Thursday, April 2, 2009

Hollywood Squeezes Stars' Pay in Slump


Hollywood, needing to cut costs in lean times, is starting to say no to its stars.

For years, top movie stars often landed deals paying them a percentage -- sometimes as much as 20% -- of a studio's take of box-office revenues from the first dollar the movie makes, even if it turned out to be a flop that cost the studio millions. As a result, the biggest celebrities broke the $20 million mark. Eddie Murphy got that kind of payday for the flop "Meet Dave," which cost Twentieth Century Fox about $70 million and took in only $11.8 million at the domestic box office.

These "first-dollar gross" deals are hitting the cutting-room floor as studios slash the number of movies they're making. For two new projects, Viacom Inc.'s Paramount Pictures has done away with such deals, even though it has landed top talent. In "Dinner for Schmucks," with Steve Carell, and "Morning Glory," starring Harrison Ford, the actors accepted "back-end" deals, in which they get a portion of the gross, but only after the studio and its financing partners have recouped their costs. The studio also cut a back-end deal with "Dinner" director Jay Roach.

"The days...where the star gets whatever he wants and gets paid through the roof -- those days are over, for everybody," says Eric Gold, a producer and manager who represents top talent including Jim Carrey and Ellen DeGeneres. "You can be the hottest thing in Hollywood, but if the economics don't match it, it doesn't mean anything....The studios are pushing back and they have to play the margins."

Hollywood stars are still paid handsomely. For example, in "Dinner," which cost a modest $65 million, Mr. Roach and Mr. Carell will receive upfront fees of between $10 million to $15 million each. Still, by deferring their gross payments until after the movie has made its money back, Paramount and its partners shaved about $5 million off the production cost of the film.

General Electric Co.'s Universal Pictures made a similar move with an untitled big-budget Robin Hood film planned for release in 2010, directed by Ridley Scott and starring Russell Crowe. According to people familiar with the project, which at one point went by the working title "Nottingham," none of the film's talent will receive first-dollar gross deals, even though the roster includes some of Hollywood's highest-paid stars.

Some stars are still able to cut first-dollar gross deals. Denzel Washington has first-dollar gross on "The Book of Eli," which comes out next year. But as the economic pressure builds, studios have begun to push back more frequently.

Studios have long regarded the first-dollar gross deals as a potentially ruinous excess, even as they went along with it. By guaranteeing rich compensation for stars, irrespective of a film's profitability, the studios ended up shouldering much of the risk.

That was less of a problem when it was easy to secure third-party financing for blockbuster budgets and DVD sales grew at a double-digit clip. But recent changes have put the studios under strain. Though box-office receipts have been up in recent months, DVD sales continue to decline. In addition, the billions of dollars Wall Street poured into the industry over the past few years have also dried up, forcing the studios to rein in budgets.

Now, studios can ill afford the gamble. "Duplicity," a thriller starring Julia Roberts, hit theaters in mid-March but has underperformed expectations, bringing in about $27 million at the domestic box office so far. Universal Pictures could lose money on the $60 million movie, while Ms. Roberts is guaranteed to walk away with several million dollars.

Kissing first-dollar gross goodbye doesn't necessarily mean that the actors' earn less money.
Jim Carrey in the past has made first-dollar gross and upfront fees of more than $20 million on films such as "Fun with Dick and Jane." But he accepted a risky tradeoff for his last major film, "Yes Man," released this past December. He forfeited first-dollar gross and took no money upfront in exchange for a sizable back-end deal, which included a 33% ownership stake in the film.

Had the film bombed, Mr. Carrey would have received a fraction of his usual fee. The film was a success, but didn't perform as well as the studio had expected. Still, Mr. Carrey made about $35 million off the deal -- roughly $5 million more than he would have made had he not forfeited his fee, according to Mr. Gold, who helped craft the agreement with talent agency Creative Artists Agency and the studio.

"It was a big moment for the business," says Mr. Gold, who noted that other similar deals have followed. "For agents, it's disruptive -- they don't want to face the idea that the business has changed forever, but the whole industry is moving this way."

Nicolas Cage, who starred in the recent box office hit "Knowing," has been one of those first-dollar gross players, but for a new family film produced by Jerry Bruckheimer, "The Sorcerer's Apprentice," he won't receive a percentage of the gross until after Walt Disney Co. and its partners on the movie have recouped some costs.

In the past, studios have struggled to push back against rich paydays for talent. With so many movies being made, big stars could cherry-pick projects and command exorbitant fees. Studios began to generate more of their box office overseas, where the name of a big actor was even more crucial to a film's success. Hollywood's high-powered agents also set themselves up as extremely effective gatekeepers to top talent.

"Starting about six months ago, the studios started to make a unified and determined effort to cut back on these deals," said one agent. "They're just not going to keep losing vast amounts of money while paying out millions to the first-dollar-gross players."

Write to Lauren A.E. Schuker at

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