How Sony’s $500 million Spider-Man sequel spun out of control

Life must be good for Sony studio chairwoman Amy Pascal. What a year she had in 2006! Under her watch, 13 of the studio’s movies opened at number one. The most successful of the lot, The Da Vinci Code, grossed $758 million. A few months later, Casino Royale raked in nearly $600 million more. By year’s end, the studio had banked a record-setting $3.3 billion worldwide. Of course, in any other industry, such accomplishments would make Pascal untouchable. But in Hollywood, where people are especially loath to celebrate the good fortune of others, the backroom scuttlebutt centered on the ungodly sums of money Pascal was laying out for the latest Spider-Man sequel.

On the surface, Spider-Man 3 has all the ingredients of a box-office slam dunk—spectacular special effects, an obsessive fan base, and a roster of bankable stars. Moreover, its two previous installments have grossed $1.6 billion for the studio.

Even before filming began in January 2006, Sam Raimi promised to pull out all the stops for his third Spidey film (likely the last he’ll direct in the series). He wasn’t kidding. As production dragged on into late summer—it had been scheduled to conclude in June—stories about the project’s ballooning budget started popping up all over town. But in the end, even the most hyperbolic of observers may have underestimated the final tab. Industry insiders claim that Sony spent $350 million or more on production alone. With marketing and promotion factored in, the total price tag will approach half a billion dollars—positioning Spider-Man 3 as the most expensive movie of all time. (Cleopatra, the 1963 epic that has long held the title of priciest picture, had an inflation-adjusted budget of $290 million.)

Still reeling from a flurry of bad press on its PlayStation 3 gaming console, Sony isn’t eager to claim this honor. A studio spokesman angrily rejects the $350 million estimate as a “complete fabrication,” insisting that production costs didn’t exceed $270 million. One of the film’s producers, Laura Ziskin, also disputes the higher total, albeit in a less forceful manner. “I refuse to say the [real] number because it makes me choke,” she tells Radar. “Spider-Man 3 was a super-expensive movie—the most expensive film we’ve ever made. But there’s no way you can get to $300 million.”

Reports of Sony’s record-breaking gamble have created a stir among entertainment insiders, seeming to evoke some combination of schadenfreude and envy. “Those are crazy numbers,” remarks one leading industry figure.

“I don’t think this sets a great [precedent] for any of us,” complains a top executive at a rival studio. “It’s beyond the beyond. The problem isn’t that other studios will now feel liberated to drop $300 million on a movie. The real danger is that it makes the $200 million movie seem not quite so bad. And the risks of that can be absolutely devastating.”

Noting Sony’s long and storied history of overspending, the head of another studio asks, “Where is the corporate oversight? Who’s demanding accountability? How is it that they’re repeatedly able to conduct themselves in this manner?”

To be fair, Sony is hardly the only studio spending big bucks on tent-pole projects. Shrek the Third blows into multiplexes two weeks after the new Spidey film, with Pirates of the Caribbean: At World’s End right behind it. Next come the Fantastic Four sequel and Steve Carell’s Evan Almighty. Then, on Independence Day weekend, Transformers hits the screen.

None of these projects was cheap. Indeed, the third installment of Pirates may also sail past the $300 million mark. But in contrast to the Spider-Man series, the second Pirates film outperformed the original and grossed more than a billion dollars. (Spider-Man 2 took in $783 million—about $40 million less than its predecessor.)

Sony’s free-spending ways have been evident ever since the Japanese electronics giant acquired Columbia Pictures in 1989, causing much consternation among competitors who feel pressure to match the studio’s largesse. The first chairmen in the Sony era, Jon Peters and Peter Guber, spent so much money that the studio wound up taking a $3.2 billion write-down. The two were eventually fired, but business continued as usual. In 1996, chairman Mark Canton blew the roof off star salaries by awarding Jim Carrey an unprecedented $20 million for his role in The Cable Guy, a film that disappointed at the box office. Soon after, Canton was also gone.

To many observers, though, the budget for Spider-Man 3 represents a terrifying new frontier, even for Sony. As other studios try to cut costs, Pascal has continued in Sony’s profligate tradition. The only woman currently heading up a major studio, she also happens to be one of the most popular executives in the business. That’s largely because she seems to have a genuine love for movie-making at a time when many of her peers are fixated on the bottom line. “Amy’s greatest strength is her intuitive, creative ability,” says a longtime associate. “Her greatest weakness is that she lets that same ability get completely separated from any sense of fiscal restraint.”

Pascal, who recently turned 49, decided early on to make her mark in the movie business. During the course of more than two decades in the industry, she has managed to survive some of Hollywood’s toughest bosses, including Scott Rudin at 20th Century Fox and the late Dawn Steel of Columbia. Many years ago she did a stint at the Betty Ford clinic. A consummate career woman, her experience there fueled her interest in a movie about a young woman coming to terms with alcoholism. It became 28 Days, starring Sandra Bullock.

Her eccentricities have made her an industry legend. On the Sony lot she is a generally ebullient presence—if not a bit manic at times. One colleague claims, “There’s a network of assistants who will tell you how many cups of espresso she’s had [before seeing visitors into her office],” and “some people have been known to avoid going in if she’s had too many.”

When she was first hired to head up the studio in 1999, Sony was hobbled by an opaque, almost indecipherable management structure. Since then, emboldened by her success, Pascal has consolidated her command and exerts strict control over every facet of the business, from casting to posters to production. “She does whatever she wants to do,” says a former Sony insider. “There’s nobody to tell her no.”