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A studio exec walks into the office of Fred Gallo, the tough-talking head of physical production at Paramount Pictures, wanting to know what it will cost to make a certain script.

Gallo plunks the script down on a scale he keeps beside his desk. It begins at $5 million and goes up to $50 million.

“If it’s over $50 million, I just say ‘No way,’ ” says Gallo.

It’s a gag, of course, but not to his hard-pressed counterparts at other studios, where at least 10 megabuck productions are currently tipping the scales at $100 million-plus.

Physical production heads are finding their jobs increasingly untenable: crushed by overweight budgets, overruled by directors who have usurped their authority over below-the-line hiring of key crew personnel, and bereft of their power to fire out-of-control helmers.

At the same time, producers are crying that smaller-budgeted studio pics are nickel-and-dimed by physical production execs flexing their powers where they can.

“You’re neither fish nor fowl,” says MGM’s Robert Relyea. “The filmmaker thinks you’re just trying to save some money. The studio thinks you’re trying to protect yourself or be talent-friendly.”

The decision-making powers over key production staffing have been legally delegated to helmers in recent negotiations by the studios with the Directors Guild.

In some cases the pressures have forced physical production heads to burn out on the job; in other cases they have taken the bullet for runaway productions and been fired.

Twentieth Century Fox’s Duncan Henderson exited his post last month after only a year and a half at Fox, where “Speed 2,” “Alien Resurrection” and James Cameron’s “The Titanic” are all in production at budgets topping $100 million.

Ironically — or perhaps instructively — Henderson’s predecessor at Fox was Jon Landau, who jumped ship to board “Titanic” as exec producer. The epic effects-laden picture is said to be sailing well north of $135 million, and perhaps beyond the $175 million spent on Universal’s “Waterworld.”

While Henderson has declined comment, several people close to him report that the vet indie line producer, whose credits include “Home Alone 2,” “Outbreak” and “Dead Poets Society,” was unhappy in the studio post.

And no wonder.

Ongoing struggle

“I can’t hold the budget line the same way today as I did five years ago,” admits Gallo. “I’d be lying if I said otherwise.”

“I think it is an honorable position,” says Donna Smith, former head of physical production at Universal and the first woman in Hollywood to hold the job at a major studio. “You can really help the filmmakers. But often it’s about helping the studio preserve the relationship.”

Smith left the job in 1996 after seven years and 150 pictures, including the tumultuous “Waterworld.”

“I’ve still got Band-Aids on from that one,” says Smith, now head of Entertainment Coalition, a production insurance and bonding company.

It starts with the script

Historically, the job of heading up physical production at a studio has always begun with breaking down scripts, working out shooting schedules and giving studio execs a production budget. In the past, it meant having a direct say in below-the-line hiring, choosing cinematographers, production designers, script supervisors.

And the head of physical production kept watch over movie shoots to make certain they stayed on schedule and within budget. Indecisive directors, slow cinematographers or spendthrift production designers were replaced.

At its best, the production department can be effective in “pre-pre-production,” according to Marty Katz, who headed physical production for Disney film and TV from 1985-92 and has mentored many of the production execs working today.

“At Disney, with scripts going forward we developed a menu of production options before the filmmaker came on, to try and develop a mutual ground on which the studio and the filmmaker could feel comfortable,” Katz says.

With a director aboard, Katz and his staff could present appropriate studio sets and props, along with location possibilities.

But the production department’s best-laid plans can shred once the director is hired.

Relyea, a third-generation production vet whose credits include “Bullitt,” “West Side Story” and “The Great Escape,” cites the cost of below-the-line talent as one factor in soaring budgets. He blames it on the decline of the studio system itself.

“Everybody belonged to the company,” Relyea says, recalling the studios’ heyday. “You had Fox people, you had MGM people. They were under contract. It was slave labor, but now you can’t say you’re going to pay a dolly grip only a certain amount, because if you don’t get him somebody else will.”

Humble beginnings

Gallo, a New York City-born-and-bred line producer, began his career running errands on location in Gotham’s mean streets. He says star power is another factor boosting the cost of below-the-line talent.

“Sometimes directors or stars request below-the-line talent,” he says. “That makes it tough on negotiations. It becomes a seller’s market.”

Dick Stenta, a former production VP at Paramount, agrees: “If you call them in and say you can’t pay them what they’re asking, they’ll go to the director.” A call is likely to come down from the studio executive to the production department telling them to back off.

But the people who handle the nitty-gritty of production agree that the salaries of dolly grips and gaffers are not the primary cause.

Nor is it the stars’ big paydays.

“You can theorize all you want to,” says Relyea, “but there is a time when you cross over into the hands of the people making the movie.”

A landmark moment in the retreat by the studios from fiscal responsibility, say some production insiders, was the agreement reached last year between the studios and the Directors Guild of America.

The new contract contains the “code of preferred practices,” language that codified for the first time the way the studios and directors have long worked.

Director takes lead

The non-binding but firm agreement obliges studios to follow the director’s lead on hiring key production personnel, such as directors of photography, editors, composers, costume designers, visual effects supervisors, casting directors, script supervisors and production designers.

“They’re no longer responsible to the studio,” says one production veteran. “They’re responsible to the director. They owe him their jobs. They’re not going to tell the director to hurry up because they’re two days behind.”

Says Stenta, “That’s the correct thing to do to snag a Martin Scorsese, a Spielberg — directors who’ve earned the right. But it seems that they gave that right to everybody.”

Add to that the fact that more and more studio deals give directors a percentage of the gross. Rather than encouraging frugality, a gross deal actually creates an incentive for a director to spend more money on a picture that will be bigger and, it is hoped, better.

But the directors are not entirely to blame either, say production mavens.

According to a view prevalent in the production community, the studios gave away the decision-making power to the directors because today’s studio execs are not only trying to please directors and ensure return business; the execs are also happy not to have to deliberate over production dilemmas.

“They’re off reading scripts,” says one production guy. “They don’t have the time.”

Little production know-how

More to the point, say old production hands, studio execs often don’t possess real production know-how.

The imbalance of power and expertise is often a stumbling block to communication, says Stenta.

“I’ve seen studio presidents who were afraid to go down to the set and have a talk with the director. He’s a lawyer, he’s an agent, he’s a creative guy. He opts to give the director what he wants because he has no solution of his own to suggest.”

Sometimes it’s better that way. With very little encouragement, production mavens will regale listeners — off the record — with tales of creative execs who visit the set and offer “small suggestions” that end up costing hundreds of thousands of dollars. And then let the head of physical production take the heat.

But creative execs argue that their job is not to know how to hire a dolly grip. That is what independent producers like Howard (Hawk) Koch Jr. are for.

Koch, who produced “The Beautician and the Beast” for Paramount and was exec producer on Par’s “Primal Fear,” was a first assistant director on films such as “Chinatown” and “Marathon Man.” Growing up in the business, he is one of the handful of studio-based producers who know their way around a set.

Budgeting tricks

His budgeting tricks leave wiggle room, apparently without unbalancing Gallo’s scale. “I want to give the director as much leeway as possible to make the best movie,” Koch says.

Some production people say that an out-of-control megabudget pic places added pressure on a studio’s smaller productions.

“The fact of the matter is that by its very nature, a smaller picture can be scrutinized,” said Henderson in an interview a week before he ankled his job, “while the larger pictures are just more difficult.”

What can a studio do when a megapicture does go out of control? It can replace the director. Firings of major Hollywood directors from a picture in production are rare, however.

Another alternative is that the head of physical production can dispatch an experienced production person to the set.

But there is not a lot the studio rep can do beyond trying to give the studio an idea of how much more money it will need to pour into the production to get it finished.

Says Marty Katz, currently in Rosarito, Mexico, on the set of “Titanic” working as a consultant for Fox: “At the end of the day, the director will do what he wants. But if you have built a relationship based on mutual concern for making the best picture possible with the money available, then you will have an opportunity to be heard.”

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    A studio exec walks into the office of Fred Gallo, the tough-talking head of physical production at Paramount Pictures, wanting to know what it will cost to make a certain script. Gallo plunks the script down on a scale he keeps beside his desk. It begins at $5 million and goes up to $50 million. […]

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