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When Talent Runs Amok
Posted by David Rosenbaum | CFO.com | US
March 20, 2012 2:30 PM ET
Walt Disney's "John Carter," which cost an estimated $250 million to make and $100 million to market, will go down in history as one of Hollywood's biggest flops, joining the infamous ranks of "Ishtar" and "Heaven's Gate."

Monday, Disney Studios said it would take a $200 million write-down on the movie, and estimated an operating loss of between $80 million and $120 million for the quarter that ends this month. (By contrast, in the second quarter of last year Disney recorded an operating profit of $77 million.)

The tale of "John Carter's" doom -- turbulence in the executive suite; upheavals in the marketing team -- is detailed in a recent L.A. Times story, but what "John Carter" and the megaflops mentioned above have in common is that they were driven by people who because of their talent -- validated by a record of past success -- were given blank checks. Talent is a priceless commodity but, as is well known within the financial community, past performance is no guarantee of future results. Or, as Malcolm Gladwell says, speaking of his 2011 book, Outliers, "We vastly underestimate the extent to which success happens because of things the individual has nothing to do with."

"Ishtar," "Heavenýs Gate," and now "John Carter" were all projects driven by individuals who were funded to follow idiosyncratic dreams. "Ishtar" was ramrodded by Warren Beatty who, after the successes of "Shampoo" and "Heaven Can Wait," was box office gold. Beatty wanted to act in a Bing Crosby-Bob Hope-type road comedy; he wanted the famously prickly Elaine May to direct, and he wanted the notoriously difficult Dustin Hoffman to co-star. Beatty got what he wanted, and more. "Ishtar's" budget, initially set at $27.5 million, rose to $51 million. The movie lost $42 million.

"Heaven's Gate" was director Michael Cimino's 1980 follow-up to 1978's "The Deer Hunter," which won five Academy Awards, including Best Picture and Best Director. "Heavenýs Gate," a grim, more-than two-and-a-half hour long Western, overran its budget by an estimated $33 million. Its final cost was $44 million and it grossed a little under $3.5 million. After the dust settled, it became apparent that Cimino was denied nothing by his studio, United Artists. No UA executive had the nerve to say stop, enough. And soon enough, no UA executive had a job, at least not at UA, which went under shortly thereafter.

The talent driving "John Carter" was Andrew Stanton's. Stanton, the lead writer on "Toy Story," directed the wonderful "Finding Nemo," and the award-winning "WALL-E." All three were hugely and somewhat unexpectedly successful (movies starring toys, fish, and silent robots?), almost black swan events. And precisely because their success confounded analysis, Stanton was perceived to possess an unfathomable, intuitive connection with the audience. But Stanton's love for Edgar Rice Burroughs' musty 1917 pot-boiler A Princess of Mars, upon which "John Carter" was based, was not shared by the audience it had to reach to succeed: young males between 18 and 25. In fact, it wasn't, it seems, shared by any audience. And whether it was wise to invest $250 million in a movie directed by a man who had never before directed a live-action film -- well, that will be answered when the heads begin to roll at Disney.

The moral of the story is that while talent is priceless, the money it spends isn't. There should always be an eye on the checkbook. Isn't that why God made CFOs?
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