Everyone has made some great points as to where all the money goes in making these big budget films. Certainly things like renting the mobile dressing rooms, hiring the caterers and craft services, set locations, extras, paying for permits,etc. Of course the grips, camera men, production assistants, best boys, assistant directors, directors of photography, etc, all have to be paid too. However I would like to point out that this is true regardless of whether it's a big budget movie like Iron Man 2 or a smaller, perhaps even straight to DVD movie, like Dungeons & Dragons 2.
The real question is "Why is it these movies that cost $100 million plus to make still look like crap?" Part of it is the inflated paychecks of many of the actors. Some actors who are very well known are still willing to work for very little money if it's a project they believe in. Many of the stars of LOTR are like this. Some refuse to work for less than their standard fee. Jennifer Lopez is a prime example of the latter. I heard she once agreed to do a low budget indipendant movie. The film makers specifically wanted her for the role, so they went out and got the extra money to pay her usual fee (which is how they got her to agree). But afterwards she said she didn't want to stay in the trailer they provided for her, she demanded they rent her her own private villa. Bigger studios will often give in to these types of diva demands, which often pushes the price of the films way up. Sometimes they have to dip into the budgets of other departments to cover these costs.
Part of it is that the studios often demand that a film be released by a certain date. This is especially true with sequels. They see how well the first one did at the box office and decide that they want another one asap. Unfortunately, especially with VFX heavy movies, this isn't the smartest way to go about it if you want a good quality product. Hollywood executives aren't necessarilly concerned with getting a good product out there though, just so long as they get a product out there.
Let's take the Dungeons & Dragons movies for example. Hardly box office blockbusters, I know, and didn't cost nearly the amounts we're talking about, but I'm familiar with their respective budgets so it's a good comparison. The first movie cost about $20 million to make. They had some pretty cool set locations in and around Prague. They had some fairly well known actors in the lead roles (Justin Whailan, Marlon Wayans, Jeremy Irons, Bruce Payne, Thora Birch, etc). If half of their budget go to the cast, where did the rest of their budget go? Much of it likely went into making unnecessarilly elaborate CGI visual effects. There are numerous ancient castles throughout Europe. They could have rented one to be used as the palace of Izmiir for much less than it cost them to create one from scratch through CGI. They had their VFX team create the technology/software to animate life-like dragons because "no such technology existed" (at least according to the Making Of featurette on the DVD). Obviously none of these morons had seen a "little known film" from about a decade earlier called Jurassic Park! And very little of the budget went towards hiring competent script writers. If my girlfriend sucked as much as that script did, I'd never leave the house! Seriously, I've seen pornos with better scripts.
Then a few years later they made the dreaded sequel, due to the surprising amount of success of the first film despite dismal reviews (I guess it made enough in DVD sales to warrant a sequel). This movie had a budget of roughly half the original. The cast were virtually all unknowns, except for Bruce Payne who reprised his role as the villain, Damodar. The VFX were mostly practlical effects. The little bit of CGI was reserved for things like the dragons and the harpies. Though I will admit they looked far better in the original, it leaves me to wonder how much better the film would've been had they another million or so to spend on the CGI. However despite having only about $10 million to work with, they had a much better quality film because the writers, director, producer, and cast all took the whole project very seriously and it shows in the final product. It's just a shame that it had to go straight to DVD, I think that if it had actually been released in theatres it might have done quite well.
