In Hollywood, More Business Than Show?

Meet the studio head of the new millennium: a corporate animal often trained as an accountant or lawyer. Guided by the bottom line, this breed is better at staying out of trouble than at courting star actors and directors.

In Hollywood’s long struggle to balance art and commerce, the business side is winning in a rout. During the last five years, the gambler and go-by-the-gut mentality that historically characterized studio executives has been fading fast.

Reflecting that trend are the recent appointments of former lawyer Barry Meyer as chairman of Warner Bros., one-time CPA Brian Mulligan as co-chairman of Universal Pictures and MGM’s Chris McGurk, who once worked as a senior financial executive at Pepsi. All underscore a growing tendency among studio owners to put safe, “bean-counting” managers in charge of their movie assets.

It’s no wonder. Costs have been outstripping profits in the movie business, requiring top executives to cleverly stretch the hundreds of millions of dollars allocated to their annual movie slates. Studio chiefs concoct endless risk-reducing schemes to finance films without threatening the balance sheet.

“In a business where there’s always tension between the creative and the financial establishment, we’re at a historical low point where the financial imperatives seem to far outweigh the creative urges,” said Walt Disney Studios Chairman Joe Roth.

These days, studios typically are part of large media conglomerates, relatively modest cogs in massive global machines such as News Corp., Walt Disney, Time Warner, Viacom, Seagram and Sony. Parent companies view studios as suppliers of films to be leveraged and add value to operations such as cable TV networks and theme parks.

Like his counterparts at other studios who have been curtailing spending and diversifying movie slates with less expensive films, Roth fears that the scales have tilted too far toward commerce.

Some critics fear that the ever-narrowing constraints of today’s studios stifle creativity, leading to even more formulaic filmmaking.

Roth and Sony Pictures Chairman John Calley--both of whom heavily rely on their gut instincts when it comes to picking movies--know they are among a dying breed in a business that is retrenching. Both Roth and Calley are expected to voluntarily leave their jobs within the next year to produce.

Tom Pollock, a lawyer who ran Universal Pictures for 10 years, suggests that the transformation Hollywood is experiencing is nothing new. “In the conflict between show and business, business has always won out. Remember, Loews [MGM’s parent company] fired Louis B. Mayer,” he said, referring to the firing of the legendary mogul in the early 1950s for lackluster results.

Twentieth Century Fox Film Chairman Bill Mechanic adds that historically, “It has always been very hard to get a handle on how to run these companies,” noting how moguls David O. Selznick and Darryl F. Zanuck each published memos suggesting “every creative decision is a business decision and every business decision is a creative decision.”

Tensions between the business and creative camps at studios have existed throughout Hollywood’s history, whether it was Selznick’s struggles to make “Gone With the Wind” at a then-unheard-of $4.25-million budget or 20th Century Fox’s flirtation with bankruptcy after making the expensive epic “Cleopatra.”

Those tensions took a different twist when large conglomerates bought studios to diversify their operations. Those companies found the movie business difficult to stomach. Insurance giant Transamerica took a bath on the United Artists flop “Heaven’s Gate,” and Coca-Cola suffered through the disaster that was “Ishtar.”

In the last decade, the pendulum has swung from one extreme to another. The early 1990s saw one of the most profligate movie regimes in history at Sony Pictures under Peter Guber and Jon Peters; executives and stars were showered with perks and virtually no expense was spared to make a film.

Those days have given way to an industrywide cost-consciousness underscored by studios consolidating operations, slashing overhead and making fewer movies.

“It requires real business acumen to run these global enterprises,” said Mulligan, an MBA who had worked for years as a top business affairs executive at Universal before his recent promotion. Operating in tandem with co-Chairman Stacey Snider on the creative side, Mulligan is the first to acknowledge that, “Companies that focus solely on business disciplines without taking in consideration the creative are doomed for failure.”

Paramount Pictures was the first studio to routinely take partners on expensive movies, a practice that virtually every other studio follows in varying degrees.

Paramount Chairwoman Sherry Lansing, who can’t greenlight a movie without the blessing of her corporate boss, Viacom Entertainment Chairman Jonathan Dolgen, said, “We make a decision to make a movie based on the script and the elements we like, and then we apply fiscal responsibility. Those things don’t exist in a vacuum.”

Lansing was quick to add, “You don’t shoot the deal, you shoot the script.”

There are valid arguments to be made that Hollywood had to bring some fiscal sanity to a business that was veering out of control with budgets of $100 million or more for mediocre films.

“It’s the rules of nature, like throwing an orange up in the air and watching it come down,” Dolgen said. “You can’t have costs outstripping the revenue growth of a market without sooner or later realizing you have a real problem.”

That said, Dolgen suggests that the decision-making process is not simply cost versus art but rather a rationalization of the two.

“Those questions don’t exist apart from each other,” Dolgen said. “The issues of cost are not diametrically opposed to creative issues, and there’s no necessary tie between high creative content and high dollar content. The best movies are not necessarily the most expensive ones.”

But several industry veterans said the movie business today is largely run by executives who are, as one put it, “defensively oriented.”

Roth said, “I think the industry is in a highly defensive mode trying to couch every intuitive call with a defensive strategy to protect itself from losing too much money. It’s less about the elation of taking a shot on a picture and having it work.”

Calley, who has run three major studios (Sony, Warner Bros. and United Artists), agrees. “There’s more and more preoccupation with the downside . . . concern about risk-aversion. I prefer to think of it as an upside business rather than a business that you have to be in to support the continuing value of your [film] library.”

It seems, however, that the most valued skill among Hollywood executives these days is an ability to stay out of trouble.

“Owners have lost their belief in the movie business, and the mentality is not how much you can make, but how little can you lose,” Pollock said.

Some would argue that studios are wastelands when it comes to original ideas. Creativity now is subcontracted out in the same way studios hire companies to provide security services or do their electrical work.

Increasingly, studios depend on prolific producers such as Brian Grazer, Jerry Bruckheimer or Scott Rudin and a host of smaller independents to deliver finished goods to be plugged into the studio’s marketing and distribution systems.

Indeed, one senior executive said that the role of the studio executive is increasingly like that of a book editor at a publishing house. Nearly finished works are delivered, which the executive may help fine-tune with suggestions.

This summer’s surprise hit “The Blair Witch Project”--made outside the studio system for $150,000 and on its way to becoming one of the most profitable movies ever--suggests that filmmakers no longer rely on the major studios to get their products to market.

Artisan Entertainment, the tiny company that paid $1.1 million for worldwide rights to “Blair Witch” at this year’s Sundance Film Festival, did an end-run around the Hollywood system in releasing the movie.

The distributor effectively used the Internet as a promotional tool to get young moviegoers excited about the movie.

“It’s feeling like the ‘70s, where you don’t need these big corporate structures anymore,” said Roth, referring to the days when renegade young filmmakers such as Francis Ford Coppola, Martin Scorsese, Milos Foreman, Hal Ashby and Peter Bogdanovich were making films outside the studio system.

He and others predict that Hollywood is going to increasingly see movie outfits such as New Line and Miramax--companies that attract innovative filmmaking and don’t carry the financial overheads and imperatives of the major studios though they are owned by them--become the new centers of creativity.

Fox’s Mechanic, a film school graduate, admits he loses more deals than he makes simply because the economics don’t make sense.

But he contends that spending less on production has no correlation to taking fewer creative risks.

“I think we’re taking more chances than ever and spending less,” said Mechanic, whose studio produced last year’s low-budget off-beat comedy hit “There’s Something About Mary.”

Finally, Mechanic suggested, “We can’t just be satisfied with lowering costs. At the end of the day, audiences have to want to see your movies. They don’t care if you spend $60,000 on ‘Blair Witch’ or $200 million on ‘Titanic.’ Our job is solely to produce movies people want to see.”

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* LINK TO VIOLENCE: The FTC begins an inquiry into the entertainment industry. C1