Hollywood stars meet the real world. It's pay cuts all round

Tinseltown 2006: takings are down, costs are up and blockbusters are out

Hollywood stars are being forced to take pay cuts as the major studios are pulling the plug on big-budget projects.

With last year's box office takings down 5.2 per cent and the cost of making movies ballooning because of added expenses for digital enhancement and global marketing, studios are refusing to meet stars' financial demands. In addition, several high-profile films due to go into production have suddenly disappeared from view.

Studios have taken note of the fact that only three of the 10 highest-grossing films last year - War of the Worlds, Charlie and the Chocolate Factory and Mr and Mrs Smith - were star-driven. The rest of the major hits - such as Star Wars: Episode III - Revenge of the Sith, Harry Potter and the Goblet of Fire and The Chronicles of Narnia - had no stellar names, or fat salaries, to speak of.

In addition, all of this year's Oscar nominees for best actor - Philip Seymour Hoffman (Capote), Terence Howard (Hustle and Flow), David Strathairn (Good Night, and Good Luck), Joaquin Phoenix (Walk the Line) and Heath Ledger (Brokeback Mountain) - worked for rock-bottom wages. The last of the big paydays went to Lord of the Rings director Peter Jackson, who was paid a reported $20m plus 20 per cent of the gross for King Kong, made by Universal.

Now studios are making sure that before any stars or directors take money from the film, they get their cut. Sony refused to give the green light for the upcoming romantic comedy The Holiday until Cameron Diaz agreed to a "cash break-even" deal. Even Tom Cruise, who normally collects around 25 per cent of his films' gross profits, agreed to take a much lower cut for Mission: Impossible 3 when Paramount was faced with a massively bloated budget and at one stage threatened to cancel the project.

Brad Pitt is another one who has taken a big cut in pay, from his customary fee of up to $30m down to just £750,000 for his latest, The Assassination of Jesse James.

Former Twentieth Century Fox chairman Bill Mechanic describes it as a long overdue rationalisation of the business: "In the past you paid someone a lot of money to star in a movie and then you spent a lot of money to make a movie and then you lost money."

Another studio executive said: "Movies no longer need big star names to make money. With most studios having to answer to larger parent companies their main aim now is to assess financial risk and that means making movies that cost less."

In recent weeks Believe It or Not, a film to star Jim Carrey and estimated to cost around £120m, was shut down by Paramount and another Carrey film, Used Guys, was rejected by Fox when the budget passed £90m. As the budget of its long-planned American Gangster crept over the £80m mark, Universal shelled out £15m to Denzel Washington to meet its "pay-or-play" contract - meaning the actor gets paid regardless - rather than go ahead with making the film.

Silence surrounds the Universal horror film The Bell Witch, which was due to go into production shortly and for which Reese Witherspoon was apparently to receive a massive £24m.

"Hollywood has always thrown ungodly sums of cash at top-tier actors, who ostensibly provide a kind of bomb shelter for the studios picking up the tab," said Entertainment Weekly.

"It was a strategy that worked well enough until it didn't ... now studios are trying to add a new step to their budget calculations: common sense."

BIG EARNERS

Three of the top-grossing movies of 2005 were star vehicles - but they were all beaten at the box office

War Of The Worlds

Tom Cruise's salary: $100m (£55m)

Total gross: $591m

Charlie and The Chocolate Factory

Johnny Depp: $18m

Total gross: $472m

Mr & Mrs Smith

Brad Pitt: $20m

Angelina Jolie: $10m

Total gross: $428m

Star Wars: Episode III - Revenge of the Sith

Ewan McGregor: $7m

Total gross: $848m

Harry Potter and the Goblet of Fire

Daniel Radcliffe: $11m

Total gross: $892m

The Chronicles of Narnia

No single large earner

Total gross: $739m