Can a disaster epic about an epic disaster avoid the very fate it dramatizes? "Titanic," director James Cameron's cinematic retelling of the story of the doomed luxury liner, is over budget, behind schedule and plagued by the sort of vicious Hollywood gossip that stokes the ulcers of studio executives. Even before anyone has actually seen it, the movie has engendered its own legend of ego and excess, both the personal and financial kinds.

With a production budget estimated at $180 million to $200 million, "Titanic" will easily surpass another ocean-borne epic, "Waterworld," for the title of the costliest movie ever produced.

Filming "Titanic" required construction of a $20 million studio in Mexico, a 775-foot facsimile of the doomed ship and a year of meticulous special-effects work. Indeed, the film is so big it took two studios -- Viacom Inc.'s Paramount and News Corp.'s 20th Century Fox -- to shoulder its ever-growing financial burden.

And it's not done yet. Originally scheduled to open on July 2, the movie has been continually pushed back as director Cameron (whose credits include "True Lies," "Alien" and the "Terminator" movies) labors to finish it in his Malibu editing room. Studio executives first hoped to reschedule it for a late July or August opening to take advantage of the summer movie season. Now they say unofficially that "Titanic" won't be ready for release at all this summer; the movie probably will debut around Thanksgiving.

Both Paramount and 20th Century Fox are standing by Cameron -- they don't have much choice -- but with varying degrees of confidence. "This movie is going to be gigantic," insists Robert Friedman, vice chairman of Paramount Communications Inc.'s Motion Picture Group. "It's going to be perceived as one of the best movies of this year, and any year. We have nothing but excitement and enthusiasm for this movie."

Executives at Fox, which put up the bulk of the money (Paramount's share was capped at $65 million) aren't quite as sanguine. "The bottom line is, nobody wants to spend that kind of money, but that's the way it turned out," said Tom Sherak, chairman of Fox's Domestic Film Group. "If it turns out to be epic, it will make money. But there will always be that conversation about: Is it too much money?' Should it be done?' "

Increasingly, Hollywood seems caught in a bigger-is-better mentality. And as the studios come to rely on these giant "event pictures" to bring in profits, "Titanic" is emerging as the prime example of the risks.

American film studios, of course, have churned out expensive epics since D.W. Griffith raised a remarkable $2 million to make "Intolerance" in 1916. But the budget-busting production has become almost routine, part of a blockbuster arms race that has swept Hollywood.

In 1992, for example, the top two revenue-producing films -- "Aladdin" and "Home Alone 2" -- cost about $30 million each. Last year, the three most successful films -- "Independence Day," "Twister" and "Mission: Impossible" -- all cost in excess of $65 million to produce. Marketing spending for TV commercials and newspaper ads added millions of dollars more.

This summer, nearly a dozen movies scheduled for release will cost in excess of $100 million each. That means moviegoers will run into a glut of movies crammed with expensive special effects during the 15-week high season that runs from Memorial Day to Labor Day. With so many glitzy films vying for attention, a financial bloodbath is all but guaranteed for those movies that don't catch on fast. The casualties so far this year include the $100 million "Volcano," which has attracted just $37 million in ticket sales. Big Risks and Rewards

The ever-mounting risks, however, may be justified by the potential rewards. Each year, a handful of successful films account for the disproportionate share of the domestic box office -- which this year will total about $5.5 billion. And that's just the beginning of the bonanza for a successful film.

Even bigger revenue awaits in all of the release "windows" that follow a film's debut in U.S. theaters: international theaters, video sales and rentals, cable pay-per-view and premium-channel plays, broadcast network airings, along with tie-ins such as toys, clothes and computer games. Even then, the cash flow may not be over: As 20th Century Fox proved this year with its "Star Wars" trilogy, some films can hit the cycle a second time.

"There is no question that it is worthwhile to make these sorts of movies," said Tom Pollock, a former head of Universal Studios who now runs the American Film Institute. "They are by far the most profitable movies for the studios when they work. . . . If you do an analysis of the most profitable movies for studios . . . you will find that event movies -- something that costs $60 {million} to $70 million or more -- are consistently the most profitable movies."

But $70 million is one thing. "Titanic," on the other hand, is steaming into uncharted territory. A Director's Fascination

Cameron's costly embrace of "Titanic" started with a 1991 documentary that featured underwater images of the ocean liner's remains. The director, who had explored similar territory in "The Abyss," became fascinated with the idea of making a feature film about the catastrophe. In 1995, he chartered a Russian-made research submarine, dove down to the wreck and shot footage that will be incorporated in the film.

Though it starts in the present, most of the film's story occurs in 1912, using fictional and historical characters to depict the momentous launching and only voyage of the RMS Titanic -- at the time the largest and most luxurious ocean liner ever built. The supposedly unsinkable ship sank after hitting an iceberg (or possibly icebergs) in the icy North Atlantic off Nova Scotia. It went down in less than three hours, killing 1,500 of the 2,200 passengers on board.

Cameron's films have never been small, and clearly, this one -- with a plot built around a romance between an upper-class passenger (Kate Winslet) and a blue-collar ship's mate (Leonardo DiCaprio) -- didn't figure to be, either.

"If you're going to do a movie about the Titanic, you know it's going to be big," said Rae Sanchini, the film's executive producer. "It was always intended to be big by both studios, to be spectacular in scale and scope. We fully intended to bring all the currently available technologies to bear to create history in a photo-realistic manner, in a way people have never seen it before. We fully intended to recreate the luxury and opulence and size of the ship, because that's part of the story."

But no one expected what was to follow. Trouble-Plagued Production

When no existing studio could accommodate tanks for the five-story replica of the ship, Fox agreed to build a 40-acre studio in Rosarito Beach, Mexico, just over the border from San Diego. The new Fox lot has four sound stages and a 30-foot subterranean tank, which Cameron used to submerge, tilt and flood "Titanic" interiors. The ship's poop deck had a hydraulic lift that tilted 90 degrees to simulate the sinking. The film's set and costume designers did extensive research to authentically recreate the era's Edwardian opulence, going so far as to order carpeting from the original manufacturer of the real Titanic's floor coverings.

The production soon became fodder for the Hollywood gossip mill. First came reports that someone had spiked the production crew's seafood chowder with the horse tranquilizer PCP during early shooting in Nova Scotia last July. The poisoning felled several dozen people, including Cameron. No suspect has ever been identified.

Since then have come stories of Cameron's legendarily fierce temper on the set, magnified by the pressures of directing hundreds of extras, dangerous underwater stunts and endless working days. There also were reports of numerous injuries on the set (the Screen Actors Guild investigated and declared the stories unfounded). Cameron has said in interviews that there was only one troublesome scene, shot over two days, in which three stunt players suffered broken bones. He says he abandoned the scene and left it for computer animation.

Winslet, one of the movie's stars, said in an interview with the Los Angeles Times earlier this month that she chipped a bone in her elbow during filming and at one point had "deep bruises" all over her arms. "Nothing could have prepared me for it," Winslet told the newspaper. "There were quite a few 20-hour days. . . . It was every man for himself on the set."

She also said she nearly drowned in a scene during which her coat became unintentionally snagged on a gate as a wave rushed toward her.

Sanchini said she regrets that Winslet felt in danger, but insisted the actress never was at risk and that the set wasn't unsafe.

"What is most unjust, most untrue, is any suggestion that . . . Jim {Cameron} at any time ignored or discounted safety concerns of the cast or crew," Sanchini said. "It is patently false. We could not have rehearsed or planned for our stunt work more scrupulously than we did."

Some of that attention to detail may account for the extraordinarily long time it took to complete principal shooting on the movie. Filming on "Titanic" began in July 1996 and stretched until the end of March 1997, more than twice the usual schedule for a Hollywood film.

The long shoot in turn has delayed completion of the film's special effects, a formidable undertaking in themselves. The movie includes some 250 visual-effects shots created by Digital Domain Inc., a computer special-effects company part owned by Cameron and International Business Machines Corp.

The technical work on the film is finally winding down at an old aircraft hangar in Marina del Rey west of Los Angeles. Employees at Digital Domain have been working 12- and 14-hour days in an all-out push to complete the film, along with post-production editing and sound. Insiders at the firm say one major shot remains to be filmed, which would take their work through mid-July. Cost Overruns

Observers say the long shooting schedule and the special post-production work are largely to blame for pushing "Titanic's" budget past its original $110 million.

"The underappreciated part of movie costs is the cost of labor," said Douglas Gomery, a University of Maryland professor who studies the economics of the entertainment industry. "Movies like this require original software programs, and hundreds and hundreds of highly skilled people working thousands of man-hours."

As movies grow more complex, the manpower required grows, too. Gomery notes that it took 11 minutes of screen credits to list all of the technicians that worked on "Who Shot Roger Rabbit?," which combined live action and animation.

Once in for $110 million, Paramount and Fox had little choice but to keep ponying up more money to keep the project going. "It's the classic dilemma in Hollywood: If you're in the hole for that kind of money and someone says they need another $10 million more to finish it, can you turn them down?" said Harold Vogel, an entertainment industry analyst with the brokerage Cowen & Co. in New York.

"Soon," said Vogel, "it becomes an extra $40 million, and then you get to $200 million. . . . Hollywood is a lot like the stock market. If you're losing money, you sometimes think it's wise to double your bet." How Waterworld' Sank

If this tale of water bloat sounds familiar, that's because it is.

The saga of "Titanic" is a financial remake of "Waterworld," the 1995 Kevin Costner vehicle that cost $172 million, the most expensive film in history until "Titanic." Like Cameron's movie, "Waterworld" ran into budget overruns, complications on the massive, floating set, and well-publicized personality disputes between the star and his director, Kevin Reynolds.

Although the film received some positive reviews, it took in $260 million worldwide -- a huge amount for an average film, but a relatively mediocre performance considering "Waterworld's" cost. It has yet to turn a profit for its distributor, Universal Pictures.

Said one executive who oversaw the film: " Waterworld' got its cash back, so it didn't lose money, but I can't honestly say it made money. It was a wash, which of course means it wasn't worth it."

The fear in some circles is that "Titanic" may turn out to be a similarly futile exercise. Long-Term Returns?

To be sure, "Titanic" has enough going for it to help it avert financial catastrophe. Cameron has a track record of creating movies with the sort of eye-popping visuals that please both domestic and international audiences. The latter are crucial because international revenue often exceeds the domestic take.

What's more, "Titanic" could be helped by some corporate "synergy." The parent companies of both Paramount and Fox own broadcast and cable TV networks (Fox, UPN, MTV, Nickelodeon, etc.) that can be counted on to carry commercials and news reports about the movie. Further, Paramount's owner (Viacom) also owns the Blockbuster video chain, which undoubtedly will feature the film in its stores when it comes to video.

But "Titanic" is lugging some awfully heavy baggage.

The sinking of the great ship has been told numerous times before by Hollywood, and this version comes without a major star's drawing power. Since distributors split box office revenue with theater owners, the movie will have to gross about $350 million just to come close to recouping its production budget for the studios, according to Tom Sherak's estimate. Add in another $55 million in worldwide advertising expenses, and the break-even point quickly passes $400 million.

While that's a tough goal to reach, it's not impossible, given all the possible sources of revenue.

"It'll recoup the investment -- if you're willing to wait long enough," said Gomery.

"Maybe some day in the year 2008, someone will buy that last Titanic' tape and then it will make money. But if you have to wait that long, it wouldn't be a very good investment . . . but if the long run is long enough, they all make money." What If It Bombs?

If "Titanic" founders, there are bound to be consequences, though not necessarily those one might expect.

Once upon a time, high-profile failures of high-budget films spelled trouble for the studios that made them. "Cleopatra," the most expensive film of its time (1963), staggered Fox, forcing the studio to sell off its back lot to stave off bankruptcy; "Heaven's Gate" (1980), another mega-budget commercial failure, lit the fuse for the demolition of United Artists.

But Hollywood has changed since those days. All of the movie "majors" are now owned by diversified media and entertainment conglomerates; 20th Century Fox is part of Rupert Murdoch's News Corp. empire, which includes newspapers, book publishers and TV stations worldwide. Paramount is controlled by Viacom, which also owns MTV, Simon & Schuster books and Blockbuster.

One film, even an expensive one such as "Titanic," "won't sink any of these companies," said Wall Street analyst Vogel. "At worst, it will put a dent in their quarterly profits, but these companies are too large to be really affected."

What the failure of "Titanic" might do, however, is poke some holes in the theory that bigger budgets make for bigger profits.

Howard Suber, chair of the Independent Producers Program at UCLA, said the emphasis on blockbuster films reduces the opportunity to make smaller ones. "It sucks all the dollars out of the system," he said. "It's like the Defense Department at the height of the Cold War. The interest alone on Titanic' could pay for a high-budget independent film."

The film's producers dismiss such commentary. They seem unaware of the potential irony of their comments about their epic labors.

Said Sanchini, referring to the real Titanic: "Part of the story is the arrogance of the time, the disparity between rich and poor, the ship of dreams that ended in a nightmare beyond anyone's wildest imagination." CAPTION: BLOCKBUSTER ECONOMICS The 10 top-grossing films in the United States last year also were big-budget films, reflecting the box-office appeal of costly special effects and other production extravagances. That economic fact of life helps explain why Hollywood continues to accept the risks of a flop.

Cost

Cost to

to make

promote

Domestic Film

in millions in millions gross Independence Day

$75

$30

$306,169,255 (Fox) Twister

88

24

241,721,524 (Warner Bros.) Mission: Impossible 65

26

180,981,866 (Paramount) Jerry Maguire

50

29

150,850,000 (Sony/TS) Ransom

55

41

136,485,602 (BV/TCH) 101 Dalmatians

66

45

136,182,161 (BV/Disney) The Rock

75

24

134,069,511 (BV/Holl) The Nutty Professor 45

17

128,814,019 (Universal) The Birdcage

42

23

124,060,553 (MGM/UA) A Time to Kill

38

29.

108,766,007 (Warner Bros.) SOURCES: Exhibitor Relations, the studios CAPTION: The plot of "Titanic" is built around a romance between passenger Kate Winslet and ship's mate Leonardo DiCaprio. CAPTION: To film this scene of "Titanic" required building a 775-foot facsimile of the doomed luxury liner, as well as a $20 million studio in Mexico. CAPTION: Jerry Maguire CAPTION: Independence Day CAPTION: 101 Dalmations