Tom Cruise's Studio Pact Is in Question

Paramount Pictures is said to be in talks with the actor and his business partner to slash the price of their production arrangement.

By Claudia Eller
Times Staff Writer

July 31, 2006

For many years, Tom Cruise has enjoyed the richest production deal of any A-list star in Hollywood. But in the latest sign of the industry's increasing obsession with fiscal responsibility, that era may be coming to an end.

Paramount Pictures, where Cruise and his producing partner, Paula Wagner, have been based since 1992, currently has a commitment to pay the pair as much as $10 million-plus a year to cover overhead, project development and other costs at their movie company, according to two sources with knowledge of the arrangement.

But that sweet deal, which is at least four times what stars such as Johnny Depp, Brad Pitt and Tom Hanks are assured by studios to fund their film outfits, was due to expire today. And Paramount Chairman Brad Grey has told representatives of Cruise-Wagner Productions that the studio would not renew it at anywhere near the current terms, sources said.

Instead, Paramount has offered Cruise and Wagner just a fraction of what they've been used to: $2 million plus a $500,000 discretionary fund each year for two years, said informed sources, who asked not to be named because of the sensitivity of the negotiations.

Cruise's attorney, Bertram Fields, said Friday, "We received an offer and we are digesting it. We will sit and talk about it." Asked whether Paramount left any wiggle room on its terms, Fields said, "It is not the case that they said this is a take-it-or-leave-it offer. I don't think my friends at Paramount would ever talk that way."

Wagner, reached on vacation in Italy, declined to divulge the dollar amount Paramount paid each year to the production company. But she denied that Cruise-Wagner — which employs about 10 people and occupies two floors of the Lucille Ball Building on the studio's Melrose Avenue lot — was as lavishly funded as sources had said, noting that in Hollywood's complex accounting practices, there's often a big difference between what is allotted and what is actually spent.

"We don't receive $10 million or $11 million a year. We do not see anything near that," she said Sunday, declining to be more specific. "We, Cruise-Wagner, do not negotiate in the press. They have made what we would consider a generous offer."

Paramount spokeswoman Janet Hill said, "We have the utmost respect for Tom Cruise and Cruise-Wagner Productions. We are currently in discussions to renew their deal."

Cruise-Wagner's production deal actually had expired in January, but both parties agreed to extend it until after "Mission: Impossible III" was released. It was then extended again until today.

This is not the first time Grey has played hardball with Cruise. Last summer, not long after the former talent manager took over the studio, he threatened to pull the plug on "M:i:III" unless the film's budget could be trimmed and Cruise's lucrative profit participation deal could be tweaked to protect the studio from losing too much money if the film underperformed.

The action sequel is likely to gross close to $400 million worldwide at the box office and is projected to earn an additional $200 million in DVD revenue. Still, Paramount expects only to break even after Cruise gets his share of the profit, which two informed sources estimate could be as high as $80 million.

The business has changed a lot since 1992, when Cruise and Wagner (who was his agent for 11 years before they became partners and who is married to his current agent, Creative Artists Agency's Rick Nicita) were first brought to the Paramount lot by the studio's then-chief, Stanley Jaffe. Jaffe had produced Cruise's first movie, the 1981 drama "Taps," at 20th Century Fox.

Cruise has made Paramount hundreds of millions of dollars over the last two decades with such hits as "Top Gun," "The Firm," "Days of Thunder," the "Mission: Impossible" series and "War of the Worlds."

"Tom Cruise has made more money for Paramount Pictures than any actor in history has made for any single studio," Wagner said.

But in recent years, the movies Cruise has produced but not starred in, including "Elizabethtown" and the low-budget films "Narc" and "Ask the Dusk," have bombed at the box office.

Wagner said any active production company would have its hits and misses. And in contrast to many actors' so-called vanity deals, which often exist more to stroke egos than to make movies, Cruise-Wagner is the real deal.

"We are a full-blown production company," Wagner said, adding that to hold Cruise and her solely responsible for flops isn't fair because Paramount has the ultimate say in what films are produced.

"It's the studio's job to decide what movies Cruise-Wagner makes," she said, noting that sometimes Paramount has passed on movies that went on to make loads of money for a rival studio.

For example, the 2001 thriller "The Others," which cost less than $18 million to make, grossed $210 million in worldwide ticket sales for Miramax's Dimension Films.

"While it is important to us to make films that make money, we're also in the business of supporting the artistic vision of filmmakers," she said.

Wagner pointed out how she and Cruise were responsible for bringing such in-demand talent as writer-directors Cameron Crowe and J.J. Abrams to Paramount, where each has overall movie deals.

If Cruise and Wagner wind up leaving Paramount, they might be hard-pressed to find another studio willing to match their current arrangement. Sources at rival studios including Warner Bros., Sony Pictures, Universal Pictures and 20th Century Fox said that deal was out of sync with current economic realities.

All the studios are taking a hard line on cost cutting, slashing overhead to improve their bottom lines. As production and marketing costs continue to soar, studios' box-office returns have been erratic and the growth of DVD sales has slowed.

Over the last year, the movie business has been seeing a dramatic contraction as studios cut hundreds of jobs, restructure operations and scrutinize producer deals that they can no longer justify.

In addition to the changing business climate, Cruise has another problem.

Though he is still considered one of the biggest stars in the world, his high-profile off-screen antics have hurt his public image and popularity, particularly with women.

Cruise made headlines last year for a now-infamous couch-jumping episode on "Oprah," when he professed his love for actress Katie Holmes.

Cruise then drew fire for criticizing actress Brooke Shields for taking antidepressants to treat her postpartum depression. The Church of Scientology, which counts Cruise as one of its most famous members, opposes the use of drugs to foster mental health.

The negotiations with Paramount, which are expected to continue for days or even weeks, are just one indication that even Cruise is not immune to Hollywood's newfound fiscal consciousness.