Paying for A-List Stars Becoming Risky Business in Hollywood

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OK, "Jerry Maguire" might not be trolling the classified ads just yet, but experts say the days of pampered megastars and "show me the money" might be numbered.

"The economics of Hollywood is definitely changing," said Paul Dergarabedian, president of the box-office tracking firm Exhibitor Relations. "With box office attendance remaining relatively flat for the past two years, along with the box office slump of 2005, there has definitely been a bit of belt-tightening."

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Perhaps nobody knows this better than Tom Cruise. On Aug. 22, after 14 years of producing a slew of hits with Cruise, Viacom chairman Sumner Redstone announced that Paramount Pictures, his company's subsidiary, would be parting ways with the 44-year-old star.

Redstone cited Cruise's erratic "recent conduct" for the unusually public Hollywood breakup.

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It's true that Cruise ignited a media firestorm when he bounced around on Oprah's couch. It's also true that he didn't garner any goodwill when he lambasted Brooke Shields for taking antidepressants for postpartum depression (he recently apologized to Shields).

But isn't all that small potatoes in a town that laughed off Hugh Grant's arrest for soliciting the services of a prostitute in parking lot and even handed Russell Crowe a Golden Globe nomination after he threw a phone at a hotel concierge?

Industry insiders say the number crunchers at Viacom had begun to see any project with Cruise at the helm as "risky business" rather than "the color of money."

"Of course it's about the money," said gossip columnist Roger Friedman. "Tom's movies were making less and less, and at the same time he was getting a bigger and bigger cut of the gross — not the net — take of the film."

In one sense, Cruise is a victim of his own success. Despite the disappointing $133.5 million "Mission: Impossible III" made at the U.S. box office this summer, Cruise's films have reportedly accounted for a full 32 percent of Paramount Pictures' revenues for the past six years.

Friedman estimates that Cruise walked away with about $75 million of the aforementioned $133.5 million due to lucrative deals that were negotiated in Hollywood's 1990s boom, leaving Paramount scrambling to recoup the film's $150 million budget (not to mention its colossal marketing budget).

But Cruise isn't the only member of the $20 Million Club to be put on a diet. This summer, 20th Century Fox pulled the plug on "Used Guys," a comedy about the adventures of two outmoded "pleasure clones" in search of the male nirvana, "Mantopia," in a futuristic society in which women rule the world.

The reason? Between salaries for stars Jim Carrey, Ben Stiller and director Jay Roach, along with the costly required special effects, the budget for the flick had reportedly ballooned above $110 million.

So studio bean counters quietly put the beleaguered project out of its misery, despite having already shelled out big bucks in pre-production.

The problem, Dergarabedian says, is that Hollywood is facing increased competition for moviegoers' eyeballs from cable TV, next-generation video game consoles and the Internet.

And with Apple and launching Internet movie download stores in the past week, studio execs are nervously eying their bottom lines.

"In order to be able to keep making movies, [studios] are going to have to draw the line somewhere," Dergarabedian said. "In a marketplace where there's so much competition, it's getting harder to justify these huge salaries for stars."

Making money on a movie is a system of diminishing returns. In general, a movie makes the largest chunk of its revenue on the first weekend it opens, and less each subsequent week until it leaves theaters.

Later, licensing for DVD sales and replays on TV can pad profits, but a movie that bombs at the box office is unlikely to be attractive to viewers who missed it the first time around.

"The theatrical first-run of a movie is really essential, and it's really what drives everything else," Dergarabedian said. "I think those new technologies will eventually bring more money into Hollywood, but right now we're in the infancy of technology and it takes a while to see how it impacts the industry."

Studios are also feeling the squeeze from big names like Bruce Willis, Julia Roberts, Tom Hanks and Will Smith, who are increasingly demanding that projects to which they are attached make deals that use their own production companies.

As the potential profit margin for studios are shrinking, executives are increasingly looking for low-budget pictures with no-name stars that can turn a tidy profit.

Last month, for example, Buena Vista Pictures' Romeo-and-Juliet dance drama "Step Up" debuted at the top of the box office.

Produced for just $12 million with nary a household name on its marquee, the movie grossed $61.7 million domestically — just shy of the $63.1 million the Jamie Foxx-Colin Farrell blockbuster "Miami Vice" managed to pull in stateside ("Miami Vice" cost $135 million to make).

And "Miami Vice" just managed to eek out a slim $1.5 million over its production budget after it was marketed internationally.

Billionaire media mogul Mark Cuban, whose company owns the Landmark Theater chain, says bloated production budgets are only half of the equation.

"Right now movie marketing is broken," Cuban said. "At $60 million to bring in 50 million people, or $1 per ticket buyer — that's the best we have done — that's a tough business. Most movies spend more in promotion per ticket buyer than they receive in revenue. That's not good."

But Cuban, who has experimented with simultaneous releasing of films in theaters, on DVD and on pay-per-view cable, has a plan. In June, he made an offer on his blog that any wannabe Hollywood exec couldn't refuse: Come up with an innovative way to get 5 million people to go to theaters to see a movie without spending $60 million in marketing, and Cuban would give you a plum job in the biz. Sound crazy? So does losing $150 million in a weekend.

"Theatrical marketing is a disaster. I thought maybe someone might have a better idea than I could come up with," Cuban said.

Cuban has received about 1,200 responses on his blog and another 2,000 e-mails in response to his challenge. He says he slowly going through them all, but hasn't run into any "model-shaking ideas — yet."

Still, Cuban doesn't think big-name actors and directors are asking for too much — he says it's the studios that are paying them too much.

"When the worst case for a studio head is that they get fired and get a nice severance package, they are [given an incentive] to spend the studio's money on 'safe' names," Cuban said.

And that, Friedman says, is where Hollywood needs to take a stand.

"If we ever see a 'Mission: Impossible IV,' the studio's mission — should they choose to accept it — will be to get a taller, younger, cheaper actor to play the part," he said.

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