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FEAR AND FINGER-POINTING CLOUD BIG-BUCK SKIES OVER HOLLYWOOD : 'Everybody's Fearful Because (the Boom) Doesn't Appear to Make Much Sense. People Think the Bubble's Going to Burst--or It's All a Dream'

WHERE THE MONEY GOES: Second in a series . Next: Spending the windfall.

May 27, 1987|MICHAEL CIEPLY | Times Staff Writer

In the 1980s, new-found billions of dollars have flowed into the entertainment business from sources ranging from videocassettes and cable television to a host of Wall Street stock and debt offerings.

Unfortunately, the rush of money hasn't created happiness in Hollywood. If anything, it has garnered widespread envy, mistrust and unease.

"Everybody's fearful because (the boom) doesn't appear to make much sense," said a William Morris agent. "People think the bubble's going to burst, or it's all a dream."

Finger-pointing has become the favorite blood sport of industry insiders. Everybody knows somebody else whose bloated compensation is supposedly "ruining" the entertainment business.

"The real inflation isn't what Barry Diller earns," said one studio chief. "The real inflation," the executive said, comes from lower-level managers and production workers who "are getting salaries that are many multiples of what they're worth." As it happens, the speaker ranks with Diller among the five or six best-compensated executives in town.

Angered by reports that Meryl Streep can command $4 million for a film, a celebrity screenwriter demanded: "What successful movie has she ever been in?"

"Out of Africa," perhaps?

"Sure. But she didn't really carry it," the writer said, apparently unconcerned that his own fees, as high as $1 million per script, according to several agents, set a benchmark for top writers' pay.

In other quarters, the finger-pointing has become more ominous. "Reckoning" is a favorite word of the moment in many of Hollywood's executive suites. It is a term the more aggressive studio managers use for what they believe is a long-overdue showdown with highly paid guild and union members, whose steady wage increases (averaging between about 6% and 9% annually over the last several years) and residual payments, the executives contend, are destroying company profits.

The studios are stockpiling movies and television shows for use well into next fall--just in case that showdown should come in the form of an industry-wide strike June 30, when a three-year contract between the production companies and the powerful Directors Guild of America expires.

"The business is in for a readjusting mode," said MCA Inc. President Sidney J. Sheinberg, defending the producers' demand that directors set a pattern for other unions by giving up the residual payments they now receive each time a movie or TV show is resold in syndication or on videocassettes.

Sheinberg and other studio heads particularly resent paying residuals on big-budget turkeys long before they have begun to earn a profit.

"That this company should have losses on 'Howard the Duck' that are big enough to arm the contras , and still have to pay out additional money (before recouping expenses) . . . well, it just doesn't make sense," Sheinberg said.

The DGA says its members are entitled to share in the long-term return from their efforts and strongly opposes giving back any residuals. Moreover, some union members say that only a fool would agree to a producer's request that they take residuals on profitable films alone, because, they claim, studio accounting can keep many a successful movie in the loss column forever.

"Between the Mafia and the movie business, all the good accountants are taken," quipped Mac St. Johns, spokesman for the International Alliance of Theatrical Stage Employees, repeating a hoary industry joke.

"Everybody's becoming more cynical as to the value of participations" that defer fees until after a film makes profits, said a Hollywood agent. He estimated that fewer than one out of 25 films ever makes money for its participants--largely because of growing studio overhead and distribution charges, which in turn pay the growing salaries of studio executives.

"Witness," seemingly one of the most successful Hollywood films in recent years, has also become the latest in a long string of "where's the profit?" horror stories.

Released by Paramount in 1985, the movie was produced for $14.4 million, according to an individual involved in making the movie, and has brought the studio more than $50 million from box office receipts, videocassette sales and other sources. Yet, he said, by the studio's reckoning, it is still $3.5 million in the red. A Paramount spokeswoman declined to comment.

"It's true that Paramount hasn't distributed any profits yet," said F/M Entertainment President Charles Meeker, whose company helped produce "Witness." Meeker said the movie has been slow to profit because Paramount is still recovering distribution and marketing costs that exceeded the production costs of the film.

Deeply cynical about studio definitions of profit, most of Hollywood now demands to have its money "up front." That insistence, matched with ready capital and sharp competition among studios and independent producers for a relatively small pool of big-name talent, has led to a rapid escalation in payments for stars, directors and writers.

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