Despite boasting a substantial production budget of $645 million, the series 'Andor' emerges as Disney's economical venture within the 'Star Wars' franchise.
Recently, the entertainment industry was shaken by the revelation that the production cost of Disney's Star Wars streaming series, Andor, reached an astonishing $645 million. The expenditure on its upcoming second season, amounting to $291 million, set a new record in financial statements for a Star Wars installation. However, this news sparked a different type of record too.
This influential piece of information about the substantial investment in Andor was widely disseminated by major news outlets and trade publications such as Deadline, SlashFilm, and ScreenRant in the US, as well as Le Figaro in France and IGN Latin America.
Everyone, including industry experts like Valliant Renegade, CultureCrave, and CosmicMarvel, grasped the significance of the news. However, some social media accounts drew an incorrect conclusion that no Star Wars production could justify such a significant outlay.
Although the facts were accurate, there was a misjudgment in the analysis. The social media platforms cannot be faulted for this misconception as it stems from the complex business model behind streaming shows. By understanding this aspect, it becomes apparent that Andor was not only a sound investment but actually the most economical of all Disney's seven Star Wars productions made in the UK.
Ever since Disney acquired Star Wars creator Lucasfilm for $4 billion in 2012, there have been heated discussions about how much Disney would invest in its shows and movies. The opacity of film financing fosters these speculations as the cost of producing movies in the US is typically kept confidential.
Typically, studios combine their expenditure on shows and movies under their overall expenses and do not disclose the budgets for each individual project. Like most movie studios, Disney maintains silence concerning the cost of its Star Wars productions and did not comment on the cost of its Star Wars projects. However, the data presented in this report came directly from the source.
This is due to the fact that 58% of Disney's Star Wars productions are made in the UK, which has stricter financial reporting requirements than the US. The reasons for Disney's decision to film a majority of its Star Wars productions in the UK, despite the public scrutiny of its spending, are clear.
Films made in the UK benefit from the government's Audio-Visual Expenditure Credit, providing a cash reimbursement of up to 25.5% of the money spent in the country. To qualify for this reimbursement, films must meet certain criteria such as having a significant portion of the production team and post-production work done in the UK, and at least 10% of the core production costs related to activities in the UK.
Studios usually set up a separate Film Production Company (FPC) in the UK for each production to demonstrate compliance with these requirements. These companies often have code names to avoid drawing attention when filming permits are requested. Identifying these companies and matching them to their respective productions requires deep industry expertise, which my colleague and I have developed over nearly 15 years.
As the only journalists worldwide who cover the financial statements of UK film production companies for national media, we have reported on them for more than 10 leading newspapers such as The Times of London, The Guardian, The Daily Telegraph, The Independent, and the London Evening Standard.
Production companies are required to submit annual financial statements, revealing the reimbursement amount, headcount, salaries, and, most importantly, the total costs. The financial statements are legally binding, ensuring that the costs reported in them are accurate. However, this is just the tip of the iceberg.
Studios then have to generate profits from the production. They receive around 50% of the ticket sales of movies played in theaters, as well as revenue from merchandise and home entertainment sales. However, the business model for streaming shows is different. Subscribers pay a flat fee to access all the content on a platform, and advertising is only sold on some subscription tiers. Since each show is not paid for individually by subscribers, it's challenging for studios to determine their revenue, let alone their profit.
As explained by Tom Harrington of media consultants Enders Analysis, "given the structure of the streaming model, it is almost impossible to robustly attribute profitability to any single piece of content." Instead, the success of streaming shows is often measured by the number of subscribers they attract to the platform. The more subscribers they attract, the higher the revenue and the difference between this and the total content cost represents the studio's profit.
The Disney+ streaming platform boasts an extensive archive of over 13,000 shows in 39 languages, and it didn't come cheap. In late 2017, Disney's CEO Bob Iger announced a $71 billion deal to buy 21st Century Fox, giving Disney control of Streaming service Hulu and adult-focused content like The Simpsons and Family Guy. This acquisition expanded Disney's content portfolio, appealing to a broader audience of potential streaming subscribers.
By offering more minutes of content, Disney can display more ads and attract more subscribers. Andor is not only an economical way to achieve this with Star Wars, but it is also the least expensive method.
As demonstrated in the table above, when you divide the expenditure of the seven Disney Star Wars productions made in the U.K. by their production duration, Andor emerges as the most budget-friendly option. Its inaugural season clocked in at an impressive 547 minutes spread across 12 episodes. Although the overall runtime of its second season remains to be seen, it's slated to feature 12 episodes once again, suggesting a similar length. With a cost of approximately $0.6 million per minute, it provides an impressive return on investment that's much needed for Disney+.
At the opposite end, we have 2015's Star Wars: The Force Awakens, which clocked in at a relatively shorter 138 minutes but carried a staggering price tag of $641.3 million, making it the most expensive movie ever, as this study disclosed.
It's important to note that cost-effectiveness and quality are two distinct aspects. Andor's first season was praised for its high quality, as evidenced by its audience score of 87% on Rotten Tomatoes, making it the highest-rated Disney Star Wars streaming show on a review aggregate site. This score even surpasses that of Disney's other Star Wars movies, with the exception of the 2016 spinoff film Rogue One: A Star Wars Story, which is set just after the second season of Andor. While it has big shoes to fill, it doesn't necessarily represent as large a risk as one might think, given that no expense was spared in its production.
The United Kingdom has become a popular location for Disney's Star Wars productions due to the country's Audio-Visual Expenditure Credit, which provides a cash reimbursement of up to 25.5% for films that meet certain criteria. Despite the significant investment in Disney's Star Wars streaming series, Andor, with a production cost of $645 million for its first season, it emerged as the most budget-friendly Star Wars production made in the UK when divided by its production duration.
Walt Disney's acquisition of Star Wars creator Lucasfilm for $4 billion in 2012 marked a turning point in the company's investment strategy in Star Wars shows and movies. The cost of producing movies in the US is often kept confidential, but the high production cost of Andor sparked widespread discussions and misconceptions about Star Wars productions' justification for such significant outlays.
Lucasfilm and Disney have maintained a tight lid on the budgets for their Star Wars productions, but in the case of Andor, the expenditure was revealed through financial reporting requirements in the UK, which are stricter than those in the US. This transparency allowed industry analysts to explore the complex business model behind streaming shows and determine that Andor was actually the most economical of Disney's seven Star Wars productions in the UK.
