COVER STORY : Plugging Into Hollywood : The common wisdom: HBO movies are bigger than TV movies but smaller than ‘real’ movies. But the cable giant takes bigger risks than the big studios and that’s a big attraction for some big names in Hollywood

Jeff Berg, head of Hollywood’s powerful ICM talent agency, called HBO last month to see if the pay-cable service was interested in producing a pet project belonging to his client, Paul Mazursky, the director of “Enemies--A Love Story” and “Down and Out in Beverly Hills.” The studios weren’t buying his story of a Santa Monica banker who loses his money and learns what it’s like to be poor.

Mike Nichols, producer and director of “Regarding Henry” and “Postcards From the Edge,” and two producer partners didn’t wait for studio rejection: They went directly to HBO with Robert Harris’ novel “Fatherland,” because they figured it was the most likely company to dramatize the speculative work about what the world might be like if Hitler had won the war. The project is now in pre-production.

Film director Barry Levinson (“Bugsy,” “Rain Man”) didn’t go to HBO himself, but he jumped when the cable company came knocking with the opportunity to produce a dramatic biography of CBS founder William Paley. The constraints of the small screen notwithstanding, he knew that was a topic no one else was going to tackle.

HBO, once despised in Hollywood as a rich in-law determined to exert control over the family business, is now a welcome player on the movie-making scene, having carved out a niche between theatrical films and TV movies with a slate of productions over the past few years that includes “And the Band Played On,” “Stalin,” “Barbarians at the Gate,” “Citizen Cohn,” “The Josephine Baker Story,” “Dead Ahead: The Exxon Valdez Disaster” and “Women & Men: Stories of Seduction.” HBO in many ways is beginning to resemble the town’s ninth film studio, albeit a mini-version, releasing a dozen movies a year through two divisions: HBO Pictures in Los Angeles and HBO Showcase in New York.

For feature-film producers who have projects with less than commercial aspirations, HBO movies offer significantly higher production and marketing budgets than TV movies for ABC, CBS and NBC. They have credibility, a cachet and usually a social conscience. The list of movie actors who have done them is growing constantly and includes Holly Hunter, Daryl Hannah, Joe Mantegna, Laura Dern, Anthony Hopkins, Jack Lemmon and Melanie Griffith. Most important, HBO movies offer frustrated producers the golden opportunity to get a movie made when all else fails.

“HBO,” Levinson explains, “offers another place to get work made--work, in a sense, that the films studios do not want to go after and the TV networks have totally abandoned. For certain subject matter, this is the only forum.”

But HBO movies are not feature films. They win Emmys--lots of Emmys--but not Oscars. They are produced for a small screen at a fifth of the cost of major studio releases. They are labors of love, frequently skimping on the more costly elements of filmmaking--ranging from “A list” acting talent to big-budget special effects. And while HBO releases most of its films in theaters overseas and also on home video, an HBO movie will never receive the marketing muscle, the distribution or the worldwide audience of a blockbuster feature film. Consequently, producers of HBO movies can kiss goodby the big payday associated with making a movie that strikes a responsive chord with the masses.

Yet HBO is a hotbed of production right now, with 60 or so projects in various stages of development in association with a hybrid of Hollywood movie and TV talent. And even though HBO eventually turned down Mazursky’s banker project, the director still recognizes the company as filling a very necessary niche in Hollywood.

“The way the movie industry is going, certain movies can get better done at HBO--ones that the movie studios are afraid of, or that may be too down or socially significant,” he says. “Whereas HBO can do it quickly and play it quickly. I figured they had the best budgets and the best reputation. Whether one loves them or not is not the point. They are trying to do projects that are timely and worthy.”

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Bob Cooper, the 48-year-old president of HBO Pictures, seems like one of Hollywood’s least likely power players. He’s a small, soft-spoken Canadian with a neatly trimmed mustache and gray hair, who spends the vast majority of his time at work behind his oversized desk reading scripts. He was an independent movie producer in Toronto before taking over HBO Pictures in 1989. He feels uncomfortable schmoozing, he says, and if you ask him what he’s weakest at, he will tell you it’s establishing a personal presence in the industry.

But don’t be fooled.

Dramatic floor-to-ceiling windows skirt Cooper’s corner office high in a tower overlooking Century City, where he commands a pack of development executives. Waiting patiently outside Cooper’s office one recent morning is John Frankenheimer, the veteran director of such classics as “The Manchurian Candidate” and “Seven Days in May.” Frankenheimer just finished directing HBO’s intense character drama “Against the Wall,” starring Kyle MacLachlan as a guard held captive during the violent 1971 riots in Attica Correctional Facility in Upstate New York.

Later in the morning, Cooper has phone conferences arranged to discuss HBO movies with Levinson and David Puttman, former president of Columbia Pictures and now an independent producer living in England. For lunch, he’s scheduled to meet with Norman Lear, the legendary creator of “All in the Family.”

But at the moment, he’s on the phone with CBS Entertainment President Jeff Sagansky, who he’s trying to interest in a movie in pre-production called “White Mile.” HBO frequently secures a license fee from a broadcast network for the rights to air HBO original movies after they premiere on the pay-cable channel to help defray production costs, and Cooper heard Sagansky might be interested in “White Mile.”

Sagansky requests a copy of the script, and Cooper is pleased. He believes they can work together: “So long as next time you speak publicly about HBO you remove some of your criticism about HBO having an easy life,” Cooper prods. “Is that a deal? OK, Jeff. Thanks. I’ll get back to you.”

Cooper hangs up the telephone and sits back with a broad smile.

In the midst of all the phone calls and meetings, there’s something that can’t be ignored, something that might just separate Cooper from the scores of chief executives in town whose decisions their companies’ financial future rests upon.

Cooper is having a blast.

On this particular morning, anyway, he’s like a kid left alone in a candy shop. He has an enormous discretionary budget at his command to make motion pictures he’s passionate about--at no measurable financial risk to his company. When Cooper puts a movie into production for HBO, he does not have to worry about generating big box-office returns, the way major studios do. Nor does he concern himself with getting huge TV ratings or offending advertisers with violence, nudity, profanity or controversial subjects, the way broadcast networks do.

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Because of this creative freedom, HBO has become a watering hole for Hollywood producers--some of them on top of their game and some of them struggling--who want to get a project off the ground that the film studios just won’t gamble on. “HBO has an extraordinary presence,” says Cooper, who produced HBO’s first made-for-cable TV movie, “The Terry Fox Story,” only 10 years ago. “Our ability to put projects together is greater than it’s ever been, and that’s the fun for me.”

The majority of HBO’s 17.4 million subscribers pay their monthly subscription fee to see high-profile theatrical motion pictures, and the revenue produced by those subscribers has been likened to an annuity by analysts. HBO, a division of Time Warner Inc., made $215 million in profit in 1992. And for the first three quarters of this year, earnings were up 6% over last year.

Michael Fuchs, HBO’s New York-based chairman and chief executive officer, channels $50 million of those annual profits into the development and production of original movies. About 85% of that money flows into the posher HBO Pictures on the West Coast, which produces eight to 10 movies a year. HBO Showcase on the East Coast is a leaner operation, concentrating on three to four movies a year with smaller budgets and edgier stories. “We’re Off Broadway to their Broadway,” explains Colin Callender, who runs the New York arm.

HBO movies do produce revenue; they are sold to foreign distributors and shown in movie theaters overseas, released on home video and sold to broadcast networks--all of which cut in half their cost to HBO. But the significant remaining deficit is simply considered a cost of doing business by HBO.

As a result, the only tangible determining factor in what movies get made is how much Fuchs, Cooper and Callender like them. Since there’s no bottom line--the movies don’t have to earn box-office revenue or achieve Nielsen ratings--there’s no need for research to test the viability of ideas. The real charge then is to pick provocative movies no one else is making in order to magnify the image of HBO and keep subscribers from dropping the service. “It’s really the only business I know of in the entertainment industry that doesn’t have a direct financial report card,” Fuchs says.

Two years ago, Fuchs challenged his company to become the cable TV chronicler of the times. “There is no modern Dickens,” Fuchs says. “So I sent a note out and said let us be Dickens. Let us look at contemporary society like no one else in the country.”

In September, HBO grabbed national headlines with “And the Band Played On,” based on Randy Shilts’ book chronicling the epidemic rise of AIDS, with participation from such Hollywood heavyweights as Steve Martin, Lily Tomlin and Richard Gere. And the same month, for the first time in the history of television, a cable channel won more Emmy Awards than any of the three major broadcast networks. Eleven of its 17 Emmys went to HBO movies, including a tie for best TV movie between its “Stalin” and “Barbarians at the Gate.”

HBO’s two biggest competitors in quality cable TV movie production are Showtime, its chief pay-cable rival, and Ted Turner’s basic-cable channel TNT. Other cable outlets either aren’t making as many films a year or, as in the case of USA Network, have opted for decidedly lowbrow fare. “Without being too cocky, I don’t think the cable industry has caught up to the quality or the impact of HBO,” Fuchs boasts. “I know there are people trying, and they’re younger than us and less experienced than us, but whether you want to look at (CableACE Awards) or Emmys, I mean, no one is within hailing distance.”

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Filmmakers in town would seem to concur. Besides “Paley,” Levinson is developing a project about how America is turning into a Third World country due to rapid economic deterioration.

“The studios have sort of abandoned that type of subject matter,” Levinson says. “In a sense, the studios are pandering more toward the common denominator, or what they think is the common denominator: a younger audience. They seem to want to feed more into that. Not that they’re not doing other things, but I think they’re afraid of what might be considered more upscale and too much to gamble on.

“The TV networks, on the other hand, have totally abandoned anything in terms of movies that are not pure out-and-out exploitation, torn from today’s headlines. They have given up completely. So HBO, in some ways, is cutting their own path. And that is going to be very attractive to a lot of filmmakers who at some point say: ‘I’d love to do this. I’m intrigued by this subject matter. I’m passionate about this story. And this is the only place to get it done.’ ”

Broadcast network executives quickly respond by saying there’s no way they can afford to match the time, attention or budget HBO devotes to features. Network movies generally cost about $3 million to make, while HBO movies range up to $10 million for such projects as “Stalin,” which was filmed inside the Kremlin.

“HBO generally tends to make far fewer movies than we do,” CBS programming chief Sagansky says. “HBO might make 12 movies a year, and we make 60. That’s way different. They will really concentrate their press and marketing efforts on those few movies. They have premiere parties for every film. They send videocassettes to all TV academy voters before the Emmys. Having said that, their quality has been good, and they have generally received a free ride at the Emmys.”

If HBO movies are more than TV movies, film studio executives point out they are decidedly less than feature films. One studio chairman, who asked not to be identified, says the economics are just too different. The average cost of features these days is about $28 million, not including the marketing costs, which usually run an additional one-third of a film’s budget. And the likes of Tom Cruise or Julia Roberts have yet to sign on to do an HBO feature.

“When you have to advertise to the public in order to get them to leave their homes and come see your movie, you have to give them a reason to leave,” he says of the major studios. “As opposed to a television movie where all you have to give them is a reason to press the button for this channel instead of that one. It’s a different level of decision making. That’s why we pay movie stars lots of money, and why we pay millions of dollars for large visual effects of dinosaurs and train wrecks that you can’t see anywhere else.”

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Cooper believes that HBO’s next real big splash, following last season’s Emmy success, will come from “Kentucky Cycle”--a project he calls “the white man’s ‘Roots.’ ” The six-hour miniseries is scheduled to shoot early next year with a target budget of $16 million. It’s slated for 1995.

“Kentucky Cycle” executive producer Stan Margulies, who produced the landmark “Roots” as an ABC miniseries in 1977, had problems trying to cajole network executives into seeing “Kentucky Cycle,” which won the Pulitzer Prize last year, when it was at the Mark Taper Forum. “In general, the networks felt the material isn’t full of lovable people overcoming handicaps to achieve success,” Margulies says. “It’s revisionist American history, and that’s not normal network fare.”

Many of HBO’s movies land at the cable channel by default like that. NBC bought the option to “And the Band Played On” from executive producer Aaron Spelling and spent 2 1/2 years trying to develop it--until ABC’s movie bio of Rock Hudson, who died of AIDS, resulted in commercial and critical disaster. As soon as NBC’s option ran out and reverted back to Spelling, his phone rang. Cooper at HBO was on the other end.

“It’s the strangest conversation I’ve ever had in my life,” Spelling recalls. “Bob said, ‘Do you still want to do “And the Band Played On”? If so, let’s do it.’ I said, ‘You mean, let’s develop it.’ And he said, ‘No, let’s do it.’ After four years of development hell, one phone call and it was on. That has never happened to me before. I’ve made 11 feature films and 128 television movies and each one of them went through development hell.”

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The rejects also come from feature-film studios. Producer Ray Starks brought “Barbarians at the Gate” to HBO last year as a last resort because he couldn’t get one of the majors to bite. Puttman felt strongly about making a movie about gun control that was stuck in development at Warner Bros., so he went to Cooper in 1991 and produced HBO’s “Without Warning: The James Brady Story.”

Ron Hutchinson has written 10 movies for HBO, including “Josephine Baker” and “Murderers Among Us: The Simon Wiesenthal Story,” and last year he was hired by the production company Producers Entertainment Group to write a feature film about the Attica prison uprising. “It was a movie that was going nowhere fast because it’s a story about a prison riot,” Hutchinson says, “and it just didn’t seem to have what (the studios) were looking for. It was clear that although we were beating up our brains, we weren’t going to get any shot with a studio.”

So they went to HBO, where John Frankenheimer, whose credits include “Birdman of Alcatraz,” directed “Against the Wall” on an $8-million budget.

“One of the great advantages at HBO is you get the payday--you get paid for writing a script,” says Hutchinson, who is now adapting Scott Turrow’s latest novel, “Pleading Guilty,” for Universal Pictures. “But you also get the real payday--the lunacy of getting the thing into production, as opposed to getting a huge payday and then standing in Malibu polishing your Jeep Cherokee waiting for the next phone call to come. HBO is really like Old Hollywood, like Warner Bros. in 1937, with 12 movies going out the door every year. And that doesn’t happen in this town a lot.”

HBO’s shift from a channel that simply showed Hollywood movies to an inside player rewriting the rules of the game actually began a decade ago. Back in the early 1980s, HBO was one of the major American business success stories of the decade. In an attempt to ensure a steady supply of exclusive theatrical movies, the Time Inc. company began investing deeply in independent and studio films to “pre-buy” their TV rights, until HBO became the industry’s single largest financier of movies and the dominant economic force in Hollywood.

Fearful studios called HBO, managed by young lawyers and MBAs, robber barons out to control the film business. They feared movie admissions would go down and pay-cable would become the industry’s main source of revenue--and HBO had a lock on it. Studio executives turned to the Justice Department to put a stop to HBO because it was becoming a monopoly by forging multiple partnerships and setting pay-cable prices too low. “They are a tremendous threat to the structure of the industry as we know it today, and ultimately to the viability of the creative process,” Alan Hirschfield, chief executive of Fox, told New York Times Magazine in 1983.

“They were not worried about creativity,” Fuchs recalls of the studios. “They were worried about control. The studios were very upset that they had allowed HBO to grow so powerful, whereas they thought they could’ve done it themselves. I can’t remember a worse crybaby stage in the business.”

But something happened in 1984 that few anticipated: the emergence of the VCR.

“Our franchise was basically uncut, uncensored movies in the home, and all of a sudden there was a window in front of us,” Fuchs says. “There was the VCR. What do you need pay television for? So it was the first time here we hit the wall. We were growing like crazy and then all of a sudden it stopped.”

Before the VCR became popular, pay cable was the second leading source of revenue for film studios after theatrical revenue. Today, home video drives the theatrical business, kicking pay-cable revenue down the entertainment food chain.

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Still, doing HBO movies almost seems to be en vogue for a wide array of feature actors. Daryl Hannah headlines “The Attack of the 50-Foot Woman,” one of HBO’s not-so-serious-minded movies premiering Dec. 14. This month, Mickey Rourke played a gunslinger who helps deputies hunt down his old two-timing gang in “The Last Outlaw.” And Mario van Peebles, who directed and starred in both “New Jack City” and “Posse,” has the lead in the supernatural thriller “Full Eclipse,” which premiered Saturday and replays next month on HBO.

While few of the actors who have done HBO movies could open their own feature films, that might one day change. “The truth is, the entire entertainment world is changing, the mediums are changing, and therefore the business is changing,” says Steve Himber, an agent at William Morris who has cast numerous clients in HBO films, including Duvall in “Stalin,” Matthew Modine in “And the Band Played On” and Diane Keaton in “Running Mates.” “So we have to view all that, adjust our sights, and re-create the deals and situations for our actors and directors.”

There’s a general consensus that in the upcoming communications superhighway, with 500 channels and video on demand, HBO and other cable outlets will have to rely more heavily than ever on original programming to survive. In many ways, that’s already happening. When development executives at film studios meet on Monday mornings to discuss the scripts they read over the weekend, they now split them up into feature projects, TV projects and, falling somewhere in between, cable projects.

“From our point of view as advisers, there’s really no downside to those kinds of projects,” a top agent at Creative Artists Agency says. “There’s no stigma like there used to be with movies of the week or television series. If it’s an interesting character or a project that normally wouldn’t be made as a big-budget feature, actors find it an opportunity to do things that are creatively stimulating. HBO has certainly been the most aggressive about putting together highly visual films for television, and I think they’ve probably made the best casting decisions--they and Turner.”

Van Peebles explains why he chose to act in “Full Eclipse,” about a neo-vigilante group of cops who have the ability to metamorphose into werewolves: “HBO let us be dark and strange and have this cinematic edge and visual signature. Tony Hickox, the director, has done ‘Hellraiser III’ and ‘Warlock,’ and this project was right in that same realm. It’s a pretty strange flick, and I like that. It was like doing a very hip, edgy, independent picture, and that’s something I welcome.”

There are certainly sacrifices involved in making movies for HBO, most of them being financial. “Working for HBO is not something to spend your life doing, but it quickens the blood now and again,” says Michael Apted, the director of “Coal Miner’s Daughter” and “Gorillas in the Mist.” He executive produced the gritty street drama “Strapped,” an HBO Showcase production directed by Forest Whitaker and shot for $3.4 million using a cast and crew working for scale. Apted had to cast lesser actors and eliminate crowd scenes, as well as work on a tight shooting schedule of 25 days.

“In the end you get a little tired of trading on people’s good will,” he says. “That song wears a bit thin, especially when you’re trying to get actors and crew in, because they might not share your passion to do the work. Acting like a second-hand car salesman, trying to get people to work for you, can get tiresome. So it’s a trade-off. For the kind of crazy freedom you get and the right to do more difficult matter, you kind of have to cut your cloth to fit that. Sometimes that can be annoying and difficult. But it’s worth it to do the material.”