It is somewhat of an understatement to say that Disney’s Marvel Studios division seems to have lost its punching power in recent years.

In 2019 it looked like the studio could do no wrong as it released Captain Marvel and Avengers: Endgame which both made more than $1 billion at the box office with the latter’s takings of $2.8 billion making it the highest-grossing film in history. However, since the start of the pandemic, none of Marvel’s movies have grossed more than $1 billion and it has released a string of productions that have been blasted by critics.

In March, Marvel fired its visual effects chief Victoria Alonso and just last month, overworked staff from her former department voted for the first time to unionize with the International Alliance of Theatrical Stage Employees.

Despite these dark clouds, all of the financial statements filed so far for the Marvel movies that have been released since the start of last year show they covered their production costs at the box office, even the widely-reviled Ant-Man and the Wasp: Quantumania.

In fact, analysis of the 13 Marvel movies that file publicly-available financial statements shows that only two have ever ended up in the red. They were perhaps the studio’s greatest gambles.

The pandemic put Disney on the ropes. It brought the curtain down on the movies it had in production, grounded its cruise ships, shuttered shops selling its merchandise and led to the closure of its theme parks as well as theaters screening its movies. For a while, the media giant’s main business unit was its Disney+ streaming platform and there was just one problem with that.

Disney+ was more popular than the Mouse could ever have imagined and just one year after the platform launched in 2019 it had 73.7 million subscribers which is more than it initially expected to have by 2024. They each paid $6.99 a month, or $69.99 a year, and got a lot of bang for their buck.

Disney+ subscribers get unlimited access to the studio’s entire library, along with any new content released during their subscription period. So although Disney+ has a solid revenue stream it can’t be attributed to individual productions on the platform. Subscribers don’t pay per movie so adding a new movie to the platform doesn’t directly increase revenue.

This proved to be a particular problem for the nascent platform in the pandemic as Disney had a packed pipeline of movies but no theaters to show them in. If it had put them straight on to Disney+ it would have made the platform even more appealing but would have enabled subscribers to watch the movies as many times as they wanted for no additional cost. In contrast, they would have had to pay repeatedly to do the same if the movies had been shown in a theater.

To address this problem Disney took the controversial decision of charging subscribers an additional fee of $29.99 to access new releases for a month. Called Premier Access, it was far from a dream ticket.

Deadline claimed that Premier Access contributed to an increase in piracy and when theaters finally reopened, The National Association of Theatre Owners blamed it for a fall in box office receipts. Theaters weren’t the only ones who lost out as a result of it.

Actors who were due to get a cut of the theater takings were also hit by the decision to put new releases straight on Disney+. It famously led to Scarlett Johansson suing Disney in July 2021 with sources telling The Wall Street Journal that she had lost more than $50 million because of Marvel’s Premier Access release strategy for her Black Widow movie earlier in the year. Johansson settled her suit in October 2021 but by then it had already put Disney off Premier Access.

As the first Marvel movie released since the pandemic, Black Widow had a tough time at the box … [+] office

Marvel Studios

As we revealed, Black Widow didn’t cover its production costs at the box office but was pushed into the black by more than $125 million in online revenue from Premier Access. The settlement payment to Johansson whittled away at that so it is unsurprising that Marvel dropped Premier Access for its next movie which debuted a month after the settlement. Called Eternals, it was released in November 2021 exclusively in theaters which were still reeling from the pandemic. This wasn’t the only reason that it was perhaps Marvel’s greatest gamble.

Eternals is named after a team of human-looking aliens from the planet Olympia who were genetically engineered to be perfect and have been hiding on earth for centuries. So the story goes, they have been locked in a war with the villainous Deviants for thousands of years even though they both have the same creator – a powerful ancient race known as the Celestials.

On paper the flick looked like a sure-fire hit thanks to its glittering array of stars led by Angelina Jolie, Salma Hayek, Richard Madden and Kit Harington. It even featured a cameo from singing sensation Harry Styles.

The movie seemed like it was in safe hands as it was helmed by Oscar-winning director Chloe Zhao whose movie Nomadland won best picture at the 2021 Academy Awards. However, Eternals divided fans with some criticising its confusing plot and the characters’ gaudy costumes which seemed incongruous with the real-world setting of many other Marvel movies.

Others praised it for its inclusivity as it also starred South Korean-American actor Don Lee as the powerful Gilgamesh whilst Pakistani-born Kumail Nanjiani played Kingo, an Eternal who can project cosmic energy from his hands and has the alter ego of a Bollywood film star. Notably, deaf American actress Lauren Ridloff also had a part as Marvel’s first deaf hero, the super-fast Makkari.

The obscurity of the characters made the movie a gamble, despite the caliber of its stars, and this wasn’t lost on Marvel Studios’ head honcho Kevin Feige. In 2019 he told The Hollywood Reporter that “it is a very big movie. It is a very expensive movie. And we are making it because we believe in [Zhao’s] vision and we believe in what those characters can do and we believe we need to continue to grow and evolve and change and push our genre forward,” He added “that’s a risk if I’ve ever heard one.” It didn’t pay off.

Black Widow and Eternals failed to cover their production costs at the box office

Caroline Reid using Flourish

The movie became one of the biggest failures of Marvel’s 32 films as it was the first to be rated ‘Rotten’ on review aggregator Rotten Tomatoes. Crucially, it also had the forth-lowest worldwide gross of all of Marvel’s movies with takings of $402.1 million according to industry analyst Box Office Mojo.

The amount that Disney received from that is known in the trade as a rental fee and it differs by territory and even by film. Filings from theater chain AMC state that “rental fees are based on the box office performance of each film, though in certain circumstances and less frequently, our rental fees are based on a mutually agreed settlement rate that is fixed.

“In some European territories, film rental fees are established on a weekly basis and some licenses use a per capita agreement instead of a revenue share, paying a flat amount per ticket.”

However, it wouldn’t be representative to base the studio’s box office share on data from just one theater chain as they all have different levels of exposure. AMC for example has no theaters in major markets such as France and Japan.

Overall, it is understood that the box office share paid to studios rises to 55% domestically, whilst China is around half that and it comes to around 43% on average in international markets. Many major blockbusters aren’t released in China, and when they are, the gross there is often small so it doesn’t tend to have a material effect on the overall split.

Taking the average of 43% and 55% gives roughly a 50-50 split of the box office between theaters and studios which reflects the findings of film industry consultant Stephen Follows. He interviewed 1,235 film professionals in 2014 and concluded that, according to studios, theaters keep 49% of the takings on average.

This gave Disney around $201 million from Eternals and in order to calculate whether this covered its production cost we need to know how much was spent on the movie which would usually be a closely-guarded secret. This is because studios’ financial statements typically combine the costs of all of their movies without itemizing how much was spent on each one.

Movies filmed in the UK are an exception and Eternals was one of them. Studios put up with higher levels of disclosure when they film there in order to benefit from the UK government’s Film Tax Relief scheme. This gives studios a cash reimbursement of up to 25% of the money they spend in the UK provided that it represents at least 10% of the film’s total costs.

In order to demonstrate this to the UK government, studios set up separate companies to make each film and they have to file financial statements showing everything from staff numbers, salaries and costs, to the amount of cash reimbursement they receive.

The companies usually have code names so that they don’t raise attention with fans when filing for permits to film on location. Eternals was made by a Disney subsidiary named Olympia Productions UK in a nod to the heroes’ home world and, according to its latest financial statements, a staggering $292.2 million (GBP241.6 million) was spent on the movie. It was nearly $100 million more than the movie was believed to have cost and the filings reveal that “the estimated final cost did exceed the production budget”. It wasn’t due to Covid.

The pandemic pushed the film back from its original release window of November 2020 but it didn’t have a significant impact on its costs as production was approaching completion when Covid started spreading.

Principal photography took place from July 2019 to February 2020 at Pinewood Studios on the outskirts of London as well as on location in the city. Harington’s character Dane Whitman works at London’s Natural History Museum where he meets Sersi, an Eternal who is played by English actress Gemma Chan and has superhuman strength, speed, stamina, reflexes and healing. Sersi can also modify matter which comes into its own in London’s hip Camden district where she turns a traditional red double decker bus into rose petals during a battle with the Deviants.

The English countryside also stood in for other parts of the world to show where the Eternals hide out. Black Park near Pinewood Studios was the site of an Aztec pyramid whilst Salisbury Plain in Wiltshire was the setting for a South Dakota ranch and Swinley Forest in Berkshire substituted for Alaska.

Chloe Zhao and Richard Madden filming in the UK

Marvel Studios

Filming in the UK drives employment and the financial statements reveal that $19.2 million (GBP15.9 million) was spent the production crew which peaked at 228 staff without even including freelancers and self-employed workers who make up the majority of the crew on a film shoot. Movie production also brings business to UK-based travel and equipment services as well as special effects studios. The bus scene in Eternals was created by German company Scanline’s London facility whilst the UK division of Disney’s Industrial Light & Magic also worked on the movie.

In return for filming in the UK, Eternals got a $38.6 million (GBP31.9 million) cash reimbursement from the government. This brought the net spending on the movie down to $253.6 million and it wasn’t covered by Disney’s $201 million share of the theater takings. However, that is just the start of the story.

The share of the box office isn’t the studio’s only return from a movie so offsetting it from the costs shown in the financial statements does not show whether the movie made a profit or a loss overall. “There will be other income generated by the production (such as DVD/Blu Ray sales, merchandising, etc.). It’s not reflecting a true account of whether the film was overall profitable,” says a Disney spokesman. Likewise, the financial statements do not show the marketing costs of the movie either so there is no guarantee that the revenue from merchandise and home entertainment will push a movie which makes a loss at the box office into an overall profit.

Offsetting Disney’s share of theater ticket sales from the expenses in the financial statements simply shows whether the movie covered its production costs at the box office. In the case of Eternals, Disney’s $201 million share of the box office left it with a $52.6 million loss after deducting its $253.6 million net spending.

Eternals wasn’t helped by being released in the midst of the pandemic though this didn’t stop Sony’s super hero extravaganza Spider-Man: No Way Home from grossing $1.9 billion just one month later.

Likewise, just five months after that, Disney debuted Doctor Strange in the Multiverse of Madness which cost approximately $30 million more to make than Eternals but yielded a profit of around $190 million as we recently revealed.

It explains why another Doctor Strange movie is believed to be in development whereas Eternals seems set to be a one-and-done. It might come as a disappointment to die-hard Marvel fans but Disney stockholders will no doubt breathe a sigh of relief.

 It is an understatement to say Disney’s Marvel Studios has lost its punching power. Since the start of the pandemic, none of Marvel’s movies have grossed more than $1bn.  Read More