The
Hollywood Economist
The numbers behind the industry.
While Hollywood awaits for the dreaded sword
of Damocles to come crashing down in the long-festering
Pellicano affair, Sumner Redstone may have engaged in a
brilliant piece of contingency planning by acquiring the
services of Stacey Snyder, the chief of Universal Pictures.
The
federal case against Pellicano, “the P.I. to the stars,”
began after FBI agents raided his office in November of
2002 and found military-grade C-4 plastic explosives, which
led to Pellicano being sentenced to 30 months in prison.
The FBI also discovered evidence that Pellicano's agency
had wiretapped, blackmailed, and intimidated dozens of movie
stars, Hollywood executives, and their mistresses. So far,
the case has resulted in the indictment of thirteen people.
The
fear, as federal prosecutors relentlessly work their way
up the Hollywood food-chain, is that the beneficiaries of
Pellicano's illegally obtained information, including some
of Hollywood's more powerful players, could be indicted.
In turn, any indictment would open the floodgates to hundreds
of millions of dollars in civil lawsuits. The loathing proceeds
from the realization that in a community where information
about the intimate affairs of celebrities is tantamount
to an opportunity for extortion, one of the many direct
or indirect beneficiaries of Pellicano's information was
the newly-minted Paramount chairman Brad Grey.
Before
joining Paramount, Grey had been a principal in the Brillstein-Grey
talent management agency, where, in 1998, he was hit with
a lawsuit by his star client Garry Shandling. Grey's law
firm used Pellicano's services to obtain a settlement.
In those bygone days, far from considering Pellicano disreputable,
Grey reportedly attempted to develop an HBO pilot about
a Hollywood detective based on Pellicano called "Hollywood
Dick". To be sure, Grey's spokeswomen at Paramount,
Janet Hill, has denied that Grey engaged in any alleged
illegal activity with Pellicano. But with prosecutors still
analyzing tape recordings and encrypted computer files seized
in the raid of Pellicano's office and with Grey's former
associates testifying before a grand jury, including such
wild-cards as the ex- “Most Powerful Man in Hollywood” Michael
Ovitz, the grand jury might come to a different assessment
than Ms. Hill. In any case, Sumner Redstone, who worked
in the Justice Department after Harvard law school, is certainly
aware that federal prosecutors—fairly or unfairly—can get
a grand jury to indict not only the proverbial ham sandwich
but also a high-profile studio executive.
Hence
the need for a contingency plan. On February 27, with the
prosecutors negotiating deals with key witnesses, Redstone
approved an offer by Paramount to Stacey Snider, who as
chairman of Universal Pictures oversaw that studio division
in addition to Focus Features and Universal Studios Home
Video. Her new job: a multimillion position as co-chairman
of Paramount's newly-acquired DreamWorks division. Since
this division already had the extraordinarily competent
leadership of David Geffen—not to mention Steven Spielberg—and
is slated to produce a mere 4 to 6 movies a year, it had
no imminent need for an additional chairman, especially
one whose contract at the time bound her to Universal until
December 2006. So the real value in retaining her lay in
her future ability to seamlessly replace Grey. Of course,
Redstone could choose a stand-by-his-man strategy and await
the outcome of the trial, if he was certain it would not
interfere with other matters on his corporate agenda, such
as seeking liquor licenses for his National Amusement theater
chain (thus adding Vodka to the popcorn economy). But with
a well-respected and proven studio chief in the wings, why
take that chance? As one Paramount executive said, “The
backup plan is already in place. If Brad gets indicted,
Stacey moves in. It make the option of letting Brad go more
feasible.”
The
irony here is that Brad Grey engineered the $1.6 billion
acquisition of DreamWorks SKG partly to compensate for the
managerial meltdown that occurred under his regime change
in 2006. Finding that Paramount had failed to create enough
promising new movies to fill its 2006-7 pipeline, he had
Paramount take over DreamWorks's slate. Now DreamWorks is
being used to harbor another future project—his replacement.
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