Numlock Awards: What has the Academy become?

Let's do some Hollywood accounting!

Numlock Awards is your one-stop awards season newsletter, and it’s back! Every week, join Walt Hickey and Michael Domanico as they break down the math behind the Oscars and the best narratives going into film’s biggest night. Today’s edition comes from Walter.

For the past couple years, I’d basically describe the main research thrust of this newsletter as “the Academy is fundamentally changing, and if we want to predict them we have to understand the nature of that change.”

We’ve seen how the membership has changed drastically and how the new members now outnumber the old, we’ve seen how the shift in who has been invited has changed the balance of power within the voting bloc, we’ve seen how the organization has become more international.

Today I want to look at another, under-the-hood shift in the Academy: what on earth is this organization anymore?

For much of its history, AMPAS’s primary objective was the Oscars. For instance, in 2012, the organization spent around $65 million on non-administrative non-interest expenses, of which $38 million went toward the Oscars. The remaining funds went mainly to the Pickford Center — the Academy film archive, its grant-making operation, and the Nicholl fellowship — and the Fairbanks Center, which hosts the Academy’s library. But the point is, the Academy mainly existed as an award show producer with some ancillary libraries on the side.

That was then, and this is now. When you look at the Academy’s balance sheet in 2021, well, you might notice something:

This is some holy-crap shift. This is a war chest. The Academy had about $362 million in total assets as of June of 2012. As of last June, that figure was $1.4 billion.

The reason for that is two-fold, one is the Academy Museum that they’ve finally opened and the other is their investment portfolio.

As for the property component, the Academy doesn’t count the value of the stuff in their museum on their balance sheet, so mainly what we’re looking at here is the value of the building and the construction they’ve built in Los Angeles. That was built through a combination of fundraising — around $200 million in 2016, you can see that jump in the Total Assets chart — and debt financing — the Academy owes around $476 million in debt, a figure that has tracked the overall value of the property. In short, the property stuff is actually a bit of a wash.

But the investments? Hot damn.

The Academy has a $709 million investment portfolio, up from $228 million nine years ago. And one reason for that is that the Academy is actually a pretty simple business. It costs $42 million to put on the Oscars every year and they get $131 million to air it.

That $90 million gap goes towards funding the libraries and the museum operations and so on, but there’s a lot left over. Backing out a little bit, between the Academy Awards revenue (steady) and the investment returns (volatile) the Academy pretty much turns a healthy profit every year:

The difference gets dumped into the investment accounts, which just keep on going up.

What’s interesting to me is what this means in terms of what the Academy is. It’s no longer a not-for-profit production company living year-to-year and hand to mouth. It’s got a thriving fundraising obligation. It’s got sophisticated facilities on a 55-year renewable lease. It makes more money than it spends, it’s got a massive and growing endowment.

It’s an extremely successful hedge fund with an endowment steadily rising toward a billion dollars attached to a non-profit cultural institution. Know what that reminds me of? It sort of resembles a university!

It also looks rather sustainable: in 2012, AMPAS’s net investment income totaled $7.4 million. In 2021, it was $70 million. And obviously 2021 was an exceptional year, but that’s the thing about managing an endowment, you structure it in such a way that a bad year means the chart goes up and a good year means the chart goes way up.

So how is this relevant for us as Oscar fans?

Mainly, I have been worried for the past couple of years about the Oscars ratings. The numbers are going down as the levee breaks on network television. Last year’s pandemic awards were especially rough.

And I’ve been worried that they’re going to do something stupid, and fundamentally screw with the show in the pursuit of ratings, with the understanding that if they lose the ABC contract, they’re doomed.

But AMPAS has stuck to their guns and their principles about the show, and I think this war chest might be why. A billion-dollar endowment means that they can operate a $40 million award show indefinitely on interest alone. It’s an insurance policy that the Oscars can persist even if the economics of network television fumble. It’s a hedge against ABC, and it’s likely good for the future of the organization if it becomes more like a university, because universities don’t need television contracts to last decades.