The Disney Star Wars Movie That Shattered Spending Records

The cost of making Star Wars: The Force Awakens was even higher than previously thought as a detailed analysis of the financial statements for its production company has revealed that Disney spent $638.9 million (£452 million) on the sci-fi film cementing its status as the most expensive movie in history.

The 2015 flick was the first Star Wars movie made by Disney and was released three years after the studio's $4 billion acquisition of Lucasfilm which owns the rights to the franchise.

The Force Awakens rebooted the series by pairing rising stars Daisy Ridley and John Boyega with Harrison Ford, Mark Hamill and the late Carrie Fisher who shot to fame in the first Star Wars film 37 years earlier. Bringing back the original cast of such a beloved movie series was a big gamble as it raised expectations as well as the risk that it wouldn't live up to them. It came at quite a cost as shown by the table below.

Disney was so confident that The Force Awakens would be a success that it spared no expense on its cast of A List actors and extravagant visual effects. However, the studio also came up with a clever way of recouping some of its spending and this ended up shining a spotlight on how much the movie actually cost to make.

Instead of filming The Force Awakens in the United States, Disney decided to shoot it at Pinewood Studios in the United Kingdom. This enabled it to benefit from the UK government's Audio-Visual Expenditure Credit which gives studios a cash reimbursement of up to 25.5% of the money they spend in the country.

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To qualify for the reimbursement, movies must pass a points test based on factors such as how many members of the production team are from the UK and how much of the post-production work is done in the UK. Furthermore, at least 10% of the core costs of the production need to relate to activities in the UK and in order to demonstrate this to the government, studios set up a separate Film Production Company (FPC) there for each picture.

The production companies have code names so that they don’t raise attention with fans when filing for permits to shoot off-site. The Disney subsidiary behind The Force Awakens is named Foodles Production (UK) after the cafe next to the San Rafael California headquarters of Kerner Optical, the original practical effects division of Lucasfilm's Industrial Light & Magic VFX firm.

Crucially, each FPC has to file financial statements showing everything from the total costs of the picture right down to size of the crew who worked on it and the amount of pension contribution paid to them. In contrast, studios which shoot in the United States rarely disclose the cost of the movies they make as their spending on them is combined in their overall expenses and their financial statements don't itemize the budgets of each one.

The blockbuster reimbursement makes the disclosure in the UK well worth it but getting the money is far from a walk in the park. The terms of the reimbursement state that "there can only be one FPC in relation to a film" so studios aren't allowed to hide costs in other companies. They also state that each FPC must be "responsible for pre-production, principal photography and post-production of the film; and for delivery of the completed film" as well as paying for "rights, goods and services in relation to the film."

It can take a great deal of time for the FPC to ensure that all invoices have been paid and only then can the company be closed. For example, Pym Particles Productions UK, named after the technology which enables Disney's Ant-Man character to shrink, was only shut down in March this year, nine years after the release of its movie about the diminutive hero.

Foodles is still booking costs on its financial statements nine years after The Force Awakens was released. Its latest filings cover the year to December 31, 2023 and show that it spent $3.7 million (£2.9 million) during that time bringing the movie's total costs to a staggering $638.9 million as shown in the chart below.

Last year Foodles also received $3.1 million (£2.4 million) of revenue but this wasn't from theater tickets, streaming, Blu Ray or merchandise sales as they all go directly to Disney in the US. Foodles, like the majority of FPCs, is just responsible for making the movie and its revenue is a key part of the process of obtaining the reimbursement.

The process begins at the very start of production when a Hollywood studio buys a script from a screenwriter and commissions a movie about it. If the studio decides to make the movie in the UK it then sets up a subsidiary company there which acquires the script from its US-based parent.

Acquiring the script gives the UK company the rights to the make a movie about it and the Hollywood studio pays it a small production services fee. As per the rules, the UK company must be responsible for everything from pre-production and principal photography to post-production, delivery of the finished film and payment of goods and services in relation to it. Then comes some financial wizardry.

If the UK company makes a profit, the financial benefit from the UK government comes in the form of a reduction to its tax bill. However, if it makes a loss, it receives a cash reimbursement in the form of a tax credit so studios fund the companies in a way which engineers this.

As shown in the diagram below, the studio buys the rights to the film from the UK company but only gives it approximately 74.5% of the projected production cost. The remaining 25.5% is provided by the studio in the form of a loan. The loan and the revenue from the sale of the rights gives the UK company 100% of the production budget for the movie and this sets the scene for the cash reimbursement.

Loans are not counted as revenue because they need to be repaid. The UK company therefore makes a loss equivalent to around 25.5% of the movie's budget. That is when the UK government steps in as it reimburses this loss. As the amount of the reimbursement is equivalent to the loan that the company owes its parent, the cash can be passed to the Hollywood studio as repayment. Thanks to these twists and turns, the UK government covers 25.5% of a film's costs, thereby reducing the studio's net spending on it.

The maneuvers leave the UK company with a small net loss which isn't a deficit in the traditional sense. This is because the UK company is wholly-owned by the Hollywood studio which provides all of its revenue through cash and a loan with the latter not classed as revenue. If the studio provides more funding in the form of cash then the UK company can make a profit whereas if more of the money is a loan it can make a loss even though the studio still pays it the same sum in both cases.

Disney does not discuss the costs of specific productions and did not respond to an opportunity to comment. However, its filings show that it received a $103.4 million (£73.5 million) reimbursement for The Force Awakens bringing its net spending on the movie down to $535.5 million. It is $88.9 million higher than our assessment last year and there is good reason for this.

Firstly, Foodles has reported $7 million (£5.7 million) of additional costs since then but that only accounts for a small percentage of the uplift. As Foodles is based in the UK, its financial statements are in British Pounds so the amount in US Dollars is based on the exchange rate which can greatly vary depending on the date. There are a number of logical ones to use.

The rate at the time of writing was used throughout our report last year in order to keep all conversions consistent. Another alternative would be to use the average of the daily rate throughout the period that the financial statements relate to. Some data on the filings, such as the number of employees, are averages of the daily numbers throughout the year, so there is justification for this approach.

However, a more logical option is to use the date of the financial statements. Not only is this date used to derive some of the data on the filings, such as the cash in the bank but, crucially, it is the end of the company's fiscal year. This date has been taken in the data above and it shows that The Force Awakens was a dream ticket for Disney.

According to industry analyst Box Office Mojo, the movie grossed $2.1 billion and Disney is believed to have received around half of it with the remainder retained by theater chains. This reflects the findings of film industry consultant Stephen Follows who interviewed 1,235 film professionals in 2014 and concluded that, according to studios, theaters keep 49% of the takings on average.

It gave The Force Awakens a profit at the box office of around $500 million easily making it Disney's most lucrative Star Wars movie. It was also the very definition of a tentpole, an industry term for a big-budget movie which makes enough income to compensate the studio for its less profitable productions. At the other end of the spectrum was 2018's Solo: A Star Wars Story which lost more than $90 million at the box office as we revealed.

The tentpole may actually be even more of a force to be reckoned with than the Foodles financial statements suggest. That is because the company was purely responsible for making The Force Awakens. Revenue from theater ticket sales, streaming subscriptions, Blu Rays and merchandise sales go directly to Disney with a recent report estimating that the latter alone generated $1 billion for the studio last year. That said, Disney also picked up the tab for the colossal cost of marketing The Force Awakens so the precise profits from the movie may remain a closely-guarded secret for a long time to come.