making the sausage

Polone’s Hollywood Cost-Cutting Solution No. 2: Stop the Pricey Producer Deals

Photo: Photos: iStockphoto

Last week, I made a case for how studios could produce more movies (the reverse of the current trend) with the same amount of money if they would just cut down stars’ luxurious perks. This week I have another cost-cutting suggestion: Get rid of useless and costly producer housekeeping deals, in which, just for the right to get a first look at a producer’s material, studios pay for his or her overhead, development executives, office space, assistants, parking, meals they allegedly have with creative talent, health insurance, cable TV, magazine subscription, iPads, stationery, mochaccinos, etc. 

Studios have reduced the number of these deals in recent years, but they’re still made and are very expensive. The Hollywood Reporter recently reported 155 of these producer deals in existence, with Warner Bros. having the most, at 31. Here is a real example of what a studio is spending on one prominent and prolific producer:

- $1.5 million per year for office rent, expenses, overhead, etc., plus a onetime $750,000 to set up the facilities

- the cost of all staffing, including executives and assistants, which probably runs over $1 million in a given year

- an annual development fund of $3 million to acquire and develop material

- two guaranteed fees for producing movies at $2.5 million each, meaning he gets $5 million whether they make at least two of his movies or not

I would guess that the total cost of this deal exceeds what’s listed above, since it is common practice to spend more than what the producer has in his development fund when he presses the studio to do so. And while this example is a big deal, there are certainly bigger: Jerry Bruckheimer and Imagine would certainly cost more.

The secret about these deals is that they are totally unnecessary, because any project that a studio producer brings in would come to that studio anyway, irrespective of any first-look or exclusive producer deals they may have. Material that gets made into movies — i.e., finished scripts, books, plays, magazine articles, foreign films, life rights, pitches, and the like — are controlled by agents. And agents only care about getting their projects sold. That is how they get paid. I can tell you from personal experience that an agent will send any project with value to anyone who can possibly buy it: the five remaining major studios, the numerous mini-studios who can fully finance … frankly, if Adolf Hitler rose from the grave and set up a film production company funded by the Taliban with O.J. Simpson as head of development, agents would be sending material there. And when they submit, they do with a producer attached, because that gives them the leverage to secure a commission from the producer before giving them the material. But this is not exclusive: Usually, the agent gives it to multiple producers for multiple studios, trying to match up the best producer for each place, and whichever one gets a studio to buy it gets to make the film. So, in almost every case, all the studios get a crack at all available projects, irrespective of having a specific producer locked up under a deal.

If you were to ask a top studio executive about such deals, they would probably justify the expense by listing all of the movies made for the studio by their stable of producers. But when you look at it case by case, you would see that that many of those producers were added to the projects after they were initiated at the studio. Often a studio will have a project with a less experienced producer attached and will force one of their in-house guys onto it; this allows the studio to apply a share of the producer’s overhead costs and their as-yet-unearned guarantee onto that specific production. Yes, it makes the film more expensive, but it also justifies the cost of that producer. It’s simply an accounting issue, because if a studio’s driving purpose was to get a more experienced producer on their projects, they could easily hire any number of them, even without an exclusive deal. Many talented producers don’t have deals with studios, and most of the ones who do are allowed to work elsewhere.

So if these deals are so useless and expensive, why do studio executives still make them? A number of reasons: (1) Because they have been doing it that way for decades, and most executives don’t want to make enemies of the producers and their representatives who benefit from this system; (2) to take care of their producer friends who may have taken care of them in the past or will in the future; (3) to better their relationships with production-company-owning actors and directors with whom they want to work (yet who, invariably, will still work for their competitors when offered a project that meets their fancy. For example, Brad Pitt’s production company has a deal with Paramount and is producing World War Z with them, in which he stars, but in the past two years he has produced Moneyball and Eat Pray Love at Sony); and (4) because those same studio executives are hoping for a lucrative producing deal of their own once they are sick of being an executive or, more likely, are thrown out of the executive suite.

So, what would happen if the studios got rid of their producer deals, other than they would lower their operating expenses? There would be more producers, each making fewer pictures. In reality, while big producers like the one whose deal is enumerated above get their names on three or four movies each a year, they delegate most of the actual producing work to their executive underlings. If those big producers didn’t have their overhead covered, they would probably have fewer (if any) executives working for them. Having to do the work themselves, they’d produce fewer films, but since the remaining projects had the producers’ full attention, maybe they’d be better films. (Well, probably not better, but they wouldn’t be any worse.) And then, the extra slots normally taken up by the formerly highly paid super-producers would be filled by the next tier of producers, who would be busier than they are now. Any extra slack would most likely be taken up by the execs laid off by the super-producers after their studio deals were cut: After all, these employees had been doing most of the work anyway, why shouldn’t they want the money and credit? In short, more producers would work, those currently at the top would make less money, and the money that normally would have gone to them would be shifted out of superfluous overhead and expense and into production, resulting in greater productivity, profit, and employment. And the only change that the audience might notice is that they wouldn’t see “from omnipresent producer Blah Blah” in so many marketing materials. But I never believed someone in Ohio ever said, “Hey, let’s go see that movie, it was made by my favorite producer.”

Gavin Polone is an agent turned manager turned producer. His production company, Pariah, has brought you such movies and TV shows as Panic Room, Zombieland, Gilmore Girls, and Curb Your Enthusiasm. Follow him on Twitter @gavinpolone.

Polone’s Hollywood Cost-Cutting Solution No. 2: Stop the Pricey Producer Deals