Whether Paramount Pictures cut off Tom Cruise as a result of his recent conduct–bouncing up and down on Oprah Winfrey’s couch, attacking Brooke Shields for taking prescription drugs, publicly speaking out against psychiatry, zealously advocating Scientological ideals–or because he was no longer providing and optimal return on investment (ROI) is moot at this point. It really doesn’t even matter whether Paramount shut the door in his face or if his Cruise/Wagner Productions company opted out in favor of going independent with the backing of $100 million from two unnamed hedge funds. What does matter is that the brand that is Tom Cruise is for sale, and financing it may prove risky business.
Today, The Wall Street Journal reported just how risky that business could be. Citing examples of failure at generating returns at the box office for hedge funds that backed such films as Poseidon, V for Vendetta, Lady in the Water, and Ant Bully, the article explains how hedge funds are starting to pull away from Hollywood.
As various forms of new media services push to the fore, video download services, Netflix, and DVRs in particular, Tinseltown isn’t always cashing out huge at the box office these days. The cost of movie making continually increases, while the ROI appears to remain flat.
Big Hollywood studios could take some advice from Star Circle Pictures, a motion picture company covered in the September issue of Fast Company. According to that film company, there exists strategies for reducing the risk associated with movies. Perhaps even Cruise/Wagner should heed that advice.