Despite hits like 'Mission: Impossible 2' and 'The Matrix,' Fox Studios Australia is currently losing money

By Daniel Fierman
Updated October 13, 2000 at 04:00 AM EDT

It was quite a party. Six thousand people, 10,000 bottles of champagne, 15,000 pints of beer. Stars like Tom Cruise, Charlie Sheen, and Ewan McGregor. Heck, even Rupert Murdoch got into the act, celebrating his new studios in Sydney.

But as any Aussie will tell you, that kind of blow-out comes with one hell of a hangover.

Opened to the public in November 1999, and built at a cost of $253 million, Fox Studios Australia (FSA) was hailed as the ultimate state-of-the-art facility: six soundstages, shops, theaters, restaurants, and a potentially lucrative backlot tour. News Corp. and its partners saw it as the perfect way to capitalize on Olympics-stoked tourism and Australia’s expanding $380 million film industry. But after the bash and a rush of good press, things went from g’day to g’nightmare.

”We’ve had challenges,” says CEO Kim Williams. Translation: The studio lost $133 million in value last year.

It’s not a problem with the retail area, which makes most of its loot from locals, or the soundstages, modestly in the black thanks to productions like Star Wars: Episode 2, The Matrix, and Mission: Impossible 2. ”It’s been positive,” says Kim Dalton, Australian Film Commission CEO. ”It provides employment and has drawn [productions] from America and Europe.” Not surprising given the economics of shooting in Oz: As Star Wars producer Rick McCallum says, ”We save tens of millions because of good exchange rates and cheaper labor.” (Though that could be jeopardized by America’s looming actors’ and writers’ strikes.)

No, the problem is the backlot tour, which has gone the way of Paul Hogan’s career. And the tours — cash cows for American studios like Universal — were supposed to be the revenue engine of the site. But as Williams concedes, the Stateside versions may offer more bang for their buck: ”People expect a thrill-and-spill environment,” says Williams, who notes that at up to $22 a head, the backlot draws about half the 1.2 million people per year needed for profitability (L.A.’s Universal saw 5.1 million visitors in 1999). So what does Fox’s tour offer? ”The backlot [has] presentations on sound, wardrobe, and makeup, a special-effects display on Titanic, reconstructions of X-Files sets, props, [an original] live show by Baz Luhrmann. That kind of thing.”

Hammered by local media, which claim the Titanic exhibit alone will lose $600,000 its first year, Murdoch swiped at the project at a News Corp. shareholders’ meeting last year, saying it wouldn’t ”set anything on fire.” In an effort to turn things around, Murdoch and his partners, Australian investment company Lend Lease Corp., are pumping $12 million-plus into refitting the complex — changes that will not include theme park elements. ”We have an insufficient number of things attractive to children,” admits Williams, who says that landing Asian tourists — the largest group of visitors to Australia, home to under 19 million people — is critical to FSA’s survival. ”It comes down to making this a great day out. Now people just go for a couple of hours and they feel cheated.”

What, they expected the Titanic to make it this time?