Los Angeles - Can a studio make money on a film based on an original and unfamiliar story, with no superstars, a vanishing DVD market and a price tag approaching US$500 million (S$694 million)?

That question looms large for 20th Century Fox and its 3-D sci-fi film Avatar, among the most expensive films ever made.

Despite many sceptics, the studio thinks it can turn a profit, in part because film creator James Cameron was the driving force behind its immense hit, Titanic (1997).

But just in case box-office receipts for Avatar fall short, Fox has worked hard to hedge its large bet on the movie.

Despite the estimated half-billion dollars spent on production and marketing, the film may carry surprisingly little financial risk for Fox's parent company, News Corp, even if it disappoints. That is because of shifting industry economics, reliance on outside investors and help from a network of allied companies and in-house business units.

Actors Sam Worthington (left) as Jake Sully and Zoe Saldana as Neytiri in the big-budget science-fiction film Avatar, which uses advanced 3-D technology to tell the story of a planet being infiltrated by human avatars.

The final cost has not been tallied, as Cameron, who has worked on it for 15 years, and his collaborators complete filming.

Published reports put the production budget at more than US$230 million. But the price tag would be higher if the financial contribution of Cameron and others were included. When global marketing expenses are added, Avatar may cost close to US$500 million.

At what point the various partners in the film would see profit depends on what share of revenue each receives as the film reaches cinemas, then home video and other media around the world.

If domestic ticket sales reach US$250 million - a level broken in the last year by five films, including Star Trek and The Hangover - Fox and its allies would appear to be headed into the black.

The studio is counting on Titanic director James Cameron (above) for Avatar's success.

Titanic, which took in more than US$1.8 billion at the worldwide box office after its release in 1997, was a major event for News Corp, then about a third the size of the current conglomerate, which has US$30 billion in annual sales.

Less than a year after the release, News Corp raised nearly US$3 billion in a public offering of shares in its filmed entertainment group, partly on the strength of the film.

In 1980, the failure of Heaven's Gate was enough to chase Transamerica Corp, which then owned United Artists, out of the movie business. But such companywreckers belong more to history than to the contemporary film business.

With Titanic, News Corp was at risk for at least half of a production budget that would approach US$300 million in today's dollars, and was borne partly by Paramount Pictures.

News Corp is carrying a much smaller share of Avatar's production cost, as private equity partners - Dune Entertainment and Ingenious Media - pick up 60 per cent of the budget, according to people who were briefed on the economics of the film but spoke on condition of anonymity.

Ingenious chief executive James Clayton confirmed his company's backing for Avatar but declined to discuss the size of its stake. Dune chief executive Greg Coote declined to be interviewed.

In a further hedge, Cameron would reportedly give up part of his own participation in the film's returns if production costs exceed a specified level.

He, along with Hollywood technology expert Vince Pace, developed much of the elaborate camera system and digital technology for the film themselves, at a cost of US$14 million. Pace said the systems are owned by a company that expects to recoup the investment by selling them to other film-makers.

"We're turning it into a business, as opposed to a path where everybody's supposed to service Avatar," he said.

While the film was largely shot in a converted aircraft hangar in Los Angeles, much of the work qualified for tax rebates in New Zealand, where Weta Digital operates under the direction of the film-maker Peter Jackson and others.

Fox's biggest investment in Avatar may be on the marketing side, where it plans to spend about US$150 million globally.

Cinema owners are predicting Avatar may play in as many as 2,500 3-D cinemas, while occupying almost as many conventional cinemas over the holiday season.

Those using 3-D bolster the overall box office by commanding ticket prices perhaps 30 per cent higher than those of conventional cinemas.

Still, the studio has experienced some problems. Initial reaction to a conventional trailer was flat and response to the 3-D Imax preview provoked doubts about whether Cameron's movie - which uses new technology to tell the story of a planet being assailed by humans - was really the cinematic game-changer that had been promised.

Taking no chances, Fox is backing up the film with what an executive recently called the studio's "secret weapon". That would be Alvin And The Chipmunks: The Squeakuel, set to open just a week after studio marketers release Avatar.

It is the relatively safe sequel to a family comedy that cost about US$60 million and took in US$217 million at the domestic box office when it was released two years ago.

- New York Times