So it has now been officially announced that Fox is giving James Cameron $200 million to direct Avatar, his 3D live action/animation hybrid sci-fi follow-up to 1997's ultra-successful Titanic. More on The Avatar later, let's talk about the how Avatar has already become one of the most expensive movies of all time.

We now live in a world where the $150 million films are being released like never before. Last year (2006) saw the release of 5 films (X-Men: The Last Stand, Superman Returns, Poseidon, Mission: Impossible III, and Casino Royale) at or over that price range. Only four out of the top twenty most expensive films have not been produced outside of the last three years.

And the sad fact is that not many of these big budget tentpoles make back their costs. A great example of movie accounting is 2006's Mission: Impossible III, which went on to gross almost $400 million worldwide, yet was considered a failure of epic by the industry. I use to marvel at the huge numbers released every Monday morning in the Box Office earnings report. But I failed to realize one thing: Movies cost money. Sure we all know that. Paramount spent a reported $150 million on M:I:III. Not exactly true. The published budget numbers are estimates at best, and do not include the press and advertising, which can sometimes double the reported budget. But that's not the big realization I was talking about.

Did You Know: A movie's distributor receives only a little more than half of the final gross. And I'm not talking before the stars salaries, special effects or P&A. I'm talking about those numbers you see every week on BoxOfficeMojo.com. The movie studios give a little less than half of that money to the exhibitor (ie Movie theater). The money split can vary from movie to movie, but generally, the contract favors the distributor in early weeks and shifts to the exhibitor later on. What this means is a cash cow like Titanic that overstays its welcome probably made less money for the distributor than it did for the exhibitor.

So how did a movie like Mission: Impossible III become such a financial failure? Let's do the math: $150 million budget + $120 million (estimated) P&A = $270 million. The movie made just under $400 million worldwide. If we give 45% to the exhibitor, the resulting figure is $220 million. Take that and minus the $270 million in production and P&A budget and you have a $50 million loss. And this doesn't even take into account the real unreleased budget number. The studio now must hope for big DVD sales to make up that figure. Mission: Impossible III has made just over $50 million in DVD sales to date. But then we're not accounting for the press and advertising for the DVD release.

The fact of the matter is that movies made for over $150 million don't make their money back in most cases. I would guess that only four of the top 20 most expensive movies listed below probably turned a profit.

So why waste the money on a big summer blockbuster when it has little or no hope of breaking even? Studios are hoping for the next Titanic, but they forget real life Titanic sunk at sea. A lesson could be learned there.

Cameron plans on releasing Avatar in 1,500-2,000 digital theaters in 3D (add 3D glasses to the P&A budget). Right now only 350 digital theaters exist. Didn't George Lucas gamble on the same digital theater revolution with Star Wars Episode II: Attack of the Clones?

"We think we're going to blow people away. We want to throw you to the back wall of the theater," said Cameron. "My goal is to rekindle those crazy mystical moments my generation felt when we first saw '2001: A Space Odyssey,' or the next generation's 'Star Wars.' It took me 10 years to find something hard enough."

Written by Cameron 11 years ago as an 80-page treatment, Avatar follows a wounded ex-marine who is unwillingly sent to settle and exploit the faraway planet Pandora. When he gets caught up in battle for survival by the planet's inhabitants (called Na'vis) he unexceptionally falls in love with one of them.

Australian actor Sam Worthington (Sommersault, Dirty Deeds) has been cast as the film's lead role, Jack Sully, after a global screen test search.

Zoe Saldana (The Terminal, Pirates of the Caribbean: Curse of the Black Pearl) will play the local alien love interest. But the twist is that the alien woman will be a computer generated character.

Cameron sees the film as a potential franchise and has signed on both actors for sequel options.

Sounds like an interesting story, but at a $200 million price-tag, one must wonder if we're in for the next Water World-sized disaster.

Below is a list of the most expensive films of all time, Spider-Man 3 which comes out in a few months will top the list at a projected $250,000,000. But who knows, may-be Avatar will beat out Spidey for the top spot. The pre-production estimated budget and the post production real life budget are two different numbers. It's not uncommon for a film which features a lot of computer generated special effects to go upwards of $70 million over-budget.