Quest for profit could prove a thriller

Shia LaBeouf, left, and Harrison Ford, in a scene from 'Indiana Jones and the Kingdom of the...
Shia LaBeouf, left, and Harrison Ford, in a scene from 'Indiana Jones and the Kingdom of the Crystal Skull'. Photo by David James/AP.
Indiana Jones series is known for its cliffhangers. But the real cliffhanger in the coming sequel is when - and if - the famous filmmakers and the star will make money.

That is because before executive producer George Lucas, director Steven Spielberg and leading man Harrison Ford get their hands on any treasure, Paramount Pictures will need to collect $US400 million ($NZ515 million) in revenue to recover its costs and make a sizable fee to distribute Indiana Jones and the Kingdom of the Crystal Skull.

If that seems like a no-brainer, consider the norm in Hollywood, where top-tier filmmakers and stars traditionally earn huge upfront fees and get a big cut of ticket sales before a studio recoups its investment.

The atypical arrangement between the studio and the triumvirate illustrates the new economic realities of the movie business.

As production and marketing costs escalate amid flat theatre attendance and declining DVD sales, studios are looking for ways to protect themselves from colossal losses on a single picture.

"It's good for both parties," media analyst Harold Vogel said.

"If the talent has a true belief in the movie, they are taking a little more risk by getting no significant compensation upfront but a much larger share of the ultimate profitability . . .

It makes sense for studios which are cash-constrained."

With the movie industry becoming less lucrative in recent years, the studios would prefer to have talent shoulder more of the risk.

One way is getting expensive stars, directors, writers and producers to defer their customary fees and forfeit their cut of box-office dollars from the first ticket sold, known as "first dollar gross".

Walt Disney Studios, for example, had such an arrangement with producer Jerry Bruckheimer and star Johnny Depp on the Pirates of the Caribbean movies, and Bruckheimer and actor Nicolas Cage on the recent National Treasure sequel.

On those hits, everyone made money.

However, most movies are not big hits, which is why studios like these "break-even" deals.

Sony Pictures would have lost a lot more than it did on The Holiday had writer-director Nancy Meyers and stars Cameron Diaz and Jude Law not agreed to forgo their usual "first-dollar" paydays.

Instead, they earned their upfront cash fees.

The 2006 romantic comedy, which cost more than $US100 million to produce, grossed only $US63 million at the US box office and had weak DVD sales.

Crystal Skull is the first "Indiana Jones" movie in 19 years.

The fourth instalment in one of Hollywood's iconic franchises arrives after years of development, script rewrites and dashed hopes among fans who are eager to see how the archaeologist-adventurer outsmarts another gang of nefarious forces.

Most movie franchises, including Harry Potter, Pirates and Spider-Man, are owned by studios.

The Indiana Jones copyright, however, is held by Lucas, who created the adventure story in the 1970s.

Lucas, who also invented the Star Wars empire, is one of the few contemporary filmmakers to own and control his movie properties.

The structure of the deal between Paramount and Lucas' San Francisco-based Lucasfilm Ltd predates the current three-year-old regime at Paramount, headed by Brad Grey.

Grey and his associates subsequently tweaked the arrangement to further lower the studio's risk.

When it became clear the movie would cost more than expected, Lucas, Spielberg and Ford agreed to offset it by waiving their large upfront fees.

Paramount executives declined to be interviewed, as did Spielberg, Lucas and Ford.

Crystal Skull will have to generate about $US400 million for Paramount to make its money back and earn its distribution fee.

Only at that point will Lucas, Spielberg, Ford and smaller profit participants, including screenwriter David Koepp, begin collecting their portion.

Paramount will take 12.5c from every dollar thereafter, while Lucas and company will earn 87.5c.

In the event that Crystal Skull fails at the box office, this arrangement will leave the filmmakers and talent empty-handed.

Paramount would lose part of its investment but not as much under a conventional deal with top talent.

Although the Indiana Jones franchise is considered one of Hollywood's surest bets - the first three pictures amassed $US1.2 billion in worldwide ticket sales - there is no guarantee that younger moviegoers will turn out in droves to see a now 65-year-old action hero in a fedora dust off his trademark leather jacket and crack his bullwhip.

Today's under-25 action junkies are wowed by computer-generated effects spectacles, such as Spider-Man, Harry Potter, 300 and Fantastic Four.

Set in 1957, the fourth Indiana Jones tale relies more on physical stunts than eye-popping effects as it chronicles Indy's adventures battling Russians during the Cold War and racing through the Peruvian jungle in pursuit of the crystal skull.

To appeal to the iPod-and-YouTube generation, Spielberg cast as Ford's motorcycle-riding sidekick Shia LaBeouf, the 21-year-old star of 2007's Transformers.

Though the deal struck between Paramount and the talent is designed to mitigate the studio's financial risk, no-one in Hollywood can predict the outcome.

"It's still a very challenging business," said Richard Greenfield, a media analyst with Pali Research.

"The average movie still loses money." - By Claudia Eller

 

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