The Rise of Internal AI Systems

2 Min Read

The latest big-budget blockbuster Michael, a biographical film that promises to track the King of Pop from his Jackson 5 days to the height of Thriller fame. Filming wrapped in 2024, reshoots wrapped in mid‑2025, and the movie finally hit cinemas in Berlin on 10 April 2026 with a US release two weeks later.

Directed by Antoine Fuqua and starring Jaafar Jackson, it cost an estimated $165–170 million. That’s a lot of very expensive moonwalking.

This week we take a look at the movie business

Film Budget

Michael’s R±165 million production budget positions it alongside Oppenheimer or Barbie.

A budget is director fees and craft services, and it also includes pre‑production, cast, crew, costumes, visual effects and marketing. Under IFRS, the costs to produce a film are capitalised as an intangible asset only when future economic benefits are probable and the cost can be measured reliably. Internally generated brands or customer lists cannot be recognised, so the “Michael Jackson” brand sits in the producer’s goodwill rather than on the balance sheet. Once the film is released, the intangible asset is amortised over its useful life and tested for impairment.

Studio spending doesn’t end on opening night. Marketing often adds 50 % or more to the production budget, and theaters typically take about half of box‑office revenue. Which is often why analysts expect high‑profile films to struggle to break even from ticket sales alone.

Revenue Recognition

Once a film premieres, studios need to decide when to recognise revenue. IFRS 15 requires five steps: identify the contract, identify performance obligations, determine the transaction price, allocate the price to obligations, and recognise revenue when obligations are satisfied.

For a movie this means separate streams: theatrical box office, video‑on‑demand (VOD), licensing to streaming platforms, and physical media. Each has its own measurement challenges. Box‑office revenue is reported daily, though half goes straight to cinemas. VOD rental sales usually equal 10–20 % of a film’s worldwide box‑office take, and studios keep about 70 % of VOD revenue.

Bulk licensing deals with streaming services are negotiated for bundles of films – HBO Max pays A24 tens of millions for library access, while Sony’s four‑year output deal with Netflix is worth around $1 billion – making it difficult to assign revenue to a single title.

From Production To Impairment

Film projects are risky. Budgets are often locked in before scripts are finalised and with delays like the 2023 SAG‑AFTRA strike that pushed Michael’s production and required reshoots, this is compounded.

Furthermore, box‑office outcomes are volatile, and star power doesn’t guarantee profits. In a post‑pandemic world, films rely increasingly on streaming. That shift raises questions about incrementality – whether a title attracts new subscribers or simply fills existing viewing time.

Because streaming services cannot attribute revenue to individual movies, impairment assessments may rely on broader cash‑generating units.

The Bottom Line

The movie industry, much like any other has its defining characteristics, which give it its own nuances to navigate from an accounting, finance and business perspective, but let’s be honest the outcome is pretty cool because in essence you’re accounting for someone’s imagination made tangible (or intangible I guess in this case).

Until next week,
The Journal Entry Team

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