COMPANY TOWN : The Flub Behind New Line’s ‘Mask’

New Line Cinema, which is releasing “The Mask” this summer starring Jim Carrey, may want to find its own mask to hide behind. In a costly slip, the company failed to sign a sequel agreement with Carrey before he became a hot commodity in “Ace Ventura: Pet Detective.”

Sources expect New Line to cough up as much as $10 million, or more than 20 times his original salary, to get Carrey to re-sign on the dotted line. While all sides declined to comment, negotiations with the actor’s representatives at United Talent Agency are under way.

Carrey was a relatively unknown cast member on Fox TV’s “In Living Color” when he signed on to star in “The Mask” last year. The surprising success of “Ace Ventura,” which has grossed more than $70 million domestically, changed all that. The elastic actor is getting $7 million for each of his next two movies: “Dumb and Dumber” and “The Best Man.”

Carrey’s bargaining position is even stronger on “The Mask” sequel because the special-effects-laden fantasy has been pegged as one of the summer’s likeliest hits. People close to New Line say the company already views “The Mask” as a franchise on the order of its other successful series: “The Teenage Mutant Ninja Turtles” and “Nightmare on Elm Street.”

“Everyone expects this movie to be a smash,” said one high-ranking industry source. “In those cases, sequel terms are usually worked out in advance. They just missed it.”

Industry executives are at a loss to explain why New Line didn’t lock Carrey in for the sequel as part of his original contract, a fairly standard industry practice.

One source described the negotiations between Carrey and New Line as “very sensitive.” Others pointed out that the actor would have renegotiated a sequel agreement once his star ascended anyway, though probably not as lucrative a deal as the one he’ll get as a free agent. Veteran negotiators said the mistake gives Carrey as much as 20% more wiggle room.

New Line, which has one of the industry’s most respected management teams in Chairman Robert Shaye and President Michael Lynne, used to be known for frugality. But it has been on a spending spree since its recent acquisition by Turner Broadcasting. To the company’s credit, “The Mask,” which cost $20 million to make, is expected to be a big moneymaker--maybe even returning enough to make up for the extra millions New Line will pay to retain Carrey.

*

What does $115 million buy you in Hollywood? A sneak peek at your movies, at least. Australian media magnate Kerry Packer, who recently bought into Arnon Milchan’s Regency Enterprises, quietly joined exhibitors at a screening of “The Client” on Wednesday morning.

Packer and Milchan were whisked to the General Cinema in Sherman Oaks in a black stretch limousine just before show time. Packer evidently was thrilled with the thriller, which stars Susan Sarandon and Tommy Lee Jones and is being distributed by Warner Bros.

Based on the enthusiastic response from West Coast theater managers, Regency and Warner plan more previews across the country leading up to the July 22 opening of “The Client.” Successful screenings also give distributors leverage in negotiating financial terms with theater owners.

As the third movie spawned by a John Grisham bestseller, “The Client” already has a strong pedigree. The first was “The Firm,” which grossed $157 million domestically. The second was “The Pelican Brief,” which took in $100.7 million.

After the screening, Packer and Milchan had lunch on the Warner Bros. Burbank lot, where Regency is based, with studio bosses Robert Daly and Terry Semel.

The backing of Packer, whose net worth is estimated at $1.7 billion, has given Milchan added muscle in Hollywood. While there’s been little revealed about the terms of their deal, Variety recently reported that Packer’s Nine Network Australia received a 30% stake in Regency in return for its $115-million investment. The company, which is also backed by the French entertainment company Canal Plus, is on an aggressive expansion drive, with Milchan aiming to produce 15 films a year by 1995.

In addition to the recent Packer investment, Milchan is said to be exploring a public offering in Regency in the range of $100 million, managed by Goldman Sachs in New York.

Regency’s output includes hits such as “J.F.K.” and “Free Willy.” The company has also produced its share of turkeys, including “The Nutcracker Suite” and “Heaven and Earth.”

*

After six years, Russell Simmons’ Def Jam Records is about to part ways with Sony Inc. and enter into a lucrative, long-term distribution pact with PolyGram International, sources said Thursday.

The deal--which is still being negotiated and is expected to be announced soon--will put PolyGram on the map in the $800-million annual rap business, allowing the London-based conglomerate to cash in on profits generated by hip-hop acts such as Public Enemy, LL Cool J, Slick Rick, Domino and Warren G.

*

Chuck Philips contributed to this report.