Producers' pacts with the majors plunge

Studio cuts impact on-the-lot deals; about 50% fewer since 2000.

By DAVE MCNARY

When producers say studios have been relentlessly cutting costs, it’s not just a complaint -- it’s the truth.

The number of term deals at the majors has dropped to about half of what it was in 2000, when a stunning 292 deals were listed in Variety’s Facts on Pacts report. That number fell to 241 in 2001, stayed fairly consistent for the next half-dozen years and then began plunging to the current level of 152 (not including pacts at Lionsgate or Overture).

"My members in features are hurting and scared," says Marshall Herskovitz, president of the Producers Guild of America. "The process of making features has become terribly difficult. And that includes people who are Oscar winners."

The 2000 edition of Facts on Pacts tallied 24 deals at DreamWorks, 33 at Miramax and 22 at New Line. At the same studios, those numbers are now three, two and four, respectively.

From just a year ago, the number of deals has fallen more than 15%, from 184. Paramount dropped from 16 to 11 and Warner Bros. shed seven deals — including such well-known names as Ron Yerxa and Albert Berger’s Bona Fide, the Broken Lizard troupe and Paula Weinstein’s Spring Creek -- to get down to 28.

For Herskovitz, the decision to pull the plug on deals isn’t a surprise.

"The studios have articulated this as a corporate policy that producer deals are not worth the expense," he says. "And the number is going to decline without question. My assessment is that they will decline until only the very large producers who are doing several films a year will have deals."

Studio execs contend that the trims have come in areas where producers weren’t delivering and in the so-called "vanity" deal arena for actors and directors. The execs were not willing to comment publicly about the decline, but they privately lament the increased corporate pressures to focus almost entirely on tentpoles and niches.

One producer, who still has a deal, says there’s ongoing resentment over star deals in a time of all around cutbacks.

"It’s so much harder for our producers now," he notes. "Star and director deals take away the resources from pure producers like me. Studios want the relationship but most aren’t productive except for a few like Will Smith."

Currently, 21 actors have term deals with major studios, including such durable players as Smith, Brad Pitt, Clint Eastwood and Tom Hanks and relatively new producers like Jennifer Aniston, Steve Carell and Owen Wilson. That’s about half the number from 2000, when thesps with deals included Denis Leary, Meg Ryan, Rob Schneider and Robin Williams.

Amid the pressures and frustration being felt in the producer ranks, the sense around town among veteran producers is that the studios aren’t yet done shedding deals.

Producers contacted for this report declined to be quoted for attribution, citing worry about that very prospect. Several also say the size and length of existing deals is decreasing.

"The horrifying thing is they’re making fewer movies," says one. "Most deals are getting cut and they’re shorter, just a year or two. So it’s not just a war on talent costs. I would say that the amount of overhead they cover is down 20% to 40%."

All this is unfolding at a time when the process of producing movies hasn’t gotten any easier -- or faster -- say execs.

"When you sign a new deal, you have buy something for them and then give them at least six months to see if they can develop it," one former studio exec notes.

And though production deals may not be as rich as before and the headaches arguably greater, producers still desire a home base and the support it provides.

"It’s motivating and it’s intimidating -- there’s less competition but more to prove," says Todd Lieberman of Disney-based Mandeville. "The bar is set a lot higher than it was a year ago. You have to be creatively aligned with what the studio wants to do -- not unlike a producer/director relationship.

"You have to have the same vision. When it works, that generates trust. The stability is very helpful. When you find someone that you like working with, you feel as if you’re situated in a good place."

Producers say they feel they’re in the crosshairs these days.

"We are up at the end of the year and we don’t know if we’ll get renewed," admits Peter Principato of Fox-based Principato/Young. "It’s very advantageous in that it gives us overhead and it’s nice to have a place to call home. It really is easier than going on the open market. I wouldn’t call it daunting, but there is added pressure as the number of buyers shrinks; the competition is hungrier and more ambitious."

And producers who still have deals are thrilled to be ensconced.

"I could not be happier," says Todd Black of Sony-based Escape Artists, who’s working on "Spider-Man 4." "I love the consistency from the junior juniors to the seniors (execs). I know what they want and they know what I like. So even if I could, I would not change."

Black says Sony and Warners, which have historically carried the most deals, have the most consistent approach to dealing with producers.

Warner-based Donald DeLine, who’s been a studio exec at both Paramount and Disney, contends that execs still value producer deals.

"As a studio executive, having a good, experienced producer on a project allowed me to sleep better at night," DeLine says. "It takes away some of the uncertainty of what’s an incredibly uncertain business. When you find people who are good at it, you hold on to those relationships."

DeLine, who’s prepping "Yogi Bear" and "Green Lantern" for WB, doesn’t expect term deals to go away.

"Budgets are getting bigger and movies more complicated, with visual effects and technology, so producing is much tougher. When people have been in the trenches with you, there’s a shared sensibility that allows for a very valuable shorthand."

One former studio exec turned producer believes the most desirable deals these days are those involving equity players such as Legendary Pictures and Relativity because of their access to funds, even though that’s also become a challenge in the current economic climate.

But several producers point to the difficulties faced even by Steven Spielberg -- arguably the world’s most successful producer -- in closing his $825 million of funding for DreamWorks. They also point to the recent moves by Disney to buy Marvel and by Warners to revamp DC Comics as indications that the studios want still more control over development.

"In this environment, a lot of the term deals don’t make much sense, given that the studios are becoming more and more marketing and distribution entities," a former studio chief adds.

The value of a deal, many producers reiterate, is that it puts them on the same page as studios.

"Many of our movies are based on underlying properties, so having the studio as our creative and financial partner from the outset allows us to align ourselves on key issues such as rights acquisition and choice of talent," says Warner-based Dan Lin.

Charles Segars, who heads the Disney-based Sparkler banner, says on-the-lot producers bring connectivity and insight onto the lot.

"Disney shorthand has very specific needs that aren’t very articulatable to the outside world," he says. "If you’re on the lot, you learn the wants and needs of the executives. The other advantage is that the creative community knows that you are a path into the studio."

Segars, who co-created a $1 billion franchise for the Mouse House, says that relationship should continue to bear fruit.

"We expect to do a third, fourth and fifth ‘National Treasure.’ So it makes sense for us to be here. "

Nonetheless, Herskovitz says the studios are shortsighted in continuing to cut deals.

"They’ve moved out of the $20 million and $30 million business; their attitude is that if you are making $100 million movies, you don’t need a lot of producers," he says. "The problem with that is that it leaves you unable to adjust to changing circumstances.

"In the auto business, for example, the companies decided to get into SUVs because they were very profitable -- until they weren’t."