Into the financial details, new reality and some turmoil at film school

The big picture was clear enough in the fiscal 2022 financial report released last Tuesday by the Academy of Motion Picture Arts and Sciences: revenue down, expenses up, generally tough in a tough financial climate.

But the finer points require some digging, both in and around the 39-page report.

On closer inspection, and with a little help from those who know the numbers — academy officials themselves declined to comment — an observer sees signs of discomfort and the contours of a profound transition from a simple, Oscar- award-winning institution to a complicated cultural institution, the faces an expensive film museum.

As for the turmoil, on page 5 of the report there was clearly a “loss on sale of assets” of about $12.3 million. Somewhat helpfully, a related footnote said, the amount represented “exhibit development costs” for property, equipment and building improvements that it noted “would not be used in the museum.”

However, according to those in the know, the write-off was intertwined with the departure of Kerry Brougher as director of the Academy Museum in August 2019 and the subsequent appointment of Bill Kramer – now general manager of the Academy itself – to fill his position. A significant part of the depreciation was due to a false start of a number of proposed projects between 2016 and 2019, when expensive consultants from around the world struggled with the challenge of concrete exhibitions around such an ephemeral medium as film to build. But the biggest hits came from two exhibits from the Brougher era. One was a Japanese-designed “immersive experience” that was only loosely connected to the films and would have lived in the space now occupied by a giant. North Northwest exhibit, and the other was a walk-in replica of Dorothy’s The Wizard of Oz House is considered inauthentic, too amusement park-like and inadequate for the museum.

More subtle problems lie at the root of the sharp drop in “grants payable” — from $1.5 million last year to about $1 million — as reported on page 3. While Covid made budget cuts, the Academy in early 2021 ‘ made some cuts and announced that he was suspending FilmWatch and FilmCraft grants. But over the months, officials also decided to change the dynamics of academy support for outside institutions. Rather than writing checks to, say, film schools, as happened in the past, “giving” has shifted to collaborative efforts—perhaps joint programs or the use of screening facilities—involving the museum’s educational arm. In theory, support for others will not decrease. But it can somehow be merged with the operation of the museum.

A shocking change: Advertising spending nearly tripled to $10.8 million by 2022, up from $3.7 million a year earlier. Spending was split between the Oscars, which had a larger advertising budget, and the museum, which had a certain amount of one-time costs when it opened in September 2021. Total advertising spending could drop slightly this year; Still, experts say, large advertising budgets are likely to be an ongoing issue as the museum tries to offer new exhibits and the Oscar show battles for viewers.

The new reality also brings higher fundraising costs. In 2022, they made a surprising jump from $4.1 million the year before to $8.5 million. In the future, look forward to spending as much, if not more, as the academy, which once lived almost entirely on Oscar performance earnings, bolsters its finances with increasingly aggressive fundraising programs.

A core question, which can only be vaguely understood in the current financial report, is the extent to which the museum needs donations to supplement its income from admissions, exhibitions and the sale of goods. In 2022, the gap between expenses and income was nearly $39 million after eliminating non-cash depreciation charges, which have no impact on cash on hand. This reflected only nine months of museum operations in the financial year; but it also contained a one-off bump of unknown size related to the museum’s opening in September.

Calculating the future income and expenses of the museum requires a lot of guesswork. But a reasonable estimate, based on reported numbers, would say that in a typical year the museum would have about $50 million in operating expenses, after earning $62.4 million in just nine months last year thanks to one-time costs — dollars have the opening achieved. .

At the same time, revenue generated could falter after hitting $23.7 million in just nine months last year as initial excitement about the opening and new visitors wanes. But the combined income from museum sales and regular contributions from embedded partners, including the museum’s wealthy trustees, would add up to perhaps $40 million in revenue. That would leave a gap of about $10 million a year that would have to be filled by the academy itself or by new donors (again note the increased cost of fundraising).

The details are just a guess. But the need for more money in the future is almost certain. This is the new fiscal reality for the film school and its museum.