Cruise in deal to revive UA

Two months after he was kicked out of Paramount Pictures, actor Tom Cruise and his producing partner are returning as part owners of one of Hollywood’s most storied movie names.

The deal for Cruise and longtime associate Paula Wagner to own at least 30% of a resurrected United Artists reflects a changing economic climate in the movie industry in which outside money from sophisticated investors is increasingly bankrolling stars and filmmakers as an alternative to studio checkbooks.

Cruise and Wagner will partner with UA owner Metro-Goldwyn-Mayer Inc., another historic name in Hollywood now controlled by private equity firms, to take charge of reviving a company that is in effect returning to its roots as an artist-operated studio. In 1919, UA was founded by four of the most important figures in the silent-movie era -- Charlie Chaplin, Douglas Fairbanks, Mary Pickford and director D.W. Griffith to offer artists creative freedom and ownership in movies.

At UA, Wagner will serve as chief executive, a role she has never held in a career that has included being Cruise’s production partner for 14 years and, before that, his agent.

Cruise won’t have an executive title but is expected to be heavily involved in developing and producing UA movies. He will star in an unspecified number but will still be able to act in movies for other studios.

The two, who are not risking their own money, plan to produce at least four films a year averaging $40 million to $50 million that MGM will market and release, and can give the go-ahead to projects costing as much as $60 million.

“When you look at the tradition of UA and what the philosophy was -- to make pictures driven by artists -- it fit into what Tom and I wanted to do,” Wagner said.

Cruise said in a statement, “It’s our desire to create an environment where filmmakers can thrive and see their visions realized.”

But some industry watchers were skeptical. Cruise and Wagner have a mixed track record as producers, and they lack experience overseeing what amounts to a mini-studio.

“Good for Tom -- it’s a great press release,” said media analyst Harold Vogel. “But it’s little beyond a press release and the revival of a moribund label that happened to be available.”

Although he is still one of the world’s biggest stars, Cruise has hurt his public image lately with off-screen antics that have turned off some moviegoers. And, at age 44, he is no longer the youthful superstar he was when he made such films as “Top Gun,” “The Firm” and “Jerry Maguire.”

Although Cruise and Wagner are considered bona fide producers, making hundreds of millions of dollars over the years for Paramount when Cruise starred in such movies as the “Mission: Impossible” films and “War of the Worlds,” they have not done as well on films without him as an actor. Last year’s “Elizabethtown” lost about $30 million for Paramount.

The Cruise-Wagner deal comes as Hollywood’s biggest stars and filmmakers are seeking outside money as they are being squeezed by cost-conscious studios coping with soaring production and marketing costs, erratic box-office returns and flattening DVD sales. Over the last year, thousands of jobs have been slashed, and lavish talent deals like the one Cruise and Wagner had at Paramount for 14 years are coming under scrutiny.

Top actors often branch out into production to make pet projects, gain creative freedom and to get a bigger slice of the profits. Cruise for years enjoyed by far the richest studio-funded production company deal of any top star, with Paramount paying as much as $10 million a year to cover payroll, script purchases and fees he and Wagner were guaranteed.

However, Cruise and Wagner were jettisoned from Paramount in August after the studio balked at continuing to fund the duo’s production company at that level. In a move that blindsided Cruise, Wagner and even Paramount’s own management, Sumner Redstone, chairman of studio parent Viacom Inc., publicly trashed Cruise, saying the star hurt the studio with his public behavior.

Cruise had jumped on talk-show host Oprah Winfrey’s couch professing his love for actress Katie Holmes, aggressively promoted his Scientology beliefs and criticized actress Brooke Shields for taking medication to treat her postpartum depression.

Redstone estimated that Cruise’s actions cost the studio as much as $150 million in box-office receipts for “Mission: Impossible III.” Although Paramount expects to break even on the film, which grossed nearly $400 million worldwide, Cruise could reap as much as $80 million because of his lucrative arrangement.

Despite that, Redstone issued a statement Thursday saying, “I wish Tom and his associates the greatest fortune in their new venture.”

A few years ago, even a star of Cruise’s caliber might not have pulled off a venture such as UA. But money from new sources such as hedge funds and private equity groups is pouring into a business once financed almost exclusively by major studios.

MGM, whose two biggest investors are private equity firms Providence Equity Partners and Texas Pacific Group, will initially fund UA and be its majority owner. MGM Chairman Harry Sloan said his studio would provide money to help Cruise and Wagner get UA off the ground. Before long, Sloan said, he will seek financing from hedge funds, investment banks and individuals to make the company more independent from MGM.

Wagner confirmed that a new fund, Winchester Capital Management, whose partners include former top CBS and Sony executive Jeff Sagansky, is providing $100 million for approved movie projects that may be cofinanced by UA.

Sloan said MGM was considering offering other top talent who want to work outside the studio system a chance to join Cruise and Wagner as partners in United Artists, which will be based at MGM headquarters in Century City.

“The studios are accusing the talent of putting them at big risk, and the talent is accusing the studios of wasting money and being political bureaucracies,” Sloan said. “This way we can create a new studio model where everyone can win.”

Having a studio part owned and run by talent is reminiscent of UA’s original philosophy when Chaplin, Pickford, Fairbanks and Griffith founded it. Even after the four were no longer involved, UA continued as a creative force. It arguably hit its zenith in the 1960s and 1970s, earning best-picture Oscars for such hits as “West Side Story,” “One Flew Over the Cuckoo’s Nest,” “Midnight Cowboy,” “Rocky” and “Annie Hall.” It also was the home of the blockbuster James Bond and “Pink Panther” franchises.

But the studio nearly sank in 1980 while owned by insurance giant Transamerica Corp. when “Heaven’s Gate” became one of the all-time box-office debacles. A year later, billionaire Kirk Kerkorian bought UA and merged it with MGM. Cruise worked with UA in 1988 when he starred with Dustin Hoffman in the Oscar-winning “Rain Man.”

In recent years, UA evolved into a label for small, independent films such as “Capote.” UA was mothballed after MGM was bought in 2005 for nearly $5 billion by four private investment firms in partnership with electronics giant Sony Corp. and cable operator Comcast Corp.

Ever since Sloan was hired by MGM a year ago, he has tried to figure out a way to revive UA and even entertained offers to sell it. Shortly after Redstone cut Cruise loose, Sloan called Creative Artists Agency, where Cruise’s representatives include Wagner’s husband, Rick Nicita, floating the idea of getting into business with the two.

Cruise and Wagner had received a multimillion-dollar infusion into their production company from Washington Redskins owner Daniel Snyder. When Sloan pitched running UA to them, Wagner said, it was a “unique opportunity” they had to grab.

“We’re moving onward and looking to the future,” Wagner said. “It’s a dream Tom and I have had to set up a company we can run, manage and be part owners.”

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United Artists: a chronology

1919: Charlie Chaplin, Douglas Fairbanks, Mary Pickford and D.W. Griffith team up to form their own studio, which they name United Artists.

1940: UA releases Alfred Hitchcock’s “Rebecca,” which wins the studio’s first best-picture Oscar.

1951: Chaplin and Pickford, the surviving partners, sell UA to entertainment lawyers Arthur Krim and Robert S. Benjamin.

1967: After a succession of hits, including “The Apartment,” “West Side Story” and “The Greatest Story Ever Told,” Krim and Benjamin sell UA to Transamerica Corp.

1975-77: UA wins three successive best-picture Oscars, for “One Flew Over the Cuckoo’s Nest,” “Rocky” and “Annie Hall.”

1977: United Artists sets an industry record for film grosses.

1980: UA’s release of Michael Cimino’s “Heaven’s Gate” becomes a critical and financial debacle for the studio. The film makes back only $1.3 million of its $44-million cost.

1981: Kirk Kerkorian buys UA and merges it with MGM.

1988: UA releases “Rain Man,” its 10th and most recent film to win a best-picture Oscar.

1990: Kerkorian sells MGM/UA to Giancarlo Parretti. He defaults in 1991, turning over the studio to Credit Lyonnais.

1996: Kerkorian reacquires MGM and UA for $1.3 billion.

2002: The UA film “No Man’s Land” wins the Oscar for best foreign-language film. Later in the year, UA releases “Bowling for Columbine,” which wins the Oscar for best documentary.

2005: MGM, including United Artists, is bought by an investment group led by Sony Corp.

Thursday: Tom Cruise and producing partner Paula Wagner sign a deal to run and be part owners of United Artists.

Times research by Scott Wilson