After ‘Argylle’ Bombs, Can Apple Keep Spending $200 Million on Big-Screen Gambles?

Apple has spared no expense with its embrace of movie theaters, shelling out $200 million to produce historical epics, war dramas and action comedies… all while the global box office contracts and rivals scramble to tighten their budgets.

For most studios, these expenditures would be ruinous at a time when hardly any movie is earning enough money to justify that kind of budget. As one of the deepest-pocketed companies in the world, though, Apple’s spending habits in the entertainment space are jokingly called rounding errors. But can the tech behemoth keep spending big on big-screen misfires? Or will a string of underperforming blockbusters eventually force Apple to economize?

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That’s the big question after Matthew Vaughn’s spy thriller “Argylle” bombed in its debut with $18 million domestically and a disastrous $35 million globally. It’s the third consecutive Apple release where an outsized budget will make it nearly impossible for the movie to turn a profit in its theatrical run. A film of this size and scale at a traditional studio would need at least $500 million globally to break even. Fewer than 10 films in 2022 and 2023 have reached those heights. It’s an especially unlikely benchmark for “Argylle” since the action-comedy, starring Bryce Dallas Howard as a reclusive author whose spy novels end up being oddly prescient to real-world events, has been saddled with negative reviews and discouraging audience scores. Instead of fulfilling Vaughn’s plans to turn the story into a trilogy, “Argylle” is shaping up to be the year’s first flop.

“No studio can sustain massive spends highlighted by underwhelming box office,” says Jeff Bock, an analyst with Exhibitor Relations. “‘Argylle’ floundering at the box office is bad press. So in a way, it’s already negatively impacted its earning potential [on streaming].”

There’s still a lingering debate about Apple’s first two major releases, Martin Scorsese’s “Killers of the Flower Moon” ($156 million globally) and Ridley Scott’s “Napoleon” ($219 million globally). Essentially those movies fell just short of or slightly eclipsed their $200 million price tags. That’s a problem given that studios split ticket sales with theaters. On top of that, Apple has to shoulder tens of millions in promotional costs as well as distribution fees to Sony, Universal and other companies who are booking Apple movies in theaters.

But Apple has a different business model. So, were those results good for streaming-backed tentpoles or terrible for mega-budgeted films with renowned directors and notable stars? “Killers of the Flower Moon” and “Napoleon” were adult-skewing prestige dramas with big budgets, R-ratings and eternal runtimes — the exact type of movie that people hadn’t returned to watch in theaters since the pandemic. So, while neither was in danger of recouping its investment, those films sold a decent number of tickets — especially compared to Scorsese’s last film, Netflix’s crime epic “The Irishman,” which didn’t play in theaters at all, and Scott’s prior movie, Disney and 20th Century’s period piece “The Last Duel,” which cost $100 million and grossed a tragic $33 million globally.

For now, Apple’s movies won’t be getting any less expensive. Upcoming films on its slate cost $100 million to $200 million and include an untitled 1960s-set space race comedy, starring Scarlett Johansson and Channing Tatum; “Wolfs,” a psychological thriller with George Clooney and Brad Pitt; and Pitt’s “Formula One” feature from “Top Gun: Maverick” filmmaker Joseph Kosinski.

Apple doesn’t share subscriber numbers or viewership data on its platform. So, it’s impossible to know if tentpoles like “Killers of the Flower Moon” or “Napoleon” are enticing new customers to sign up. These movies may get a small boost from premium video-on-demand sales on home entertainment, but they aren’t benefitting from other downstream revenues, like consumer products.

The company has remained similarly quiet about its overall film strategy, which seems to prioritize prominence over profits. As it experiments to find a winning formula, these robust theatrical releases can be written off as advertising expenses. Ideally, cinemas can help its films build enough awareness to generate awards chatter and buzz for its streaming service, Apple TV+. Will there be a point where Apple becomes associated with theatrical flops, turning off talent from wanting to work with them? And what happens with popcorn fare like “Argylle,” which isn’t the kind of project that will be rewarded down the line with Oscar attention?

“No matter what the endgame for streamers is — promotion, awareness, clout — the underlying idea is that audiences will flock to your platform because of the strength of your product,” Bock says. “They flash a bunch of cash to attract talent but fail to make an imprint with the product.”

Analysts point out that Apple is new to the theatrical business, having only released three major movies to date. Some believe the company’s massive market cap gives it the financial flexibility to keep figuring out the model that works best. However, like any publicly traded company, Apple is beholden to shareholders and has to justify how it allocates its capital.

“We’re looking at a small sample size of three movies in six months,” says Shawn Robbins, the chief analyst at BoxOffice Pro. “Apple has such deep pockets that it can continue to invest until it finds the model that works — even if it’s doing it at a loss.”

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