Par & all of H'wood feel ripple effect

On Aug. 21, Paramount Pictures confirmed that MTV Films and Nickelodeon Movies are being elevated to full-fledged studio divisions, with Scott Aversano as prexy of both.

Brad Grey could breathe a sigh of relief. After 18 months of frenzied media scrutiny, his regime had seemingly put the last piece in place and could focus on making more movies.

The serenity lasted less than 24 hours.

On Aug. 22, Sumner Redstone announced that Par had terminated its deal with Cruise/Wagner, citing Tom Cruise’s “recent conduct” and unacceptable behavior as the cause.

The statement was surprising, because Hollywood is used to the banal “we wish them well on future endeavors” partings. But this divorce had a ripple effect throughout the studio and much of the rest of Hollywood.

People in town again started raising “Who’s in charge at Paramount?” questions, wondering why Redstone made the announcement instead of Tom Freston or Grey (who were said to be caught off-guard).

It also caused tension with CAA, which makes millions off Cruise. CAA agents naturally declared outrage, but they’re in a precarious position.

Another of the agency’s marquee clients is Steven Spielberg (who also had problems with Cruise’s behavior around the release “War of the Worlds”). Spielberg himself is part of the Par puzzle because DreamWorks Pictures is now a key supplier of films under the studio umbrella.

Though the Par-Cruise divorce seems final, there’s still likely to be a custody battle over projects that are currently in Par’s corner. The battle is likely to have some complicated twists when it comes to CAA’s now potentially dicey relationship with Paramount.

C/W may be out, but CAA still has plenty of business at Par. Clients Brad Pitt and Jamie Foxx have production pacts at the studio and one of its biggest female stars, Renee Zellweger, is currently in front of cameras on Par’s “Case 39.”

But with C/W’s departure and in the absence of prolific producer Scott Rudin, the attention turns to which shingle or division will step up to replace them.

Grey and his team have plenty of resources, including Par’s own production department, DreamWorks, MTV Films, Nick Movies, Paramount Vantage, etc.

But insiders still question what types of pics the studio will be making. “He may have all his people in place, but now their job is to show what they can do,” says one studio executive. “And that will be hard considering how many people you can go through to get a movie made.”

Cruise’s production partner Paula Wagner went on record questioning Par’s strategy and said the studio needs to spend more time figuring out its goals.

The negative attention likely hit Grey the hardest. Since taking office, Grey, a methodical, quiet-spoken man, has had to live through an intense rumor mill about his decisions and the way in which they were carried out.

At the top of the buzz list: the many exec changes. Grey has flipped the ranks with some out-of-the-box appointments, with TV vet Gail Berman as head of the film studio and literary agent John Lesher as prexy of Paramount Vantage, not to mention the peek-a-boo buy of DreamWorks this year.

The Cruise camp was even more caught off-guard because talks with Paramount hadn’t completely fallen apart when Redstone’s statements hit the press. Although a reduced production pact was on the table — somewhere in the neighborhood of $2 million a year — both parties remained civil even as it was becoming clear that C/W would leave its longtime base.

Until last week, Redstone had never approached Cruise to talk about the actor’s behavior. Even after Cruise’s life became a tabloid spectacle in summer 2005, Par greenlit “Mission: Impossible 3.” At the premiere for the film this summer, Redstone hugged Cruise and relations were good by all accounts.

The Redstone-Cruise blowup may have seemed sudden, but it carries echoes of management tension that have dogged Viacom for over a decade.

Redstone — brilliant, driven, entrepreneurial — has been criticized for his reluctance to pass the baton and to step out of the limelight. In the 1990s, he clashed with his second-in-command Frank Biondi and fired him in early 1996.

Redstone later savaged Biondi in his 2001 autobio “A Passion to Win.”

He ejected vice-chairmen Philippe Dauman and Tom Dooley after Viacom merged with CBS in 1999. CBS chief Mel Karmazin, a strong-willed exec well liked by Wall Street, became No. 2. While publicly denying tension between them, Redstone would often omit any mention of Karmazin when discussing the future of the merged company.

Karmazin ankled in 2004, leaving octogenarian Redstone under increasing pressure to provide Viacom with a succession plan.

There were two solid choices: MTV Networks chief Tom Freston and CBS topper Les Moonves. So Redstone split his company in half early this year, naming Freston CEO of Viacom and Moonves chief executive of CBS Corp.

Redstone’s comments about Cruise have garnered him lots of headlines, but left Freston — and studio head Brad Grey — in an untenable position at a delicate time in Par’s evolution.

In recent months, the media has written negative articles about Freston and his division. Redstone never defended his lieutenant.

And the Grey has its own history of clumsy pinkslips. Donald De Line found out he was fired through a third party while he was in London. Distribution topper Wayne Lewellen was let go after 33 years with the studio. Other employees found out they were being let go when they attempted to drive on the lot for work in the morning but were denied access.

One former employee says it’s surprising the studio hasn’t found a better way to part ways with former employees.

“There is an incredible sense of hubris. Their actions indicate no sense of ramifications regarding future business in this town,” says the former Par exec.

“It’s shocking that they didn’t just end it and say, ‘We’ve decided not to renew,’ and that way they can still take control over the situation without giving the reasons.”

In the meantime, the media had a field day with the Cruise flap. Had any exec in Hollywood history ever publicly denounced a star like this?

Redstone’s comments incited fierce reactions in a town that usually tries to keep a cool demeanor. Wagner denounced Redstone’s remarks as “outrageous and disrespectful.” CAA’s Rick Nicita (who’s married to Wagner and reps Cruise) said the statements were “shockingly offensive and graceless.”

CAA’s Richard Lovett told the N.Y. Times, “Paramount has no credibility right now.”

And Cruise attorney Bert Fields told the L.A. Times that it was “as priggish and pompous and inane a statement as anyone has ever made in the history of the entertainment business. It will, I believe, be emblematic of a self-destruction of a mighty mogul.”

Michael Fleming and Jill Goldsmith in New York contributed to this report.

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