Reading the Hollywood Tea Leaves [10:53 am]
The fallout from Tom Cruise’s public PR meltdown is being spun a variety of ways, all suggesting that there’s a change in the wind for Hollywood business models:
Mr. Cruiseâ€™s representatives insisted that they had not been fired but instead had quit and had already lined up $100 million in financing to produce movies on their own.
Either way, the parting of the ways was anything but amicable. And it came as the latest sign that the media conglomerates that control Hollywood are growing impatient with the megastars who earn the highest salaries.
“He didn’t go out and kill somebody. He didn’t drive drunk. He didn’t beat up his wife,” Guber said. “I think he will remain a top star in the business and command a great deal of attention and bring in a great deal of revenue.”
The public is notoriously fickle when it comes to movie stars, although Cruise has sustained broad popularity longer than most.
And Cruise does not face the same kind of challenge confronting Mel Gibson, who spouted anti-Semitic remarks after being stopped for drunk driving.
Others, however, were looking for hidden meanings in Redstone’s comments. Anthony Valencia, entertainment analyst with money manager TCW in Los Angeles, called the situation “very curious.”
He wondered whether there were other factors, instead of Cruise’s behavior, that led Paramount to cut the cord. He pointed out that Paramount executives had tried to negotiate a new deal with Cruise long after he hopped around on Oprah Winfrey’s couch.
“If you can’t reach a deal, that’s one thing,” he said. “But would his behavior have been as problematic as long as the deal terms would have been more favorable?
The Internet is growing fast as an entertainment channel, and the cost of producing blockbusters is rising almost as quickly. That emboldens studio chiefs working for publicly traded companies to challenge the fickle power of the most popular stars.
To be sure, celebrity still matters, blockbusters still fill theater seats and movie stars still live like, well, movie stars. But the same shifts in technology and audience tastes that changed the music industry are starting to influence the movie business.
While egos, star power and box office clout all may have been part of the equation, flagging DVD sales could have served as the tipping point that led Paramount, headed by chairman Brad Grey, to make an offer that would have scaled back Cruise’s rich package of compensation for the films he headlines for the studio.
Even though this year’s “Mission: Impossible” movie fell short of its two predecessors, no one is arguing that Cruise hasn’t amassed an impressive box office record at Paramount. But he also enjoyed a famously rich deal that guaranteed him about 20% of box office revenue as well as a piece of DVD sales — a perk few stars have ever commanded.
During the past 18 months, growth in the DVD market has slowed dramatically. As a result, home video isn’t automatically providing the same guaranteed upside to films that might not have performed spectacularly in theaters. In turn, the studios are becoming less willing to strike deals that give stars participation in box office revenue as well as a portion of DVD sales.
Paramountâ€™s salvo against its biggest star may be an attempt to bring some financial sanity to the old asylum. But itâ€™s also another sign of just how badly the film industry has lost its bearings in this new media environment, where the once-reliable teenage audience is suddenly less reliable; video games and the Internet are making the inroads into movies that TV once did; and DVD sales, which once seemed like the studiosâ€™ salvation, are plummeting.
The stars, for their part, have helped create an untenable economic situation. But even though Mr. Redstone wants to bring them to heel, he is devaluing the moviesâ€™ greatest asset, and opening a breach the studios alone canâ€™t fill. The fear in Hollywood is that Mr. Redstone may be smashing the star-driven model without putting anything in its place but financial responsibility, and audiences donâ€™t line up to see financial responsibility.
Of course, Hollywood is accustomed to prophecies of doom. The difference this time is that everyone â€” stars and executives alike â€” seems clueless. The asylum is out of control and no one knows what to do about it.
Even later (Aug 28): A Big Star May Not a Profitable Movie Make
[I]f you ask economists and other academics that study the movie industry, Mr. Redstoneâ€™s decision was, in financial terms, spot on. The best reason to get rid of Mr. Cruise or, for that matter, Mel Gibson, or Lindsay Lohan, is not their occasional aberrant behavior. They, like most marquee names in Hollywood, are simply not worth the expense.