In a move that could foreshadow a slowdown of Hollywood's free-spending ways, Paramount Pictures Corp. on Thursday terminated its exclusive production agreement with Don Simpson and Jerry Bruckheimer, the high-priced team responsible for "Top Gun" and "Days of Thunder."
Paramount announced that the two sides mutually agreed to end the five-year production agreement, which was unveiled amid considerable fanfare just nine months ago.
The official reason given for the split was that the "environment for motion picture production has changed." Sources close to the discussions, however, said relations between the two sides soured over two key points: the poor box-office showing and budget overruns on "Days of Thunder" and the producers' failure to develop many projects in recent years.
One source close to the studio estimated that their producers' overhead alone--without development costs--was between $3 million and $4 million a year. Studio Chairman Frank Mancuso was said to be especially concerned about Simpson-Bruckheimer spending habits on "Days of Thunder" this past summer.
Originally budgeted at $49.5 million, the film came in at about $63 million, and reports of liberal spending by Simpson-Bruckheimer and star Tom Cruise during the production were rife.
Paramount's costs on "Days of Thunder" included a $6-million producers' overhead fee for Simpson and Bruckheimer, according to knowledgeable sources. Industry sources said the typical producers' fee on a film of that size is generally in the $1-million range.
"Days of Thunder," which grossed $80 million domestically but returned only about half of that amount to Paramount, has yet to turn a profit, sources close to the studio say. The Simpson-Bruckheimer picture was at least partially held to blame when the studio's pretax operating profit took a 4% drop, to $55.1 million, for the fiscal quarter that ended July 31.
The Simpson-Bruckheimer termination also suggests serious belt tightening by David Kirkpatrick, who was recently hired away from Walt Disney Co. to head Paramount's motion picture group. Kirkpatrick has reportedly let it be known that he expects contract producers to complete at least one picture a year, which runs counter to Simpson and Bruckheimer's recent work habits.
Simpson and Bruckheimer declined to be interviewed Thursday. But people close to the pair said they never exceeded the bounds of their contract. One associate defended their production record, noting that they recently acquired the movie rights to two books and have four projects on the top of their priority list for production. The associate added that budget overruns on "Days of Thunder" are as much Paramount's fault as the producers'.
"If you're going to judge them on one movie, that's ridiculous," this associate added, pointing to the major success of the pair's earlier films.
"Days of Thunder" was the first film the pair produced since "Beverly Hills Cop II" three years earlier. Before that, though, they had made hit films in rapid succession, earning producer credits on "Flashdance" in 1983, "Beverly Hills Cop" in 1984 and "Top Gun" in 1986. They bombed with another movie, "Thief of Hearts" in 1984.
Others said Simpson and Bruckheimer are already looking to shop their projects elsewhere. In the meantime they will continue to work on the Paramount lot. The pair reportedly has six offers from other film companies on the table.
"Don and Jerry walked away happy," said one associate. Another top talent agent predicted that Simpson and Bruckheimer will quickly land at another studio. "A number of companies will want to make a deal with them," he said. "They are definitely not damaged goods."
One rumor has Simpson and Bruckheimer going to Walt Disney Studios. Studio Chairman Jeffrey Katzenberg on Thursday said that "we would be thrilled to have them" but that there is no deal.
In other quarters, however, the Simpson-Bruckheimer termination was seen as a first sign of financial sobriety in Hollywood, where movie production costs have jumped roughly 50% over the past two years. One studio executive said the entire industry is turning its attention to cutting expenses.
Harold Vogel, an entertainment analyst with Merrill Lynch, agreed that Paramount's move is the beginning of a trend. "The pendulum has now started to swing back to a more rational and sane level of spending," he said. "It's only the beginning, however. There's a lot more to come throughout the industry. The costs will be reined in."
In an industry renowned for excess, Simpson and Bruckheimer's deal still managed to turn heads. At the time it was announced, the pair claimed that Paramount had handed them a half-billion dollars and the freedom to make any films that struck their fancy.
"They put up the money, we put up the talent and we meet at the theater," Bruckheimer told The Times.
Comments such as that--which were repeated to other reporters in the press and on national TV--reportedly infuriated Paramount officials. The studio, which also has lucrative production deals with such top talent as Eddie Murphy, insisted that the deal was worth half of what Simpson and Bruckheimer claimed.
The actual value of that deal was in the eye of the beholder, depending largely on how many movies Simpson and Bruckheimer could make under the five-year agreement. But it is clear from both sides that the deal was a rich one--providing the duo with a huge chunk of the box office receipts on their movies, and even going so far as to give Simpson the right to direct and act in his projects.