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Hollywood Confronts New Austerity

Photo of Anne Thompson By Anne Thompson | Thompson on Hollywood August 4, 2009 at 4:27AM

Patrick Goldstein calls around to nail down the new austerity hitting Hollywood. And Kim Masters details pay cuts for Denzel Washington and Tom Cruise, as well as how cost-cutter Disney is trying to deal with spendthrift producer Jerry Bruckheimer, the exemplar of Hollywood's old ways.
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Thompson on Hollywood

Patrick Goldstein calls around to nail down the new austerity hitting Hollywood. And Kim Masters details pay cuts for Denzel Washington and Tom Cruise, as well as how cost-cutter Disney is trying to deal with spendthrift producer Jerry Bruckheimer, the exemplar of Hollywood's old ways.

Ask anyone, and they'll tell you nobody's getting the money they used to. The numbers the studios used to pay talent were insane. The studios always had the power to dial it back, but only when their revenues started slipping with DVD sales did they start pulling in their spending. And the Writers Strike did not help things, writes Goldstein:

Studio chiefs say that in the old days -- meaning five years ago -- everyone was enjoying boom times. Year after year, DVD revenues kept soaring. In an up market, it was easy to be generous with back-end profits, since it looked like there was plenty of profit to go around. The studios didn't mind if the talent got rich, just as long as it wasn't at the studios' expense. But times have changed.

"Two years after you'd made a movie, you'd look at the P&L [profit and loss] statement and the numbers always turned out better than they were when you'd greenlit the movie," says one top studio executive. "Even a movie that you'd thought was a break-even proposition turned out to be nice moneymaker. But now it's the complete opposite. The DVD revenues keep going down. You look at a movie two years later and the numbers aren't anywhere near where you'd originally projected them. When the Walt Disney Co. reports earning losses in back-to-back quarters, it's very compelling evidence that the entire business is in trouble."

The steep downturn in the DVD market, where revenues are down close to 25%, might have been enough in itself to prompt studios to get tough with talent. But with marketing costs still skyrocketing, with the collapse of the capital markets leading to far less money pouring in to help studios assemble film slates, something had to give. According to another popular theory, the writers strike turned out to be incredibly bad for talent -- notably writers -- since the months of enforced production stoppages gave studios a rare opportunity to sit back and analyze their business, a process that had especially disturbing consequences for talent.

This article is related to: Headliners, Hollywood, Studios, Cash Crunch, Tom Cruise, Disney


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