How Marvel Saved $40 Million On Its Biggest Movie Of 2022

Marvel Studios was handed $41.7 million (£33.7 million) for filming last year’s blockbuster movie Doctor Strange in the Multiverse of Madness in the United Kingdom according to analysis of company filings.

Benedict Cumberbatch stars as the movie’s eponymous hero whose mission is to protect a dimension-hopping teenager from the clutches of Elizabeth Olsen’s Scarlet Witch.

The sequel to 2016’s Doctor Strange, it was released in May last year and, according to industry analyst Box Office Mojo, grossed $955.8 million making it the most successful of the three films Marvel released in 2022.

The $41.7 million payment came from the UK government and reduced the net cost of the movie to $172 million. It was still more than expected and the filings explain why.

The movie was originally due to be released in May 2021 but was delayed by a year as the coronavirus pandemic temporarily brought the curtain down the production.

The filings state that in early 2020 “given the emergence and global spread of Covid-19, preparations for filming were halted… As a result, the production schedule was delayed. Production on the film was able to resume in August 2020.” It didn’t last for long.

In January 2021 Olsen told Jimmy Kimmel Live that production had stopped due to a rise in Covid-19 cases in the UK. “Since the hospitals are overwhelmed here we can’t go back to work until that calms down,” she said. It was such a problem that Marvel claimed $1.5 million (£1.2 million) of furlough grants from the UK government in connection with the movie. Even that didn’t go far enough.

The filings reveal that by October 2021, when the vast majority of filming had taken place, the “cost was forecasted to be over the production budget.” The filings add that Marvel “expected that the budgeted production costs for the motion picture will increase significantly due to ongoing obligations and costs required to implement safety measures and social distancing in line with government guidance.”

Movie budgets are usually kept a closely-guarded secret as studios tend to absorb the cost of individual pictures in their overall expenses. However, the costs of movies made in the UK are consolidated in single companies which file annual financial statements.

This helps them benefit from the UK government’s Film Tax Relief scheme which allows production companies to claim back up to 25% of the costs they incur in the UK.

The production companies have code names so that they don’t raise attention when filing for permits to shoot on location. The Multiverse of Madness was made by Supreme Works Productions II which is named after Cumberbatch’s character who is the Sorcerer Supreme of the Marvel Cinematic Universe.

Financial statements for Supreme Works Productions II show that over the nine months to May 8 2021 the company received a $35.9 million (£29 million) tax credit which followed a $5.8 million (£4.7 million) payment the previous year when pre-production began.

Across both periods, a total of $213.7 million (£172.5 million) was spent on making the movie before it banked the tax credit. It received a slightly higher tax credit than the $36.5 million (£29.6 million) paid for the first Doctor Strange movie even though that one had a higher budget at $228.1 million (£184.1 million).

One of the biggest single costs of making the Multiverse of Madness was the $20.8 million (£16.8 million) salary bill with staff peaking at 381 people according to the financial statements. That doesn’t even include freelancers and self-employed workers who make up the majority of the crew.

The film was shot at Longcross Studios outside London which is also where its predecessor was made along with a number of other Marvel movies including Guardians of the Galaxy and Thor: The Dark World. Marvel also hired buildings across London to double for locations in the film with the historic British Museum memorably being used to represent the headquarters of the time travel police the Illuminati.

Other key costs include equipment hire, travel and spending on visual effects companies like Industrial Light & Magic (ILM) which is owned by Marvel’s parent Disney. In 2014 ILM opened an office in London to capitalize on the surge in interest in filming in the UK. It is still rising.

Figures released by the British Film Institute (BFI) show that in 2021, combined spending on film and high-end television production in the UK hit $6.9 billion (£5.6 billion). It was the UK’s highest-ever total and was $1.6 billion (£1.3 billion) more than the BFI reported in 2019 before the pandemic hit.

The tax relief has cast a spell on all aspects of the UK film industry. In 2019 Disney signed a long-term deal to occupy most of London’s Pinewood Studios and two years later streaming giant NetflixNFLX
agreed to double the size of its base at Shepperton. In 2024 the doors will also swing open to a $370 million (£300 million) complex in the Dagenham area of London which will be the city’s biggest film and television production campus.

However, it hasn’t been a fairytale for theaters. They typically keep half of the proceeds from films with studios retaining the remainder. This gave Marvel a $305.9 million profit on Multiverse of Madness with $477.9 million going to theaters. It was one of the exceptions.

The North American box office hit $7.5 billion in 2022, down from more than $11 billion in 2019 and 2018, according to ComscoreSCOR
. A dearth of blockbusters last year combined with competition from streaming sites and tightening purse strings fueled the collapse of the US division of the world’s second-largest theater chain, Cineworld. Weighed down by $8.9 billion of net debt and lease liabilities, the US arm of the London-listed company filed for bankruptcy protection in September.

Since then it has shuttered 23 theater sites and told a bankruptcy court last week that it plans to close 39 more to save $22 million a year. Over in Europe, the biggest privately owned operator, Vue, resorted to a debt-for-equity swap in July last year to help it stay afloat.

Their plight raises questions over whether taxpayers’ cash would be better spent on stricken local companies than profitable foreign studios. Disney’s latest results show that in the year to 1 October 2022 its media and entertainment division generated $4.2 billion of operating income on $55 billion of revenue and amassed a total of 235.7 million streaming subscribers which is more than any other media company.

The dark clouds appear to be clearing for theaters as the $2 billion haul of 20th Century Studios’ Avatar sequel has proved that they haven’t lost their pulling power. However this year will be the true test as studios are rolling out some of their biggest franchises in a bid to try and tempt people through theater turnstiles more often.

Marvel’s slate includes Ant-Man and the Wasp: Quantumania and the long-awaited Guardians of the Galaxy Vol.3 whilst Indiana Jones will return after a 15-year hiatus. This year will also see the release of the latest instalments in the Transformers and the Fast & Furious franchises as well as a slew of sequels to top performers like Dune and Aquaman.

Film industry analysts, Gower Street Analytics, are forecasting a 12% increase in global box office revenue to $29 billion in 2023. However, the increase in Dollar terms is still almost a third less than the average of 2017 through 2019. So although the stage is set for theaters to make a comeback in 2023 it remains to be seen if they will have a happy ending.