Money for Nothin'
Hollywood is a microcosm of the US economy: a tough place to make a living for most people and a place where it simply rains money for others. The current strike by the Writer’s Guild makes the difference clear, but with one problem. The union should attack not only the studios — they need to go after the stars as well.
People in the movie and music business are not paid like the rest of us. They earn money any time their work is broadcast, syndicated to cable, embedded in other work, etc.
Some years prior to the 1988 Writers Guild strike, I had to explain this to a senior executive of a British conglomerate that happened to own a music label. Over a memorable dinner featuring some really nice French wine, he was astonished to learn that even radio voice announcers are paid each time their commercials air on TV or radio.
Tugging on his monogrammed and bejeweled cuffs, he looked at me archly and proclaimed in high Oxford: "Mr. Manley, I do not expect to pay the plumber each time I flush the commode!"
I advised him not to worry because he already paid the plumber. His record company had paid musicians residuals for years. He politely changed the subject back to the roast duck, which was exquisite.
More than two decades later, the technological, commercial, and
competitive landscape is changed beyond recognition and writers are again on
strike. Once again, the dispute is over who gets paid and how much when the industry makes money in news ways.
But one profound business change is largely below the horizon, even though it is responsible for much of the increased economic pressure on the studios.
During the past several years, more and more studios have embraced
participation agreements with the industry’s most famous actors,
directors, and producers. These deals may be freely arrived at, but from a business perspective, many turn out to be foolish.
Under the terms of a so-called first dollar gross deal, big actors and
producers can make upwards of $70 million on a single film, even if the movie loses money because participation deals are structured as a share of revenue, not a share of profits.
According to a report in the Herald Tribune, "major
studios in theory give away as much as 25 percent of a film’s receipts
under such arrangements", noting that
The actual take is lower, because of certain adjustments. (This is
Hollywood, after all.) But a Hanks, Cruise or Carrey whose movie brings
$600 million back to the studio from all sources might easily wind up
with a $20 million salary, and an additional $50 million on the back
end, while an A-list director and producer could take in tens of
millions more.Industry-wide, the tab piled up to $3 billion or more last year, …helping push the business of making
films, which was somewhat profitable a few years ago, into a loss…
Once it is understood that the biggest stars and directors can rake
in dollars even from money-losing movies, it becomes easier to
understand why companies dug in their heels when asked to make richer
residual payments on media of the future than they offered on home
video of the past..
It is also not hard to see why the situation is especially galling
for movie writers, who typically do not share in the most lucrative
gross deals.
These deals are, of course, the studios’ responsibility — they signed every one of them. But stars, not studios, have been the beneficiaries.
The next time you see celebrity actors and filmmakers join anonymous writers on the picket
line, remember Deep Throat’s advice: follow
the money. It leads to the stars.
If you enjoyed this post, please subscribe to the feed and get future articles delivered to your feed reader.
