two movies costing $150 million each? Yes, but only if your idea of “success” is very modest.

When a mid-budget drama hits, it can yield a decent profit and some awards. When a $100 million movie hits, it can yield a billion dollars of profit, a theme park ride, and fives more films in the series. Hollywood is no longer in the business of hitting singles. They now swing for the fences almost every time they step to the plate, even if that means also getting the occasional, big-time strike out (see John Carter).

Hollywood accounting

Want to know a secret about Terminator 2’s $100 million budget? It was probably less than that by several million dollars. Still enough to warrant the “most expensive movie” tag, but not by as much. Every time you see a film budget in the news (and especially on Wikipedia) the figure is most likely inflated. Why are the actual budgets of studio films so hard to nail down? Because it’s not in the studios’ best interest to let the real figures get out. In the case of a misfire, they want to be able to write-off as much as possible, just like any other business. Likewise, in the case of a hit, they’ll want to minimize the profits they have to share with others. Here’s an extreme example of studio accounting in action: Back in the ‘90s, Winston Groom, author of the original Forrest Gump novel, had a deal with Paramount for 3 percent of all net profits of the film adaption of his book. Even after the film racked up nearly $700 million dollars in global ticket sales, though, Paramount still claimed the film hadn’t yet reached profitability. Groom had to take legal action, which resulted in an undisclosed settlement to resolve the matter out-of-court (so the actual accounting books would never be made public). The take-away from this? When making a deal with a studio, never settle for “net participation” when you can get gross.

It’s not all bad news

All the above isn’t to say that the last decade hasn’t been good for filmmakers interested in intimacy over spectacle. In many ways, it’s never been better. As big studios step away from smaller films, they leave a void that independent producers have been all-to-happy to fill. And it’s never been easier to produce and distribute a feature film completely outside the studio system, using newer, cheaper technologies that not only produce great images and sound, but also help keep crews smaller and more affordable. Sure, it’s harder than ever to get a major studio to back your passion project … but it’s easier than ever to make it yourself, for the price of a used car. Or less.