Commentary: Studio execs in turnaround

It's never been harder for Hollywood's high and mighty

The life expectancy of those running Hollywood studios has shortened. Harry Sloan, Dick Cook, John Lesher -- they've left the building. Most recently, that other shoe that seemed suspended indefinitely over Universal City dropped, and Marc Shmuger and David Linde were dismissed.

Why do some survive in the job and others fail? Is it a secret only Amy Pascal knows? It certainly isn't luck, because there are too many moving parts in the movie business that need to be orchestrated. But it certainly isn't knowledge, because there are too many moving parts in the movie business that need to be orchestrated. It's something in between.

Being the head of a studio can be a great job -- you get to pick pictures, get a bunch of dough and go to fun parties and charity events. And then there's the jet. But when things go bad, you know. It's as if everything is OK until someone speaks the unspeakable: "The pictures aren't working." Cut to: (Your chairman's name here) is pursuing his/her recently discovered life-long passion to be a producer.

There is no other business that pretends so effectively in failure that $100 million decisions are the province of one person -- the one who has greenlight authority. In the real world where the rest of us toil, losing $100 million on one product line might be enough to take down the whole company. Not so with movies, where it becomes no one's responsibility until there are too many loss-makers and someone has to take the fall. In reality (at least in studio reality), these decisions are made by committee -- production, marketing, international, video -- everyone has a say.

When you can only say "yes" to a picture 15 to 20 times a year, how you get to "no" is really more important -- only because if you're a major studio and you're not at that level of production, you have too much overhead hanging around. So, if you pissed off the wrong people or you're told the Monorail route is changing and you don't get on board, it doesn't matter how much money you made last year or how long you've been there when the pictures don't work.

And there's always a time when they don't work -- except for the ones that come right after the chairman is fired. Given the successful opening of Universal's "Couples Retreat," it might have been better planning to let Shmuger and Linde go before "Land of the Lost" opened.

Years ago, before all the studios were owned by corporations, the chairman's job seemed bigger. And if you got fired, you were in line for the next job opening down the street or over the hill. Until your resurrection, you had a producer deal, went to a smaller company or formed your own and played the role of shadow government.

As Michael Wolff wrote in New York magazine a number of years ago, "When something is taken away from you, you just have to get the failure over with -- get as far away from it as you can. And then, after a decent interval, you put your finger back in the wind." Now, when you're out, you're pretty much gone.

The changes in studio management the past year and the remarkably quick downward trajectory from contract extension to dismissal has less to do with the movies not working and more to do with a fundamental shift in what it means to be a studio -- who should run them and who should own them. The model used to be just make the pictures, run them through the various distribution platforms and build the library, because the secret of the movie biz was merely to stay in business.

And all the studios had money troubles in the past. Fox had to sell its back lot to Alcoa, and that became Century City when "Cleopatra's" budget ballooned. MGM sold its props, its New York street and the river that Tarzan swung around. Columbia was saved from bankruptcy by "Close Encounters of the Third Kind." Before being owned by congloms, the studios were always on a boom or bust cycle. But they survived.

The problem now comes back to what the movies cost and what talent gets paid. When your costs are too high or the first-dollar gross deals too sweet, you have little flexibility but to market in the traditional way and stick to the distribution windows. Redoing the deals and putting all the gross after break-even with 100% video gives you more of a chance of getting your investment back, only to give away all your upside.

That's the fundamental disconnect. Studios need to look at a slate of pictures and ensure the winners pay for the losers; talent looks at the individual picture. There's a lot of money in the movie biz in success, but the trick is not letting the failures kill you. If studios could control production costs instead of treating their slates like a lottery, there would be more opportunities in marketing and distribution.

And, if Comcast buys NBC Universal, we could see interesting things happen to distribution windows and experimentation with pricing. Back when Edgar Bronfman Jr. ran Universal, he suggested that more expensive movies should cost more to see. That made no sense -- theater owners control ticket prices and cost really isn't an indication of quality or of demand. But with Comcast controlling millions of cable households, the idea of differential pricing depending on where, when and on which media you choose to watch something makes a lot of sense. Imagine day-and-date on everything everywhere -- and one marketing budget.

Because studios are long-term organizations when it comes to the development and exploitation of their product, a studio chairman benefits and pays for the actions of his or her predecessor and conveys the same benefits and liabilities on those who follow. It is precisely this time frame that makes it inefficient and costly to change leadership; in a business of ups and downs, consistent management makes it easier to weather the storms.

But with the business in such a state of flux, that's harder for a chairman to accomplish than ever before. To survive, you have to control the costs, make money for your bosses and always have a "Spider-Man" or "Transformers" up your sleeve.

Jeffrey Korchek, vp legal and business affairs at Mattel, worked for years at Universal Pictures as executive vp business and legal affairs. He is an adjunct professor in the Peter Stark program at the USC School of Cinematic Arts.