text Zorianna Kit illustration John Dinser

When you’ve got a net worth of $7.5 billion, you can pretty much do whatever you want, to whomever you want. But over the past six months, Viacom Chairman Sumner Redstone – No. 35 on the 2006 Forbes list of the 400 richest Americans – has put that theory to the test. In fact, the eighty-three-year-old mogul, whose media holdings include CBS, MTV Networks and Paramount Pictures, had just about everyone in the entertainment industry, friends and enemies alike, in shock when he cut off negotiations in August with actor Tom Cruise and ousted him and his production company from Paramount Pictures after fourteen years. The following month he fired Viacom CEO Tom Freston, a trusted lieutenant for more than two decades.
The old adage about actions speaking louder than words may be true, but in Redstone’s case, his public comments following the double-barreled dismissal of Cruise and Freston are still resonating in executive suites and dinner parties from Brentwood to Tribeca and everywhere in between. In the December issue of Vanity Fair, in reference to his handling of Cruise, Redstone proclaimed that “the time of the big star getting all this money is over,” and expressed hope that his actions “had a salutary effect on the rest of the industry.”
To assess just how salutary an effect Redstone’s bloodletting was having, Fade In asked more than a dozen movie business insiders for their take. Some disagreed (mostly the talent reps, but who can blame them?), others agreed, but most took Redstone’s remarks as a stepping-off point for a discussion about overarching change in the way the entertainment industry does business. Most acknowledged that the star system is changing, meaning star salaries will have to change as well.
As evidence of one conspicuous change in financing strategy, several cited the deal Endeavor put together for Sacha Baron Cohen’s first film post-Borat fame as a prime example: Instead of a studio bankrolling the project, a comedy tentatively titled Bruno, the private fund Media Rights Capital is putting up the budget, believed to be in the $20-$25 million range, with Universal Pictures paying $42.5 million to license the film for fifteen years, after which Cohen will own the picture, along with 15% of the gross.
Does this prove Redstone’s contention that the days of big stars getting sweetheart deals are over, at least on the studio side? If so, is Cohen’s gambit a new precedent that reflects a shift in the way deals will be done? Is the cantankerous octogenarian out of touch with the way Hollywood works, or are his comments a harbinger of the direction the business is headed?
Here’s what the top agents, studio executives, attorneys, producers and managers we surveyed had to say. 

THE AGENTS
Agent “[The days of big stars receiving massive fees for their work] may be over for someone, but it’s never over on a generality. Go back in history. It’s never been over, and it never will be over. This is a supply-and-demand business. When the demand is less than the supply, then numbers go down. And when the demand is more than the supply, prices go up. It’s really as simple as that. Why are they paying Sacha Baron Cohen more money for his next movie? They’re paying him money because they know what it’s going to be. And that’s just the name of this game. Do you see fewer Mercedeses in Beverly Hills because prices have gone up? It’s all about what people want. Sumner didn’t get rid of Tom Cruise; he couldn’t make a deal with Tom Cruise. Sumner is a very smart man when it comes to running a corporation, but he’s getting a little old, is the way I’d put it. Not only did he cost Viacom the money that it could make in the future with Tom Cruise, but he cost the company the money that he had to pay to Tom Freston – eighty-some-odd million dollars! Sumner Redstone is a man who is penny-wise and pound-foolish.”

Agent “Sumner can sit there and say, ‘That’s it, I’m done paying stars all this money,’ and Alan Horn over at Warner Bros. can say, ‘OK, well, I’ll pay him that amount.’ And all of a sudden Sumner has to eat his words. The film industry is based on stardom, and it is this country’s largest export, bar none. And the biggest of those films have the largest names on the marquee. Hence, there’s no way that the largest export, which is spurred on by the largest star, in any way can be mitigated by Sumner Redstone’s comments. I remember when I started [in] the business, Jeffrey Katzenberg said Disney was going to cut its slate of films from twenty-two to six. Three or four years later, they were back at twenty-two again. The business is nothing but an accordion. Pulling out and then pushing in; pulling out, pushing in. Or [it’s] like a water balloon, where you squeeze here and it’s going to bubble out somewhere else. If Sumner’s not going to pay stars, and he’s saying that era is over, there’s always someone else who will pay. The money will always be there. Look what’s going on right now with hedge funds. You’re having these multibillion-dollar hedge funds fund producers like Joel Silver and saying, ‘We’re going to underwrite your negative; go make movies for us, go give us product to sell.’ Well, the product they want to sell has to have Tom Cruise or someone major at the front. So the bottom line is, the money is there in hedge funds to pay for these things, and if not from Sumner, it’ll come from ‘Blank Blank’ hedge fund out of Greenwich, Connecticut. Then studios will get jealous, and they’ll pick up the slack again. They all say they’re cutting back until someone finally says, ‘Oh, screw it.’”

Agent “What you’re going to see is this: More and more resistance from studios to paying out big gross percentages [to stars] before they recoup their money. Not gross percentages as such, but to pay them out while the studio is underwater. Fox is doing it more and more, and all the other studios are going to follow suit. They’re not going to want to pay out money until they [reach] a true ‘cash break even’ point. It’s not the upfront salary that kills you, it’s paying out twenty percent on gross. Take a big-budget movie – let’s say [it cost] $150 million. Now you spend another $100 million to go market the thing. So true breaking even is $250 million. If you’ve got a star you’re paying $20 million against twenty percent, it’s not the $20 million that’ll kill you. Before you hit $250 million, you’ve already paid him another $30 million. The studios are going to say, ‘We’ll pay your money, but we won’t pay you any fresh money until we are “cash break even.”’ It doesn’t make sense otherwise. If a movie does $300 million in revenue, the star can make $60 million while the studio makes a $10 million profit? That’s not going to work. And that’s a function of just numbers. Tom Cruise makes star-driven movies with big below-the-line [costs], big directors, etc., and those are expensive businesses to mount. Therefore you don’t want to be paying him big gross percentages – i.e., tens of millions – while you are unrecouped. You have to look at each guy differently. [With] Will Ferrell in Talladega Nights, there’s nobody else you’re paying out gross to, and the below-the-line [budget] isn’t exorbitant, so you’re going to break even at an earlier point. With Sacha Baron Cohen, the below-the-line [cost] is limited, you don’t need a star director, you don’t need costars. Sumner is just trying to make himself sound relevant. Who wants to see this old fool spun off on anything? He has conducted himself like a buffoon –classless and stupid. So Tom Cruise went off the rails. Then conduct yourself with class and dignity and quietly cease negotiations. Running around bad-mouthing people is low-class.”

THE EXECUTIVES
Executive “It just depends on the project. If you could get Will Ferrell in a $45 million comedy and you have to pay him $20 million, it’s probably worth it. But if you’re making Evan Almighty and you have to pay Steve Carell $7 million, or Jim Carrey $30 million, Jim Carrey is going to lose that battle because you’re already in for so much money. It’s not fair that stars would be making money while we’re losing money. It’s not so much about the gross; it’s about first-dollar gross. It really hurts when you’re in the red on a movie and you’re paying huge amounts to an actor. The days of that check being written really easily are over because studios have lost money on movies where stars made money. It all started changing when the price of the movies dramatically increased. And that’s been in the last five years. It’s always going to be about overall budget, overall gross out the door, what you think the movie can do and how much risk you want to assume. It’s not fair to have all of the risk sit on the studio’s shoulders every time.”

Executive “I’ve personally seen a level of truth to [the shift in pay structure], at least internally where I work. There’s certainly an attitude that the cost of talent has gotten out of whack relative to return and relative to sharing risk. In a day and age where you’ve got marketing budgets that are becoming bigger than the production budgets themselves, you’re looking to pare down that cost and that risk anywhere. And at the end of the day, when you look at some of the return on investment in these stars that you’re paying these astronomical sums to, you start to realize that some of those getting paid are not actually butts-in-the-seats draws. I would argue that there’s probably the single fewest amount of real true movie stars today than we’ve ever seen in terms of a studio being guaranteed a certain level of performance by them showing up in a movie. What defines a movie star has gotten into such a shades-of-gray area. Dane Cook, for example, was declared a movie star before he ever had a movie out. Though the movie ultimately did fine (Employee of the Month), it was not comparative to what the hype was. People are swinging blindly trying to grab that next guy because they see a star system that’s gotten a bit creaky. And a generation of guys – the guys that are really worth paying – are getting to an age where soon it’s going to be less and less viable to pay. For every Will Smith that’s emerged, there are ten other guys who had their moment and flamed out, or work in certain genres but don’t work in another. Matthew McConaughey in one area is worth his money, and in another area, not as much. You’re seeing more and more of that now. I do think people are recognizing that at a point in time, particularly with first-dollar-gross players, something’s going to have to give. The business models of the studios are morphing anyway, and just because talent’s got a certain point of view, or talent representation has a point of view, doesn’t mean that they should be looked at as how this model is going to morph. So there’s some real truth to what Sumner said.”

Executive “It totally depends on the project. For very big, commercial movies, I would not be surprised if actors continue to get full freight because movies stars are what sell movies internationally. But for more risky propositions, the deals are going to have to become increasingly creative because nobody is bulletproof. No movie star can guarantee success 100 percent of the time, and it becomes a question of economics. It doesn’t make economic sense to put the studio in a position where they can’t possibly make a profit except in exceptional circumstances like a Harry Potter or a Spider-Man. And so [an actor’s] compensation has to be proportionate to the risk the studio is taking. On movies like Syriana and Good Night, and Good Luck, George Clooney never took anything close to his fee because the movies didn’t justify it, nor would they ever get made if he took anything close to his full fee. [But with Ocean’s Eleven] his compensation was proportionate to the commercial prospects of the movie.”

THE ENTERTAINMENT LAWYERS
Attorney “Certainly the studios are being very public about clamping down on these deals. But do I think it’s dead for good? No, because everything cycles around. If they stop, then I don’t know that someone else won’t step in there. There will be competition, and people will break ranks. But there are absolute ramifications right now. There are definitely fewer people getting paid what they used to get paid by the studios, but then there may be other ways to get movies made. Like this new Sacha Baron Cohen movie that was announced in the paper; MRC’s financing it. They stepped up, they paid him a lot of money, gave him a big ownership position in the picture and the studios were forced to compete with each other. Did they pay it directly? Maybe they’re paying it indirectly in that they have to pay a certain negative cost, and the negative cost included a big fee for Sacha. And they have a lesser ownership position as a result. So the traditional sort of ‘go straight from A to B to get paid’ is being clamped down upon. But because there’s competition, and because there’s still a desire to see the best content, and to see the biggest stars, there will be a form of competition in the marketplace, which will get those people paid. Very few stars are probably worth it, so there aren’t a lot of them who make a studio think that an audience is going to show up to a movie no matter what, because it is based on that star. So Sumner’s right in that way. I don’t think studios are just going to willy-nilly pay that kind of money up front. But there will be competition. Sacha got paid without any studio making the first deal.”

Attorney “I agree, and I disagree. The people at the major studios who are in charge of fiscal responsibility want it to be over. They don’t believe it’s fair that a star will get all of their money up front while the studio’s investing tens of millions, if not hundreds of millions of dollars. Therefore, there’s been a major rollback in those kinds of deals. History tells us that there’s always going to be somebody who steps up and pays those kinds of fees – either because they’re trying to get into the business, trying to get back into the business or it’s the only way they can get something done and their job is depending on it. So fiscal responsibility would say you don’t make deals like that, especially given the return on investment they’re seeing. However, the creative side, or factors outside of that like jobs, job performance, projects, passion, or just a desire to enter a marketplace, will outweigh fiscal responsibility.”

Attorney “Leverage is what’s going to determine [whether the star is going to get his money]. If you have the leverage to get $20 million or $25 million for an actor, the studios are going to pay it. If Sumner Redstone wants an actor for the right part, for the right movie, he’s going to pay for it. If it’s the right business decision, he’s going to make that business decision because he’s going to be mad if Rupert Murdoch gets that actor, just like he was mad when Rupert Murdoch got MySpace and he didn’t. So Sumner will pay for the right actor to open a movie. The $25 million actor is not going to go away unless they stop making big movies, because in order to make big movies, you need the big actor. So long as the big actors are surrounding themselves with smart people who recognize leverage when it exists, they’re going to get paid the big bucks.”

THE MANAGERS
Manager “It is not over, but it is tightening up. There may not be as many stars getting paid [what they want]. The studios are being more conscious of who they’re paying those exorbitant amounts of money to. But there are certain stars that deserve it, command it, demand it and will get it, no matter what. Sure, there may not be as many, and they may not always be making their $20 million. But there will always be stars, and there will always be the demand for stars and there will always be studios paying the stars. Sumner had to justify his actions to Tom Cruise, and so he has to say that it is not happening anymore in order to justify what he did. But you’re telling me that the Brad Pitts of the world and the Will Ferrells of the world and the Sacha Baron Cohens of the world and people like that don’t demand that money when their movies open the way they open?”

Manager “There is an acknowledgement on our side, which there hasn’t been except in the last couple of years, that we have to be cognizant of the health of the studios. We have to pass that on to our clients, and everybody understands. No midlevel to upper-level actor is getting paid the numbers they used to get paid. And I don’t see that coming back. It’s the same way in every business in America. If you sell tickets, if you bring people into a theatre, if you bring people in front of a TV, if you bring people to the casino or into the sports arena, you’ll get paid. But if you don’t bring them in, you’re just not getting paid. [The $25 million star] will continue to get paid in the genre that they sell in. The hope we all have, and I’d like to believe it is the hope everybody has, on both sides, is: ‘Let’s come up with a back end that is realistic.’ A back end so that the studio is entitled to recoup its investment. Everybody is entitled then to get paid fairly. If not, what’s going to end up happening is representation, together with the independent financing out there, will start making the movies themselves and find other ways to distribute them.”

Manager “It’s been over for a long, long time, actually. Take someone like Leonardo DiCaprio, who has taken pay cuts on his last five movies – whether it’s anything he’s done for Scorsese, or whatever – he’s not gotten his price. The problem that’s happening is movies are costing so much to make, and they’re not bringing in the money. Then you get movies like Saw, Saw II, Saw III, and they’re made for nothing, with unknowns, and they make a profit. But when you have a movie like The Departed, let’s say, that cost over $100 million to make, it needs to make $200 million to break even. So if it’s not making $200 million up, it’s not successful. What’s happening is more and more, they’re asking the stars to actually take the risk with them. Johnny Depp is not getting his fee for Pirates of the Caribbean. He’s cutting his price, and he’s not getting first-dollar gross. He’s taking a pay cut upfront and a pay cut from the back so the movie can get made. We’ve actually been asked to do that [for our clients long before] Tom Cruise and this Sumner Redstone thing. It’s just that people haven’t picked up on it. But we in the business know. Twenty million dollars is not being thrown around as fast as it used to be. Actors’ quotes are completely meaningless. I know people who, for ten years, have not gotten paid their quote.”

THE PRODUCERS
Producer “There’s definitely a movement to try to change the business structure. We all know it. There’s a push back in terms of big salaries, in terms of gross. And everybody wants to make the very best movie, and people have been making fair deals. It’s just all how it’s done. Unfortunately, not everyone is going about it in the most judicious way. The Cruise thing would be an example of this, meaning, ‘You don’t want to pay him as much? OK, fine. Sit down, talk to him, maybe there’s a way to make a deal.’ You know what I’m saying? It’s all how it’s done, that’s all. It’s not that people are trying to make better or different deals; it’s the way they’re going about it that makes the environment even harder. It’s like saying, ‘Look, here’s the problem: we’re on the line for the investment, we’re spending ten dollars. You’re going to make twelve dollars before we even see our ten dollars, which would be OK except that we’re probably not going to even see it until X, Y or Z happen. So what we’re asking is that you take this amount instead, then we’re going to give you a little bit more later.’ Do you see what I mean? It’s just about laying all your cards on the table. But instead it feels like there’s a move to do it in a hostile and forceful way, which causes people to dig in and creates an environment where making movies is even harder. Unfortunately, too many people figure it’s all about leverage. Just try it nice the first time. If it doesn’t work, then you can resort to force. But if the tactics remain the same and the distribution system changes, you’re going to have a lot of people looking to move on out. If the distribution system changes, are the studios the studios any longer? It puts the studio in a situation where potentially they have less upside. Look at the deal Sacha just did.”

Producer “I don’t agree with [Redstone] as a blanket statement. It will not affect whomever the top three guys are at any one time. And right now, those three guys are probably Tom [Cruise], Tom [Hanks] and Jim [Carrey]. There will always be ‘those’ guys. Those guys might fall off the list, but the days of there being six or seven of those guys around – and a good example of that is Nicolas Cage – are gone. Because a guy like Nicolas Cage being in a movie doesn’t guarantee things. You have to practically have an unbeaten streak of big movies that are in your wheelhouse making a lot of money. The minute you have one or two losers, suddenly you’re not guaranteed to get that. So there will always be two or three guys that do get that money, but there’s not a big list anymore. Production costs are so high now [that] movies can cost $200 million if you throw in the $20 million guy. Without him, it could be $180 million, which is significant to a studio. And comedies shouldn’t cost a lot of money unless there are special effects.”

Producer “There’s actually truth in the market to what Sumner said. There’s a real vibe going on out there where if you are the right giant star in the right genre, they will pay. But big stars in the wrong genre, or less-than-big stars in any genre…well, the studios are rolling things back. It’s kind of like the real estate market, where the sellers are not lowering their prices because they’ve still got their [mindset], and the buyers are not looking to come up, so there’s that disconnect. The guys who are killing the business are not the $20 million or the $25 million actors. Those guys are going to continue to get paid what they can get paid – that’s not going to change. What’s going to happen is, if those guys have a couple of missteps, and they fall into what I’ll call the middle – and the middle for me is below $20 million – that’s where you’re going to get killed right now. It’s easier for the studios to either go for an unknown like Borat, or to pay Tom Hanks whatever Tom Hanks wants. Everything in the middle is going to meet some gridlock. Believe me, if Mission: Impossible III had worked and had out-grossed the first one, Tom Cruise would be getting whatever Tom Cruise wants. It’s because Tom Cruise’s movie didn’t work that he fell into the middle. Tom Cruise can be the most abusive guy when it comes to costs, as long as he’s at the top of his game. But if he missteps and falls off that perch into a notch below, it’s the notch below where everything starts to get funky. And right now, he’s definitely in the notch below. Even the [the announcement in November that Tom Cruise and his producing partner Paula Wagner will take over MGM’s dormant United Artists film label] is a shell game. Everyone knows that it’s basically Cruise/Wagner Productions being loaned the UA name – no library, no cash flow, just the name. And that anything they make with Tom Cruise in it, they get up to thirty percent of the gross. But they have to basically gap-finance each picture on a picture-by-picture basis. It’s truly a shell game for him to try to save face, to try and make it look like he’s still relevant. It serves [MGM Chairman/CEO] Harry [Sloan]’s point, it serves Tom’s point, but unfortunately nobody’s fooled.”