A Slasher Is Loose On Paramount's Lot

In the biggest hit film of 1990, a dead man comes back from the netherworld to save his wife from her impending demise. Ghost, made with a relatively modest budget of $23 million, has already taken in more than $400 million at the box office. But even as Patrick Swayze and Demi Moore were packing them in, Paramount Pictures Corp., the Hollywood studio that released the film, was struggling to return from a Hades of its own making.

The sad truth is that soaring production costs have turned even some box-office hits into money-losers. Sure, every Hollywood studio has felt the pinch of rising costs. But Paramount has become the first to take a stand against high-priced action films and pampered actors. "They've made it very clear," says Robert Rehme, co-producer of Flight of the Intruder, which Paramount released on Jan. 11. "They are not going to tolerate funny numbers any longer."

THUNDERSTRUCK. Paramount has seen its share of those. Last year alone, the studio had to write down the losses on 5 of the 15 films it released. Among them was Days of Thunder, one of the summer's biggest hits, with $82 million in ticket sales. Paramount got about half of the box-office take. But the Tom Cruise movie about car racing cost the studio a staggering $58 million to make. The write-downs also included The Two Jakes and Crazy People, lower budget films that flopped.

Paramount's big-budget parade included the $55 million it spent to make The Godfather Part III, $38 million for Another 48 Hours, and $35 million for The Hunt for Red October. Overall, Paramount had a strong year at the box office, finishing a close second to industry leader Walt Disney Co. But the costs cut operating earnings for the studio, a unit of Paramount Communications Inc., by at least $30 million, estimates analyst Raymond Katz of Shearson Lehman Brothers Inc.

The film unit's spending spree helped drag down profits for its parent. For the year ended Oct. 31, the entertainment group, which includes TV operations and accounts for 69% of overall income, saw operating profits drop by 16%, to $212.5 million, on $2.4 billion in revenues. "Nowhere in the industry is it more evident than at Paramount that costs have gotten out of control," says Katz.

Katz figures that the average Paramount film cost $30 million to make, well above the $27 million average at other studios in 1990 (table). To help rectify the problem, Paramount shook up management last summer. Studio Chairman Frank Mancuso fired production chief Sidney Ganis, who had held the job for three years after heading up marketing. In his place, Paramount brought back 39-year-old David Kirkpatrick, a longtime film executive who has done tours at independent producer Weintraub Entertainment Group and at Disney.

Hired initially by Paramount in 1976, Kirkpatrick worked at the studio during the days when it was run by Barry Diller and Michael D. Eisner. Known as Hollywood's cheapest studio at the time, Paramount relied on tightly focused story lines and ruthlessly trimmed budgets to keep its film costs well below the industry average. In 1984, Diller left to run Twentieth Century-Fox Film Corp., and Eisner became Disney's chairman.

SHOVING MATCH. Kirkpatrick's early training certainly qualifies him for reining in Paramount's costs. Unlike Ganis, an easygoing and well-liked man, he also brings a tougher demeanor to the task. It's Hollywood scuttlebutt, for instance, that a few years back he and Jerry Weintraub got into a shoving match over the editing of Troop Beverly Hills, a 1988 Weintraub Entertainment film that bombed. Neither executive would discuss the incident, but not long afterward Kirkpatrick left for Disney, where he oversaw production of such films as Pretty Woman.

The clamps were tightened at Paramount not long after Kirkpatrick was hired. In November, he bought out the contract of Top Gun and Days of Thunder producers Don Simpson and Jerry Bruckheimer, a hugely lucrative, five-year deal signed a year earlier. None of the parties will comment, but the parting came not long after Paramount took a $7 million write-down for Days of Thunder. While Paramount swallowed the loss, Simpson and Bruckheimer walked away with more than $10 million.

Mending Paramount's free-spending ways will require a lot more than cutting loose two producers, however. The studio is loaded with high-priced talent. The most expensive is undoubtedly comedian Eddie Murphy, who was paid an estimated $12 million to make this summer's big-budget action film, Another 48 Hours. That helped boost the costs of the film to $38 million, enough to slash profits even though it grossed an impressive $80.6 million at the box office.

MURPHY'S MILLIONS. Then there are the perks: To make Coming to America, the studio picked up the $1 million tab for the bodyguards, personal trainer, and other members of Eddie Murphy's entourage. Worse yet, Murphy complains he is underpaid and is seeking closer to $18 million a film, say Hollywood sources. Paramount expects to announce a new Murphy film soon. But to keep costs to the low $30 million range, the 29-year-old comedian won't be crashing cars or shooting `em up.

Dealing with the likes of an Eddie Murphy underscores the paradox Paramount faces. It still intends to do big-budget films with flashy stars. But Kirkpatrick is under orders to spend no more than the $420 million that Paramount spent in 1990, while increasing the number of films to 20 from 15. Projects being developed will be halved from 250, saving $30 million. Paramount will pass on projects with several expensive stars and won't do sequels. Says Kirkpatrick: "We all believe in the powerof the story. People pay their $7.50 to get an emotional response, not necessarily to see a lot of special effects."

Paramount's tighter fist has already lost it at least one film. Richard and Lili Zanuck, who came to Paramount after producing the 1989 blockbuster Driving Miss Daisy, took their new project to a rival that agreed to nearly double the measly $10 million budget Paramount was offering.

In the end, however, a management shakeup isn't going to solve all of Paramount's problems. The studio could still fall prey to its search for box-office gold--particularly since some rivals are willing to pay ever-higher prices for talent and scripts. But even if Paramount can simply flatten out the growth of its film budgets, it will be quite a coup.

PARAMOUNT'S
      BIG-BUDGET FILMS
      Film                Estimated cost
                            Millions
      DAYS OF THUNDER             $58
      THE GODFATHER PART III       55
      ANOTHER 48 HOURS             38
      THE HUNT FOR RED OCTOBER     35
      ESTIMATED INDUSTRY AVERAGE*  27
      *Shearson Lehman Brothers Inc.
      DATA: BW