In conversations and calls around town these past few weeks, it was hard to find someone not actively rooting for the success of Top Gun: Maverick. A few reasons for that, none of them altruistic, of course:
- First, it’s not a comic book movie, and its success would tell Hollywood people that, post-pandemic, there’s a chance for big-budget, non-comic book movies, and thus maybe there’s a chance for my movie.
- Second, it’s the first older-audience wannabe blockbuster since March 2020, so its success would signal that over 40, infrequent moviegoers will return to theaters for the right offering… and thus maybe there’s a chance for my movie.
- Third, the original Top Gun is a movie that most of the middle-aged white men running the business grew up loving, so a successful reboot would mean there is an appetite for this kind of throwback action spectacle…and, say it with me now, maybe there’s a chance for my movie.
Whatever the reason, all of Hollywood seems to be invested in something that will almost certainly make less than Minions: The Rise of Gru, and will end up far less profitable. No matter. This kind of fascination got me interested in the financials at play, so I spent the week talking with insiders on all sides of the deals behind Top Gun: Maverick. So much has been written about the executive dramas around this film; the firing of Paramount chairman Jim Gianopulos after he resisted sending movies to streaming; the hiring of Brian Robbins of Nickelodeon to orchestrate a Paramount+-first movie strategy; the question of whether Shari Redstone is angling to sell the whole damn company. What became clear in my chats is that, amid all the noise and hurdles, two people executed at a really high level here, and both stand to win big: Tom Cruise and producer David Ellison.
With a not-astronomical production budget of $172.5 million and a prints and advertising spend of more than $150 million, Paramount’s break-even number on Top Gun: Maverick is about $410 million, according to studio sources. Not bad, these days. Domestic theater owners are giving Maverick 4,735 screens, topping 2019’s The Lion King for the most ever, and Cruise just capped an over-the-top and amazingly controversy-free P.R. tour straight out of 1995. If the $200 million+ global opening weekend tracking is accurate, the studio likely will make real money on this thing. (Paramount declined to comment on any numbers I’m revealing today.)
But Cruise could be in line for an arguably more impressive payday. CAA’s Kevin Huvane, Maha Dakhil, and Joel Lubin, along with attorney Matt Galsor, got him $12.5 million upfront, according to multiple sources close to the negotiations—but that’s Starbucks change compared to the real value. He’ll earn more than 10 percent of first dollar gross, with escalators that increase the percentage as the movie makes more money. Remember, that’s a dime for every dollar that Paramount takes in, not the total box office collected by the theaters. Studios generally negotiate for a little more than 50 percent of domestic revenue (Disney, with its market power, can get more), a little less than 50 percent internationally. There are limited “off the top” deductions from the “first dollars,” like for residuals, but they don’t fundamentally change the calculation. That’s in contrast to the more typical “net” or “cash break” deal, where the studio makes its money back first, then the talent participant gets a taste. Or, more common these days, bonuses for pre-set box office milestones.
Obviously, first dollar is preferable, and top stars and filmmakers used to get it with regularity. It’s much rarer now, of course (producer Jerry Bruckheimer, for one, didn’t secure first dollar on this movie, despite having scored it on some of his previous productions), though not unheard of, as some studio business affairs executives would have you believe. And it’s even rarer on a big-budget movie like Top Gun: Maverick, which is expected to generate hundreds of millions of dollars for the studio. Despite having made movies since 1981, Cruise has never starred in a billion-dollar grosser, even adjusting for inflation, and his highest-grossing movie, Mission: Impossible—Fallout, failed to crack $800 million worldwide. But he still was able to command that huge first-dollar gross to return to a 36-year old franchise. So yeah, it’s a good deal.
Cruise’s dollar-one position also applies to home video revenue, and here’s where it gets interesting. Studios traditionally have output deals for various Pay TV windows (though that’s changing thanks to in-house streamers), and the Paramount movies go to Epix. Why a B-level channel like Epix? Paramount owner Viacom (now Paramount Global) used to co-own Epix, so the Paramount films went there at what talent dealmakers often claimed was a submarket price, arguably screwing the participants but making Viacom whole through the ownership of a viable cable channel. Cut to 2017, when MGM paid $1 billion to buy out Viacom’s and Lionsgate’s share of Epix. That submarket output deal was re-upped for another five years, but Viacom no longer benefited from ownership of the channel. Plus, soon after, Viacom started to realize that huh, maybe streaming services might be a thing? So the whole arrangement was renegotiated, and in 2021, a new deal through 2023 gave Paramount slightly higher license fees from Epix, and, importantly, the ability to sub-license certain titles for Paramount+ to be streamed 45 days after their release in theaters.
It’s complicated, but basically, Paramount got to keep the Epix output deal and essentially put certain high-value movies on Paramount+ for a minimal price. This weekend, for instance, as my kid has notified me approximately 1,000 times, Sonic the Hedgehog 2 is on Par+ while still doing decent business in theaters. If you think about that Epix sub-licensing arrangement, it’s great for Paramount, and potentially not so great for profit participants, considering what streamers are shelling out for rights. Talent reps are waking up to this imbalance, and saying, Hey, what if you took this movie that was being shuttled from Epix to your streamer and sold it to Apple instead? Or at least paid us what the market would bear? I’d expect this situation to be revisited soon.
At least Cruise doesn’t have to worry about Top Gun: Maverick appearing on Paramount+ after 45 days. Or at least he doesn’t for now. His deal gave him approval rights over changes to the distribution plan, which is currently a 120 day theatrical window. But now, I’m told, that window is a moving target, so we’ll see if Paramount is able to throw some money at Cruise to shorten it for Par+, or for a premium video on demand offering. Remember, Cruise’s deal was negotiated before the pandemic, so the studios hadn’t yet tossed their windowing traditions in the garbage. That means Paramount couldn’t even entertain offers from Amazon and others to take the film during the pandemic shutdown without going to Cruise, who dislikes the direct-to-streaming model as much as Thetans and psychologists. So I’m told there were no serious discussions, even if Redstone or her C.E.O. Bob Bakish might have enjoyed a check in the $500 million range.
Given all the variables, it’s difficult to determine how much this arrangement will ultimately pay Cruise. But if Maverick performs as is now expected, nine figures is totally possible, according to sources.
Ten years ago, if you had to bet on one of Larry Ellison’s kids in Hollywood, how many of you would have gone with David? Megan had the great taste, the relationships with auteur directors, a company that cultivated the aura of a film festival afterparty V.I.P. room. David, by contrast, was a flyboy with populist dreams of making Terminator sequels. Exactly the kind of rich kid who comes to Hollywood and gets fleeced.
Flash forward to today, and Megan’s Annapurna, while still active—and she’s still got all those Oscar nominations for great films like Her and Zero Dark Thirty—has struggled to make its financial model work. And the elder Ellison, after years in Megan’s shadow, is having a nice run. His Skydance, with backers now including Redbird Capital, Tencent, and Korea’s CJ ENM, sold off pandemic movies like The Tomorrow War and Without Remorse to streamers for big checks. He’s in the Paramount franchises like Mission: Impossible and Transformers. He’s got a rich Apple deal, with his animation division, run by Pixar co-founder John Lasseter after his exit from Disney in the wake of inappropriate behavior, about to release its first film, Luck, in August. And now, after developing Top Gun: Maverick for more than a decade and putting up 25 percent of the budget, Skydance is entitled to 40 percent of the back end, according to sources. Skydance’s breakeven number is $450 million, and it will own a piece of a new (old) franchise that could throw off hundreds of millions of dollars for years. (Skydance declined to comment.)
We can be cynical about a .001 percenter coming to Hollywood and leveraging the family resources, but Skydance is actually a pretty decent success story. When Ellison, a pilot, launched his company and partnered with Paramount, a Top Gun sequel was the first movie he said he wanted to make. He and original producer Bruckheimer got director Tony Scott on board to return, then together they pitched Cruise at SoHo House in 2011. Ellison, Cruise, and Bruckheimer were scouting locations with Scott in Nevada in 2012, the day before Scott jumped to his death from a bridge in Long Beach. After a big conversation over whether to move forward, Scott’s brother Ridley ended up convincing them to do it. Finally, in 2018, cameras rolled (Ellison was on set many days, and flew in some of the planes in the movie) and the publicity machine was about to switch on in 2020 when the pandemic delayed everything for two years.
Now, having waited patiently, Skydance likely has a global franchise, and if Ellison has his way, Cruise will make two or three more of them. This film was conceived as a one-off, a somewhat risky bet on the longevity of Top Gun as a franchise, so there are no deals in place for sequels or spinoffs or TV offshoots (and Paramount owns the I.P.). But I’m guessing those conversations begin on Tuesday morning.