Friday, August 25, 2006

Cruise split highlights deeper issues

Industry's changing economics, star's appeal play role

Thursday, August 24, 2006; Posted: 8:47 a.m. EDT (12:47 GMT)

LOS ANGELES, California (AP) -- While the messy divorce between Tom Cruise and Paramount Pictures won't sink Cruise's career, it still points to a sea change in an industry that has tolerated celebrity misdeeds as long as they didn't hurt the bottom line.

The 14-year relationship between Cruise's production company and Paramount exploded Tuesday after Sumner Redstone, chairman of Paramount parent Viacom Inc., said Cruise's recent behavior, such as jumping on Oprah Winfrey's couch and aggressively advocating Scientology, was "creative suicide." Redstone said such displays cost the studio up to $150 million in lost ticket sales for Cruise's last film, "Mission: Impossible III."

Redstone may have been basing some of his reaction on the fact that negative public perception of Cruise has soared in the past six months in the closely watched Q Scores, which rate celebrity popularity. They indicate that negative perception of Cruise jumped nearly 100 percent since mid-2005, while positive perception fell about 40 percent.

"He's definitely at his low point in terms of consumer appeal, among both males and females," said Henry Schafer, executive vice president of Marketing Evaluations Inc., the Q Scores company.

Whether that means moviegoers are spurning his films is a different matter, says film producer Peter Guber, who has worked with Cruise in such movies as "Rain Man" and a "A Few Good Men."

"One would have to believe he will remain luminous in the near term," said Guber, chairman of Mandalay Entertainment Group and host of AMC's "Sunday Morning Shoot-out."

"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.

"It's probably going to take more time to get back to where he was in consumer popularity," Schafer said of Cruise. "If he comes out in the next year or so with a big hit movie, that will help."

The acrimonious split comes at a time when studios are slashing costs, especially the kind of huge paychecks that stars such as Cruise have commanded, even for production deals. Paramount was reportedly paying his company, Cruise/Wagner Productions, $10 million a year to develop new projects.

Studios are no longer the private domains of moguls who often inserted a "morals clause" into star contracts and could scuttle a career based on bad behavior.

Now, studios are part of huge public media conglomerates under enormous pressure from profit-obsessed shareholders.

Cruise rep: 'I felt there was an atmosphere of hostility'

Stars are also under intense scrutiny by celebrity-driven tabloids and Web sites. Recently, a studio executive openly chastised Lindsay Lohan for late-night carousing that delayed production of her latest film.

Still, Cruise will likely continue to star in films for Paramount, even as his company vacates the Paramount lot and raises private financing. Cruise/Wagner has several films in development at Paramount as well as other studios.

Cruise himself was never under contract to Paramount as an actor and has appeared in films for other studios over the years, including "The Last Samurai" for Warner Bros. in 2003. (Warner Bros. is a unit of Time Warner, as is CNN.)

Wednesday, Cruise's representatives said the star had told Paramount weeks ago that he would not renew his Paramount deal.

"Paramount made a firm offer for a new term of years," said his attorney Bertram Fields.

That offer was for far less than what Cruise/Wagner had been receiving to pay for overhead and development costs, Fields confirmed.

But he said Cruise had told Paramount he was more interested in starring in films going forward rather than producing them and needed less money to renew.

Fields said he and other advisors recommended Cruise and his partner, Paula Wagner, reject the offer because of a change in attitude among Paramount executives toward the pair.

"I felt there was an atmosphere of hostility and this was a place he would never get a fair shake," Fields said. "I think he was about to communicate that position and Paramount found out about it, panicked and decided to get out before he did."

Paramount spokesman Carl Folta declined to comment Wednesday beyond Redstone's remarks.

Wagner said Tuesday that her company has secured independent financing from two hedge funds.

'Things are slowing down'

Studios, seeing profits shrink as box-office flattens and DVD sales decline, are trying to dump the long-held economic system in Hollywood that led to stars earning paychecks north of $20 million.

"Studios see things are slowing down and they can no longer afford to make big movies" and agree to lucrative deals for actors where, in some cases, "the star makes more than the studio at the end of the day," said media analyst Harold Vogel.

"Mission: Impossible III" made $393 million in worldwide ticket sales and is sure to be a big seller on DVD. And Wagner points out that the collaboration between Paramount and Cruise/Wagner Productions has produced $2.5 billion worth of business.

But "Mission: Impossible III" made less money than the first two films of the series, despite general agreement that it was the best of the trio by far.

"I do think the film underperformed in the domestic market considering this was the best of all 'Mission: Impossibles,"' Guber said. "But to say that's a reason to pull the plug on the whole relationship does strain some credibility."

Cruise and Wagner will likely have no trouble raising money to finance their own films.

Hedge funds are sitting on about $1.7 trillion in cash according to one estimate, and fund managers are searching for places to invest.

Funds have invested about $5 billion in films over the past several years and that figure is expected to rise to $50 billion in the next five years or so, said Andrew Schneider of HedgeCo Networks, which tracks hedge funds.

Simon Franks, chairman of Redbus Group, a private equity group, said he would be happy to invest in a Cruise/Wagner production.

"Most actors are overvalued, but Cruise is one of the few who is undervalued," Franks said. "He's never had a failure, so you'll get a high return on average investment."

Tom Cruise's Team Lashes Back at Viacom Boss

Thursday , August 24, 2006

By Tim Arango

LOS ANGELES — The shocking Tom Cruise-Sumner Redstone feud escalated into a full-blown War of the Words Wednesday, with Cruise's camp slapping back at the media mogul, saying he's the one who has lost his mind.

Bert Fields, the powerful Hollywood lawyer who represents Cruise, told The Post that 83-year-old Redstone "was a mighty mogul once who has self-destructed in front of everyone."

Those fiery comments came a day after Redstone, who controls Paramount Pictures' parent company Viacom, publicly bashed Cruise for the actor's bizarre off-screen behavior. Redstone said Cruise's personal conduct "has not been acceptable" to the studio.

Fields defended Cruise's oddball behavior — and said the real losers are the shareholders in Viacom.

"What was his personal conduct?" Fields asked. "Jumping on a couch on Oprah Winfrey because he's in love with Katie Holmes? That really deserves the death penalty?"

"Or speaking out against mood-altering drugs for children? That's a real reason for the shareholders to be deprived of billions of dollars?"

Over his career, Cruise's movies have raked in close to $3 billion in ticket sales in the United States alone.

All of Hollywood was picking its jaw off the floor Wednesday after the bitter parting of ways between the star and his longtime studio home — but no one's jaw dropped farther and faster than Paramount boss Brad Grey's.

"Redstone decided to make this announcement totally independent" of Grey, said one source close to the matter.

This source said the studio boss was "caught off-guard" by Redstone's comments, made Tuesday to a Wall Street Journal reporter before boarding a plane to Aspen to give a speech.

Paramount was in chaos Wednesday, as executives worried that Redstone's remarks would drive away other movie stars from the studio.

"People in the company are upset about this because it makes Paramount seem like a less talent-friendly place," said a source.

Paramount and Viacom had no further comment Wednesday. Both Grey and his boss, Viacom CEO Tom Freston, planned to make the announcement in a more graceful way, said a source.

Even if the principals weren't speaking on the record Wednesday, plenty of people in their orbits were.

Redstone's comments, which severed a lucrative 14-year relationship between Cruise and Paramount, rattled many Hollywood executives, who said they could not recall an executive so publicly dressing down such a megawatt star.

"I think it's reprehensible," said one high-level executive at a rival studio, calling Redstone an "old fart."

"Tom Cruise hadn't hurt anybody but himself," this person said, "and he can make a comeback. We'll all be in business with him if he comes with the right script."

A source close to Redstone fired back, saying, "He's blunt. He says what he thinks. Maybe in Hollywood that's a rarity."

The Cruise camp, already under siege for the actor's increasingly weird behavior over the last year — everything from going bonkers on Oprah's couch to ranting to NBC's Matt Lauer about antidepressant medication — quickly responded to Redstone Tuesday evening.

Paula Wagner, Cruise's partner in the film company Cruise/Wagner Productions, called the remarks "offensive" and "undignified."

"Whatever remarks Mr. Redstone would make about Tom Cruise personally or as an actor have no bearing on what this business issue is," Wagner said. "There must be another agenda that the studio has in mind to take one of their greatest assets and malign him this way."

A source close to Redstone insisted Wednesday that the issue had nothing to do with money.

Reports claimed Paramount would have kept Cruise on the lot had he lowered his price, said to be close to $10 million annually plus a hefty cut of the box office.