Ben Hoyle, Arts Reporter
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From the silent films of Charlie Chaplin, Douglas Fairbanks and Mary Pickford to George Clooney’s modern Rat Pack in Ocean’s 11, 12 and 13, Hollywood has always loved a star.
A reckoning may be looming, however. Research suggests that the demands made by A-list actors have turned the movie business into a loss-making industry at the precise moment that it has mislaid its audience at the box office.
A report, Do Movies Make Money?, predicts that the 132 films distributed by the six leading Hollywood studios in 2006 will make a pretax loss of $1.9 billion (£920 million).
The findings by Global Media Intelligence (GMI), an offshoot of Screen Digest, a London-based research company, are based on evidence that revenue growth has stalled after a “golden age” between 2000 and 2004, while costs have ballooned. GMI believes that several of the biggest box office hits of 2006 made an overall loss or failed to return significant profits to their investors. These include Mission: Impossible III, Superman Returns, Dreamgirls and Miami Vice.
Falling DVD sales, increasingly ambitious marketing campaigns and demand for ever more spectacular special effects have all played supporting roles. The leading culprit, however, is the spiralling costs of “gross participation” deals, which can account for up to $100 million on a single film.
Roger Smith, the author of the report and an industry veteran of more than 30 years, said that deals offering top actors, directors and producers a share of the gross revenue from a film have risen steadily in recent years. They are not included in budgets and are paid on top of the star’s official salary. GMI estimates that they cost Hollywood at least $3 billion last year.
The sum dwarfs the $121.3 million paid out in residuals to writers, the payments which are at the centre of the screenwriters’ strike called by the Writers Guild of America last week.
According to Mr Smith, stars such as Tom Cruise or Tom Hanks are typically guaranteed $20 million for a role but are also entitled to 20 per cent of the studio’s slice of the worldwide gross, which can be up to $500 million on a global hit such as Pirates of the Caribbean: At World’s End.
“A nine-figure payday is extremely rare, but the high eight figures is not unusual,” Mr Smith said.
GMI calculated that Cruise made $95 million from Mission: Impossible III, which he starred in and produced. The film took just under $400 million at the global box office.
Paramount, the studio that had invested an estimated $150 million in the film, “maybe got $10 million as its share”, Mr Smith said. The studio dumped its most high-profile star soon afterwards, ending a 14-year business relationship.
Investing in films has always been a gamble, with studios traditionally relying on big hits to cover the losses on the rest of their slate. Participation deals are biting by sucking the profitability out of the hits, Mr Smith said. “They make anything short of a wild hit not that profitable. One recently retired studio executive put it to me this way: ‘It isn’t that the losers lose so much; it’s that the winners don’t win enough’.”
The details of individual packages are generally kept secret but Disney, the one studio that does declare the amount it pays out in participations and residuals, spent $554 million on them in 2006, nearly four times more than in 2002.
At the same time the link between star power and box office success is becoming less reliable.
Peter Bart, the editor of Variety, the industry newspaper, wrote last month: “Here’s the new benchmark for predicting box office performance: if a movie star heads the cast, downgrade the forecasts. While movie stars today can help open a picture, they sure as hell can’t guarantee success. Some distributors inevitably ask, has the basic concept of a movie star become something of an anachronism?”
He listed Clooney, Ben Stiller, Jodie Foster, Halle Berry, Brad Pitt, Mark Wahlberg, Joaquin Phoenix, Jude Law and Jamie Foxx as A-listers whose recent films have “either underperformed or tanked”.
Of the 15 most successful films at the US box office this year only three were traditional star vehicles: The Bourne Ultimatum with Matt Damon, Live Free or Die Hard with Bruce Willis and Wild Hogs, a motorcycle comedy with John Travolta.
Despite record-breaking showings at the global box office this summer from blockbusters such as Spider-Man 3 and Transformers, the most talked-about success stories in studio circles have been the likes of Knocked Up and Disturbia, low-budget films with no stars or gimmicks.
Mike Gubbins, the editor of Screen International, said: “The studios have spent a fortune this summer and I’m not sure the box office justifies it. Their success has been unrealistically paid for, which is why there is a growing interest in backing smaller films which can offer good returns without the studio having to bet the bank.”
A-list and their hits
— Pirates of the Caribbean: Dead Man's Chest $423,315,812 Johnny Depp
— Spider-Man 3 $336,530,303 Tobey Maguire, Kirsten Dunst
— Harry Potter and the Order of the Phoenix $291,808,642 Daniel Radcliffe, Emma Watson
— Night at the Museum $250,863,268 Ben Stiller, Robin Williams
— Men: The Last Stand $234,362,462 Hugh Jackman, Halle Berry, Ian McKellen
— The Bourne Ultimatum $227,015,425 Matt Damon

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In the past, when times were bad, e.g. the Great Depression, WWII, Hollywood made movies that took people away from their troubles. Even serious films which probed the foibles of human nature stayed away from overtly politcial themes. Currently, films are practically propaganda pieces, mostly from the left. The morality presented in them is of the lowest order and there is the same relentless focus on despair and failure which one can get for free from the 24/7 news cycle. Art and life reflect one another, which is perhaps why, if one really wants to see a good movie, one must rent one from years past.
Jim, New York City, NY USA
Everbody on here's got an axe to grind, but that doesn't make them accurate. The truth is that the reason that the Iraq movies have not done well is not b/c American's support the war --have you seen any polls lately? 2/3 of the country is against it-- no, the reason is that we're all still enduring the Iraq travesty every night on the evening news and don't care to go out to watch more of the same.
Of course, that has nothing to do with the topic of this post anyway, b/c "Mission Impossible 3" "superman returns" and other big budget movies that failed had nothing to do with Iraq or politics anyway.
Chip, Silver Spring, Maryland
The problem with Hollywood today is the wrong people are making movies for the wrong audience. In its "golden era", Hollywood producers, directors, and actors had a solid grounding in literature and theater. Today, their background is the lowest common denominator banality of television, and it shows.
Moreover, the demographic driving the movie buisness these days is the 18-to-24-year-old male who craves only noise, explosions, and shoot-outs, not to mention the quick-cut editing necessary for their short attention spans.
The people with the time and money to spend on movies are the over-50 crowd. They enjoy and support good movies, but Hollywood practically ignores them. That leaves us with a contemporary desposal movie culture that is mostly junk and drivel.
Ralph, San Antonio,
Tent poles no longer make huge amounts of money because studios think that audiences are stupid and are not interested in the story. This was true about 10 years ago but not people want more. They want the Bourne movies which were great films as well as tent poles, not Mission Impossible 1,2,3 who cares? Spending 250 million didnt reap superman returns anywhere near the amount that was expected. Why? A+ for effort, C- or execution. Also the reason why Lions for Lambs didnt do as well as expected. Maybe people are tired of listening to how the world is going to hell in a hand basket. We have the news for that. Knocked Up was hilarious and made people forget about the real world. That's what films are. A fantasy. And you can create that without spending hundreds of millions of dollars.
Polly, Suffolk, England
Like all big business this decline has more to do with the Product than the cost base. Rendition, Valley of Elah, Lions for Lambs, Stop Loss, Redacted. These are all examples of why the US isn't going to the cinema. Movie stars are in their own little bubble; surrounding themselves with those who think the way they do. They don't know anybody who votes Republican or admires their countries armed forces so why should they be making films aimed at a population they know nothing about.
I'm British and I refuse to watch anything with Sean Penn or George Clooney, so Middle America is definately not going to put bums on seats. I own over 1000 DVD's and I'm not going to the cinema either. The left wing luvvies have the right to say what they want. I have a right not to pay money to listen to them.
To be fair, does Hollywood care? They know that movies like this will go down swell with the Anti-American crowds in the rest of the world.
Chris, London , UK
The level of box office takings suggests that movies remain highly popular. Perhaps those American readers who despire an industry that made America popular should listen to those actors who resent US foreign policy, US environmental policy and particulalry Bush because the rest of the world does to. Open you eyes.
Ben, London,
I have to agree with all the US commenters on this topic, Hollywood actors are pompous, selfimportant know it all socialists. How dare they preach to everyone else about what and how they should live their lives when they live in palaces and earn multimillions of dollars.
Tom, London, England
could it be that the films and or the stars are just not that good? i can't think of the last time i HAD to see a film.
paul turner, toronto, canada
I think i would hang around for a couple of years making a film for a pay day of 95million dollars! in fact take a decade - i'm not woried.....
Nick B, Leicester,
Writing is absolutely essential for a movie to take off. Nowadays Hollywood is so caught up in preaching about the war and turning out war movies that they forget that audiences go to movies to forget about what's going on in the real world. The writing was so good when Hollywood started because all of the great play writes and novelists were paid by the studios to write witty, intelligent stories. Casablanca is probably the most witty film I have seen. I find myself drifting towards movies written and filmed in Britain more and more because I find there is still some creativity in this world, it's just not in LA anymore
Lesley, Boston, MA, USA
Wow! . If I understand these contributors above correctly it goes like this:
American movie stars voice democratic opinions against the "New Vietnam in progress", therefore Hollywood actors are all commie pinko terrorists.
What a country!
And these contributors have votes!
American movies are tanking because audiences have become jaded with explosions etc. The Golden Age of Hollywood was the 1950s when you could expect a rich, well-written story that entertained on a deeper level. Until Hollywood recognises that, its decline will continue.
Greg Palmer, Düsseldorf, Germany
It's interesting that this article is putting most the blame on star power cost. What about the story? The art of good story telling is all but gone. The language is so offensive, one has to take a shower in their brain once they get home. Family values? Down the drain. Hollywood (TV and movies) doesn't seem to mind making rude and socially unacceptable people out of the kids that watch their garbage. How many generations of watching stuff from Hollywood has it taken to dumb down our society?! And the kicker? Actors, producers, directors, writers gone politically loud and over the edge. Don't they realize that by spewing hatred about our President, the war, and our country that they have offended at least 50% of those who used to watch their movies? Our family doesn't go anymore. We no longer indiscriminately spend money for our entertainment to watch bad movies and support such people.
Julie Anne, Naperville, IL, USA
A couple of things: while movies are always great fun for an evening out, the blathering leftist opinions of under-educated, ignorant "stars" agitate American families. To pile on insult to injury the movies themselves are anti-family values and abusive toward American traditions. Countless numbers are no longer going to movies which are now nothing more than a mouthpiece for socialist/marxist political thought.
Rita, OKC, Oklahoma
I can only speak for myself but the reason I don't go to movies anymore is because actors have turned into political activists. I don't know how they think that they have a right to use their status to speak about their opinions. I for one am not interested. I'm tired of the hate they show for our leaders, our country and especially our servicemen. I hope they all keep loosing alot of money until they get the message. SHUT UP AND ACT!
Mickie Postier, Belfair, Wa
The real reason Hollywood is having a problem is that 50% of Americans, and I surmise the rest of the world, do not agree with the politics of Hollywood and are staying away from the movies in droves. I must admit I and all of the people I know are doing just that. If they would just entertain without political shots at the President, the Republicans, the religious (at least in this country) I can attest that most of us would return to the movies. In droves. The 'hottest' stars are also the most vocal politically and they will never regain our viewership. Just have one pro-war movie without Clooney and see what happens.
Mary Sunshine, Las Vegas, NV
Get your facts right. Your numbers oare for US Domestic markets only. Pirates of the Caribbean: Dead Man's Chest grossed $1.06 billion on the World market - not $423.3 m.
Source:WorldwideBoxOffice
Richard, Bucharest, Romania
dig a hole, jump in it, bury yourself and then complain you can't breath..............nuff said
common sense , san antonio ,
With all these high tech films, nobody is asking how much the computers get paid? Seems like it is ok for them to get mega millions, yet the actors get hauled over the coals for making 10 or 20. Nobody ever mentions that it takes literally YEARS to make a film and so it is not surprising that actors get paid the big bucks. How would you like hanging around for that length of time? Tom Cruise only makes a film every few years, and in my book, he deserves every penny he gets!
paul, waterloo,