Tom Cruise cut a limited financing deal Monday with a group of investors who include the owner of the Washington Redskins and a former top executive of Walt Disney Co.'s ESPN channel, allowing Hollywood's most bankable star to move his production company off the Paramount Pictures lot after 14 years.
The new deal is a fraction of the production contract Cruise currently receives from Paramount, underscoring the star's declining popularity at the box office. The investor group would provide Cruise with $2 million to $3 million a year to cover the overhead of his movie production company, according to a source familiar with the deal. Terms of the new deal were not disclosed Monday.
Cruise's new investors are Daniel M. Snyder, owner of the Redskins and chairman of theme park operator Six Flags Inc.; former ESPN programming chief Mark Shapiro, who now runs Six Flags; and real estate magnate Dwight Schar, a Six Flags director.
Cruise and his producing partner, Paula Wagner, must still find financing to make the movies they develop and a studio to distribute them.
"What drew us to them was their great track record," said Shapiro, who will oversee the investment. He emphasized that the deal would not involve Six Flags in any way.
"I've got a company to turn around here," said Shapiro, referring to Six Flags, which has struggled with $2 billion in debt and a sagging stock price. "Dan has a Super Bowl to win."
Paramount has been paying Cruise and Wagner a reported $10 million annually to cover the overhead of their production company, which has released films that Cruise has starred in, such as "War of the Worlds" and the "Mission: Impossible" series, as well as "The Others," with the star's former wife Nicole Kidman, and "Ask the Dust," with Salma Hayek and Colin Farrell.
Paramount Pictures had offered to renew the production contract with Cruise at a lower rate of about $2 million a year, but the actor balked. Although Cruise's deal with Paramount expired July 31, the studio had extended it for another month to give Cruise more time to line up alternative financing.
Before the deadline, however, Sumner Redstone, chairman of Paramount's owner Viacom Inc., publicly dismissed Cruise last week, calling the star's erratic off-screen behavior "inappropriate" and his salary out of whack in an industry struggling to make money.
Although the Hollywood studios usually finance the overhead costs of the production companies of their movie producers, Wagner said last week that she and Cruise were interested in creating a new business model that would draw its money from outside the traditional studio system.
Yet Cruise and his representatives had been shopping for another home in Hollywood all summer without success, according to talent agents and movie executives who did not want to be named because the talks were confidential. At least three studios had rejected Cruise's terms, they added.
"It all feels very knee-jerk," said an agency executive. "This feels very Plan C, maybe even Plan D. When you lose your studio deal and you get into business with amusement parks, that's a problem."
Cruise was not available for comment. His agents at Creative Artists Agency would not discuss the new deal. Wagner declined to be interviewed for this article.
Shapiro said Cruise's agents at CAA approached him and the other investors in mid-August, telling them that Cruise and Wagner were planning to produce their films independent of Paramount. One of Cruise's agents, Kevin Huvane, is close friends with Shapiro, according to several sources, and brought the partnership together as the agency scrambled to find a home for the actor.
Wagner said last week that she and Cruise had lined up financing from hedge funds to cover the cost of producing movies. The team was seeking at least $100 million, according to Hollywood agents and executives. The name of the hedge fund remained unknown Monday and Cruise's lawyer, Bertram Fields, said last week that no hedge fund deal existed.
Shapiro and his partners will fund a production company that employs fewer than 20 employees. Wagner is looking for office space in Los Angeles to serve as the company's headquarters.
In exchange, the partners will receive an undisclosed return on the films that are ultimately developed by Cruise and Wagner.
Snyder, 41, made a name for himself in 1999 when he bought the Washington Redskins and the NFL team's stadium for an eye-popping $800 million. Snyder has since been questioned for splurging on players and coaches with only lackluster results.
Last year, Snyder hired Shapiro, 36, away from Disney to turn around Six Flags, owner of the Magic Mountain and Hurricane Harbor amusement parks in Valencia. At ESPN, Shapiro developed programs for all of the sports network's channels.
Snyder had waged a proxy battle with Six Flags and won seats on the company's board in November. He took a seat himself and also named Schar and Shapiro as directors. In December, Snyder wrested control of the company from current management and became chairman.
Wall Street sources Monday questioned the investors' rational of sinking time and money into an unpredictable Hollywood star when they faced such difficulties in turning around their own company.
Cruise Makes Financing Deal With Investors
The actor, whose ties with Paramount were cut last week, will get up to $3 million a year to cover the overhead of his production company.