New to Hollywood? Watch Your Wallet.

When Americans visit certain exotic foreign spots, we're bound to be warned, by certain well-meaning friends, to enjoy the ruins but be sure to avoid salads and shellfish.

It does seem a little ethnocentric, but it's probably saved a few of us from writhing on a couch in a doctor's office where one can't read the diplomas on the wall. If there are any.

In the same spirit of cautionary tales, it seems only fair, as monsoons of new money rain upon Hollywood from India (if bankers will only back the enthusiasm of Reliance Big Entertainment), Dubai (where Spike Lee wants to score some cash), and Abu Dhabi (where the government-owned Abu Dhabi Media has set up a $1 billion international filmmaking fund), to give our friends from those warmer financial climes a little heads up about the ways of the Wild West.


Rule No. 1: Movies are not a money-making enterprise, at least not for you. Legions of investors have found out the hard way that Hollywood is happy to pick your production fund like a chicken bone and leave you half insane.

Think about Sony's debacle in buying the former Columbia Pictures, as well as all of the sadder-but-wiser insurance companies, too-clever-by-half hedge fund managers, and groups of American orthodontists who have frittered away fortunes on silver-screen dreams. Most have little to show for it other than perhaps a photo of themselves standing next to an indifferent Nicole Kidman in a bright red gown.

The lesson: Movies can generate a lot of revenue at the box office, but many don't. Even stinkers can rely on foreign sales, DVD sales, and other ancillary rights to generate enough income to recoup their cost -- but you'll be lucky to see any of it.

Rule No. 2: Jam tomorrow and jam yesterday but never jam today. The White Queen in Through the Looking Glass would be a wonderful studio executive. Contracts may promise lavish rewards, but the jam has a funny way of never actually turning up.


You don't have to be from the Middle East or South Asia to discover this painful lesson. You might be from some other booming region, like Texas -- and you might even be a very sharp Harvard graduate and seasoned Texan, like Tommy Lee Jones -- and yet come to feel that you've been flimflammed by a studio.

Witness Jones' lawsuit filed in San Antonio last Thursday, seeking more than $10 million in unpaid earnings he said had been promised to him for starring in the $160 million hit, No Country For Old Men.

Although Jones had a contract structure that was not all that unusual, which promised him considerable back end -- that is, net profit -- in exchange for cutting back his usual upfront acting fee, the suit also accuses Paramount of procedural errors in drafting the contract.

The lesson: Jones made the mistake of acting first and trying to collect later. See Marlon Brando example below for how to avoid this gaffe.

Rule No. 3: What's yours is theirs, and what's theirs is theirs. Paramount was, of course, the target of perhaps the most notorious lawsuit ever filed to pry profits out of Hollywood's legendarily Byzantine system of studio accounting. Newspaper columnist Art Buchwald went to war with Paramount in 1988 over the rights to Coming To America, an Eddie Murphy hit that was curiously similar to Buchwald idea that the studio had rejected.

The mysteries of studio finance have been well detailed in Edward Jay Epstein's The Big Picture, as arising in part form the complicated shell game that is modern film finance:

"Studios now outsource the making and financing of most of their movies ... to off-the-book corporations. ... Studios are usually obliged to share their proceeds ... [but they are the party] to decide who gets what share. ... If any other participants do not agree with these decisions, their recourse is limited since the studios usually control the information on which these payments are based."

Epstein memorably quotes one studio financial executive referring to his operation as a "black box" that even skilled auditors usually can't crack open.

The lesson: If you have leverage, use it ruthlessly. When New Line desperately wanted Peter Jackson to produce its Lord of the Rings follow-up The Hobbit, he made sure he'd locked up a satisfactory slice of the trilogy's pie before signing on.

(Next -- and why aren't we surprised? -- the heirs to Lord of the Rings creator J.R.R. Tolkien sued for their cut.)

Rule No. 4: When it comes to actor demands, resistance is futile. The big dogs naturally get a better shake, as the foreign investors will discover as they encounter actors' demands for things like personal chefs on the set, luxury accommodations on locations and doublewide trailers with pop-outs when filming at a studio.

(Heck, Will Smith in recent years has persuaded producers to see the logic of renting a three-story bus behemoth -- from him -- for his use during shooting.)

The lesson: Keeping actors happy is important -- no matter what the cost -- because it keeps productions on schedule. Failing to do so can be even more expensive.

Rule No. 5: Everyone else has more power than you do. When a 1990 Tri-Star production called The Freshman fell behind schedule, requiring Marlon Brando to go two days over his scheduled stop date, he declined to appear on the set each day before being handed a $50,000 check. That was the per-diem penalty provided for in his contract.

When the studio balked, Brando called up a Canadian newspaper (the movie was being filmed in Toronto) and blistered the production on the record. Some of his choicest opinions: "It's horrible, a flop, but after this I'm retiring. I wish I hadn't finished with a stinker."

And the costs keep coming even after production ends. When it's time to go to a film festival to promote the picture, for example, expect to buy first-class tickets and hotel suites for the hairdresser, the make-up person, the personal assistant, and the ne'er-do-well brother. Balk at the cost, and you may well get no help in promoting the picture -- or, worse, a petulant star bad-mouthing the film.

The lesson: Surrender all notions about running a movie studio like a real business.

Still, the industry isn't entirely thankless. I recall being on the Freshman set for the last day of shooting as Brando (who was reading his lines off cue cards, a common practice for him) leaned into the lens, got the attention of the producer and director, and in the friendliest possible way, flipped them the bird.

Welcome to Hollywood.