Universal Pictures’ chairmen, Marc Shmuger and David Linde, have found themselves where all Hollywood executives invariably land when their studios falter: more talked about than their movies.
And Universal is having a dismal year, managing just one hit in eight months, the action-packed car racing sequel “Fast & Furious.”
Not surprisingly, the chairmen and their boss, studio President Ron Meyer, are under pressure from their corporate overlords at parent company NBC Universal and owner General Electric Co. The executives are being grilled over why their movies haven’t clicked with audiences, why they cost so much and what the plans are to change course.
NBC Universal Chief Executive Jeff Zucker recently dispatched his chief financial officer on a three-week mission to the studio’s West Coast headquarters to scrutinize management’s method for picking movies and setting production and marketing budgets.
Universal’s troubles come at an already trying time for Zucker, who also faces problems with the media company’s struggling network. NBC Entertainment suffered its latest management shake-up last month when co-Chairman Ben Silverman left after only two years.
There are rumblings that a similar executive overhaul could soon unseat Shmuger and Linde, who have been Meyer’s top movie lieutenants since 2006 and had their contracts renewed in January for four more years. Nasty infighting and finger-pointing inside the executive suites have prevented Meyer’s team from working together smoothly and haven’t helped the situation at Universal.
And if the studio doesn’t rebound, Meyer knows that he too will be held accountable.
“I share a great deal of responsibility, and we are all in this together,” Meyer said. “It’s easy to second-guess ourselves, but 90% of our decisions were the right ones with the wrong results. Marc and David have done a great job leading this organization, and I have confidence in the entire team to come up with the proper solutions to get us back on track. We’ve got a bad case of the flu, but by no means is this terminal.”
For the most part, Universal has been stable since NBC Universal acquired the studio five years ago. Meyer’s team delivered record profits in 2007 and 2008 from hits such as the musical “Mamma Mia!,” the action sequel “The Bourne Ultimatum” and the R-rated comedy “Knocked Up.”
But the last year has been a far different picture.
In the most recent quarter, Universal lost money. In the last two years, the studio accounted for about 25% of NBC Universal’s total revenue, but this year its contribution is expected to be lower.
The studio’s cold streak dates to December with the disappointing performance of the animated feature “The Tale of Despereaux” and “Frost/Nixon,” one of several high-profile, adult-oriented dramas that audiences largely rejected along with “State of Play,” starring Russell Crowe, and “Duplicity,” featuring Julia Roberts.
Universal’s strategy this summer to bet on three comedies and a period gangster picture rather than follow Hollywood’s customary practice of releasing audience-pleasing sequels and “franchise” films has cost the studio dearly. The expensive Will Ferrell comedy “Land of the Lost” stands to lose about $70 million. Sacha Baron Cohen’s raunchy “Bruno” alienated many moviegoers; Michael Mann’s “Public Enemies” fell short despite the usual drawing power of Johnny Depp; and no one’s smiling at the disappointing performance of Judd Apatow’s “Funny People.”
Shmuger and Linde recently discussed the state of affairs at Universal.
Presumably you’ve been thinking a lot about what went wrong this year. What lessons have you drawn?
Shmuger: It has certainly been a humbling year. First, there’s a real need to be making movies for less money. Second, there’s a real premium on sharper, more marketable concepts. Audiences are clearly seeking escape from their lives.
Are you shifting strategy?
Shmuger: We are refocusing our efforts on doing what we think we’ve always historically done best, which is modest-budgeted comedies. And we really need to get our franchises and tent poles moving again.
Is it a fair rap from your bosses that Universal’s movies cost too much?
Shmuger: This year one of the challenges we’ve had is that the cost base of the movies has been too high, and we need to address that.
How do you plan to do it?
Shmuger: Make tougher decisions. Be willing to say no if we can’t get a picture that we happen to love at the right price, because that’s what’s necessary in this new economy in order to run a successful business.
How much pressure are you feeling from NBC Universal and GE?
Linde: We have an obligation to run the company at the highest level a studio can operate, and that is defined ultimately by profitability. In the last couple of years, we’ve been at the height of profitability of any studio in this business. We’re having a down year, absolutely.
There’s supposedly been infighting among the executive team. Why?
Linde: The summer’s been frustrating for everybody. But I have an incredible amount of belief in this group of people. I’m not suggesting that there’s not discussion and frustration. This is a really cohesive group of executives who have shared a lot of success in the past and will share a lot of success in the future.
Though not so cohesive lately?
Shmuger: Well, I think [we] are now. The struggles of the summer have been difficult for all of us. It was a trying experience for all the individuals involved. Where we are at right now is a real shared commitment about trying to move forward with a united purpose.
You have several expensive movies coming up -- “Robin Hood,” “The Wolfman” and “Green Zone.” Given the new economics of the business, would you have gone ahead with those movies today?
Shmuger: I don’t think looking back is meaningful in any of those cases. It’s looking forward and how do we make the best version of each of those movies so they have the potential to be successful.
Putting aside the success of the war drama “The Hurt Locker,” which was a low-budget film, isn’t “Green Zone,” a costly drama about the hunt for weapons of mass destruction in Iraq, problematic, given that movies with Iraq war themes haven’t done well?
Shmuger: We were encouraged by “Hurt Locker” because it begins to show signs of an opening in the audience for a subject matter which hadn’t existed in the prior 12 months. It gives us the belief that with a little more time, that openness might even become greater, which is why we made the decision to [release Green Zone] in March 2010.
Given that your offbeat films “Bruno” and “Funny People” didn’t get the audience support that you were hoping for, what kind of creative risks will you be willing to take in the future? Shmuger: One of the lessons of the summer for us is that we probably pushed the creative risks a little too far. A creative risk is in context to what something costs. At the right price, one can go further and further out in the creative pursuit. We’re taking that in stride as we’re looking at the decisions we’re making going forward.
What happened with “Land of the Lost”?
Shmuger: That was the one real miss; I think we would call it a real failure. We spent too much to make the movie. The tone was just too weird, and in hindsight we got it wrong.
Was “Bruno” too risky?
Shmuger: It was more radical than where the marketplace is today. That was the limitation on how big it could be.
Linde: We’re really proud of “Bruno” and we’re going to make a substantial amount of money on it. [But] these were decisions made 18 months ago, and the marketplace has changed. We have to live with that change and “Bruno” didn’t find an audience.
You found out the hard way with “Frost/Nixon,” “Duplicity” and “State of Play” that audiences aren’t flocking to adult dramas. Will you move away from making those types of films?
Shmuger: I think those movies absolutely [can be made] depending upon how much they cost and how you end up distributing them. You can have a good business out of that.
So will we see some adult dramas on your future slate?
Shmuger: [Yes, but] with a different set of economics that we’ve done it in the past. “Frost/Nixon” cost $29 million, and we didn’t think we could get hurt making that movie. [It received] multiple Academy Award nominations, but in this economy that movie ends up losing money.
How has the bottom falling out of the DVD market affected your filmmaking and release strategy going forward?
Shmuger: We probably will be making 13 to 14 movies a year. There was a period . . . when we were making four or five more than that. So it’s a significant readjustment in recognition of the new economics of the business.
Does it also mean you’re going to be more rigorous on talent costs, especially since studios can no longer depend upon stars to sell movies?
Linde: There used to be a margin of error that was supplied by the growth of the DVD business -- that margin of error is gone. So you have to adapt your business accordingly. That means there has to be less aggregate cost in making these movies -- whether it’s upfront or back-end costs -- and that ultimately means coming up with new partnerships with talent.
Shmuger: There’s no doubt the star system is in transformation. Arguably the two biggest stars in the first half of 2009 were Kevin James (“Paul Blart: Mall Cop”) and Liam Neeson (“Taken”), and then there were the ensemble casts of “Star Trek” and “The Hangover.” That’s a significant shift in the meaning of star power and a shift to the premium that is being put on concept and genre.
Do you think that your bosses will give you a chance to correct your course and carry on given the year you’ve had?
Shmuger: By all indications yes, and that’s what we’re prepared to do.
Do your feel that your jobs are in jeopardy?
Shmuger: I’m focused on just moving forward and how we’re learning from any of the missteps and how we’re correcting the course. We’re getting support from that up and down the company. What you’re asking about is the thing that is not in our control. As I’ve grown older, it’s the one thing I’ve learned not to worry about.