Cruise may have been undone by DVD slowdown

LOS ANGELES: The public rupture this week between Paramount Pictures and Tom Cruise generated plenty of dramatic headlines.

But the breakdown in the negotiations over renewing a 14-year deal between the Viacom-owned studio and Cruise's production company, Cruise/Wagner Prods, might have been the result of something as mundane as DVD sales.

That, at least, is the view of a number of executives and analysts who offered their take on the situation on Wednesday, a day after Viacom chairman Sumner Redstone stunned Hollywood with his comment to the Wall Street Journal that he did not think "someone who effectuates creative suicide and costs the company revenue should be on the lot".

While egos, star power and box office clout all may have been part of the equation, flagging DVD sales could have served as the tipping point that led Paramount, headed by chairman Brad Grey, to make an offer that would have scaled back Cruise's rich package of compensation for the films he headlines for the studio.

Even though this year's Mission: Impossible movie fell short of its two predecessors, no one is arguing that Cruise hasn't amassed an impressive box office record at Paramount. But he also enjoyed a famously rich deal that guaranteed him about 20 per cent of box office revenue as well as a piece of DVD sales – a perk few stars have ever commanded.

During the past 18 months, growth in the DVD market has slowed dramatically. As a result, home video isn't automatically providing the same guaranteed upside to films that might not have performed spectacularly in cinemas. In turn, the studios are becoming less willing to strike deals that give stars participation in box office revenue as well as a portion of DVD sales.

"A lot of pressure has been brought to bear on these corporations, which have to grow their stock earnings in an area that is not growing by leaps and bounds," one major talent agency chief said. "So what are their choices? They have to cut back."

Said a high-ranking studio executive: "DVD sales was a growth industry that covered a lot of sins. We've now seen the top, and we have to be more responsible about everything. When the best-case scenario won't work or you only make a 5% margin on the best-case scenario, you have to take a step back. It's not the upfront money (for the talent) but the participations that are hurting us."