Jordan Stein over at Minyanville wrote a great piece about how the economy is causing a little bit of deflation for the salaries of Hollywood stars. As an example, Stein pointed out how Disney (NYSE: DIS) doesn't want to go overboard in terms of compensating Nicolas Cage for his services in the next National Treasure feature. That's a popular franchise, and Cage is arguably a key to its success. But guess what? Doesn't matter, because money is tight, and Hollywood managements need to inject some sanity into negotiations.
Which, of course, has always been the problem. There's never been any sanity when it comes to negotiations in Tinsel Town. Stars are overpaid, and they take too much of the gross dollars generated by celluloid assets. If we were talking about private studios, I wouldn't mind. But I own shares of Disney and believe that overpaid talent is one reason why the stock hasn't done much over a decade.
However, I'm not so sure that things are changing that much in Hollywood. If you read the entire article that Stein referenced, you'll note that it implies that individuals such as Will Smith and Johnny Depp aren't seeing reductions in their compensation packages. It might be great that Mickey Rourke may have been offered only $250,000 by Marvel (NYSE: MVL) for an opportunity to be in the Iron Man sequel, but unless bigger stars see reductions in their bottom lines, then the system cannot truly change.
And there's the topic of literary sales. It was mentioned that a screenwriter who may have received $500,000 for a project is now seeing a figure more like $300,000. It amazes me how Hollywood works. Honestly, $300,000 for the services of a screenwriter is too much (I'm sorry, it just is). A smart studio should be able to extract several top-quality screenplays from that sum of capital. It doesn't add up. (And, hey, if any studio out there wants to hire me for a lot less money to pen a project, let me know!)
Here's how Hollywood needs to work. Budgets must be aggressively reduced, financial participation on projects have to cease so that cash flows can be maximized for studios, and concepts should be stressed over star-driven vehicles. The article cited earlier claims that this may now in fact be the new business model for movies. I don't buy it. Once the economy starts to improve, connected agents will once again try to score a boatload of money for their clients (for obvious reasons). It's human nature to want a lot of money. However, studios need to drive talent compensation down even further; intense pressure must be placed upon the process.
I don't really think that publicly-traded studios such as Time Warner (NYSE: TWX) and Viacom (NYSE: VIA) actually get the fact that a strong idea oftentimes will trump the allure of a big star or writer. They also don't understand that so many talented people out there would be willing to appear in movies and television shows for a lot less money. It's just not necessary to offer $20 million upfront and attach 10% of first-dollar gross as a sweetener. While there are reports out there suggesting that General Electric's (NYSE: GE) dividend is in danger of being cut, I'm certain that its media asset, NBC Universal, is still paying too much to Hollywood players. And I own GE, as you can imagine...
Disclosure: I own Disney, GE; positions can change without notice.
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Reader Comments (Page 1 of 1)
1-24-2009 @ 6:54PM
jeteamy said...
Hollywood is getting what they deserve-less money!! They are Bush bashers and are pro-democrats which got us in this economic mess in the first place. I do not see anyone going after Barney Frank and ChrisDodd!! No, Hollywood sucks up to the Obamas which their political party is leading us into a depression.
1-24-2009 @ 11:49PM
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1-25-2009 @ 4:46PM
Drew said...
It used to be that people had either : "starving artists" and troubadores that "sang for their supper". If we are falling like Rome did, leading to a Dark Ages, then we will have a return to sanity by viewing entertainment as a luxury, NOT a necessity. Life needs to be spent on what's real, not that which is not. We Americans have made being entertained more important than being attentive to what our government does, and now we'll pay for it - but at least an actor won't get a cut of the action we'll get from our friends the Chinese...
3-02-2009 @ 11:04AM
Bruce Watson said...
You call for reduced pay for scriptwriters even as you state that "a strong idea oftentimes will trump the allure of a big star or writer." Umm...where do you think those strong ideas come from?
While we're at it, attacking writers, pretty much the lowest-paid members of the creative totem pole seems disingenuous at best. Citing your $300,000 figure, Katherine Heigl's asking price could go to pay for 43 scripts, with enough left over for a hefty $100,000 tip. What's even funnier is that she's the fifth-highest paid actress in Hollywood.
I understand the irritation about Hollywood's bottom line, but attacking writers is comparable to going after meter maids when complaining about a city's budget. While they don't appear to be productive in the same way as grips or propmasters, underpaying writers pretty much guarantees the continuation of wretched, sub-par movies.
Ultimately, you're right--a good idea trumps anything. The thing is, good ideas cost money...