Behind MGM's Apple Overture: How Much Is a Bond Movie Worth?

Multiple sources say Apple kicked the tires on Daniel Craig starrer No Time to Die and mulled an offer in the $350 million to $400 million range for what would have been a 12-month license. (Bloomberg first reported Apple’s offer.) That was far short of the $650 million to $700 million — one source tells THR that even $800 million was mentioned — that MGM was hoping to get to make such a deal worthwhile.

The valuations on the MGM side are informed by several factors. The movie cost around $250 million to produce, including the tax incentives from some of the shooting locations. There are licensing fees that need to be paid to United Artists, co-run by Megan Ellison’s Annapurna and MGM, and to Universal Pictures, which is currently set to distribute the movie internationally. Then there are generous box office bonus deals for stars Craig, Rami Malek as well as director Cary Fukunaga and others. There is also the $50 million or more spent on marketing the movie, which has been (so far) twice delayed. And MGM was basing their numbers on a presumed global box office of over $1 billion, a figure attained by 2012’s Skyfall but not by 2015’s Spectre, which grossed $880 million.

But to streamers such as Netflix, the numbers were a nonstarter. “Bond is a one-shot kill,” says one top executive, “but is it worth it? You’d be setting up a need for a Bond-like movie once a month and for $500 [million] or more, it’s not worth it. You’re better off focusing on your own originals.” (Netflix has been investing heavily in its original action movies, notably its Michael Bay spy thriller 6 Underground, starring Ryan Reynolds, which cost at least $150 million and was viewed by 83 million member households within a month of its Dec. 10, 2019, release.)

But what was driving this fishing expedition was MGM’s current financial state. Sources say the Beverly Hills-based company is accruing around $1 million in interest a month on the money it borrowed to make No Time to Die, which it won't be able to recoup until the movie opens in theaters.

“MGM is suffering. Every major distributor at this point has a pile of unreleased expensive movies. The pile grows larger by the day,” says Hal Vogel,  CEO of Vogel Capital Research. “These films are inventory. They are sitting there with no return on their investment. Even with low interest rates, the interest costs are piling up. So going the streaming route is not that crazy. You’ve spent the money. And you’re not getting it back anytime soon.”

Weeks after No Time to Die was delayed to next year, S&P Global weighed in on MGM on Oct. 22, downgrading the firm’s credit rating from B+ to B based on "sustained high leverage as a result of ongoing delays in its theatrical releases." The ratings agency added that it expects MGM’s cash flow “will remain weak over the next 12 months before both credit measures improve in the second half of 2021.”

Complicated things is the fact that MGM only owns part of Bond. Half is controlled by EON Productions, co-run by Barbara Broccoli, daughter of original Bond producer Albert “Cubby” Broccoli. Multiple sources say that Broccoli was initially unaware of the streaming-rights fishing expedition for No Time to Die, and when pitched by Ulrich, quickly took the boats out of the water, so to speak. “This was definitely not a meeting of the minds,” says a top-ranking studio exec with knowledge of the overtures.

Broccoli is seen as a staunch traditionalist who is very much in support of the theatrical experience. Furthermore, Bond is a franchise connected to luxury and scarcity, and by going to a streamer there could be a brand hit in her eyes, according to one insider. “It’s a dip into a pool you won’t be able to get out of,” says the source.

That sentiment points to a generational divide among executives. It is especially notable that even as MGM may be seen as cash-strapped, and could theoretically sell the Bond franchise, any buyer would have to contend with EON, an entity that is driving the creative engine on the movie and determining the output. It’s telling that there has not been a James Bond series focusing on, for example, Moneypenny, or spinoff on Goldfinger, or even, say, a cartoon centered on Blofeld’s cat.

Also feeling flummoxed on the sidelines are traditional Bond promotional partners such as watchmaker Omega and beer brand Heineken, who have geared up twice for a release that, unlike tomorrow, never came.

"The company to my knowledge has dismissed recent reports of a contemplated sale of its latest Bond film," adds Tuna Amobi, analyst at CFRA Research. "That being said, while [MGM] seems to be currently in a bind due to its inability to effect a theatrical release of its latest Bond film, I believe the pandemic's disruption and resulting shifts in various distribution windows do raise some significant complications regarding the ultimate 'fair' valuation — either for the film or the library assets as a whole — which could pose a major hurdle for any such transaction, pending further visibility on the potential course of the pandemic."

Kim Masters and Georg Szalai contributed to this report.

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