Universal delays huge potential Spielberg theme parks payout

In a move that spares Universal Orlando theme parks a potential financial jam next year, Steven Spielberg has agreed to delay by seven years his option to demand a payout worth hundreds of millions of dollars under a longstanding consulting agreement.

The amended deal will make it much easier for the theme park company to renegotiate a heavy debt load that comes due next April and could ultimately net the director even more money than he would otherwise have received.

As part of the agreement signed in 1987 with Universal Orlando, a joint venture of General Electric Co.'s NBC Universal and private equity firm Blackstone Group, Spielberg receives 2% of ticket sales and a portion of concessions at the company's two Florida theme parks. In addition, he gets a portion of revenue from Universal Studios Japan in Osaka, but not from Universal Studios Hollywood.

Last year, Spielberg made about $34 million from the Orlando and Osaka parks for his work consulting on attractions based on movies he has directed and produced, such as "Jaws," "Back to the Future," and "Jurassic Park," according to a regulatory filing by Universal Orlando.

He also had the right starting in June 2010 to forgo his quarterly payments in exchange for a lump sum based on the future value of his deal.

That would likely have been a financial hardship for Universal Orlando, which has $1 billion in debt due next April that it is trying to restructure. In its last annual report, the company acknowledged that such efforts "could be adversely impacted" by the looming possibility of a huge payment to Spielberg, which it was not certain it could afford.

A public filing of the amendments to Spielberg's deal does not explain what the director is receiving in exchange for agreeing to delay his potential payout, and a Universal spokeswoman declined to comment. However, it appears to be connected to a point that guarantees him a percentage of revenue from Universal theme parks currently in the works in Singapore, Dubai and two undisclosed locations.

In addition, the delay could prove more lucrative for Spielberg, already one of the richest individuals in Hollywood, as attendance at Universal Orlando is expected to get a boost beginning next spring when a lavish new attraction based on Harry Potter opens.

The deal amendment also spells out that Spielberg's obligations will transfer to any new owners, a potentially important point as NBC Universal may be taken over by cable operator Comcast Corp. in a deal under discussion with the media conglomerate's owner, General Electric Co.

Spielberg declined to comment through a spokesman.

--Ben Fritz and Claudia Eller

Photo: Steven Spielberg at the National Board of Review Awards in 2007. Credit: Evan Agostoni, Getty Images.

Pricey tropical junket seems to have paid off for 'Couples Retreat'

One of the keys to the strong $35.3-million opening of "Couples Retreat" was that oldest of Hollywood marketing ploys: the glitzy media junket.

Universal flew dozens of journalists to Bora Bora for interviews with the cast in the same tropical setting where the film took place. As described by writer James Rocchi on MSN, the all-expenses-paid trip also included activities such as watching sharks and feeding stingrays.

Costly junkets used to be common in Hollywood as a way to generate tons of publicity. One of the most lavish examples was a $5-million-plus bash that Disney held for "Pearl Harbor" in 2001. Such lavish events are far less common in Hollywood today, as cost-conscious studios are not only cutting back on expenses, but also trying to avoid ostentatious signs of overspending. Modern-day junkets are usually in hotels, with cheap plastic backdrops built for on-camera interviews

However, Universal decided that lush tropical backgrounds were just what the PR doctor ordered for "Couples Retreat." A concerted publicity effort may have seemed particularly wise this week since there were no other new movies in wide release, leaving stars including Vince Vaughn, Jason Bateman, Jon Favreau, Kristen Bell, Kristin Davis, Faizon Love and Malin Akerman as the only fresh faces for national entertainment media.

One source close to the film said the studio spent twice as much as it normally does on the "Couples Retreat" junket. The extra money was taken from spending that typically would have gone to other advertising and publicity.

The source felt confident that the investment was worth it, noting that the "Couples Retreat" junket generated around 10 times as much media coverage as such events typically do.

-- Ben Fritz

Photo: Faizon Love, Kali Hawk, Jon Favreau, Kristin Davis, Malin Akerman, Vince Vaughn, Jason Bateman and Kristen Bell (left to right) in "Couples Retreat." Credit: John Johnson / Universal Pictures

Marc Shmuger, David Linde out at Universal Pictures [Updated]

After a prolonged box-office slump, too many high-cost movies and executive turmoil, Universal Pictures chairmen Marc Shmuger and David Linde have been ousted after their 3 1/2 year run as the studio’s top movie lieutenants.

Rather than recruit an outsider for the top movie job, Universal Studios President Ron Meyer has promoted two insiders to succeed the duo. The studio's marketing chief, Adam Fogelson, has been named chairman, and production president Donna Langley, co-chairman, reporting to Fogelson.

Meyer is banking on the pair to reverse the studio’s box office slump and end the infighting that's disrupted the studio’s executive suites for several months.

Shmuger and Linde’s removal is the fourth senior-level shake-up to hit one of Hollywood’s major studios in the last few months, coming on the heels of the abrupt departure of Walt Disney Studios chairman Dick Cook two weeks ago. Earlier this month, Metro-Goldwyn-Mayer Inc. chief executive Harry Sloan was pushed out, and a few weeks earlier Paramount Pictures removed its two top movie executives, John Lesher and Brad Weston.

Such upheaval comes at a particularly treacherous time for the movie industry when studios can no longer rely on once-robust DVD sales to prop up their business, making it increasingly difficult for them to recoup costs on their flops and make healthy returns on their more expensive hits.

The long-rumored management changes at Universal come as the studio’s parent company NBC Universal and owner General Electric are engaged in talks with cable giant Comcast Corp. to sell a 51% controlling stake in the media company.  A broader housecleaning at NBC Universal could come down if and when there is a change of ownership. This is the second major upheaval in recent months under the watch of NBC Universal chief executive Jeff Zucker following this summer’s departure of his hand-picked top television executive, Ben Silverman, who left after two tumultuous years

With the dismal box office year that Universal has had — capped by the poor showing of its current release “Love Happens” and this summer’s high-profile disappointments “Land of the Lost,” a costly misfire starring Will Ferrell, Judd Apatow’s “Funny People” starring Adam Sandler, “Public Enemies” with Johnny Depp, and Sacha Baron Cohen’s “Bruno” -- Meyer, Shmuger and Linde have been on the firing line of Zucker and NBC Universal’s owner General Electric

Universal currently ranks last among its rivals in market share so far this year, with just 8.6%, a poor standing also attributable to disappointing returns from such adult dramas as director Ron Howard’s “Frost/Nixon,” “State of Play” starring Russell Crowe, and “Duplicity” with Julia Roberts.

In light of the glaring downturn, the Universal executives were asked by NBC Universal chief executive Jeff Zucker and GE honcho Jeffrey Immelt to explain why their movies weren't clicking with audiences and costing so much, and what plans they had to get back on course.

Meyer’s ultimate decision to dismiss Shmuger and Linde was months in the making, and had been met with some initial resistance from Zucker, according to several people close to the situation.

Zucker, these people explained, leaned toward giving the pair a chance to change course, especially since they were the same executives who presided over two of Universal’s most profitable years in 2008 and 2007 with such hits as “Mama Mia!,” “The Bourne Ultimatum” and “Knocked Up.” Shmuger and Linde were also each given four-year contract extensions in January, which would mean that GE will be looking at hefty settlements.

But, in recent weeks, the pressure on Meyer to make a change began to mount as some of Universal’s biggest producers, including Marc Platt, Brian Grazer and Scott Stuber, continued to lodge complaints and frustration about a leadership vacuum, the lack of a clear strategy and decision-making that they found untenable.

Shmuger and Linde have also come under fire for the high costs of some of their big event movies, including “Land of The Lost,” which cost some $200 million to make and market and will lose about $70 million, according to people close to the matter. A number of the team’s 2010 releases, among them “Robin Hood,” “The Wolfman” and the Iraq War drama “The Green Zone,” each have production budgets that exceed $100 million.

But, in the end, Shmuger and Linde’s undoing was not limited to their ill-fated movie picks and budget overruns.

Meyer privately told close associates that he would not fire the pair over a bad slate of films, since no studio is immune to the vagaries of the movie business and difficult-to-gauge audience tastes. People close to the studio said Meyer became unhappy with Shmuger and Linde’s inability to sustain a spirit of teamwork and put a stop to the turmoil that has roiled the studio's executive suites.

Universal Pictures in the dark about Comcast talks with parent NBC Universal

As if the management at Universal Pictures didn't have enough to worry about.

As rumors continue to swirl about an impending executive shake-up at the Hollywood studio, Universal Studios President Ron Meyer and his team apparently had no clue that Comcast Corp. has been in talks to buy a stake in NBC Universal.

When a story about a potential deal between the two companies broke on the industry website the Wrap on Wednesday afternoon, Meyer and his movie chairmen Marc Shmuger and David Linde were heading to Thousand Oaks for a preview of the studio's upcoming Christmas release "It's Complicated," a comedy romance directed by Nancy Meyers and starring Meryl Streep, Alec Baldwin and Steve Martin.

According to a person close to Universal, when Meyer recently met with NBC Universal Chief Executive Jeff Zucker to discuss the future of Shmuger and Linde, who have been under fire for the studio's dismal year at the box office and whose jobs are on the line, he was told that any such decisions had to be put on hold because something "major" was going on with the media company. Zucker did not specify what that was, said the person.

Three people familiar with the situation said that Meyer had been consulting with Zucker about the studio chief's desire to make a management change, when he was told to temporarily table the move. So, the fate of the two embattled movie executives and that of NBC Universal continue to hang in the balance.

On Wednesday, NBC Universal declined to comment on the talks between Comcast and NBC Universal. And, a spokesman for Comcast denied a report from the Wrap that a deal was in place, saying "While we do not normally comment on M&A rumors, the report that Comcast has a deal to purchase NBC Universal is inaccurate."

Well, one thing is for sure: As the title of Universal's forthcoming movie suggests, it's complicated these days at the General Electric-owned media company.

-- Claudia Eller

Photo: Universal Studios President Ron Meyer, second from left, with Universal Pictures chairmen Marc Shmuger, second from right, and David Linde, right, at the premiere of "Funny People" in July. Director Judd Apatow is left and star Adam Sandler is center.

Universal scales back its video game ambitions

Universal Pictures' hopes of becoming a major video game publisher have been put on hold in the face of a bad economy and a major flop.

According to three people familiar with the studio's video game operations, it is no longer actively financing production of games based on its movies after its first such effort, "Wanted: Weapons of Fate," sold poorly when released in March.

Based on the 2008 movie of the same name starring Angelina Jolie, "Wanted" sold only 100,000 units in the U.S. in its first month, generating under $6 million in retail revenue. High-quality games like "Wanted" typically cost $20 million or more to produce, before marketing costs. Universal probably wants to be cautious about money-losing ancillary ventures in a year when its movies generally have performed poorly at the box office.

"Weapons of Fate" was hurt by production delays that saw it come out nine months after the movie hit theaters and three months after the movie was released on DVD. That meant it wasn't able to benefit from the studio's substantial marketing campaign for the film.

One person familiar with the studio's plans said that although Universal hasn't given up on the idea of investing in video games, the studio is being very conservative following the performance of "Wanted" and the overall slowdown in video game sales recently.

Last summer, when "Wanted" was first announced, Bill Kispert, vice president of Universal's Digital Platforms Group, said the studio was running a "hybrid model" whereby some games based on its movies would be licensed to other game publishers like Electronic Arts and Activision, while others would be produced internally. To further that effort, Universal brought on experienced video game producer Pete Wanat to oversee internal productions.

Those ambitions have clearly been scaled back, however. All of Universal's movies with video game potential are now being licensed to other publishers, though one source said the studio was considering some original projects in the early stages of development as video games. Wanat left Universal when his contract expired earlier this year.

Other studios are taking differing approaches to video games. While Fox continues to license all of its properties to other publishers, Paramount released a downloadable game based on "Star Trek" in May and has ones based on "The Warriors," "Top Gun" and "Days of Thunder" in production. Walt Disney Co. and Warner Bros. are producing a variety of games based on movies and TV shows and, in select cases, original ideas.

-- Ben Fritz

Photo: A scene from "Wanted: Weapons of Fate." Credit: Warner Bros. Interactive Entertainment.

$1 Redbox DVD rentals could pinch Internet video services, study finds

Apparently there's more to fear in Redbox's $1 DVD rentals than meets the eye.

The leading DVD kiosk vendor has done deals with half of the Hollywood studios (Lions Gate Entertainment, Sony Corp. and Paramount Pictures), while the other half (News Corp's 20th Century Fox, Warner Bros. and NBC Universal) have sought a waiting period to protect sales of movies new on DVD.

A study from SNL Kagan finds that online video-on-demand services like Apple Inc.'s iTunes could suffer if consumers start to think $1 is the right price for a movie rental.

Kagan examined the cost of delivering online video at six levels of quality, based on assumptions about the average Internet speed, movie length and delivery cost.

Only in the two lowest-quality instances (known as standard definition) did Internet on-demand services come out ahead when rentals cost $1. After subtracting delivery costs and the studio's cut of 70 cents, the profit could be measured in pennies: 8 to 19 cents.

But at $3.99, every flavor of Internet video, including high-definition, delivers a profit, Kagan found.

The implications of the rental-for-a-buck are ominous.

"It could just have earth-shattering consequences to these services hoping to reach people through the Internet," said Wade Holden, the Kagan entertainment industry analyst who crunched the numbers.

Holden said Internet delivery costs could take years to come down enough (through more-efficient video compression and higher bandwidth rates) to make 1-dollar on-demand rentals economically feasible.

A going rate of $1 would gut the rental market, which Kagan projects at about $8 billion this year for 1.74 billion rentals.

"It would be a colossal shift for the rental market to go from $8.03 billion to $1.74 billion — a change studios are likely not to get on board with," Holden wrote in a report issued Aug. 31. "If that were to happen, revenue sharing would most likely not be an option and VOD providers would have to pay massive licensing fees to studios looking to maintain their revenue streams."

--Dawn C. Chmielewski

Redbox sues Warner Home Video over new DVD restrictions

Redbox filed suit Tuesday against Warner Home Video, its third such lawsuit against a Hollywood studio over attempts to delay distribution of newly released DVDs to the operator of $1 movie rental kiosks.

The suit takes issue with new distribution terms imposed by Warner Home Video that would prohibit kiosk operators like Redbox from obtaining new releases on DVD for 28 days after they go on sale. Time Warner Inc.-owned Warner Bros. adopted a policy for its home video unit similar to that imposed by Twentieth Century Fox and Universal Pictures, which also prompted Redbox to bring civil suits.

"Warner Home Video's actions come at the expense of consumers," Redbox President Mitch Lowe said in a statement.

The studios are split over how to deal with the fast-growing operator, which now has 15,000 vending machines at grocery, convenience and drug stores nationwide, as well as at the nation's largest retailer, Wal-Mart Stores Inc. Sony Pictures Home Entertainment and Lions Gate Entertainment this summer signed multimillion-dollar distribution agreements with Redbox, which is a wholly owned subsidiary of Coinstar Inc.

Warner Home Video could not be reached this morning for comment.

-- Dawn C. Chmielewski

Photo: A Redbox DVD rental kiosk. Credit: Justin Sullivan / Getty Images

Day of reckoning for Marc Shmuger and David Linde?

Hollywood's latest cliffhanger has everyone in town speculating about the fate of Universal Pictures movie chiefs Marc Shmuger and David Linde.

Many are wondering whether the two will survive the disastrous year their studio has had this year with such box office misfires as "State of Play," "Duplicity," "Land of the Lost," "Bruno" and "Funny People." (April hit "Fast and Furious" was the one notable exception.)

It's not only the significant financial losses that have their boss, Universal Studios President Ron Meyer, disturbed.  He is angered by the high level of disharmony, distrust and finger pointing that have permeated the executive ranks in recent months -- for which he holds Shmuger and Linde responsible as the team leaders.

If there's anything Meyer hates, it's a culture gone amok. One of the main reasons that Creative Artists Agency always was (and still is) one of the most effective and powerful businesses in Hollywood was that it was predicated on the philosophy of teamwork established by Meyer and the agency's other founders.

Shmuger and Linde are well aware that their jobs are on the line. In recent weeks, they have humbled themselves, taken responsibility for the missteps and attempted to smooth the executive waters, as they acknowledged in a candid interview in today's Times. The topics discussed include the high costs of their films, infighting among the studio's executive team and just what went wrong with "Land of the Lost."

Within the next two weeks, it likely will become clear whether Meyer is going to give the duo a chance to right the ship or toss them overboard.

-- Claudia Eller

Read: Universal execs under fire for a flop-filled season

Photo: David Linde, left, and Marc Shmuger at the Universal Pictures lot. Credit: Brian Vander Brug / Los Angeles Times  (An earlier version of this caption incorrectly referred to Brian Shmuger.)

'Fast & Furious' moves 3 million DVDs in first week

The DVD business may be down, but it's not out yet for the biggest titles.

Universal Pictures' "Fast & Furious," the first big-budget event movie, the first to sell more than $150 million of movie tickets domestically and the first big release to hit DVD this year sold and rented a combined total of more than 3 million units its first week, the studio said.

That's less than 2001's "The Fast and the Furious" and 2003's "2Fast 2Furious," which earned $146 million and $127 million, respectively, at the box office. Both moved about 3.5 million DVD units in their first week. 2006's "The Fast and the Furious: Tokyo Drift," which grossed only $62.5 million at the box office, sold and rented 2 million units its first week.

Though Universal surely isn't ecstatic to see the latest "Furious" movie move fewer DVD units than its two predecessors that performed similarly at the box office, 3 million is a solid number given overall industry trends. Total DVD sales were down 13.5% in the first half of the year, even accounting for the fast-growing Blu-ray segment, while rentals were up 8%.

The studio declined to break down how many of the 3 million units were rentals and how many were sold to customers. Given the market data, however, it's likely the rental portion has risen compared with previous films in the series. That would depress overall revenue for Universal, given that the profit margins on rentals are significantly lower than for sales.

Studios are typically protective about what DVD sales data they share publicly, especially if the numbers don't make them look too good. Warner Bros., for instance, declined to share any information on the performance of "Watchmen," which launched on DVD on July 21.

Though retailers are cutting down on the amount of shelf space they devote to DVDs, many Los Angeles-area stores featured "Fast & Furious" and sold it at or below wholesale cost. At the Best Buy in West Hollywood, the movie was in the front of the store on the morning it debuted, July 28, and cost $15 for the standard disc and $25 for Blu-ray. Typical wholesale prices for new movies are $18 for standard and $25 in Blu-ray. Target in West Hollywood sold the movie for $16 and $26, while at Fry's in Glendale, the regular disc was $15 and the Blu-ray was only $20.29.

Joy Papa of Silver Lake picked up "Fast & Furious" on impulse at Fry's, saying that unlike the increasing number of consumers defecting from purchases to rentals, she liked having movies available to watch whenever she wished. "Every time a new movie comes out that I like, I buy it even if I saw it in theaters," she said.

But Papa, who owns a Blu-ray player, was still being a bit budget-conscious, choosing the less expensive standard-definition version. "I decided this one was cheaper, plus I can play this one in my van," she said.

-- Ben Fritz

Photo: Paul Walker and Vin Diesel in "Fast & Furious." Credit: Jaimie Trueblood / Universal Pictures

New Olympics channel already creating headaches

Will the U.S. Olympic Committee grab the gold or suffer one of those crushing "agony of defeat" moments?

A controversy over the U.S. committee's plans to launch its own cable channel intensified today when the International Olympic Committee, the worldwide organization that organizes the games, jumped into the fray. The IOC said in a statement that it doesn't want the U.S. group's proposed new cable channel to interfere in dealings with its powerful television partner, NBC Universal.

"The proposed channel raises complex legal and contractual issues and could have a negative impact [on] our relationships with other Olympic broadcasters and sponsors, including our U.S. TV partner, NBC," the IOC said.

NBC Universal's parent company, General Electric, has committed $2.2 billion to broadcast the 2010 and 2012 Olympic Games and owns a minority stake in a start-up venture, Universal Sports. That new cable channel, available in 45 million homes, is designed to shine a spotlight on off-season events, lower-profile Olympic sports and other "lifestyle sports" programming.

But if the U.S. Olympic Committee succeeds in launching its own channel, then Universal Sports might find itself without some of the key Olympics programming that it is banking on. NBC Universal owns the venture along with InterMedia Partners, a private equity firm.

Another concern for the IOC is whether the U.S. committee's efforts will become an unwanted wrinkle in the bidding for the next round of television rights for the 2014 Olympics and beyond. Already, NBC Universal, Disney's ESPN and News Corp.'s Fox Sports have expressed an interest in bidding on the Games.

The flap exposes more friction between the IOC and the U.S. Olympic Committee, which have had an ongoing feud over their revenue sharing plan. 

"The IOC's cooperation with USOC includes working together on Olympic sponsorship and broadcasting agreements within the United States,'' The IOC said in its statement. "We were aware that the USOC had been considering a new 'Olympic broadcast network,' but we have never been presented with a plan, and we had assumed that we would have an opportunity to discuss unresolved questions together before the project moved forward. It is for this reason that the IOC is disappointed that USOC acted unilaterally and, in our view, in haste by announcing their plans before we had had a chance to consider together the ramifications."

-- Meg James