Universal May Be Cutting Costs by Seeking Financial Partners

Although Vivendi Universal continues its yearlong financial slide, Universal Pictures has seven films starting production in the early fall--a hefty outlay of expenses for any studio, much less one that is owned by a company in the throes of a liquidity crisis.

It’s business as usual, insist several Hollywood producers working with the studio. And because it costs less to keep a studio up and running than it would to restart a moribund operation, it’s also smart business, according to one former Universal studio executive.

But beneath that veneer of normality, and behind that $12.5-million check written to “Spider-Man” star Tobey Maguire to play a lead role in the upcoming “Seabiscuit,” the studio is starting to be weighed down by Vivendi’s financial troubles, sources said.

It appears that Vivendi Universal Entertainment Chairman Barry Diller is pressuring the studio to spend less money across the board, sources said. And one cost-cutting measure is a tactic that Universal has tried to avoid: seeking financing partners in exchange for various film rights, including the right to sell the film in foreign countries as well as the video, DVD and television rights.

“They are really struggling,” said one producer, who, like everyone interviewed for this story, declined to be identified. “They are looking for a financial partner on [nearly] every movie they make now.”

A studio spokesman downplayed suggestions that the studio was cutting costs. Selling off rights is not unprecedented, he added, noting that DreamWorks was a financial partner on Universal’s “A Beautiful Mind.”

Diller and other Universal executives declined to be interviewed for this story. Diller is believed to be working on a plan to spin off Vivendi’s U.S. entertainment assets into a new entertainment company that could be launched in a public offering, Wall Street sources said. Diller hopes to convince current Vivendi Chairman Jean-Rene Fourtou that the venture would help solve the company’s overall financial problems.

Sources, however, say new pressure from Diller is behind Universal executives’ current talks with other studios about partnering on two big-budget movies: “Seabiscuit,” directed by Gary Ross, and “Intolerable Cruelty,” a feature from the producing-directing partnership of Joel and Ethan Coen that would star George Clooney and Catherine Zeta-Jones.

Several other films in production this year are co-financed, but the studio spokesman stressed that the partnerships were not made solely to limit the studio’s financial exposure.

Universal joined with DreamWorks to finance the extremely expensive “Dr. Seuss’ The Cat in the Hat” with “Austin Powers” star Mike Myers, at Myers’ request.

Independent production company Spyglass Entertainment is Universal’s financial partner on the upcoming $80-million Jim Carrey movie “Bruce Almighty”--which will be directed by Tom Shadyac--as part of a make-good deal on “Firefly,” the disappointing Kevin Costner movie also directed by Shadyac. And 20th Century Fox is co-financing a film intended to be a sweeping historical epic, “Alexander the Great,” starring Leonardo DiCaprio, to secure the services of Fox-based director Baz Luhrmann.

For Universal Pictures Chairman Stacey Snider, any new pressure to secure film financing partners would be deja vu.

Under previous Universal owner Edgar Bronfman Jr., Snider was ordered to cut spending by selling off international rights to movies such as “Erin Brockovich” and “American Pie,” rights that, in retrospect, would have been wise to keep, since the films were money-making hits.

When former Vivendi Chairman Jean-Marie Messier acquired the studio, he reversed course, directing Snider to dramatically limit the practice. As a result, the studio has fully benefited from the box-office success of “The Mummy” and other hits, including the sequel to “American Pie.” In its second-quarter financial results, Vivendi portrayed the studio as one of its most profitable units.

If the studio is trying to conserve cash by selling off rights, the result could be a reduction in revenue, but that would not show up on the company’s balance sheet for at least two years.

Despite rumors of new cost-cutting pressures, producers working with Universal say they haven’t noticed Snider changing her aggressive, hands-on running of the studio.

“We haven’t seen anything slow down,” said one producer with several projects in development at the studio, including two scripts bought just recently.

A week ago, Universal signed Ben Stiller to star in a major comedy for Jersey Films written and directed by “Meet the Parents” screenwriter John Hamburg. Also recently, the studio agreed to make “Van Helsing,” a big-budget special-effects vampire movie directed by Stephen Sommers and starring Hugh Jackman, which will start filming in January 2003.

“If there is a chill, I don’t feel it,” said one producer.

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Times researcher Scott Wilson contributed to this report.