The Indiana Jones series is known for its cliffhangers. But the real cliffhanger in the long-awaited upcoming sequel is when -- and perhaps even if -- the famous filmmakers and the star will make money.
That's because before executive producer George Lucas, director Steven Spielberg and leading man Harrison Ford get their hands on any treasure, Paramount Pictures will need to collect $400 million in revenue to recover all its costs and make a sizable fee to distribute "Indiana Jones and the Kingdom of the Crystal Skull."
If that seems like a no-brainer, consider the norm in Hollywood, where top-tier filmmakers and stars traditionally earn huge upfront fees and get a big cut of ticket sales before a studio recoups its investment.
The atypical arrangement between the studio and the triumvirate illustrates the new economic realities of the movie business. As production and marketing costs continue to escalate amid flat theater attendance and declining DVD sales, studios are increasingly looking for ways to protect themselves from colossal losses on a single picture.
"It's good for both parties," said media analyst Harold Vogel. "If the talent has a true belief in the movie, they are taking a little more risk by getting no significant compensation upfront but a much larger share of the ultimate profitability," he explained. "It makes sense for studios, which are cash-constrained."
With the economics of the movie industry becoming less lucrative in recent years, the studios would prefer to have talent shoulder more of the risk. One way is getting expensive stars, directors, writers and producers to defer their customary fees and forfeit their cut of box office dollars from the first ticket sold, known as first dollar gross.
Walt Disney Studios, for example, had such an arrangement with producer Jerry Bruckheimer and star Johnny Depp on the "Pirates of the Caribbean" movies, and Bruckheimer and actor Nicolas Cage on the recent "National Treasure" sequel. On those hits, everyone made money.
However, most movies are not big hits, which is why studios like these so-called break-even deals. It also can prevent them from losing their shirts. Sony Pictures would have lost a lot more than it did on "The Holiday" had writer-director Nancy Meyers and stars Cameron Diaz and Jude Law not agreed to forgo their usual "first-dollar" paydays. Instead, they earned their upfront cash fees.
