Disney, Warners prime to pump out the product

THE STUDIO SHAKEUPS taking place represent an intriguing redeployment of money and power. Twentieth Century Fox, with Joe Roth following Barry Diller out the door, more than ever emerges as the monolithic House of Murdoch. In film as well as TV, Rupert Murdoch’s iron will predominates.

Disney, by contrast, in closing its expensive and autonomous deal with Joe Roth, continues to add new colors to a studio that once seemed monochromatic. Jeffrey Katzenberg, Disney’s hyperactive chairman, prefers a different metaphor. “I want other voices in the room,” he asserts, and he has acted upon this notion with characteristic aggressiveness. Given Roth’s eclectic agenda, as well as other deals with Merchant and Ivory as well as Interscope, Disney is no longer the citadel of “high concepts.”

In persuading Sherry Lansing to take its top film production job, Paramount has signaled its need to bring in an executive skilled in the care and feeding of diverse talents. Lansing, too, is expected to draw upon a spectrum of filmmakers and satellite companies to help overcome the gridlock that grips Hollywood.

A central reality confronting studio chiefs today is that soaring costs and pervasive instability have made it nightmarishly difficult to mobilize a coherent slate of projects. Hollywood more and more resembles a Kafkaesque enclave where talented people cannot figure a way to bring their visions to reality. The apparatus designed to serve the system has instead consumed it.

“Making good films has to be an exercise in risk-taking,” is the way Katzenberg puts it. The problem, he notes, is that to a filmmaker, failure can mean obliteration. Hence few are willing to take artistic risks.

By bringing in Joe Roth, Katzenberg is endorsing an executive renowned for being “talent-friendly”–for nurturing the risk-takers. This in itself is an interesting step for a studio famous for its fiscal and intellectual toughness.

THE DEAL IS ALSO INTERESTING for a number of other reasons. Roth will have free reign to greenlight his projects. He will essentially take his money off the top while Disney gleans its full distribution fee; Roth’s projects will be substantially, but not fully, cross-collateralized.

This arrangement, engineered by the ubiquitous Michael Ovitz, overcomes the obstacles that defeated a comparable deal that Warners made with the Ladd Co. a decade ago. Alan Ladd Jr., like Roth, had the ability to greenlight pictures, but his company also had a massive overhead, handling its own advertising and distribution and splitting distribution fees with Warners. This gave Ladd autonomy, but it also took away much of the incentive from Warners to push his films. (Paradoxically, after the deal was terminated, the huge returns from the “Police Academy” series enriched both Warners and Ladd.)

By contrast, the Roth overhead will be relatively modest and he will readily utilize the highly skilled Disney mechanism to market and distribute his films.

Some Disney-watchers, while applauding the Roth deal, suggest that the arrangement was intended to accommodate considerations other than the need for artistic pluralism. Given its divergent production pipelines, including 10 films a year from Touchstone and Hollywood Pictures, five from the Disney label, five more from Roth, plus others from Interscope, Andy Vajna, etc., the Disney machine will be capable of pumping out in excess of 30 films a year in the foreseeable future.

Why would Disney aspire to such a high level of output? A clue lies in Disney’s adeptness at eliciting off-balance sheet financing from diverse sources. The company managed to raise $ 1.5 billion for production through limited partnerships between 1985 and 1990 and recently closed a $ 400 million bond offering. (Some Disney watchers are bemused that animated hits like “Beauty and the Beast” are funded in-house.)

What these arrangements accomplish is to protect Disney’s downside while embellishing its upside. Warners, too, has been stepping up production and building market share given the protection of its rich HBO deal, its arrangements with Arnon Milchan’s self-funding company and other such entities.

BOTH DISNEY AND WARNERS are dedicated to the proposition that studios should focus on two kinds of product — modestly budgeted projects like Disney’s hugely successful “Sister Act” and high-end megapix like the “Lethal Weapon” series. Both entities want to avoid the dangerous middle zone–the $ 35 million high-risk projects like MCA’s “Mr. Baseball” or Columbia’s “Hero”–projects that , though quality films, nonetheless cost too much to make.

Ironically, there are several high-profile examples of these risky “middle zone” pictures opening this Christmas–projects that desperately need major openings and Oscar nominations to break even.

The other major studios no doubt will evolve strategies to cope with the massive Disney-Warners presence. These strategies may take the form of further executive shifts such as those that occurred during the past two weeks. One thing is clear: Though Hollywood understands the high price of instability, the studio shuffle is irrevocably a fact of life–indeed, the favorite indoor sport.

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