Kirk Douglas

Until the 1950s, Hollywood was controlled by seven major film studios. More importantly, it was controlled by moguls, all of whom were men they of eastern European origin, who ran the studio just as the kings of their previous countries ruled the peasants. Creative control belonged to the mogul, while the money was always controlled by the bankers of New York, the so-called "Suits".

This power alignment began with the beginning of Hollywood prior to 1920, and continued for 40 years and over. What has been keeping intact the caste system, where the stars were controlled by individual studios. They were paid on an annual basis, and did not have a say in the movies they appear in. In essence they were slaves of the system, not very different from how baseball players have been treated until the Supreme Court banned the career-long captive players.

The caste system began to crack Hollywood in the 1950s, when Kirk Douglas, father of Michael Douglas went independent, and formed one of the first independent film companies called Bryna, for his mother. They produced the "Vikings", "Spartacus" and "Seven Days in May". The so-called Studio system was dead. Power shifted to the individual actors, who became the brand names in their own right.

Two developments began in the 1960s. The Hollywood studios would be borne by the companies, then bought by the search giant influence of multinationals in the world. The second is that the stars began to exercise their power. large multinationals like Sony, Newscorp, Viacom and hated the fact that stars had so much power. In the past ten years, A-List actors like Tom Cruise, Johnny Depp, and Robert Redford started to receive profit participations, which the studios only gave begrudgingly.

At first it did not matter because Hollywood accounting is such that somehow the studios could always show a loss on the film. The stars are wise very quickly, and started taking front end participations, a percentage of the ticket when moviegoers bought tickets. In my 35 years on Wall Street, I participated in financing many movies, and I must say that nobody has ever made money on the backend. Regardless of the size of the film, somehow the movie always lost money when it comes to backend participations.

We have now reached a point where large multinationals that control media on a global basis are tired of what they put up with the name of the star mark. Mel Gibson as you know is in trouble on the West Coast with his drinking and alleged anti-Semitic remarks from cancellation of a series of Disney Holocaust with Gibson's production company.

Now Tom Cruise has clashed with Sumner Redstone, and Viacom. Redstone said publicly that he does not like some velocity measurements in the last year. It makes no sense. Normally when a studio with a star breaks, there is no public statement. None should be given and how they fair share. It's more personal.

It is said that Viacom had offered Cruise a contract two million dollars of output, down $ 4 million in the previous case, plus a fund of $ 6 million for the development of film projects. Here is the real deal. Tom Cruise did "Mission Impossible III" for Viacom, the big film about 400 million dollars worldwide. Cruise had negotiated as a right, 25% of gross revenues of Viacom on the film.

This is how it works. The movie does $ 400 million. The theaters get half, and Viacom gets half, or 200 million dollars each. Cruise gets 25% of half of Viacom, is 50 million dollars. In the end Viacom gets $ 150 million, and Cruise gets 50 million dollars. Sounds great for Viacom is not it. Not really, Viacom must pay for the film that would be 150 million dollars, more ad.