Diane Francis on Business Issues

Wednesday, September 06, 2006

Tom Cruise Unplugged

It used to be said there's no such thing as bad publicity, but just ask Tom Cruise and Mel Gibson.

Their firings, over bigoted statements, are "brand chill", or a warning to the overpaid members of Hollywood's brat pack that if they too become defective they will be discarded.

In fact, a market correction may be underway, given the fact that Hollywood is embattled. Like overpaid CEOs in sunset industries, these superstars cannot make the case that they should make mega dollars and benefit more than others.

Cruise's goofy Scientology, girlish outbursts about his female friend and dismissiveness of psychiatric drugs led Viacom Chairman Sumner Redstone of Paramount Productions to end a 14-year partnership. He called Cruise's behaviour "suicide" and said it was affecting his box office popularity.

Mr. Redstone estimated that Cruise's "Mission Impossible" sequel should have made US$150 million more than the US$383 million to date due to his offensive remarks.

The "brand discipline" imposed on Mel Gibson is much more severe and permanent. Now in rehab for alcohol problems after his arrest for drunken driving, he is probably finished. Or should be.

His anti-semitic outburst, during his arrest, as well as his arrogant threats toward the police cost him a television series deal immediately. And photos of him with a bevy of young beauties in a bar that night certainly raises questions about his marriage and Catholic faith.

In the days that followed these revelations, Gibson published an apology that repaired nothing.

Today, there are rumors that his next self-financed extravaganza "Apocalypto" may never be released or distributed. If true, that will mean he is financially as well as professionally finuto.

What's interesting about these silver screen dust-ups is that they further underscore an inflection point in the world of entertainment.

Salaries have become so stratospheric that performers are often self-destructive, indulging themselves, morally or otherwise, without regard to others, including their business partners. Think Cruise or Gibson. Think Michael Jackson.

At the same time as the business world has created these monsters, Hollywood is embattled, as are all artistic businesses, as a result of the web and computers.

The music industry will never be the same. But animation and special effects have started to crowd out big-name talent in terms of attracting crowds into movie theatres. These include recent blockbusters such as the "Lord of the Rings", "Harry Potter" or the "Incredibles".

The public also has a thirst for documentaries which take on subjects as diverse as global warming, penguins, McDonald's or President Bush.

Games are also a problem. Video games now earn more revenues than Hollywood's movies, a cross-over that occurred two years ago.

Then there's piracy. The industry is wrestling with the switch to digital filmmaking, which creates significant benefits for studios -- it is cheaper and provides better picture quality -- but will require more attention
to the risk of piracy.

What's also different is how the marketplace has waded into all these issues too, imposing discipline on the studios. Stocks thud with every dud.

So perhaps what we're seeing is a badly needed market correction.

"Many insiders say that only one in 10 bets pays off in movies,"
said Harvard Business School Professor Anita Elberse in an interview with me last year. "If you are looking for a sure return to your investment, you should not invest in movies."

There is also no link between success and star power, she said.

Stars have more staying power because they are, by definition, good at selecting the best scripts and portraying their characters. In addition, they have the best advisors and marketers to enhance their reputations and salaries.

But the payoff is minimal. She examined the financial results of 500 movies since 2001 involving 600 stars to determine whether there was a payoff for the
enormous amounts that movie stars earn.

"There is," she said. "On average, a major star is worth US$3-million revenues."

But to some studios a star is worth much, much more.

Take the all-time record payout which was earned by the mildly talented Keanu Reeves. After turndowns by all the A-list players, even he had to be enticed to lend his name to the "Matrix" movie.

The project caught the public's imagination and his revenue-share, back-end deal ended up giving him the biggest payday ever, or US$225 million.

His salary range went up but his movies since then have been bombs which proves that paying huge sums of money to anyone, whether a talented, known actor or CEO, is no guarantee of success. Or failure.


At 11:13 PM, Blogger vishnuprasath said...

High paying jobs are most important in the current economic situation.
Most of the companies are developing in India and there are lots
of job openings in various indian cities, which provides high salary.


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