The Big Picture

by Ben Fritz

  Netflix, however, would compensate everyone handsomely up front in order to debut a Brad Pitt drama on its streaming service. It paid $75 million for global rights to War Machine, confident that its controversial subject matter and A-list lead would draw attention and engage at least some subscribers, even if others were put off by the subject matter. The difference between the film’s production budget and Netflix’s check was money that Pitt and the other talent would pay themselves.

  By June 2016, Netflix got its hands on Sony’s other former favorite son, Will Smith. Bright was one of the hottest packages to hit Hollywood in a while. CAA offered studios the chance to produce a supernatural cop movie starring Will Smith and directed by David Ayer, who had made the respected End of Watch and had worked with Smith on the commercially successful, if critically reviled, superhero movie Suicide Squad. Sony was willing to pay between $40 million and $50 million and Warner Bros., together with MGM, offered a little more, but Netflix wrote a check for more than $90 million. That was about twice the production budget of the film, meaning $45 million would go to the talent as up-front payment.

  Though it featured extensive visual effects, Bright was based on an original idea, making its commercial prospects on the big screen against the latest Marvel sequel questionable at best. That was one of the main reasons that Will Smith and his partners were willing to go with Netflix. “I was after the creative freedom, the ability to make really hard-R-rated movies with vision and voice and see them play in the on-demand world,” Ayer said. “You do that as a theatrical release, and you’d better hit a bull’s-eye, some cultural zeitgeist. Otherwise it’s a gamble for studios; it’s easier for them to justify $200 million budgets for tentpoles than $40 million to $90 million for the movies I like to make.”

  As of this writing, the world still doesn’t seem to know what to make of Netflix’s strides into the film business. Brad Pitt’s War Machine debuted to decidedly mixed reviews, and there’s no way to tell whether it was a success financially. But it certainly didn’t make any discernible impact on the national culture or the conversations about war and politics that it satirized.

  The $50 million Okja, from South Korea’s most famous director, Bong Joon Ho, and starring Jake Gyllenhaal, debuted to both boos and a four-minute standing ovation at the Cannes Film Festival in 2017, signifying the international film community’s uncertainty over how to treat a company that disrespects movie theaters while embracing a beloved auteur. And what about Netflix’s biggest gamble: a $120 million-plus drama starring Robert De Niro and Al Pacino and directed by Martin Scorsese called The Irishman, which began shooting in 2017?

  These developments reveal one certainty: the bonds that movie studios had forged over decades with stars, directors, and other talent were now forever broken. Ted Sarandos had proved that even though he delivered films via Wi-Fi to devices that fit in a pocket, he could build a better home for movie stars than the movie studios themselves.

  8

  Frozen

  Why Studios Stopped Making Mid-Budget Dramas

  Amy Pascal was furiously trying to save a movie she thought might be the next Citizen Kane. She was doing this while getting a mammogram.

  Despite the all-day physical exam that she had planned for that sunny November day in 2014, Sony’s motion picture chief was busy typing e-mails and making phone calls in a last-ditch effort to hold on to Steve Jobs, an unusual biopic about the Apple cofounder that had consumed much of her professional life that year.

  Too much, in the eyes of Michael Lynton, who thought she should be devoting her time to finding the desperately needed franchises that could deliver big profits.

  But Pascal had a passion for Steve Jobs, which had not lessened despite the many frustrating months of trying to move it from script to camera. Despite a modest budget that fluctuated between $33 million and $70 million and the A-plus talent that had orbited it at various times (including the writer Aaron Sorkin, the directors David Fincher and Danny Boyle, and the actors Leonardo DiCaprio, Christian Bale, Michael Fassbender, Scarlett Johansson, and Seth Rogen), Sony could never make the financials work. And so the team behind the movie, led by the powerful and profane producer Scott Rudin, were taking it out to other suitors. After reluctantly agreeing to let it go, Pascal was now having second thoughts. How could she give up on this movie just because the numbers didn’t add up on paper? In her gut she believed it could win awards, win at the box office, and be remembered for decades.

  This wasn’t who Amy Pascal had been for most of her career. It wasn’t who she wanted to be for the rest of it. “I just made the worst decision of my career and i will regret it forever,” she told a friend the night before the mammogram. “I don’t know what I was thinking.”

  Now Pascal was letting her annual checkup turn into one of the most stressful days of her career, as she tried to find some way to keep Sony involved in the film and regain her sense of pride as a mogul willing to take risks. When Rudin told her that he had to get her on the phone ASAP to discuss the possibility, she needed him to hang on: “In man gram machine,” one of the most powerful people in Hollywood informed another.

  It was an absurd situation for many reasons. Perhaps most fundamentally, it shouldn’t have been so hard for Amy Pascal to make Steve Jobs in the first place. Why, any rational person might ask, would a studio that for the past few years had struggled to make money on movies that cost between $150 million and $260 million say no to one that cost as little as $33 million, came with an A-list talent pedigree, was based on a best-selling book, had a good shot at winning awards, and concerned one of the most fascinating men in modern America?

  Why, in other words, was it so hard to make a high-quality, interesting, original mid-budget movie for adults?

  Queen of the Stone Age

  Certainly no one in Hollywood had a better track record with these types of films than Amy Pascal. The prior year, Captain Phillips, starring Tom Hanks in the true-to-life story of modern sea piracy, had been one of the few bright spots for Sony in a dismal 2013. It grossed $220 million worldwide and generated a healthy profit of about $45 million. Other profitable, Oscar-nominated mid-budget dramatic hits under Pascal’s reign at Sony in the 2010s included American Hustle, Zero Dark Thirty, Moneyball, and The Social Network.

  Compare that to the agony of The Amazing Spider-Man 2, which cost $260 million and made less than $20 million in profits. Given all that, didn’t it make more sense to focus on the movies that cost one-fifth as much and earned more profits?

  Michael Lynton certainly didn’t think so. When Pascal believed she had come up with the perfect setup for the Steve Jobs movie—DiCaprio, Johansson, and Rogen together, at a budget of about $70 million—she urged her boss to sign off. “I would take that bet everyday . . . would you?” she asked hopefully.

  “No, not at that number,” he shot back. “Still a drama.”

  What, the moviegoer tired of superhero sequels might ask, is so bad about the d-word? From Gone with the Wind through Sunset Boulevard, The Godfather, Rain Man, and Saving Private Ryan, dramas have long been among Hollywood’s most beloved and successful movies. If Sony’s movie chief was better at making them than the competition, why not focus on what she did best? Left unsaid by Lynton, but certainly understood by Pascal, was that major studios like Sony couldn’t settle for hitting singles and doubles when the competition was regularly blasting home runs.

  The hundreds of millions of dollars in profits created by one Avengers or Jurassic or Spider-Man film dwarf the profits of Captain Phillips, The Social Network, and American Hustle combined. And then there are the sequels, consumer products, and other sources of revenue that come along with a hit franchise film. Those movies also require a lot less work, compared to their potential returns. Creating TV ads and billboards, booking screens, and all the other efforts that a studio’s staff puts into releasing a film are largely the same, whether it’s a drama that might make $50 million or a superhero sequel that might make $2
00 million. So why not have your team put most of its energy into the latter?

  While Sony had a better track record with mid-budget dramas than other studios did, it couldn’t change the fundamental economic equation. Although the maximum profits on a drama like Steve Jobs are a fraction of those for Transformers, the expected losses from a drama’s failure are often similar or worse. Even the lamest big-budget superhero films, like The Amazing Spider-Man 2, almost always attract some audience, drawn simply by the visual spectacle and the appeal of brand-name titles. Dramatic films, because they have no built-in franchise appeal and because they are competing with a slew of excellent dramas available to watch or stream on TV, have to be really good. They are, in Hollywood parlance, “execution dependent.” When the final result is anything short of wonderful, the box-office returns and studio losses can be abysmal.

  That’s why the worst box-office scenario Sony projected when greenlighting The Amazing Spider-Man 2 still called for it to make a profit. For Steve Jobs and other dramas, like Cameron Crowe’s Aloha, Meryl Streep’s Ricki and the Flash, and Will Smith’s Concussion, Sony envisioned significant losses if the stars didn’t align. The latter three films, in fact, did lose money; even someone with Pascal’s track record wasn’t immune to losses on mid-budget dramas. Other studios, lacking someone with her expertise, were even more likely to bleed red ink when they strayed from big-budget “event” movies.

  In 2016 alone, nearly every mid-budget movie with a hint of drama to it and that was released nationwide flopped. Among them: the Olympic skier biopic Eddie the Eagle, the Matthew McConaughey Civil War drama Free State of Jones, Tina Fey’s Whiskey Tango Foxtrot, the Russell Crowe–Ryan Gosling cop film The Nice Guys, and the Iraq War gun-running tale War Dogs. Sully, La La Land, Hidden Figures, and Arrival were the only mid-budget dramas to gross more than $100 million. And that was considered a surprisingly high number because only two comparable films had grossed that much in 2015.

  In 2000, even though average ticket prices were 38 percent lower than they are today, nine mid-budget dramas grossed more than $100 million.

  The biggest change over the years is just how poorly mid-budget dramas now perform when they aren’t hits. In the past, if a major studio put its resources behind a movie, it was virtually certain to gross at least $15 million. But now, with big franchise films sucking up the oxygen in multiplexes and with most of the cultural buzz about interesting dramas centered on television, a new dramatic movie could come and go unnoticed, as if it never existed.

  TriStar, Tom Rothman’s label devoted to mid-budget dramas that he ran before taking over all of Sony Pictures, released one flop after another, including Ricki and the Flash, The Walk, and Billy Lynn’s Long Halftime Walk, which grossed less than $2 million.

  Sony wasn’t the only studio whose shrinking number of mid-budget dramas floundered. Fox released the Warren Beatty–directed drama Rules Don’t Apply to just $3.7 million. Disney’s Queen of Katwe, an inspirational true story about an African chess prodigy, made a dismal $8.9 million. DreamWorks’ WikiLeaks drama The Fifth Estate grossed only $3.3 million. And Universal’s By the Sea, a dramatic love story with Angelina Jolie and Brad Pitt, didn’t even make it to $1 million.

  “There just is no floor anymore,” Rothman ruefully observed to Pascal.

  “I know,” Pascal replied to her friend. “It’s fucked.”

  These are exactly the types of movies that people claim they want more of, but they rarely get up off their couches to go and see. And in the age of puny DVD sales, most of these films end up losing tens of millions of dollars. No wonder studios make so few of them. Counterintuitive as it may seem, the mid-budget drama—the inexpensive movies that adults regularly complain have disappeared from cinemas—has become the riskiest category of films for major studios.

  That’s why, before she began desperately trying to save Steve Jobs while in her gynecologist’s office, Amy Pascal had reluctantly decided to give up on making the movie herself. She had gotten the budget down to $33.5 million after giving up on the team of David Fincher, Leonardo DiCaprio, and Scarlett Johansson, instead settling for Danny Boyle, Michael Fassbender, and Kate Winslet. But still, when her financial staffers ran the numbers, they told her the film would need to gross $100 million worldwide just to break even and $139 million to make a measly profit of $20 million.

  Sure, Sony’s Captain Phillips and Zero Dark Thirty and The Social Network had grossed more than that. But they were exceptions in a modern Hollywood littered with mid-budget-drama flops. Betting on repeating that success with Steve Jobs would be like putting your money on a single number at the roulette table because it had come up a few times before. Andrew Gumpert, who ran the business side of Pascal’s movie operation, urged her to take a different tack: “If ever there was a fact pattern where we should own zero of this film,” he wrote, “this is it.”

  It made sense for Sony to release Steve Jobs, in other words, only if somebody else would pay for it. That way, the studio could put its name on the movie, and get the glory associated with releasing it, without having to take any financial risk. Pascal and her team knew Gumpert’s analysis could mean only one thing. As Doug Belgrad put it: “We need Megan.”

  Help Me, Megan Ellison, You’re Our Only Hope

  If studio lots inspire and impress with the grandeur of their art deco buildings and faux main streets, the main entrance to Annapurna Pictures makes a very different statement. The first sight upon entering its complex of five buildings in West Hollywood is a massive A, on a black background. Like a pointillist painting, it initially appears to be a smooth image, but upon closer inspection, it is made up of tiny distinct images—not dots, but thick rectangular boxes that once held a generation’s only way to see Scarface, The Graduate, E.T., or the Look Who’s Talking trilogy. It’s a work of art composed of several thousand VHS tapes on twenty-seven shelves.

  Inside Annapurna’s offices are classic movie posters, a vintage arcade machine, and a staff of several dozen who are, with a handful of exceptions, under age forty. All of them dress like they’re under thirty. The ultimate Hollywood hipster heaven, some call it.

  It’s the playground or the business, depending on your perspective, of Megan Ellison, Annapurna’s founder, CEO, and raison d’être. Some view her as a trust-fund baby having fun with Dad’s money in Hollywood, others as a desperately needed patron of the arts in a cultural business dominated by the bottom line. She may be best understood as a fallback home of the interesting, original, challenging movies for adults that studio executives like Amy Pascal wanted to make but couldn’t anymore.

  Ellison’s short filmography since starting Annapurna in 2011 is one any studio executive would kill for—if they cared only about reviews and award nominations, not the bottom line. Fourteen films were released from 2012 through 2016, seven of which were nominated for major Academy Awards, such as best actor or actress, director, and picture. The Master, Zero Dark Thirty, American Hustle, Her, Foxcatcher, Joy, and 20th Century Women were all produced thanks to Ellison’s money. Studios like Sony handled the mundane but important tasks of marketing and distribution, allowing them to share in the glory of acclaimed films without taking on the financial risk of making them.

  They were happy to leave that unpleasant task to the shy, Aston Martin–driving, eighties-rock-band T-shirt-wearing, cinema-loving daughter of the world’s fifth-richest man—a young woman who arguably made a bigger mark in Hollywood than any mogul this century before she turned thirty, in 2016.

  Amy Pascal especially adored Megan Ellison. The two movies that brought Pascal’s studio closest to winning an Oscar this century, Zero Dark Thirty and American Hustle, were financed entirely and 50 percent, respectively, by Annapurna’s chief.

  “The kind of movies Megan is helping to make are tough to do, but they’re the reason we all got into this business,” Pascal said of her young friend. You can imagine Pascal pursuing a life like Ellison’s if, instead of being born middle-clas
s in Los Angeles, she had been the daughter of Larry Ellison, cofounder of the Silicon Valley software giant Oracle, who is estimated to be worth $62 billion.

  Megan Ellison’s parents divorced before she turned one, and she spent her childhood watching VHS tapes at her mother’s home with her brother, who would grow up to finance more mainstream, big-budget films, like sequels to Terminator and Star Trek. From a young age, the introspective, cerebral, and blunt brunette cultivated something of a punk-rock alternative persona but hardly rebelled against her elite upbringing. She raced speedboats with her father in St. Tropez and learned to competitively ride horses on her mother’s estate.

  Ellison attended the University of Southern California’s prestigious film school but dropped out after two semesters and traveled the world. Among her destinations was Nepal, where she hiked the Himalayan mountain Annapurna, for which her company would be named. Upon returning to the United States, she decided that what she really wanted to do was use her wealth to finance movies from directors she admired. Ellison certainly had eclectic tastes: she worshiped John Cassavetes and Robert Altman yet called the Back to the Future films the “greatest film trilogy of all time”; she also had a soft spot for 1980s comedies like Goldie Hawn’s Overboard.

  When she started working in film, in about 2006, Ellison couldn’t have known just how big an opening there would be for her business plan, thanks to the coming franchise-ation of the major studios. At the time, she started with low-budget efforts that could charitably be described as learning experiences. After contacting the director Katherine Brooks out of the blue on MySpace, Ellison showed up at a meeting on a Harley-Davidson and agreed to finance Brooks’s independent movie Waking Madison, which cost about $2 million. It ended up going straight to video. Three subsequent efforts also made little impact among critics or at the box office. But things changed in 2010, when Ellison gained access to a substantial inheritance, estimated to be in the hundreds of millions, if not billions.