‘Andor’ Is Actually Disney’s Cheapest ‘Star Wars’ Production Despite $645 Million Cost

Earlier this week the media industry was rocked by the news that the cost of making Disney’s Star Wars streaming series Andor had hit $645 million with the $291 million spent on its upcoming second season being the highest sum ever shown in financial statements for an instalment of the sci-fi saga. However, it has now emerged that the spending also set another record of a very different kind.

This author’s exclusive about the staggering spending on Andor was reported all over the world by the leading newspapers and trade titles from Deadline, SlashFilm and ScreenRant in the United States to Le Figaro in France and IGN Latin America.

They all understood the news perfectly along with expert pundit Valliant Renegade, CultureCrave and CosmicMarvel. However, some social media accounts analyzed it and reached the flawed conclusion that no Star Wars production could justify such high spending.

While the evidence was accurate, there was a disturbance in the force when it came to the analysis. The social media accounts can’t be blamed for this as it’s due to the Byzantine business model behind streaming shows. When that is taken into account it doesn’t just demonstrate that Andor was good value but it was actually the cheapest of all of Disney’s seven Star Wars shows and movies that were made in the United Kingdom.

Since Disney bought Star Wars creator Lucasfilm for $4 billion in 2012 there has been fervent fan speculation about how much it would spend on its shows and movies. The opaque nature of film finances opens the door to this speculation as the cost of making movies in the United States is usually a closely-guarded secret.

The reason for this is that studios tend to combine their spending on shows and movies in their overall expenses and don’t itemize the budgets of each one. Like most movie studios, Disney doesn’t discuss the cost of individual pictures and didn’t provide comment on the cost of its Star Wars productions. It didn’t need to as the data in this report comes straight from the horse’s mouth.

That’s because 58% of Disney’s Star Wars productions have been made in the U.K. which has far more stringent financial reporting requirements than in the U.S. There is good reason why Disney has chosen to film so many of its Star Wars productions in the U.K. despite it shining a spotlight on its spending.

Studios filming in the U.K. benefit from the government’s Audio-Visual Expenditure Credit which gives them a cash reimbursement of up to 25.5% of the money they spend in the country.

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 U.K. and how much of the post-production work is done there. Furthermore, at least 10% of the core costs of the production need to relate to activities in the U.K. and in order to demonstrate this to the government, studios usually set up a separate Film Production Company (FPC) there for each picture.

The companies usually have code names so that they don’t raise attention with fans when filing permits to film on location. Tallying the company names with the productions they are responsible for requires deep industry knowledge which my colleague and I have built up over nearly 15 years. We are the only reporters worldwide who specialize in covering the financial statements of U.K. film production companies for national media and we have reported on them for more than 10 leading newspapers including The Times of London, The Guardian, The Daily Telegraph, The Independent and the London Evening Standard.

The production companies have to file annual financial statements which lift the curtain on the otherwise secretive world of film finances as they reveal the reimbursement amount, the headcount, salaries and, crucially, the total costs. U.K. law requires the financial statements to be true and accurate so there is no question about the costs shown in them. However, that’s just the start.

Studios then have to try and make a profit on the production. They receive around 50% of the ticket sales of movies playing in theaters as well as revenue from merchandise and home entertainment sales. Streaming shows are a different story as subscribers pay a flat fee to access all of the content on a platform. Advertising is sold on some subscription tiers but none of the subscribers pay to watch each show which makes it tough for even studios to say how much revenue, let alone profit, they generate.

As Tom Harrington of media consultants Enders Analysis explained, “given the structure of the streaming model it is almost impossible to robustly attribute profitability to any single piece of content.”

Instead, the hallmark of success for streaming shows tends to be 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 is essentially the studio’s profit. When it comes to content, size matters.

The archive on the Disney+ streaming platform spans more that 13,000 shows on in 39 languages and it didn’t come cheap. In late 2017, Disney’s chief executive Bob Iger announced a $71 billion deal to buy 21st Century Fox giving it control of streaming service Hulu and adult-focused content such as The Simpsons and Family Guy. This diversified Disney’s content making it appeal to a wider audience of potential streaming subscribers.

The more minutes of content Disney can offer, the more ads it can fit in and the more content there is to tempt subscribers. Andor isn’t just a cost-effective way to do this with Star Wars, it’s the cheapest way.

As the table above shows, when the cost of the seven Disney Star Wars shows and movies made in the U.K. is divided by the run time of the production, Andor comes out the cheapest. Its first season lasted for a whopping 547 minutes across 12 episodes and although the total run time of its second season hasn’t yet come to light, it is set to span 12 episodes again so a similar length can be expected. At just $0.6 million per minute it delivers tremendous value for money which is precisely what Disney+ needs.

At the other end of the spectrum is 2015’s Star Wars: The Force Awakens which ran for just 138 minutes but cost a massive $641.3 million, making it the most expensive movie of all time as this report revealed.

Of course cost effectiveness and quality are two very different things. Andor’s first season excelled at the latter as its audience score of 87% gave it a higher rating on review aggregator Rotten Tomatoes than any of Disney’s other Star Wars streaming shows. Indeed, its score is even higher than any of Disney’s Star Wars movies with the exception of 2016 spinoff film Rogue One: A Star Wars Story which is set immediately after the second season of Andor. It has big boots to fill and although no expense has been spared, it isn’t perhaps as big a risk as it may seem.