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Author: esxokm Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 49675  
Subject: Star compensation Date: 5/2/2013 5:18 AM
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Here's something interesting I read in The Hollywood Reporter.

It was said that Todd Phillips, who directed The Hangover, was to receive a $6.5 million fee. But Time Warner and Legendary Pictures wanted to bring the already somewhat relatively small budget of over $40 million down. So the next deal was to give the director half that money upfront and the rest if the movie was a success. The director's agent and attorney decided to do something different. I'll quote here -- "The director would forgo his fee almost entirely in exchange for what sources say is a 16 percent stake in the film. Warners agreed, and the arrangement ultimately would earn Phillips nearly $70 million from the first Hangover."

Though the subject of the article isn't Disney, I thought shareholders here would find this notable. I continue to wonder about the fascination Hollywood has with giving away so much valuable equity to talent. Shareholders oftentimes complain about too many equity awards to CEOs, yet look at the equity given away in this case. Also note that the director didn't necessarily take any risk at all, as it is said that he decided to forgo "almost entirely" his fee.

Hollywood has to rethink its philosophy of risk management. Put another way, is profit participation more of a risk than upfront fixed salaries that are high?
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