In the latest austerity move in Hollywood, Universal Pictures has asked its three top movie suppliers -- Imagine Entertainment, Working Title and Stuber Productions -- and other production companies it funds to cut overhead and economize to compensate for the tough economic realities of the movie business, according to people close to the situation.
Some of the studio’s producer contracts will not be renewed when they expire. Others with longer-term agreements, including Imagine, Working Title and Stuber, have agreed to reduce operating costs, watch expenses and find efficiencies in their businesses. Universal has 15 producer deals.
Every studio has its own stable of in-house producers that receive payments from the studios to cover salaries and other overhead costs. The studios rely on the producers to scout and develop projects to fill their production pipeline. A producer deal can cost a studio from the hundreds of thousands of dollars to several million dollars a year.
As the economics of the movie industry have soured and DVD sales, which long propped up the business, have fallen sharply, all the studios have been cutting overhead and the number of producer deals they bankroll.
Universal cannot order the overhead cuts among their producers because of contractual obligations. So whatever form the reductions ultimately take will be voluntary and differ among the companies.
A year ago Universal undertook a studio-wide belt-tightening campaign that included ending some producer deals and reducing staff by 3% (about 80 employees) as part of parent company NBC Universal’s mandate to slash overhead across all divisions by $500 million.
NBC Universal chief Jeff Zucker has also been scrutinizing spending at the studio after a year of cost overruns on big-budget movies such as the upcoming 2010 releases “Robin Hood” from Imagine and “The Wolfman” from Stuber, on top of a string of box-office flops such as “Land of the Lost” and “Funny People.” The studio recently replaced its two top movie lieutenants in hopes of turning around the company’s fortunes.
With a pending deal to sell controlling interest in NBC Universal to cable giant Comcast Corp., Universal executives are under increased pressure to further reduce costs and show its soon-to-be-owner a leaner operation.