Studio Executive Rewards Share The Blame For High Ticket Prices

A long-simmering Hollywood feud overheated last week when Jeffrey Katzenberg, the former Disney executive and current DreamWorks partner, brought a $250 million suit against his former employer. Essentially, Katzenberg is trying to enforce a provision in his old contract that grants him 2 percent of the profits from Disney productions for which he was responsible as long as they are generating money.

The courtroom action should provide a fascinating insight into where all the money goes in Hollywood. A lot of attention is focused on star salaries, which are certainly outrageous and getting more outrageous all the time. And occasionally the crafts unions, which just signed a modest contract, are blamed for the spiraling production costs - the average Hollywood movie now costs $36 million.

But studio executives, as opposed to studio owners, are reaping rewards like never before in the history of Hollywood. Whether it’s through generous stock options or performance bonuses, or deals such as the one Katzenberg says he had with Disney, CEOs, presidents and various executives are profiting like never before. This, of course, follows a general pattern in business these days, with executives making so much in salary that it has become a political issue. But show business has its own peculiar notes to ring, largely because by its nature it plays out everything in public.

The situation is not unlike the one in baseball, in which owners cry poverty and point the finger at “overpaid” ballplayers. They show a balance sheet in which their clubs are losing money, but in the meantime they take care of their personal balance sheets by paying themselves out of funds with labels such as “general administration.”

Hollywood executives can take the same advantage movie by movie. Money from box-office takes can, for example, be sped directly into executive accounts before, rather than after, a movie’s profits are added up.