Disney's Power Struggle

Can the studio rebound if actors demand the upfront payouts of yesterday's market and producers like Jerry Bruckheimer blow $170 million on a movie like G-Force? Kim Masters on Hollywood's new math.

08.02.09 10:45 PM ET

“So what’s going on in Hollywood?” asks a leading producer, calling me from a few time zones away. “Is there still a business?”

You know things are bad when even the rich people are fretting.

Third-quarter results are rolling in and they aren’t pretty. More than one studio is rumored to be on the brink of regime change. “I think it’s one of those times,” says a studio chairman. “It doesn’t happen that often. It’s a financial crisis and a technical paradigm shift. Things are really changing.”

Even really big stars are getting the memo. As one talent representative out it, “10 is the new 20.” Stars simply must take less cash upfront in exchange for a bigger cut of the profit if the film’s a hit and the studio gets its money back first. Case in point: Tom Cruise is getting a promise of about $11 million to do his next project (a romantic comedy that was called Wichita but will have a name change). That’s a lot of money, of course, but only about half (or less) than what he used to get.

“Disney is not in creative stagnation,” Iger began. “We like being No. 1 for the weekend in the U.S. and we like the performance to date, but it’s got some challenges from an economic perspective.”

Recently Denzel Washington tangled with Fox over Unstoppable, which re-teams the star with director Tony Scott. Knowledgeable sources say Washington demanded “full boat”—his usual deal of $20 million or 20 percent of the profit, whichever is more. Adult thrillers have fared poorly this summer—including Washington’s last film with Scott, The Taking of Pelham 1 2 3. Fox declined to make the deal. And for a while, there was some kabuki in which Washington supposedly walked away from the project. He’s back now.

With these big names getting into such tense discussions, imagine the ever-so-delicate conversation between Disney and its thousand-pound gorilla, producer Jerry Bruckheimer. The Hollywood wires have been buzzing for weeks about the astonishing cost of his latest film, G-Force, the Disney guinea-pig movie that made headlines for bumping Harry Potter out of the No. 1 spot. The film is said to have cost a staggering $170 million, so the superhero rodents will have to have legs like Elastigirl to make a profit.

Last Thursday, Disney Chairman Bob Iger and Chief Financial Officer Tom Staggs had their earnings call with industry analysts and announced, among other gloomy numbers, that the film studio had lost $12 million in the quarter. That includes just some of the cost of G-Force, which Staggs described as “a very expensive film.”

The cost wouldn’t be shocking for a Pixar or DreamWorks Animation movie that draws in a broad audience. But G-Force looks like a movie primarily for little kids. It could have been done for a fraction of the cost, like Fox’s Alvin and the Chipmunks (which arguably had an added advantage because the chipmunks had been an established brand for decades). But Bruckheimer is a spare-no-expense producer who would never settle for cheesy effects.

And Disney is not eager to tell him no. “For Jerry, they’ll do anything,” says a leading agent. And that’s not unreasonable. Bruckheimer is worth his weight in plutonium. He’s brought enormous riches to Disney for years now with franchises like National Treasure and Pirates of the Caribbean. “Jerry is so much their go-to guy in terms of live action—it allows him to be indulged in ways that most people can’t be these days,” says a former studio executive.

Perhaps he made G-Force to satisfy Disney’s desire for more family entertainment. The picture was the directing debut for respected special-effects man Hoyt Yeatman, who also came up with the story. Yeatman has done lots of work for Bruckheimer—he was effects supervisor on Crimson Tide, Con Air, and Armageddon. But this seems like a big assignment for a first-time director. Working in 3-D is expensive, especially when changes are made. What might be a simple reshoot in live action is a very costly proposition with animated 3-D guinea pigs.

“Jerry’s a perfectionist and if the movie turned out to be not as great as it could have been, he would keep working on it and working on it,” says the former Disney insider. And of course, Disney is trying to preserve its aura at a time when critics say the studio’s films haven’t lived up to the vaunted Disney name. (Obviously, this criticism doesn’t apply to Pixar’s genius movies.)

So when analyst David Miller of Caras & Co. tried to lob a softball to Iger and Staggs in last week’s earnings call, it turned out to be more of a bean ball. “[Disney’s had] three hits in a row if G-Force carries over from an outstanding opening weekend,” Miller marveled. “So you’ve got Up, The Proposal, and G-Force—again, three hits in a row. What would you say to your critics out there who continue to claim that Disney is in creative stagnation?”

You could almost hear Iger and Staggs exchange glances. “I don’t get to talk to our critics all that much,” Iger began (which in itself could be worrying). “So I just—Disney is not in creative stagnation.” As for G-Force, he continued, “we like being No. 1 for the weekend in the U.S. and we like the performance to date, but it’s got some challenges from an economic perspective.”

Iger raised some eyebrows in an earnings call last March when he took a shot at the Disney studio for spending too much on movies that weren’t working. This time, he declined to look back in anger. He stuck to prospects for future movies, including Prince of Persia—another Bruckheimer extravaganza set for next summer. Based on a popular videogame, it stars Jake Gyllenhaal as the title character, who must save the world from the destruction wrought by the Sands of Time. Somehow that seems very appropriate just at this moment.

Following the disappointing Confessions of a Shopaholic, G-Force represents a rare double stumble for Bruckheimer. In a time of increasing fiscal constraint, many of his competitors are wondering if finally, Disney will lean on the man with the golden touch. “Even Jerry is not going to be able to get away with it anymore,” says one producer. “They’re under too much pressure.”

Asked for comment, Bruckheimer referred me to Disney. A spokeswoman at the studio simply said, “We are always looking at ways of being more efficient.”

But back in March, I interviewed Disney Chairman Dick Cook about the state of the business and he was unequivocal: “Every part of the business is in the process of changing and this economic downturn has just made it come along faster,” he said. Cost-cutting will be imperative and it will affect everyone. “There are some that haven’t quite got it yet,” he said. “It maybe hasn’t hit them yet. But this is something that’s hitting everybody... No one gets by this downturn.”

And that seems to be made manifest by the plans for the fourth Pirates of the Caribbean. Johnny Depp will return as Captain Jack Sparrow, but there will be no Keira Knightley, no Orlando Bloom, and no Gore Verbinski directing. It’s a smaller world after all.

Kim Masters covers the entertainment business for The Daily Beast. She is also the host of The Business, public radio's weekly program about the business of show business. She is also the author of The Keys to the Kingdom: The Rise of Michael Eisner and the Fall of Everybody Else.