Production pacts get dicey
Pressure builds as deals decline
Variety's annual Facts on Pacts survey shows the total number of feature deals is at 226 -- a decline of just three deals since last fall and only 10 since November 2004. Sony, Warner, DreamWorks and MGM have reduced their number of deals while Disney, Fox, Paramount, Universal and Focus have gained over the past nine months.
But the overall figure is destined to drop in coming months as studios look to trim costs and make fewer films. And the decline could become significant if other studios decide to follow the Disney model.
"It's gotten much harder to get a deal and to keep a deal," notes JC Spink, whose New Line-based shingle produced four pics last year. "I thank God every day that I have one."
The terrain has gotten trickier as studio chiefs face increased pressure from Wall Street to improve their bottom lines rather than reward past accomplishments. The best-known go-to shingles -- such as Jerry Bruckheimer at Disney, Ron Howard and Brian Grazer's Imagine at Universal and John Davis at Fox -- aren't in any danger of going away, but everyone else is feeling the chill.
"What's happening is that the midsized films have been getting squeezed out," one Par-based producer notes. "And from the studios' standpoint, they're asking, ''Why should we pay overhead when indie producers can deliver what we need, like 'Little Miss Sunshine'?"
In other words, the mantra for the next 12 months will be "produce or perish." Operations that bring their own financing -- such as New Regency, Spyglass and Strike -- will become more popular.
"What you're going to see is more of an MGM-style rent-a-system where the studio simply distributes something that's been fully financed," another producer asserts. "There's a lot of equity out there from places like Relativity, Lakeshore, Legendary and Sidney Kimmel."
Marshall Herskovitz, who runs Bedford Falls with Ed Zwick and also is president of the Producers Guild of America, believes the current situation has been percolating for some time and is now getting noticed a lot more.
"Over the past five years, there's been a reduced willingness to pay for overhead and development," Herskovitz notes. "I say this knowing that the economic model of the film industry is not rational -- movies cost too much, studios are paying too much for top stars and there are too many films getting made. We've all had the experience of feeling swamped when you see your film open against three others and then seeing four more films open the next weekend."
Herskovitz, whose deal is at Warner Bros., is hopeful that the downward trend in what studios spend on producers won't continue.
"Luckily, this is a cyclical business," he adds. "But what you're seeing is far less favorable terms for producers. And I'd expect that to continue for a while."
Even such notable production companies as Cruise/Wagner and Red Wagon aren't exempt. Paramount's seeking to renegotiate the Cruise deal at lower terms following a less-than-spectacular performance by "Mission: Impossible III"; Red Wagon's future at Sony is murky, due partly to the high costs of its deal.
Still, big new deals haven't completely vanished. Par brass was happy to give "MI3" helmer J.J. Abrams a five-year deal that guarantees he will receive $22.5 million, including $2 million a year for overhead, a $2 million per year "draw" as an advance against his producing or helming fees and $500,000 per year as a discretionary fund.
A more typical pact pays between $500,000 and $1 million annually in overhead plus a similar "draw" on fees. But many of the current pacts don't amount to much more than the right to pitch projects to the studio, since much of the overhead allocation gets eaten up by costs such as rental of office space.
Many producers want a studio deal for the status, even with the downside of watching projects languish while studio execs dither on making a yes-or-no decision.
"You want to be in the mix," says one Fox-based producer. "You feel really out of it if you're not on a lot."
Here's the breakdown of changes to producer deals at each studio in the past year:
Disney: Despite its planned cutbacks, the Mouse House actually beefed up, making new deals for Robert Zemeckis' ImageMovers, Angela Robinson, Alicia Keys and Damien Saccani. Departures -- the first of many expected to come -- included Frontier and Callie Khouri.
DreamWorks: With the sale to Paramount, many deals weren't renewed. Departures include Dennis Leary, Richard and Lili Zanuck and Zemeckis.
Focus: Focus nearly doubled its number of deals. Timur Bekmambetov, Queen Latifah and Intrepid signed deals with Rogue.
Fox: Perhaps the town's most stable studio, Fox made three new deals including Nicole Kidman's company.
MGM/United Artists: More than half the Lion's deals expired as the shingle became mostly a co-financing operation.
New Line: Mini-major's new deals are Wyck Godfrey/Marty Bowen, Matthew McConaughey and Jon Shestack; gone are Film Engine, Mike Karz and Landscape.
Paramount: By far the most changes of any studio. Besides J.J. Abrams, the new deals include Cameron Crowe, Will Ferrell, Dede Nickerson, Sher-Shamberg and David O. Russell; expired deals include Michelle Manning, Richard Linklater, Jordan Kerner, Klasky/Csupo, Bob Cort and Michael London. And Sean Daniel's new deal is without longtime partner Jim Jacks.
Revolution: Its five deals will expire soon.
Sony: Lived up to its pledge to reduce deals, with Deborah Newmyer as the only new pact. Centropolis, Corduroy, Leonard Goldberg and Jennifer Lopez have departed; more are expected soon.
Universal: By far the most significant increase among the majors, it now has the largest number of deals with 34. New pacts include Judd Apatow, Darren Aronofsky, Stephen Gaghan and Greasy Entertainment (brothers Jon, Dan and Doug Heder).
Warner Bros.: Even though it reduced the number of deals, it still has 33 pacts, including new deals with Todd Phillips and George Clooney through his new Smoke House shingle. Departures include Ira Glass, Dylan Sellers and Jon Shestack.
